The Catch All CBA (Collective Bargaining Agreement) Thread

A good sign will be if they're selling out their expanded stadium in 2 years.

 

Well it turns out I screwed up the effective Salary cap number as well by accidentally hard coding the number of 500K players for the first year (7). Below are the revised numbers including the April 2014 numbers. Note - numbers include all the players listed, not just those on current teams.

Year	CBA/Team	Total Comp	Total/team	#500K players	500K Comp	effective cap	# teams
2007	$2.093	$42.224	$3.248	7	$14.665	$2.389	13
2008	$2.102	$47.280	$3.152	7	$15.113	$2.378	15
2009	$2.315	$51.878	$3.459	8	$15.946	$2.662	15
2010	$2.550	$71.305	$4.457	10	$28.013	$3.018	16
2011	$2.678	$85.079	$4.727	17	$33.127	$3.358	18
2012	$2.811	$99.258	$5.224	21	$40.031	$3.670	19
2013	$2.952	$95.078	$5.004	14	$29.901	$3.799	19
2014	$3.100	$115.346	$6.071	19	$49.397	$3.971	19

Some comments - the Union negotiated an $800K per team raise and ended up getting a $2.6M raise and counting (I'm sure a several teams are thinking of signing players during the next transfer period). In addition, the effective cap/budget is almost $800K more than negotiated. All these different sources of money (GA, Allocations, et al) are just and increase to their spending cap under a different name.

I think both sides realize that by spending more to get better players, they can grow the league. As quality and pay continue to increase, MLS is increasingly competing with other leagues for players and expansion will create even more jobs. If teams like Indy and Sacramento are able to bring in reasonable revenue, they might even start putting some salary pressure on the lower end journeyman pay scale. That is why I think the point of contention will be on players freedom, benefits, increases in minimum wages rather than player salary. Players are going to want to tap into opportunities to get paid for what they produce on the soccer field. MLS owners in contrast seemed determined to hold down pay to non-National team North American players as much as possible.

 

Excellent info, thanks for compiling this. I'm sure you've posted this elsewhere, but would you mind explaining the "effective cap" calculation.

In addition, I came across this article on the Philly Union SB Nation blog. It is tremendous.

http://www.brotherlygame.com/2014/4/1/5544564/the-mls-cba-a-point-of-view-on-player-salaries

It does a great job of comparing MLS revenues and salaries to the other domestic leagues. As the author points out, the minimum and maximum aren't really that far off the other leagues, but the median wage is far lower.

Another thing that is really striking is how much MLS teams spend on non wage costs. MLS teams spend 73% on those costs versus 26% for the premier league. Obviously that greatly reduces the league's ability to spend on players. You'd have to assume that most of those expenses are costs related to the recent stadium construction boom. Anyway, I'd definitely advise everyone to check out the article.

 

The more revenue a league makes, the greater percentage it can devote to player salary.

 

True.... It's also the byproduct of a being a young league filled with a bunch of new teams.

 

Did you know that TFC is owned by the cable companies? Cable renewals, increased ad revenue will go a long way to repaying the money.

 

Also on what basis do you think MTL is overspending?

To my understanding the team ended last season at a slight loss, and expects to more or less break even this year.

 

They're overspending relative to the performance of their team on the pitch. Their team is pretty bad this year and is a long shot for the playoffs.

 

I only count the first $500K of a players salary. Given buy down DP numbers and what not it seemed like a reasonable and simple line to pick for representing the type of player in reach for every team without have to dig into their pocket. I'm sure LA, Toronto, Red Bulls all realize they'd be much better teams with 10, $500K players than 1, $5M player. But the DP rule is designed to keep parity by making sure the high salary teams have enough weaker players on the field so the lower salary teams can still be competitive.

 

Certainly true. But Tripet1 posted numbers from the Swedish league that showed teams paying almost double what MLS teams did last year and my recollection was the highest revenue was something like $25M. Search Triplet1 somewhere for details.

 

Yeah I found the post.

That's 6 teams with higher than median MLS payroll, sure, but MLS has four teams (Toronto, Seattle, LA, NY) that have a higher payroll than any of them.

 

But they do so with a significantly less revenue. MLS seems to have high non-player costs compared with other leagues. Which is probably completely legit but it is interesting.

 

Not to nitpick, but in MLS that's not been the case. The 2007 Forbes estimates indicate the teams collectively made about $166M, and total guaranteed compensation was $42.2M -- meaning 25% of revenue went to player payrolls. The 2012 Forbes estimates published last year indicate that the teams collectively made $494.2M, and total guaranteed compensation was $99.2M -- about 20% of revenue.

In other words, while pay increased nicely, as a percentage of revenue pay dropped five percent between 2007 - 2012. For every dollar generated, the owners paid the players 20 cents instead of a quarter.

That's not all that unusual. Frankly, most businesses aspire to it because they'll make more money. But it is very different from how salary caps work in other U.S. major leagues.

For example, the NFL and NHL salary caps also have a salary floor specifically tied to revenues which will force the owners to spend a specific percentage of revenue on payrolls at a minimum. MLS does have a floor (or, at least the last CBA that was online did), but that floor isn't tied directly tied to a change in revenues like modern salary caps usually are.

The players are making more money -- there is no question about that -- but had the percentage of payroll remained 25% of revenue instead of dropping to 20%, the players would have collectively received an additional $24M in 2012.

 

First, note that I said "can" not "will." Leagues that have more revenue can devote a higher percentage to player costs.

The $24 million gap you cite I believe can be attributed to the homegrown player initiative. That and the league's stadium building binge have been the chief non-player cost increases I can think of during that timeframe.

Over time, I do expect the percent of revenue MLS teams spend on player costs to increase, eventually to a comparable level of the other US leagues (around 50%).

But I don't see much point comparing it to European leagues. Fear of relegation and the incentives of qualifying for European competition lead for teams both high and low to spend beyond their means. The level of debt is absurd, and Financial Fair Play is being instituted to rein in the excesses.

MLS however is run as a business. It is trying to grow in a sustainable way.

 

I think the owners probably just kept it. Hey, it's a business, they're entitled to it. In 2007, Forbes says collectively the teams lost $26.6M (EBITDA), but in 2012 they made $34M. Keeping that $24M in their pockets had a lot to do with the turnaround.

 

I'm not so sure there is that much to keep. EBITDA may be $34M, but remember that is before interest expenses. Collectively the league has spent hundreds of millions on new facilities over the last 5 years or so. Nearly all of that has been privately financed by the owners, thus I would assume that most teams are carrying significant debt related to stadium construction and many are probably carrying debt related to their franchise fees. Given all of the recent spending, I'd be pretty surprised if the leagues's collective interest expense is not greater than $34M. That will not show up in Forbe's calculation of EBITDA, but it is a cash expense and, as a result, the league probably has reported a loss.

That said, the capital investments the league is making has resulted in better operating results and a significant appreciation in the value of the individual teams. My educated guess is that the league's cash outflows exceed cash inflows. However, I would also guess that the incremental appreciation in the value of the team exceeds these losses and that most owners are generating a healthy ROI as a result. However, the need to spend so much cash on capital improvements is likely limiting the league's ability to spend on player salaries.

 

In 2012, Garber said "Teams can put debt on their stadiums. We have no debt on our clubs." I take that to mean the owners haven't borrowed expansion fees or money for other facilities. That could have changed, but it would have changed recently. As for stadium debt, some teams undoubtedly have stadium debt -- it was a major issue for Checketts and RSL, for example -- but clearly not all of them do. (Seattle, with earnings over $18M, being an obvious example.) Further, that stadium debt represents a choice they've made in order to contribute less capital as their share of the stadium cost, so it's not like they've been hard done by. There are choosing more leverage to conserve their cash.

http://www.sportingnews.com/soccer/...r-mls-commissioner-sporting-news-conversation

 

I

Don't misunderstand me, I don't think the owners are being hard done by. Not at all. I do, however, believe that the owners are currently making the necessary capital improvements. Improvements that are necessary for the long term viability if the league and because the league is so young the league is being forced to spend more in the aggregate than any other domestic league or major league abroad. Because the league must make these investments , they have less cash for wages.

With all that said, clearly they should be spending more than 20% of revenues on wages. Especially considering that 12 players earn 40% of total wages. The league NEEDS to increase its spending on the "middle class" player for the league to reach the heights we all hope it will. However, I was a little disappointed to see how many teams are still spending under $4 mln in total wages. That makes me fear that we'll see a smaller increase than we'd like. It is great that average wages per team has risen to $6 mln, but an average median wage of $100K or so ain't gonna get it done.

 

Though e.o.y.-e.o.y. comparisons tend to work better, I thought I'd update these numbers with the new player figures.

Note here that there are fewer players in the equation. There's only 29.2 players per team in the 2014 list, probably because more guys will get signed later on. That could change the 40%ile player in either direction, depending on whether the new guys are expensive or cheap. The 12th man figure could only realistically go up. So in that sense you're talking about a 6.7% rise from last year.

It's because you went team by team and I went league wide. Maybe 12th man is not such a good term, because what I'm really saying is that if you parsed all the top payrolls out amongst the teams evenly, this is what the 12 man on the last of them would get paid. He is, in 2009, the 180th highest-paid player in the league, and in 2013/14, the 228th (more teams). In 2015, he'll be the 252nd.

 

I agree with every word.

 

Garber has said the league now spends $20 million per year on player development, which is close to the $24 million figure you cited. That's a cost it didn't have in the past, and it is directly related to trying to improve the product on the field. Also, teams are investing more in international scouting now than they used to. After all, what good is it buying expensive foreign talent if you're buying bad players?

So while the percentage of revenue spent directly on player salary declined, I don't believe the percent of revenue invested in building the roster has.

 

Any EBITDA calculations would already include those expenses. I'm happy that the league is increasing its spending on development. That's great for the league and great for the game, but it doesn't change my opinion on the need to increase spending especially on players 4-20.

 

Changing gears a little bit, what do you guys think about increasing the number of international slots on the roster? I don't think it has happened yet, but as the league continues to expand MLS could run the risk of spreading American talent to thin. I believe really strongly that one of the missions of the league should be to develop a higher level of talent for the National team. However, when the league adds it 20th, 21st, 22nd, 23rd and 24th teams it will also need to add 150 players, 110 of whom will have to be Americans under the current rules. Given the current talent pool, it's tough to see this happening without reducing the overall quality of play.

I think it might be a decent idea to increase the number of international slots to 10 in order to account for this. That would reduce the number of new American players to around 60, which I think is probably more doable.

BTW, I'm lumping Canadian players in with American for the purpose of this discussion.

 

That's not relevant to what I'm talking about. The $24 million number I was citing wasn't EBITDA, but rather triplet1's projection of how much more revenue MLS would have to have spent on player salary in 2012 to equal the same percentage MLS spent in 2007.

Nah, I think 8 is fine. It was already increased from 5. And teams are becoming pretty adept at helping players get green cards, and thus count as domestics. So I don't think the player pool will get too stretched.