The Premier League Problem

I've been unable to spend much time here, so I'm sorry for the lateness of the reply.

Nearly a year ago, a Cowboys NFL blog had an excellent series of articles on the finances of the NFL and revenue sharing -- because of the similarities in the systems, in some respects it was an even better critique of MLS.

Here are the relevant portions:

The breakdown in MLS following the 2002 restructuring is nearly identical as to what constitutes shared revenue and what is retained revenue.

The piece continues:

http://www.bloggingtheboys.com/2011/2/21/2004505/nfl-lockout-2011-revenue-gap-problem

Actually, I suspect the NFL will partially solve this problem because the new projected national TV deals are so huge that they will infuse a massive amount of shared revenue into the system. MLS seems less likely to see that happen only because so much of its rapidly growing revenue isn't shared. Even if the new TV deals geneate a lot more money for MLS, slice the 19 or 20 ways and they will still pale next to stadium revenue, shirt deals, local sponsors and, yes, some local TV deals.

As for some of your other comments, I'm sympathetic or in agreement. Yes, big market teams have to spend more to be relevant. Yes, big market teams can drive revenue to the league in a manner small market teams often can't. As the blog I quoted put it, "unlocking these revenue streams is easier for big market teams than for small market teams."

All of that is persuasive IMO.

Which is why part of me -- the cold hearted part -- believes that this might all be inevitable. That as MLS matures, if it is going to grow dramatically, almost by definition small market MLS teams are destined to have a hard time because it's simply too expensive to fund them comparably to big market teams (where I think the growth will be) or share the revenue needed to allow them the same opportunity to compete. I've said as much in the past, much to the consternation of small market fans.

Then I consider Columbus and Salt Lake City and Kansas City -- well run teams that have worked hard to keep up and fund new infrastructure IMO -- and part of me believes strongly that I'd like them to have a decent chance of both existing and competing in the MLS circa 2032. But when RSL GM Garth Lagerwey says of the newest tweaking of the DP rule touted to help small market teams, “It’s a great rule for the league. [But] it’s a bad rule for us as a small-market team. It’s yet another that the big markets can dominate,” I think it's worth pausing to see if perhaps the scales aren't tipping more than intended thanks to non-shared retained revenue.

http://www.mlssoccer.com/news/artic...used-youth-development-despite-dp-initiatives


Since the restructuring ten years ago, the focus has been on retained earnings and just like in the NFL that's done some good things -- new stadiums for starters. But disparity in income can be destabilizing, both on the field of play and in the boardroom, which is why I'd put broader revenue sharing rules in place now if parity is important in the future because once teams have these retained earnings, they'll be reluctant to part with them and, unlike the NFL, the national TV money won't be enough to provide a similar counter-balance.

Could that cost some growth in big markets? Yes, I suspect (and fear) it could -- just as the Giants or Bears would doubtless be worth much more if they hadn't shared so much revenue. But it also might insure that smaller markets are competitive.

Is there value in that?

Again, I'm conflicted. I think MLS could grow faster if teams were allowed to retain money and spend an unequal amont on players -- that the fate of a few small market teams isn't critical to MLS any more than it was to the early NFL -- but for lack of a better term I think there is a fairness issue here too that needs to be part of the discussion, and meaningful shared revenue is at the core of that.

 

There might be an increasing revenue gap between NFL clubs, but are there any clubs who can't afford to pay the full salary limit?

 

Remember, the NFL has both a ceiling (the cap) and a floor -- every team must pay at least as much as the floor. Detroit, the lowest revenue team, has managed to pay it, but reportedly they have consistently lost money (almost unheard of in the NFL), as has Jacksonville in recent years. The Ford's probably won't miss it, but it's a concern.

The bigger problem is the cap is calculated based on revenue that isn't shared, making it very difficult for small market teams to actually have sufficient revenue to spend to the cap's limits. This from an earlier blog from small market Buffalo under the prior CBA:

http://www.buffalorumblings.com/section/sbnation?page=9

Again, I think the NFL will be bailed out by a huge influx of shared revenue dollars, as a familiar MLS executive explained earlier this year:

http://content.usatoday.com/communi...le-tv-revenue-in-next-round-of-negotiations/1

The NFL had previously agreed to an additional shared revenue scheme that was very contentious -- wealthy teams resented paying into the fund -- and it has ended, but, again, it can solve its problem with the huge anticipated influx of TV revenue.

Again, despite the criticism of the EPL, in some respects it is as progressive as the NFL on revenue sharing -- a huge chunk of Wigan or Bolton or Blackburn's budget comes from shared TV revenues, both domestic and foreign, and the same is true in the NFL for small market teams.

In MLS, again I think the capital call is probably paying for a large portion of the salary budget, but money for DPs must come from the individual owners and those costs are being funded (I believe) with primarily unshared revenue. Those DPs, in turn, help teams generate additional unshared revenue in the form of local sponsorships and TV, which can, of course, up their budget for DPs.

It's still early days, but some of the criticism of the EPL (which I've layered on too on occasion) increasingly strikes me as a touch sanctimonious. Like the EPL, much of the base payroll for every small market MLS team comes from the league, but in the case of MLS these teams have to generate a lot of that through a capital call. What's more, with every DP exception, MLS is allowing unshared revenues to be used for big market teams to buy better players. That may be the smart thing for MLS to do -- again I think I'd do the same thing in their shoes -- but I don't think we should pretend that it isn't happening. There is a significant payroll disparity now and without more shared revenue I think it will grow.

 

How much are the owners taking out each year from those teams that lose money and/or don't pay near the cap ceiling?


For years it seemed you could put a small bedside cabinet in charge of an NFL team and it'd turn a profit, so where are they going wrong? Are fans just not buying the tickets, or has the cap now got to a level where some teams, with the best will in the world, just can't afford it?

The US tv deal relies on ratings, and the tv people know how much money they get for selling those adverts. Unless the tv companies are making a vast profit through undervalued rights, that seems a bit optimistic. The tv companies aren't going to bid an amount that would see them making a loss on the deal.

 

Lions are like 8th or 9th biggest spender in the NFL. It's not just players, it's also everything else.
But they've sucked their way into bad revenues.
Therefore the lack of profit.

I'm very much in support of bailing out small market teams and making them competitive.
But that does not mean I'm in favor of making Lions profitable.
They'll be very much profitable if they stop being a joke for several years in a row. Not even be a contender or even a consistent playoff team, just stop wasting picks and stop frustrating fans.
Or they could cut costs to league average and be profitable right now.

I understand your economics-driven concerns. I just think they'll be negated by built-in revenue sharing that comes through TV and gate revenue.
I don't think MLS will ever be like NFL in terms of actual TV deal size of course. But I don't see why a good % of MLS revenue eventually wouldn't come through national TV.
Besides, so far it's obvious that an expensive designated star or three don't make a dynasty in this system.

But I don't understand your concerns regarding increase of DP slots.
You basically need to consider this question: do you think MLS shareholders / decision makers want to keep smaller teams competitive. I think they do. If so, why would they break the balance? It's something THEY control. Unless you think they don't want competitiveness, or you think they are so stupid that they'll kill it by accident and will forget how to change the rules to bring it back, I don't understand the concern there.

 

You guys are so stupid. This system is so much better than MLS! There's no hope for Toronto or Chivas. How long has it been since they made the playoffs?! In the Premier League, fans of ALL teams can be hopeful. There's always hope that at any moment their team could be bought by a foreign billionaire and transform the club into a title contender within one transfer period! Norwich City could win the league next year! That can't happen in stupid MLS in stupid America with your stupid rules, you stupids! You guys just need to open your minds and be realistic for once!

 

How about the Spanish League odds?

 

Do you have the NFL odds on hand for comparison?

bit late in the season but the comparison should still be useful.

 

The NBA might be a better comparison, considering where they are in the season. Id' say the NHL, but the only bets being taken at this point is on if there will be a season or not.

 

When was the last time the EPL had a back-to-back champion compared to MLS?

 

2006-2008

 

Yes. It was a lawyer's question.

And it's not important because most global soccer leagues have their small contenders number too but that doesn't mean there's a diminishing interest in the game. Bundesliga may have two-three contenders for the title but its clubs still average over 42K a gate (and that's with a bunch of lower capacity stadiums).

This thread is a red herring that's designed to make MLS fans feel better about a qualitatively inferior league.

 

I'm not going to argue over what is a title contender team. However, the reason people like the Bundesliga is any team can realistically make a run at a Champions League spot within a few years. Over the past 5 years there have been 11 different Bundesliga teams that have finished in the top 4 (which would be a Champions League spot in England typically). Only Bayern Munchen has finished in the top 4 each of the last 5 years, with Schalke next at 3 times, 4 others at 2 times , and 5 at 1 time (and one of those teams has been relegated since then). England has had a total of 6 teams finish in the top 4 in the past 5 years. Man U and Arsenal have finished there each year, Chelsea 4 times, and Man City, Tottenham, and Liverpool twice each. And at this point this year all the top 5 teams are from that group of teams with only Liverpool well outside the race. When you are talking about making a good league you want something like Germany over the like of England.

 

The only problem that the EPL has is how to count all of the money they are raking in by using a system that encourages greatness instead of mediocrity. Thankfully, only a small minority finds the lack of parity in the EPL an issue. You can't argue with the money that the EPL generates.

If the EPL decided to pursue a path of parity, foreign revenue would dry up and the league would be quickly become irrelevant. Bandwagon fans and neutrals want to watch great teams. If the EPL can't provide that, these fans will simply follow other leagues.

 

Oh, so that's what the NFL has been doing wrong all this time.

 

You do realize that the NFL doesn't have to compete with any other American football leagues so they can get away with it. Besides the EPL generates far more revenue per capita than the NFL. In fact the EPL is the most successful league in the world when you factor in population. Not bad for a league with pro/rel and no salary cap.

 

I take it that you are the type of fan who questions why a super league has yet been formed, so that likewise fans can enjoy Barca v Man Utd on an endless loop. At the risk of conceding an argumentum ad populum, I'll agree that the numbers seem to be in your favor. There is, however, a different perspective on the current state of the game. "This shit is for the dogs" kind of sums it up. The dog in question, is of course, that conditioned by Ivan Pavlov. But any self-reflecting soccer nut will come to the realization that there is certain amount of dog in each of us. The sport, after all, is a business of sorts, with all its periphery stratagems to get us to part with our money. The question at hand is how much should competitiveness be determined my money? Or, in other parlance, how much of a dog are you?

 

I enjoy watching my local team play but I also find it a treat to watch teams like Barcelona. Teams like Barcelona would not be possible if parity was the priority in La Liga. Fans of the game would be denied seeing great teams like Barcelona. They would be denied seeing a great player like Messi surrounded by other great players. It would be a shame to deny this to all fans of the game. I find it absurd that people would like to take this away from soccer fans so a few Real Betis fans can be happy that their team has a chance at winning the league. I don't see how this helps the game. You lose a lot with parity.

 

What you describe is a spectacle, less so a sporting event. Sport, by its very nature, is a competitive endeavor. Or it used to be defined as so. I think we are talking about two different things.

 

So why not make Barca the soccer version of the Harlem Globetrotters? Then the league can get back to, you know, actual sport. Because what you're describing is exactly what the Globetrotters were created for.

 

That attitude explains the success of the big Euro super-clubs in attracting fans all over the world. I can't really tolerate the average American fan of teams like Man U or Barca because their fandom is so easy. Fans of teams like Man U don't have to worry about lean years. Their team is always going to be competitive in its league and the Champions league. There's no risk in being a fan of a team like that, and it strikes me as a completely sterile experience. I respect the local fans of a team like Swansea City much more than average American fan of Man City.

 

Well the opposite of that is people that do follow a local team even when the teams sucks, but still follow an European super clubs to enjoy success.

I understand people in the USA that did not have teams back in the days or who do not have an MLS/NASL/USLPRO team in their city to follow European only teams, but most people I go to the FIRE games follow other teams, be it Man U/Barcelona/Chelsea/Barca or some Mexican/Central American team.