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MLS Notes: Sustaining Success in the Current Economy

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MLS Notes: Sustaining Success in the Current Economy
(Photo by Mike Stobe/Getty Images for New York Red Bulls)

If you listen closely, you'll hear a very surprising sound.

It's the sound of MLS standing strong and making a commitment to expansion while other American sports leagues are scaling back on payroll and laying off employees.

America's "other" sports league will expand to 18 teams by 2011 after it adds a Philadelphia team in 2010, and clubs in Portland and Vancouver for the 2011 season.

When you consider the magnitude of the global economic meltdown, it's pretty amazing that a sport that most Americans consider to be inferior is faring so well in the States.

About two weeks ago, fellow US football enthusiast Kwame Manu asked me to do an article on how the MLS has been able to continue expansion in this economic climate. I'm taking that prompt and running with it, giving an explanation for how MLS has managed to remain successful in any economic climate.

 

Salary cap

For the 2009 season, MLS has imposed a $2.3 million salary cap. That's a tremendously small figure when compared to any other major sport in the US, but it's a smart thing for MLS.

MLS is still in its infancy, and as such, not every club is making enough money to turn a profit just yet. But thanks to soccer-specific stadiums and shirt sponsorships, every club is either profitable, or very close.

These stadiums and sponsorships aren't lucrative enough yet to allow teams to start blazing through large stacks of cash.

In an effort to combat the small profit margins, MLS keeps salaries in check with the cap. This means that even if all 15 clubs are spending their allotted $2.3 million, the league will only be dishing out $34.5 million in salary. David Beckham could easily afford to bankroll the league for a couple of seasons.

 

The league controls its contracts

Conor Casey of the Colorado Rapids is tied for the league lead in goals scored this season, with six.

He is not under contract with Colorado.

Instead, he has a contract with MLS, just like the vast majority of the other players in the league.

It's a unique model. Incoming players sign a contract with MLS, and then are allocated to a specific team. This ensures the financial health of the league as a whole because the people negotiating the contracts are aware of MLS' current economic status. It also helps avoid a New York Comsos-esque spending spree by any one club.

Individual clubs can sign players and pay for them out of their own pockets, if they have an open designated player slot. The full salary of these players doesn't count against the salary cap, but each team can only have a maximum of two designated players on their roster.

Currently, MLS only has six designated players in its ranks. They are all players whose salaries would be a substantial chunk of the salary cap.

 

Squad size

According to a recent report by the Guardian, Liverpool FC has 62 players on their books. That means that their squad is more than twice the size of  any given MLS squad. Liverpool has the financial resources to maintain such a large club. No MLS club is capable of carrying such a large roster.

In fact, MLS squad sizes shrunk this year when the reserve rosters were abolished. I suspect that move had something to do with the poor economic climate.

For 2009, teams are allowed to carry up to 20 senior players on their roster that will count against the salary cap. In addition to those 20, teams can carry up to four developmental players that will not count against the cap.

Limiting rosters to a max of 24 players prevents salary expenditure from becoming bloated. It helps prevent teams from spending beyond their means.

 

Conference play

From a competition standpoint, I hate the fact that MLS is divided into two separate conferences. The dual-conference system creates some problems when the playoffs roll around and I’d just as soon see it abolished in favor of a unified table that awards playoff seeds to the top eight teams, but that’s an article for another day…

Economically, the conferences make perfect sense. In the early days of MLS, the schedule was very unbalanced. Teams would play three matches against in-conference foes and just one or two against clubs from the other conference, similar to the divisional play we see in Major League Baseball.

This type of scheduling really helps cut down on travel expenses. It’s much cheaper for a team like Los Angeles to play Colorado than it is to fly the entire club cross-country to New York once or twice each season.

Keeping travel expenses in check helps teams operate more cheaply, which helps increase profit margins. That’s good business.

 

New stadiums

In the beginning, MLS teams were forced to share football stadiums with local NFL or college teams. This often meant being locked into a terrible lease which just sucked money out of the MLS club's pocketbook.

Flash forward to 2009, and you've got Chicago, Columbus, Dallas, Houston, Salt Lake, Los Angeles, Chivas, Toronto, and Colorado in their own stadiums. New York and Kansas City have their own on the way. When Philly enters the league, they'll be playing in a brand new stadium built just for them.

In fact, one of the most important requirements for being granted an expansion franchise is having some sort of stadium deal in place.

These stadiums are a great revenue stream. Teams take home parking, tickets, concessions and merchandise sales. These venues can be used for concerts, World Cup qualifiers, and even drum corps shows.

Compare that to New York's lease at the Meadowlands, which essentially allows them to go through the seats after games and pick up any loose change that fans may have dropped.

 

Open up the champagne!

Don Garber and his cohorts in the league offices know what they're doing. They've got a successful business model for MLS which is allowing it to survive and thrive. Thanks to their smart financial management, there is a healthy interest in expansion because the league is in good shape.

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