Will MLS have a $4.5 million salary cap in 5 years time?

$27 million. 8 from ESPN, 10 from NBC, 9 from Univision. All of them end after the 2014 season. I wouldn't be surprised if NBCUniversal makes a comprehensive bid next time shifting Spanish language broadcasts to Telemundo. Maybe MundoFox will be in enough homes for Fox to do a comprehensive bid as well. Even so, it's going to be a while before truly big money happens in a TV deal.

 

Is MundoFOX going after sports?

 

Over the 20-year period Gary Bettman has been commissioner.

It also helps that the NHL is a gate-driven league, not unlike MLS. Except NHL teams have 41 home games, 17,000+ seat arenas, and the Canadian dollar went from being a joke in the late 90's to level with the American dollar for a while now (the NHL had six Canadian teams for the majority of Bettman's tenure and just added a seventh vs. MLS with three).

Speaking of Canada, cursory googling didn't produce a value for Canadian MLS TV deals. Any insight? Are they split evenly with the rest of the league?

 

Not sure, but if the idea of comprehensive bids comes through then it would be a way for Fox to tie up all the MLS coverage regardless of language.

 

Big, long term TV deals can be negotiated on the basis of potential viewership down the line. It's possible there could be an agreement at the end of 2014 (hopefully after massive ratings for the 2014 World Cup and some spillover to MLS), where networks pay far more than the current value of the league because of what they believe the near future potential is.

And along with that, there might be an implicit condition to make the league raise the salary cap more than they normally would because of that massive increase in revenue.

 

Well, how much did the cap go up when the TV deals where signed, giving MLS an influx of $20M+ for the first time?

5% per year.

That's the model. There is no indication that the cap number is tied to an increase in revenues. The cap goes up 5% per year.

Now, they may bump up the allocation money with the extra cash, but MLS doesn't release how much allocation money it awards so we won't know.

http://www.phillysoccerpage.net/2012/06/26/the-great-allocation-money-chase/

 

I remember reading about 10 million in allocation money, but that was probably just speculation.

 

Isn't your very argument contradicting your conclusion? They started raising the cap by 5% a year only after the increase in revenue. If the next TV deals are larger than expected, what makes you think they wouldn't use that money to increase the cap by more than 5% a year?

 

No, that was an actually statement made by Garber at the ASG two years ago. Of course, keep in mind over a 1.2 million has been rumored to go to an expansion side, so minus that addition the real number is closer to 7-8 million per year split among now 19 teams.

 

The 5% was a Player Union and MLS LLC negotiation, but you are right, perhaps if there is a nice increase, the league and players will agree on a say 7.5% yearly increase and/or a nice bump in the CAP to say 3.5-4 million.

We really do not know.

 

Frankly, any rise in the cap will be partially attributed to TV revenue and mostly attributed to the negotiating tactics of the MLSPA. The cap increase is a negotiated item in the CBA. Frankly, MLS owners can continue to raise it 5% and distribute additional revenue by way of allocation dollars. This allows them to commit to only a small budget number but still spread the wealth in any given year; protecting them from being on the hook in the case of a bad year.

 

Frankly, any rise in the cap will be partially attributed to TV revenue and mostly attributed to the negotiating tactics of the MLSPA. The cap increase is a negotiated item in the CBA. Frankly, MLS owners can continue to raise it 5% and distribute additional revenue by way of allocation dollars. This allows them to commit to only a small budget number but still spread the wealth in any given year; protecting them from being on the hook in the case of a bad year.

 

We definitely don't know how the league would react to a good increase in TV revenue. Though as I said in a post earlier in this thread, if TV networks pay more than what the current value of the league seems to be (based on TV ratings), then that means they're investing in something they think is undervalued. They might expect the investment to go toward something that can help increase the quality of the league, such as raising the cap.

I don't recall the cap being something that was negotiated in the CBA. I thought it was something that owners agreed upon partially based on how the CBA went.

Of course, I'm sure there is a good reason why the current CBA and all current TV deals expire simultaneously at the end of 2014.

 

It is not, in fact the MLSPA waives their right to negotiate the budget specifically. However, budget increase has been tied to the automatic player salary increase over the past three CBAs and has been part of the negotiations. If you look at most press releases, the budget was "announced" as part of the new CBA *even though it is technically not.

That being said, each CBA has seen a negotiated one time bump in the budget, then an annual increase equal to automatic raises for veterans. In 2010, there was a 10% bump and then 5% every year after that. Until proven differently, the budget increase will come out of CBA negotiations.

 

Exactly.

The salary budget was modeled on a 5% annual increase from the very beginning. We know this because a letters between Clark Hunt and Todd Durbin were noted in the Fraser appellate court decision:

"In his letter, Hunt urged that the team player salary budget be reduced by $70,000, with the “bulk of the reduction” coming from the “bottom 12 players on each team whose only alternative is to play in one of the other U.S. professional leagues or one of the lower division foreign leagues.”   Hunt also suggested that salary growth should also be limited to five percent a year, reasoning that “until there is significant domestic-based competition for MLS players, the rate of salary growth should be relatively easy to contain.”   In response, Abbott cautioned that “a reduction of $70,000 in player salaries per team [would] impact the quality of players we are able to attract.”   At the same time, he agreed that, “for modeling purposes the player salaries should be held to [a] 5% [increase] per year.”

http://caselaw.findlaw.com/us-1st-circuit/1441684.html

And, if you look at the annual adjustments over the years, other than when times have been really tough, MLS has done a pretty good job at funding the 5% annual increase.

In addition to the baseline salary budget, MLS awards allocation money, but it appears there is a lot more flexibility about how allocation revenue is adjusted. From the link I posted above:

"Allocation money is a “rolling revenue stream” teams receive primarily during the off-season, MLS spokesman Will Kuhns explained. The MLS Board of Governors meets three times annually — at the MLS SuperDraft, All-Star game, and MLS Cup — to make decisions on salary and allocation money matters, [MLS spokesman Will] Kuhns said."

When the league has some extra revenue, it tends to push more money into allocation revenue, it hasn't made big adjustments to the annual salary budget that would have the impact of pushing up the baseline for subsequent seasons as well.

Now, some have suggested the players will force an increase in the salary cap during the next CBA, but remember the salary cap itself is not part of the CBA. Indeed, outside of the single entity world, for a salary cap to be legal and enforceable, it must be part of a collective bargaining agreement, but that's not the case here. Which is why (I'm convinced) MLS goes to great pains to call it's annual payroll limit a "salary budget" rather than a "salary cap." Not because it doesn't function like a cap, but because MLS doesn't negotiate over it with the players. (As an aside, players unions talk about decertifying in other sports because absent a union to collectively bargain over a salary cap the league opens itself up to anti-trust litigation.)

Bottom line, I don't think we are going to see a big adjustment to the salary budget -- it will typically continue to grow at 5% a year IMO. We may see a jump in allocation money should the TV deals really jump, but there is no certainty to that.

 

Has anybody ever found a number for the Canadian rights? What about the English rights?