40 clubs with "promotion and relegation"...

Oh look, Tuna Boy is back

 

Pro/rel in any form in the USA is not viable today or any at any time in the future. There are too many legal, financial, and political realities that make the idea utterly impractical in the USA. I'll outline some of them here with a hypothetical.

Let's say that you're MLS commisioner in 2030. There are 40 top-tier franchises. Things are going really well, obviously, because you've gotten to 40 franchises and the league is stable financially, logistically, etc. All of this progress has come under a single-tier franchise system. If this system has brought you all of that success, why would you then blow it up for a foreign one with little promise of improving that success?

Pro/rel supporters want you to do just that - they see you have 40 teams now, and they want you to force pro/rel among them (20 teams in MLS1, 20 in MLS2). This isn't out of line with what the author suggests as viable in this article when he says that MLS can make pro/rel viable by seeking to "extend its centralised ownership structure to lower divisions, so that income from all tiers would always be pooled among MLS shareholders to insulate them from relegation-related losses".

So there it is, a proposal for pro/rel right on your desk. The pro/rel advocates want it done. Should you do this? Can you do this?

You lean back in your captain's chair behind your desk and, the more you think about it, the more convinced you become of the answer. It is a no-brainer.

Let's start with viewership. Your league has done pretty well with viewership so far (hence the growth and profitability), but MLS2 wouldn't help with this. Casual sports fans (the ones your league's success largely depends on) aren't going to be excited about your new "MLS2". It won't be watched anymore than the AHL or MiLB. Yes, hardcore fans will continue to show up to watch the relegated Dynamo/Galaxy/Red Bulls/Timbers/whoever got sent down take on minor league teams in MLS2, but there are not enough of them to sustain a major league. Hardcore fans are, by definition, uncommon. This is true even in established leagues like the NFL, MLB, and NBA. Most fans don't know advanced details about the back-end of their teams' rosters or their assistant coaching staffs. Most tune in casually, buy some gear, go to a few games, and leave it at that. That's your typical fan.

Said typical fan isn't going to support your relegated MLS team, he's going to go watch the MLB, NFL, NHL, NBA, or college basketball instead. Your MLS2 teams will be getting AHL, D-League, and MiLB attendance and TV viewership levels, and that simply isn't good enough.

Relegated teams who were already struggling for attention in major markets (ex: DCU, LA Galaxy, NE Revs, Chicago Fire, etc) might very well be damned by relegation as it drains what little draw they had. How many Chicagoans are going to go watch minor league soccer's Chicago Fire when the Blackhawks, Bears, or Bulls are in town? The answer is not many. There's no good reason for MLS to embrace this risk of the potential total annihilation of otherwise viable major market franchises.

Broadcasters who paid for 40 top tier teams aren't going to pay that same sum for 20 top tier teams and 20 minor league squads (your second tier teams are going to be minor league, as all second tier sports are in North America, and they'll be treated accordingly). That's money MLS will be leaving on the table, which doesn't do any good for the health of the league.

Sponsors are in the same boat as the broadcasters - I'm Adidas and I'm paying X-millions of dollars to be associated with 40 top tier teams. If you're going to come to me later and say that you now only have 20 top tier teams because you relegated half of them, I'm paying you less. That's money left on the table, and that's no good for the league.

Owners who paid $100m+ for franchises aren't going to accept their investments being pushed into a second tier where their value will essentially be totaled (remember that if you have 40 teams and want to force pro/rel, you need to force 20 owners and their franchises down into the new minor league - they'll not be going voluntarily, so good luck selling them on this). If I'm an owner/ownership group, I came to you with a lot of cash for the purpose of buying a top-tier team, and a big reason why I did so was because I knew my investment would be stable just like other professional sports teams are here in North America (read: consistently top tier, consistent broadcast revenue, never major league one year and minor league the next, etc, just like NBA, NFL, NHL, and MLB teams). I signed a host of binding contractual agreements that made the fact that I was buying a top-tier, major league (not second tier, minor league) franchise quite explicit. Now you've decided to unilaterally change those terms and turn my major league investment into a minor league squad.

If I wanted a minor league team, I would have gone ahead and spent 5-10% of the money I paid you to put a club in the USL. That's not what I did, so I'm upset.

Keep in mind, as an owner, the current set-up has been excellent for me. MLS clubs have been minting money (and I'm talking present day, nevermind future growth). Most MLS teams were profitable in 2012, and that number is only going up. The league's collective profitability is in the 8 figure range and growing.

The Sounders FC ownership group paid $30 Million to buy into MLS in 2009 and the franchise is now worth nearly $200 Million - this is a nearly 500% increase in profitability we're talking about, and such stories are far from exceptional. Nearly every franchise has seen dramatic increases in value for its owners since buy-in, ranging from 50% to 500% increases. These are excellent returns. And, what's better, these returns go up annually - the franchises are worth more and more every year. This is an investor's dream - not only do you get a huge return on your investment and an engine of growth for your portfolio and overall net worth, you also get the stability of knowing your investment is stable in its value (stable enough to attract major foreign investors, e.g. City Football Group, to make massive outlays of cash to join a league with limited pedigree/history in a country where soccer is, at best, the 5th most popular sport on a professional level and probably 6th).

But now you want pro-rel. So this means that, as an owner, my engine of growth may no longer be an engine. Relegation could not only halt the consistent growth I've been getting, but it could very well take an axe to the growth I have managed to generate - my $175 Million franchise might only be worth $150 Million after relegation the first year, and $120 the next after another year at the second level. Even without relegation, the removal of the stability enjoyed by a team under the current model and the institution of the risk of relegation would be enough to decrease franchise value significantly.

I own the team, so these losses are coming right out of my pocket. If I have partners and shareholders who also have a stake in all of this, they are losing too - and they won't be happy. Institutional investors (some of whom are most certainly owners of stake in companies that hold MLS teams as part of their portfolios) have a way of making a real fuss when you mess with their money, because a lot is at stake for the entities (pension funds, school endowments, major non-profits/foundations, and high net worth individuals) whose money they are managing. They're gonna be upset.

The pro-rel advocates will respond to this by saying "well that's too bad, this is about merit, if you don't want to risk relegation just do a good job!" Owners, their partners, and their shareholders are going to laugh at that because a) it's naive (their money is being placed at risk and they are met with responses about the need to simple deal with that for the sake of some not-terribly-well quantified, fanciful idea of "merit" and "tradition" held by pro-rel advocates who don't care or won't consider the major financial implications at play) and b) they didn't sign up for that level of risk and don't have to accept it (they bought into single-tier, not pro/rel).

So, as an owner knowing all of this, what am I going to do when you (the Commissioner) try to bring in this MLS1/MLS2 model and institute pro/rel? Sue, of course. In the event of your plan going forward, you should expect a massive lawsuit, and you should also expect judges to take the league to the cleaners. Corporate lawyers are going to have a field day getting large judgments against you on behalf of all of the wealthy owners and other interests looking to sue you for unilaterally altering the terms of binding contracts and creating large diminutions in value for owners, their partners, and vulnerable shareholders (i.e. the many retirees whose portfolios took a hit when you relegated the team that their mutual/pension fund has a stake in). There's no hope for you in court.

And how about the politicians whose efforts helped you secure all those franchises in the first place? They lobbied for you and solicited large amounts of taxpayer money for the chance to have a top tier team in their locale (those stadiums are expensive!). Many of these locales already had minor league squads - they were looking for more. That's what MLS promised and that is what they took taxpayer money to pay for. Now you threaten to take their top tier team down into a minor league (or, if they're one of the unfortunate 20, you've already forced them down).

Let's say I'm a local politician whose municipality went to bat for an MLS club. I led an effort to secure tens of millions in taxpayer dollars to help develop this club, and secured the votes to get the club what it needed to get going (stadium site, permits, etc). A lot of political and actual capital went into this, and it was the promise of my city getting a permanent major league sports team (potentially putting us on the map and getting us closer to the levels of bigger cities who have multiple major league teams) that allowed it all to work. We signed binding legal agreements explicitly noting our desire to create a major league franchise.

Now the club is online in MLS and we're excited, but I've just heard that the league has decided to create a minor league and send my team there. This isn't what the city signed up for. We already had minor league teams, we don't need another one; we were able to secure political and financial support for this team because of the benefits a major league team would provide and the promise that said benefits would be consistent and long-term. That's gone now. This obviously sucks for me, but all of my key supporters (local businesses that wield tremendous political influence and invested heavily in the new team) are pissed too and want me to do something about this.

What do I do? I have the city (or the state, or both) hire some pricey, ambitious, and highly capable litigators to take the league to the cleaners on behalf of the state (or perhaps not on the state's behalf, since the state will probably be suing you too in a separate action), and I almost certainly win because no judge is going to look at this and not see an egregious breach of contract that resulted in the potentially massive waste of taxpayer money.

This is to say nothing of the logistical issues inherent to having pro/rel in a landmass larger than Europe (Canada + USA). Pro-rel is easy when you're an Englishman playing for Liverpool and every possible trip you could make for a league game (regardless of who goes up or down in any given year) is shorter than the trip between LA and San Jose. When you're in North America and that LA to San Jose flight is BY FAR your shortest, it's a different story. Pro/rel could put a major dent in your team's travel budget in a way it couldn't back in the Queen's country.

So, knowing all of that, how do you justify the move to pro/rel to all of the other interests around you that help govern the league? You can't say it will make the league more profitable (the American franchise system is indisputably the most profitable system of professional sports organization on Earth with a long track record of success here that pro/rel will never have; meanwhile, pro/rel systems are known to be rife with financial instability around the globe). You can't say it won't make enemies of all your owners, investors, sponsors, broadcasters, and political allies. You can't say it will attract more fans (again, minor league sports don't attract big viewerships in the USA, and your new MLS2 will be a minor league). You can't say it makes more logistical sense either in a landmass this large.

So what conclusion can you make? Just one: don't do it. It creates endless political problems, logistical problems, legal problems, and potentially apocalyptic financial problems that your league, which is already successful, doesn't need. There's simply no way pro/rel will be embraced given all of these realities. It's not just impractical, it's financially and legally implausible.

 

Also, how is having a really convoluted season format going to help things?