What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come)?

The current hard cap is $2.3 mil this year. Assuming that it will increase to $2.5 mil for 2010, it would look like this under the various sports league models:

The current MLS hard cap structure
NRL (rugby): $2.5 mil (league paying) floor; $2.8 mil ceiling
CFL: $2.5 mil (league paying) hard cap; luxury tax $3 for $1 over at $2.8 mil and beyond
NFL: $2.5 mil (league paying) floor; ceiling ~$2.9 mil; incentive bonuses not counted toward the salary cap
$2.5 mil (league paying) salary cap with paid attendance bonus (1000 paid attendance above the league paid average attendance = $100k in extra cap space)
$2.5 mil (league paying) salary cap with DP exempted
$2.5 mil (league paying) salary cap with 2 DPs (1 exempted, 1 not)
$2.5 mil (league paying) salary cap with 2 DPs (both exempted)
NHL: $2.5 mil (league pay) lower limit; $3.5 mil upper limit
NBA: $2.5 mil soft cap (league pay); luxury tax ($1 for $1 over) starting at $3 mil
NBA/Snowden: $2.5 mil soft (league pay); $6 mil hard cap; luxury tax ($1 for 1 over) starting at $3 mil
Snowden's two tiers cap: $2.5 mil soft cap (league pay); $7.5 mil hard cap (3:1 ratio)
UEFA Platini: cap links to 25% of each club's total revenue with luxury tax
MLB: no salary cap; luxury tax starting at around $4-6 mil
EPL, USL, La Liga, Serie A Mexican FMF, J-league etc... no salary cap

MLS is at a crossroad. What happen in the 2010 CBA will determine the future of MLS for the next 5-8 years and beyond. It will set the foundation of where MLS will go from here and what kind of league MLS will be. In the past several years, MLS have been successful in building SSSs, getting a $17 mil a year TV deal, shirt sponsorship initiative that have net MLS tens of millions and the $150 mil 10 years adidas deal. According to Soccer America, "since the last collective bargaining agreement with players in 2004, MLS has received more than $200 million in expansion money." With team #19 and #20 to come, MLS will receive another $75-80 mil in expansion fee. The new breed of expansion teams (Toronto, Seattle, Philly, Vancouver, Portland, Montreal) are showing signs of significantly higher attendance than the old MLS cities. Maybe, it's time to install a more flexible salary cap structure.

I believe the best cap structure for MLS is one where the ratio between the highest team and lowest team is about 2 to 1. This keep the whole league competitive as oppose to the like of EPL where the ratio between the Chelsea and Hull is 25 to 1. In addition, some form of luxury tax is needed to help the low revenue teams financially. This means that if the high revenue teams want to spend more, they will have to pay for this advantage. What I would like to see as the salary cap structure in 2010 and beyond is the NBA/Snowden mixture:

$2.5 mil soft cap (pay by the league)
$6 mil hard cap (pay by the club ownership from the $2.5 mil onward)
$3 mil luxury tax threshold ($1 tax for $1 over)---teams under this threshold will receive luxury tax

What kind of salary structure do you think is best for MLS to grow, succeed and prosper in the years to come? Here's Simon Evans, a Reuters Sports Correspondent, opinion on the matter:
http://blogs.reuters.com/soccer/2009/07/30/americans-fall-for-soccer-but-can-mls-cash-in/

p.s. This will probably be my last poll about the salary cap. Sorrie for another pc4th damn annoying poll. : )

Re: The comprehensive salary cap structure for 2010 and beyond thread

FYI:

Ratio of top payroll / bottom payroll for NBA 2008-09=1.703
Ratio of top payroll / bottom payroll for NFL 2008 = 1.822
Ratio of top payroll / bottom payroll for NHL 2007-2008 = 2.03
Ratio of top payroll / bottom payroll for J-league 2009 = 5
Ratio of top payroll / bottom payroll for MLB 09 = 5.47
Ratio of top payroll / bottom payroll for EPL 07/08 = 24.94


2008 NFL payroll

NFL Teams Total Payroll
NFL Oakland Raiders Teams $ 152,389,371
NFL Dallas Cowboys Teams $ 146,401,600
NFL Minnesota Vikings Teams $ 133,354,045
NFL Cleveland Browns Teams $ 131,916,300
NFL New Orleans Saints Teams $ 131,531,820
NFL Pittsburgh Steelers Teams $ 128,815,061
NFL Tennessee Titans Teams $ 126,017,443
NFL Arizona Cardinals Teams $ 122,110,110
NFL Jacksonville Jaguars Teams $ 122,109,207
NFL Chicago Bears Teams $ 120,065,819
NFL San Francisco 49ers Teams $ 118,766,239
NFL New York Jets Teams $ 116,910,097
NFL St. Louis Rams Teams $ 116,677,660
NFL New York Giants Teams $ 115,816,180
NFL Miami Dolphins Teams $ 114,649,660
NFL Buffalo Bills Teams $ 113,364,927
NFL Carolina Panthers Teams $ 112,114,711
NFL Washington Redskins Teams $ 111,963,684
NFL San Diego Chargers Teams $ 111,813,340
NFL Cincinnati Bengals Teams $ 109,727,880
NFL Philadelphia Eagles Teams $ 109,557,398
NFL Houston Texans Teams $ 108,445,418
NFL Tampa Bay Buccaneers Teams $ 104,329,311
NFL Seattle Seahawks Teams $ 102,985,710
NFL Atlanta Falcons Teams $ 96,391,525
NFL Detroit Lions Teams $ 95,827,117
NFL Denver Broncos Teams $ 95,599,778
NFL Green Bay Packers Teams $ 94,018,300
NFL Indianapolis Colts Teams $ 93,373,915
NFL New England Patriots Teams $ 92,734,120
NFL Baltimore Ravens Teams $ 90,713,965
NFL Kansas City Chiefs Teams $ 83,623,776

Ratio of top payroll / bottom payroll for NFL 2008 = 1.822


----------------------------------------------------------
NHL

2009-2010 Salary cap

-- The Upper Limit: $56,800,000
-- The Lower Limit: $40,800,000

http://content.usatoday.com/sports/hockey/nhl/salaries/default.aspx

Team (2007-08) Total Payroll ($) (2007-08)

Colorado Avalanche 61,290,750
New York Rangers 56,705,000
Philadelphia Flyers 56,973,200
Anaheim Ducks 50,769,200
Calgary Flames 50,934,900
Dallas Stars 49,420,000
Boston Bruins 49,501,600
.
.

Buffalo Sabres 45,954,400
Carolina Hurricanes 49,948,600
Detroit Red Wings 44,633,000
Edmonton Oilers 46,915,659
Florida Panthers 39,749,200
Los Angeles Kings 40,502,000
Minnesota Wild 46,183,000
Montreal Canadiens 42,313,500
New Jersey Devils 47,622,511
New York Islanders 39,007,720
Ottawa Senators 49,997,370
Pittsburgh Penguins 41,384,200
San Jose Sharks 41,454,800
St. Louis Blues 39,047,833
Tampa Bay Lightning 38,954,167
Toronto Maple Leafs 46,445,180
Vancouver Canucks 45,710,000
Washington Capitals 44,309,200
.
.
Atlanta Thrashers 36,580,000
Phoenix Coyotes 35,694,750
Chicago Blackhawks 34,800,540
Nashville Predators 30,273,340
Columbus Blue Jackets 28,010,000

Ratio of top payroll / bottom payroll for NHL 2007-2008 = 2.03


---------------------------------------------------
NBA (min salary @ 75% of cap, luxury tax @ 121% of cap)

http://www.nba.com/news/salarycapset_080709.html

2008-2009 payroll
http://hoopshype.com/salaries.htm

1. New York Knicks $94,842,168
2. Dallas Maverick $92,758,122
3. Cleveland Cavaliers $91,650,943
4. Boston Celtics $80,659,701
5. Portland Trail Blazers $80,600,059
6. Phoenix Suns $75,626,030
7. Houston Rockets $75,469,051
8. Los Angeles Lakers $75,255,408
9. Sacramento Kings $73,129,886
10. Detroit Pistons $72,076,423
11. Toronto Raptors $71,965,453
12. Milwaukee Bucks $71,421,682

------------pay luxury tax----------

13. Washington Wizards $70,259,475
14. Indiana Pacers $70,036,797
15. Denver Nuggets $70,478,826
16. Miami Heat $69,865,650
17. San Antonio Spurs $69,299,039
18. Orlando Magic $68,713,618
19. Oklahoma City Thunder $68,533,648
20. Chicago Bulls $68,520,301
21. Golden State Warriors $68,461,515
22. Philadelphia 76ers $68,393,588
23. Atlanta Hawks $68,012,336
24. New Orleans Hornets $67,866,515
25. Minnesota Timberwolves $66,066,569
26. Utah Jazz $65,632,827
27. New Jersey Nets $62,609,434
28. Charlotte Bobcats $61,787,680
29. Los Angeles Clippers $60,775,937
30. Memphis Grizzlies $55,705,279

Ratio of top payroll / bottom payroll for NBA 2008-09=1.703

---------------------------------

Richard Snowden's two-tier cap system

http://soccer365.com/us_news/story_81208190400.php



UEFA Platini: cap links to certain percentage of each club's total revenue

http://www.independent.co.uk/sport/football/european/platini-aim-is-financial-fair-play-1547556.html
Platini's proposals: Wages could be linked to percentage of club turnover

NRL

In 2009, the salary cap for the sixteen teams is $4.4 million, with a $3.96 million salary floor.

The NRL is one of the only major leagues to implement a salary cap when there are competing leagues in other countries where there is either no salary cap, or a much higher cap per club. As a result, there is a constant drain of players from Australia to Europe where salaries for the elite (and even for average players) are considerably higher. The NRL has chosen to continue with the cap, believing that any reduction in quality of the sporting product due to the loss of these players is less than allowing richer clubs to dominate.



No salary cap with luxury tax like MLB

http://www.cbssports.com/mlb/salaries

Code:

	Team	Payroll	Average
1.	New York Yankees	$201,449,289	$7,748,050
-----------------pay luxury tax--------------------------
2.	New York Mets 	      $135,773,988	$4,849,071
3.	Chicago Cubs	      $135,050,000	$5,402,000
4.	Boston Red Sox	      $122,696,000	$4,089,867
5.	Detroit Tigers	      $115,085,145	$4,110,184
6.	Los Angeles Angels	$113,709,000	$4,061,036
7.	Philadelphia Phillies	$113,004,048	$4,185,335
8.	Houston Astros 	      $102,996,415	$3,814,682
9.	Los Angeles Dodgers	$100,458,101	$4,018,324
10.	Seattle Mariners	    $98,904,167	$3,532,292
11.	Atlanta Braves	        $96,726,167	$3,335,385
12.	Chicago White Sox	$96,068,500	$3,694,942
13.	St. Louis Cardinals	$88,528,411	$3,278,830
14.	San Francisco Giants	$82,161,450	$3,043,017
15.	Cleveland Indians	      $81,625,567	$3,023,169
16.	Toronto Blue Jays	      $80,993,657	$2,892,631
17.	Milwaukee Brewers	$79,857,502	$3,194,300
18.	Colorado Rockies    	$75,201,000	$2,785,222
19.	Arizona Diamondbacks	$73,571,667	$2,724,877
20.	Cincinnati Reds	        $70,968,500	$2,957,021
21.	Kansas City Royals	$70,908,333	$2,727,244
22.	Texas Rangers	        $68,646,023	$2,367,104
23.	Baltimore Orioles	        $67,101,667	$2,580,833
24.	Minnesota Twins    	$65,299,267	$2,251,699
25.	Tampa Bay Rays    	$63,313,035	$2,183,208
26.	Oakland Athletics	       $62,310,000	$2,225,357
27.	Nationals	               $59,328,000	$2,045,793
28.	Pirates	               $48,743,000	$1,874,731
29.	San Diego Padres	        $42,796,700	$1,528,454
30.	Florida Marlins	        $36,814,000	$1,314,786

Ratio of top payroll / bottom payroll for MLB 09 = 5.47


English Premier League

TOP PREMIER LEAGUE WAGE BILLS 2007/08

Current exchange rate = $1.64 = £1

Chelsea - £172.1m
Manchester Utd - £121.1m
Arsenal - £101.3m
Liverpool - £90.4m
Newcastle Utd - £74.6m
Portsmouth £54.7m
Manchester City £54.2 m
Tottenham Hotspur £52.9 m
Aston Villa 50.4 m
Everton 44.5 m
West Ham United 44.2 m
Blackburn Rovers 39.7 m
Fulham 39.3 m
Bolton Wanderers 39 m
Wigan Athletic 38.4 m
Sunderland 37.1 m
Middlesbrough 34.8 m
West Bromwich Albion 21.8m
Stoke City 11.9 m
Hull City (2007 figures) 6.9 m

Ratio of top payroll / bottom payroll for EPL 07/08 = 24.94

J-league

2009 J-league payroll

(1) Urawa Reds - 1,250,000,000 Yen = $12.5 mil
(2) Gamba Osaka - $10.5 mil
(3) Kashima Antlers - $8.3 mil
(4) Vissel Kobe - $7.3 mil
(5) Kyoto Sanga FC - $7.0 mil
(6) Oita Trinita - $6.5 mil
(7) Jubilo Iwata - $6.4 mil
(8) Kawasaki Frontale - $6.2 mil
(9) Kashiwa Reysol - $6.1 mil
(10) Shimizu S-Pulse - $5.9 mil
(11) Nagoya Grampus - $5.8 mil
(12) FC Tokyo - $5.6 mil
(13) Yokohama F Marinos - $5.2 mil
(14) Omiya Ardija
(14)Sanfrecce Hiroshima - $5.1 mil
(16) JEF Utd Chiba - $4.8 mil
(17) Albirex Niigata - $3.6 mil
(18) Yamagata Montedio - 250,000,000 Yen = $2.5 mil

Ratio of top payroll / bottom payroll for J-league 2009 = 5

Re: The comprehensive salary cap structure for 2010 and beyond thread

while i am in favor of the mls significantly raising the bar for player salaries and even allowing 2 DPs with salaries not to exceed $ 2 mill, because they have more $$$$$$$ available due to better sponsorship and expansion fees, i have been rethinking the idea of a luxury tax that will support weaker financial teams in more challenging markets

the idea of 'rewarding' weaker financial teams with money from successful financial teams seems on the spur of the moment an idea that will help keep equality in the league

but my take on it has been that the lower earning teams may see no big incentive to market their team better because they will be getting $$$$$ from the other successful teams in the league

i would rather mls brass use the luxury tax, or at least a significant part of it, into enhancing the marketing skills in cities that need help; free handouts rarely work well and only keep those in need always in need-- there needs to be accountability to ensure that the weaker markets are using the best strategies possible to get stronger support in their cities

some weak markets are weak because of lousy management skills and ownership interest; rewarding them with money from the successfully marketing/ownership cities may be counterproductive IMO

Re: The comprehensive salary cap structure for 2010 and beyond thread

FYI: This is where the league paying $2.5 mil come from in my model. Keep in mind that MLS also get a large cut of each team shirt sponsorship to pay for player salaries and league operation that was not included in this feasibility study. Each team will send the league 30% cut of its gate receipts. In a way, the league highest attended teams are subsidizing the league lowest attended teams. For example, Seattle (30,204) will send revenue from 9,000 paid tickets while FC Dallas (9,229) will send revenue from 2,700 paid tickets [this assume that Seattle has 30,000 paid tickets and Dallas has 9,000 paid tickets.]

Code:

                           Pre-Contraction               [b]Post-Contraction[/b]
Revenues          Investor/Operator       MLS      [b]Investor/Operator     MLS[/b]

Gate Receipts            50%               50%               [b]70%         30%[/b]
Concessions             100%                0%              100%          0%
Parking                 100%                0%              100%          0%
Local Sponsorships      (1)                (1)              100%          0%
National Sponsorships    0%                100%               0%        100%
Other Stadium Revenue  100%                 0%              100%          0%
National Media           0%                100%               0%        100%
Local TV & Radio       100%                 0%              100%          0%


Expenses

Player Salaries          0%               100%               [b] 0%        100%[/b]
Front Office Expenses  100%                 0%              100%          0%
Team Travel              0%               100%              100%          0%
Broadcast Expenses       0%               100%              100%          0%
Rent                    50%                50%              100%          0%
Game Day Expenses       50%                50%              100%          0%

(1) The first $1.5 million was retained by the team and the remaining
revenue was shared with the league
http://www.kansascity.com/multimedia/kansascity/archive/sports/KC_Soccer_Final_Report.pdf


p.s. Must read article
http://www.signonsandiego.com/sports/soccer/20060927-9999-lz1s27goal.html

At MLS games, announced figures often include large numbers of free tickets plus inflated totals
By Mark Zeigler

Official attendance in 2005: 15,108
Paid attendance in 2005: 10,746 (29% less)

Re: The comprehensive salary cap structure for 2010 and beyond thread

Under this model, each team can spend up to 25% of its total revenue. Teams can exceed this 25% threshold by paying luxury tax ($1 for every $1 over).

My analysis if MLS go with this model:

What the league would look like: The league will have a few elite clubs, a few good but not elite clubs, a few mid table clubs, and the bottom dwellers. Basically, it will be similar to most soccer leagues around the world. Think J-league with playoff (see the J-league payroll above.....$12.5 mil to $2.5 mil). 8 teams playoff (12 teams playoff when MLS have 24 clubs), however, will allow many more clubs to compete for the title.

Financial Viability/profitability: Unlike most soccer leagues, MLS will be much more financial viable because the largest costs, player salaries, are capped at 25% of each club total revenue. Luxury tax will allow the rich to spend more while helping the low revenue clubs be profitable. Revenue sharing will also help out the league low revenue clubs (for exampe, for the past several years 30% of each club gate receipts go to the revenue sharing pool). Basically, teams will live within their means and spend the income they have. If the team generate more money, the team can spend more money.

Rate of Growth (values of club):This model would allow for significant growth for the league, especially the elite clubs. MLS will be a top 10 football leagues in a relatively short time. Under this model, MLS top teams (Los Angeles, New York, Toronto, Seattle) will be among the best teams in the Americas within a few years. Take for example Seattle, who many guesstimate to generate over $35 million this year. This is even more revenue than many FMF clubs. Unlike these FMF clubs who can spend as they feel fit, Seattle can only spend $2.3 mil + DP that cost $425,000 toward the cap. If Seattle are allowed by MLS to spend the profits they have, they could put together a $15 mil team, pay luxury tax and still be profitable. With a much better team, their attendance could reach as high as 40,000 (just need 7,500 more fans to the current 32,500 fans). This would mean their sponsorship, merchandise, local tv and radio, concession, parking revenue will also increase. And the cycle repeats itself. Success begets more success.

Toronto, with its 15,000 waiting list for season tickets, can expand BMO Field to 35,000. I wouldn’t be surprised if they sold out the 35,000 seats stadium, especially when the team have a player salary budget of $12-14 mil instead of $2.3 mil. New York and Los Angeles are two of the biggest soccer markets in the world with billionaire owners. Basically, MLS top clubs will have a lot of room for further growth while top teams in Mexico, Brazil, Argentina have reached the saturation point. Under a financial model that restraint salaries cost, allow top teams to build upon their success and grow to their potential, team values will increase significantly.

Likelihood of success in the Champions League: With $15 mil teams, MLS can win the title once every 2 or 3 years. If New York, Los Angeles, Seattle, Toronto grow to their full potential, this will happen more regularly.

League image/reputation:

Soccer fans usually judge a league by its top teams. You hardly ever hear fans compare the Premiership and La Liga by their bottom half teams. If MLS top teams play well and have the talents on equal footing with Mexico's FMF top teams, MLS will be among the top 4 leagues in the Americas. Winning a few Champions League titles will also help the league image and reputation. Many soccer fans in this country will support MLS. Some will only support MLS if it’s a top 5 league (EPL, La Liga, Serie A, Bundesliga, Ligue 1) but for many, a top 10 leagues is good enough.

Likelihood of MLS adapting this model: Low.
However, this model has many things to recommend itself. Financial viability. Check. High rate of growth. Check. Becoming a top 10 soccer leagues/the 5th major in USA/Canada within a short time. Check. Champions League success. Check.

The negative side of this is the league would be uncompetitive in which many teams have low shot at winning the title. Having a playoff system helps, but in the end, it will usually be the elite teams who will win it. If NY, LA, Sea, Toronto owners can convince the rest of MLS by writing a large enough check, they might go for it. This is the fastest way for the league to grow significantly and still be profitable.

Here ends my analysis.



-------------------------------------------

Am I too optimistic? Can Seattle average 40,000 with a much better team ($12-15 mil)? Can Toronto average 35,000 with a $12-15 mil team? Can New York and Los Angeles sold out their stadium? Is $12-15 mil payroll big enough to compete against top Mexican clubs for the Champions League title? Will the TV rating increase with 'must-watch' teams? Will MLS image/reputation/perception among soccer fans and sports fans improve considerably in this country and abroad? Will the league be profitable if salaries is capped at 25%?

Re: The comprehensive salary cap structure for 2010 and beyond thread

Snowden's two tiers cap: $2.5 mil soft cap (league pay); $7.5 mil hard cap (3:1 ratio)

http://soccer365.com/us_news/story_81208190400.php

Re: The comprehensive salary cap structure for 2010 and beyond thread

MLS still isnt a top tier league and still dosent make allot of money so they need to raise the cap but not t much

A more flexible salary structure compare to the current hard cap proposed by triplet1:

What do you think? Could it work? And would it be a better cap structure compare to the current one?

Re: The comprehensive salary cap structure for 2010 and beyond thread

http://www.matchfitusa.com/2009/08/cooper-departure-represents-mls-reality.html

It’s sad that MLS is losing good talents like Cooper while the like of Seattle can’t spend part of its enormous profits (guesstimate at about $15 mil profits this year on $35 mil revenue) to retain such players or bring back talented young Americans that could improve this league. As long as MLS can only be as good as its weakest teams, it will struggle to compete against Mexican clubs. Who am I kidding, MLS can barely compete against Central American and Carribbean clubs as is.

If MLS follow the UEFA Platini's model where teams live within their means and spend the income they have (25% cap directly links to revenue, luxury tax in the form of $1 for $1 over the 25% cap), could MLS top teams be on par with Mexican top teams in a very short time? And within several years, could they surpass top FMF teams? Think Red Bull with $30-40 mil budget and paying the league lot and lot of luxury tax dollars. Red Bull Inc. is spending big money on 2 Formula Teams, Red Bull Salzburg, RB Leipzig etc...Why not let them spend big money on MLS (beside the stadium) and donate to MLS lot of luxury tax revenue? Wouldn't a success club in New York benefit the whole league?

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

Depends on your objectives. I think you'd get less of a spread between the highest payroll and the lowest this way than the formula you suggest, so it might be easier to implement.

Some rough numbers:

Assume for the sake of argument that after a slice for the league each team gets $1 million from the national TV money and $1.5 million from national sponsorships -- that's $2.5 million per team as a base cap number. Now add back some of the gate receipts. If Columbus has $3 million of gate receipts (which is a guesstimate based on last years numbers in the Columbus Dispatch), they'd get back $500,000 of the $1 million they send to the league, for a total cap of $3.0 million. OTOH, if TFC is generating $9 million (20,000 x $30 a ticket x 15 games), sending $3 million to the league, they'd get another $1.5 million for their cap, for a cap number of $4 million.

As I said, it's a modest reward for selling more tickets, but it probably won't provide a team with a $10+ million cap.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

You'd probably have to set a floor and a ceiling for that just to be sure.

By contrast, the following idea:

. . .probably doesn't need the hard cap it proposes, because it's doubtful that teams would spend that much under it with that hefty a tax. The 1:1 luxury tax I call "the tinkerer's cap"--it would see teams spend into the luxury tax zone, but likely most of them would spend very little.

A team might pay a lot of tax to buy a championship, but in MLS's playoff system that wouldn't be certain enough to risk a financial disaster if it failed. What I think the "bigger teams" would really do is this: at a point in the season about where we are now, they'd look at the table and ask themselves whether buying an extra player or two at a typical MLS starter's salary would improve their odds of making the playoffs significantly, or improve the chances of getting one round further. If so, they'd sign a guy or two and be willing to forfeit a couple hundred grand in tax, but that's about as far as it goes. That's about what one more playoff game is worth.

So this year, you'd probably see LA, Seattle, DC, and Toronto grab a decent player or two to shore up their chances. Chicago might also be a possibility. NY is too far out. Houston is already in (and I don't know that they'd be a bigger spender in these circumstances anyway, trusting more in their FO and coach to build a good team for a reasonable price) and Colorado, Columbus, Chivas, KC, FCD, NE probably don't draw enough to justify it.

But what you probably wouldn't see (unless DPs were exempted), is Beckham/Blanco/Henry type spending--even though ticket-wise that type of purchase might well be justified for a handful of guys. Beckham probably sent the Galaxy's payroll to over $10M, if the BBC estimate of his percentages are to be believed. Imagine the amount of tax they'd be paying on that, I would think it would be impossible.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

I've thought about it a lot since he proposed it, and I just don't like the luxury tax idea for MLS. In fact, two different reports from fans posted on Big Soccer had a lot to do with my thinking on this: First we had HSG moving a weekend game for a concert, essentially shoving the MLS game where gate receipts must be shared to a less desirable night for a concert where they could keep the income. Next we had a Revs fan recount a conversation with a person in the front office where they noted (as I recall) that they really saw no benefit to a DP -- better to let other Owners spend their money and just sell tickets when their stars come to town (which they in fact just did again this weekend.)

Those reports, and my sense of some of the organizations more generally, have convinced me that there are Owners who are riding on the coattails of others. They seem perfectly content to let others do the heavy lifting -- as long as they get paid. Until that changes, I think it's a mistake to adopt policies that reinforce that approach, and a luxury tax would do that IMO. Just keep the cap low, wait until AEG or RBNY or some other owner is desperate or foolish enough to want some player badly and make them pay you for the privilege -- which is essentially what a luxury tax is.

That's why I like having the cap reflect, in part, an individual team's financial performance. I'd like to incentivize them to market better and sell more tickets, not just spend their energy figuring out ways to chisel money out of the other owners. I'm not prepared to suggest their entire payroll should be pegged to a percentage of their gross revenues though. Those TV deals and national sponsorships are negotiated by the league and SUM, not the individual Owners, and I think that money should be shared equally. Gate receipts? That's another matter. Giving the Owners back some percentage of what they generate in gate receipts as a bump in their payroll rewards teams that spent money and resources to market well, rewards fanbases that buy those tickets and doesn't just give those Owners additional compensation for keeping their hands in their pockets and selling concert dates.

If the percentages are adjusted appropriately (50% of the gate receipts seeming a reasonable number to me), as I said the difference between the highest cap number and the lowest probably isn't all that great, but the signal that it would send is important IMO.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

If what you are saying is true...that many owners just want to get paid, then Platini model [cap at 25% of each club total revenue, luxury tax $1 for $1 over for exceeding this 25% cap] is perfect for MLS owners, though not necessarily for the fans of HSG, NE, and other small revenue clubs. If the check is big enough, the like of New York, Los Angeles, Seattle, Toronto, Vancouver can sway the other owners to vote in favor of this proposal.

Since the salary cap is directly links to 25% of a club total revenue, clubs can use the other 75% of revenue to pay for expenses. Any left over is pure profits. If a team can’t be profitable when it only spend 25% of its total revenue on player salaries (which is heavily subsidized by the league through revenue sharing) receive luxury tax revenue, receive SUM distribution, then that team is not trying hard enough.

Many ticket buyers are family, youth type who attend for a nice day out. A winning team do not necessarily bring out the crowd. Six championship teams actually have had their attendance DECREASE the year after they won the title. What does bring out the crowd however is the stars as triplet1 noted and I quote "better to let other Owners spend their money and just sell tickets when their stars come to town (which they in fact just did again this weekend.)" There will be significant increase in attendance when the elite clubs ($12-15 mil clubs) and their stars come to town.

Seattle (40,000+) Toronto (35,000+) Vancouver (30,000+) Los Angeles (27,000) and New York (25,000) will be good for the league. These figures are realistic if these clubs win on a consistent basis and have much better talents (think $12-15 mil team vs. $2.3 mil team in term of talents).

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

As I said, I wouldn't go that far. Those TV contracts and sponsorships are negotiated by the league -- they represent a joint effort -- and they should be shared equally IMO. Gate receipts require more effort from the teams themselves to generate, which is why I would focus there to provide some incentives.

What I've suggested is actually close to the NFL structure; share the TV money and sponsorship money equally, which provides much, but not all of the money for team payrolls, but require and allow teams to make up the balance from what the NFL calls "local revenues" generated in the stadium.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

I would take your proposal as the next MLS salary structure over the current one any day of the week. It's a much needed improvement.

If MLS decides to keep the current salary structure, it would look like this in the years to come (assume 10% growth each year):

2009: $2.30 mil
2010: $2.53 mil
2011: $2.78 mil
2012: $3.06 mil
2013: $3.37 mil
2014: $3.71 mil
2015: $4.08 mil
2016: $4.50 mil
2017: $4.94 mil
2018: $5.43 mil
2019: $5.98 mil

However, as MLS improves, so does the soccer leagues that MLS compete with.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

I disagree. I believe if there is no $6 mil hard cap, the Red Bull will exceed it even if paying hefty tax for it. If MLS impose the NBA/Snowden structure for 2010, I believe New York will spend up to the max $6 mil (and pay $3 mil luxury tax). The Red Bull is a "for brand awareness organization." Their brand value increases when their team is doing well. I wouldn't be surprised if they spend $17 mil: $10 mil salaries and $7 mil luxury tax if they could.

With a winning, better quality $10 mil team, they could sell out the RBA which will generate a lot of revenue for them. With sell-out and increased demand, they could increase prices. Just imagine a consistently winning $10 mil team in a sold out Red Bull Arena will do for New York and its revenue. They would get a sizable local TV deal especially in a market that have over 18 million people. Other high revenue markets like Los Angeles, Seattle, Toronto (in 30,000 seats) will want to be on par with the Red Bull, so they will spend too, especially when they have the income for it.

Seattle will generate about $35-38 mil in revenue this year and probably make at least $15 mil in profits. It will not be a financial disaster for the team to spend an extra $6 mil in order to put together a winning team. In fact, a winning team is crucial for their on-going success. Los Angeles generated $36 million in 2007 according to Forbes. These teams can take less profits in the short-run in order to gain in long-run (revenue, club value etc...).

I disagree. LA, NY, Seattle, Toronto (in 30,000 BMO Field) will spend big (and pay big luxury tax). Even if they spend $15 mil in salaries and luxury tax, they are still profitable. I'm not saying they will spend $15 mil, but I wouldn't be surprised if they spend at least $10 mil.

The $6 mil hard cap is there there to restrain spending from teams who can afford to spend big. A 2 to 1 ratio will help maintain MLS competitiveness. Teams that do not have the income to spend over the luxury tax threshold will stay under it because teams can only receive luxury tax revenue if they are under the threshold.


FYI 1: New York Knicks payroll was $124 mil in 05/06 ($74.5 mil above the salary cap and $62.3 million above the tax line). As a result, they paid $62.3 mil in luxury tax.

FYI 2: NY Yankees payroll in 2008 is $201 mil compare to $123 mil for the Boston Red Sox. NY paid $26.9 mil in luxury tax. This number could have been a lot higher if the luxury tax threshold has not been set at $155 mil. In addition, MLB luxury tax is not $1:$1 like NBA,

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

It should $10 million hard cap. Eliminate the DP.

LA Galaxy spend $8.8 mil with Beckham. I find the league would raise the level of play dramatically if it could sign 3-4 mid-level players to million dollar deals. Spending money does make money.

The NASL was the perfect storm for dissolution, MLS has surpassed it and is now in untreaded water. Risks need to be taken.

This risk is small! But may have huge rewards.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

MLS pays for the player salaries and its league operation from 4 revenue sources: 30% gate receipt of every team, national tv deal (~$17 mil a year), national sponsorship, and a large portion of shirt sponsorship. There are a few reasons why I use a very conservative $2.5 mil in my 2010 assumption for the various salary structures despite knowing that there will be a new CBA in 2010.

First, throughout MLS history, the salary cap only increase by tiny amount. A $200,000 increase next year is part of that trend. I expect the salary cap in 2010 to be around $2.5-2.7 mil, though I sincerely hope that it would be $3 mil, but that’s just wishingful thinking in my part. A $3 mil cap in 2010 would mean MLS has to find $11.2 mil ($700,000 increase x 16 teams) from somewhere.

Second, attendance has dropped for many teams. League wise the drop is about 1,000, despite Seattle averaging over 30,000, which will have a negative effect on national sponsorship, merchandise, concession, parking, shirt sponsorship and local sponsorship revenue too.

Third, MLS is a single-entity company. This gives the league a very powerful position in determining the amount of its salary cap. For some owners, it's in their best interest to keep this cost (player salaries) as low as possible even if it means a very slow rate of growth.

http://sportsillustrated.cnn.com/2009/writers/soccer_america/08/05/MLS.forecast/2.html

p.s. Just to clarify: This thread is not about how much the salary cap should be but what kind of structure the salary cap should be. The $2.5 mil is my best guesstimate (accurately or not) to serve as the base for what kind of salary structure that is best for MLS to grow, succeed and prosper in the years to come. And yes, the DP is assume to be included in every salary structures.

$500,000 will be counted toward the salary cap for a DP. (it is $425,000 this year). To have a DP will probably mean paying $500,000 in luxury tax. If all of the DP salary is counted under the luxury tax model then it would discourage teams to spend on players like Beckham, Henry and Ronaldinho. DP is good for the league profile, attract new fans, higher tv rating and sell a lot of tickets for both home games and road games. No team would pay Ronaldinho $6 mil a year knowing they will pay another $6 mil in luxury tax. Another thing to keep in mind is that a well-known DP will be more likely to come if the team is doing well on the field. Players like Beckham, Henry, Ronaldinho are used to winning titles and expect the same for their MLS team.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

MLS isnt past the NASL which lasted 16 years, MLS isnt even 14 years old and this is the exact time in which the NASL started making decisions which led to its end. The demise of the NASL was caused because the NASL didnt have a strict cap and the NY cosmos were able to bring in expensive players and the other clubs had to spend to keep up but the other clubs didnt have the money, to quick expansion played a role but MLS has already looked at the demise of the NASL when making decisions and it will be no surprise when they do it again and keep a fairly strict salary cap maybe agreeing to a 5% increase each year.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

"Financial disaster" was laying it on a little thick, yes. But what I mean is, if you spend millions trying to win a championship and it doesn't work, that's millions you've thrown down a hole. Spending $6 Million, on only $3 Million worth of talent, and having the odds of winning the title still uncertain, especially because there are others who are financially capable of matching you if you did that, is not a move I think MLS FOs are likely to make. Further, if it backfired, that's the kind of move that gets GMs fired. MLB teams do not have 1:1 taxes, and if they did it would alter the Yankees' incentives radically.

It's much, much safer to use that kind of 1:1 tax to shore up a couple weaknesses to try and push into the playoffs. (That's why I like the idea, btw, and that's why I proposed it once myself).

Re: The comprehensive salary cap structure for 2010 and beyond thread

The articles point was good but trying to make it a moral duty of MLS is stupid... it's simply supply and demand. As long as their is an endless supply of mid-level MLS talent, why should they overpay to bring it in?

MLS also benefits more from foreign players because it often lends some "credibility" with people who only respect foreigners as soccer players.

The only U.S. players MLS should try to get back into MLS are the ones that showed they were good enough to go over there, make a mark in those leagues, AND THEN come back to MLS... because then they bring the quality aura home with them (a la Brian McBride or even a Bobby Convey).

The league AND the player benefits by letting them go abroad.

First, MLS had to have a league. Second, they had to produce players good enough to export. Third, they must become good enough to import quality.

We're simply in phase two right now.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

I believe there are 4 relatively inexpensive and easy ways for MLS to improve and take MLS to the next level. This is especially true now that EPL and La Liga matches are being broadcast on ESPN2.

1. The ownership of each club actively encourage supporters atmosphere like setting aside a Supporters Section solely for supporters. Great supporter atmosphere will attract more fans and make the viewing experience much better. The success in Toronto and Seattle is dued in no small part to the atmosphere.

2. Flexible salary cap structure where markets with the biggest potential are allowed to improve their team using their own money. In return, they pay for this spending advantage in a form of luxury tax. A soccer league is usually judged by its top clubs. Having clubs that could go head to head against the best in this region (FMF top clubs) in the Champions League will improve MLS image, reputation and perception.

3. Clubs and players more willing to play attacking/open soccer. Top to bottom approach like DC United, Chivas USA where it is the club philosophy to play attacking soccer and GM/coach/players follow this philosophy.

4. A playoff system that make the regular season more meaningful (reward the best teams in the league). Right now, the reward for the best teams in the first round playoff is having the the second of a 2 games series at home. This is a tiny advantage and some would argue that it is even a disadvantage since the higher seeds have to travel twice as much for the two games.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

Would MLS be on par with the Mexican league within a short time if MLS ends parity by installing the Platini model? For example, can the like of Los Angeles, New York, Toronto, Seattle compete against top Mexican clubs with $10-15 mil salaries?

Would it be better if MLS ends parity now so the league can grow extremely fast and when it reaches its potential, MLS can institute parity again? By then, many soccer fans would be hook on MLS and the league has established itself as one of the 10 best soccer leagues in the world and America’s 5th major leagues. Most of these fans would still follow the league even if parity resumes. Best of all, all MLS teams can be profitable under the Platini model since wages is capped at 25% of revenue.

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

Which salary structures do you think the ownership of MLS 18 clubs (counting Portland and Vancouver) would vote for? The one that is best for MLS to grow, succeed and prosper in the years to come?

The inflexible hard cap structure of today?
A more flexible salary structure (with luxury tax to help the small revenue teams)?

New expansion teams: Toronto, Seattle, Philly, Vancouver, Portland will vote for a more flexible structure in my opinion.

Big markets teams: Los Angeles, New York, Chicago, DC United will also vote for a more flexible structure IMO.

Would the small markets team vote in favor of a more flexible salary structure in return for significant luxury tax revenue (~$2 mil a year)?

Re: What kind of salary structure is best for MLS (to grow, succeed and prosper in the years to come

I am very ready to see MLS increase the cap. However, the choices you've provided are just too numerous to consider rationally. Personally, I would like see the following:

1. Clubs sign and pay players; Not MLS front office (this would require changing how revenue flows betwen owners and front office).
2. Have a salary floor and ceiling. Allow higher revenue clubs to spend more monhey.
3. Allow exemptions for re-signing key players. Call it the Tony Sanneh rule.
4. Intra-MLS free agency? Yes!
5. Plow expansion fee monies into signing players (or developmental rosters), but not salaries.