I've been searching for a while now for a full definition of MLS' single entity structure but have had little luck. I've been able to gather information from several threads on this board and other online sources as to the specific details of the structure, but non have been able to paint a complete picture of how it works. I know the basics, such as the MLS owning players contracts and the like, but I still have several questions about the structure. Specifically, how much power do teams really have? For example, lets say Miami or St. Louis (or any other candidate for that matter) is awarded one of the expansion slots, how much power do they have in going out and hiring an administrative team and is this team payed for my the investor, or by the MLS itself? After investing in the MLS and having a team in the league, how much of the cost of running the team is assumed directly by the investor and also, how much of the revenue (if any) can be claimed directly by the investor. I guess most of my questions have to do with how far the single entity's power reaches and how much power investors have within their own teams. Thnx
Basically it works like this. A potential investor puts down the required fee to enter into MLS ($40 million at the moment), that money is split evenly amongst the current teams' owner/operators (groups that own more than one team getting the appropriate share) whilst giving them about a 50% share and operating rights to a the franchise of their bid. For example. Seattle gives $40 mil to MLS in exchange for an even share of the shared revenue that comes from media, marketing, and merchandising deals and sales as well as what comes in from SUM (Soccer United Marketing). Essentially the new investor is buying a piece of everyone else's pie and handing off half of his to everyone else. The league covers travel expenses for the teams as well as up to 3.2 million for player salaries and some staffing as well (at least I think they pay for some of the staffing).
Let's start with defining what a "single entity" league is. The respected Sports Business Journal offered this basic definition earlier this year: Link: http://www.sportsbusinessjournal.com/article/58865 MLS is really what I would term a "modified" single entity structure, and it has been almost since the beginning. Alan Rothenberg, who experienced spiraling player costs first hand when he owned the NASL Aztecs, envisioned a pure format where the league owned the teams and the investors owned shares only in MLS itself -- indeed MLS had what it called "passive" investors in the beginning. David Wangerin notes in Soccer in a Football World that before the first season even started "Rothenberg was soon forced to compromise over MLS, halving his entry fee to $5 million and designating a new category of 'investor-operator, individuals who would be permitted to control a club while still adhering to the single-entity framework." (pages 267-268) There has been a tension ever since in delineating how much control the investor operators should have. Following contraction of the Florida teams in January, 2002, MLS restructured its single entity model, reallocating costs that would be absorbed by the owners and the revenues they could retain. That model was described in detail in a report sports consultants CSL prepared for Johnson County for a previous Wizards Stadium proposal and made available to the public. The report makes clear that "the investor operators are responsible for hiring their own front office personnel, hiring front office personnel, negotiating local media contracts and conducting local promotions." (page 16). For revenues, each ownership group retains 70 percent of ticket revenue and 100 percent parking, concession and other stadium revenues, local sponsorship revenues and local TV revenues. MLS gets all of the national sponsorship money, all of the national TV money and 30% of the gate receipts. (pages 16-17). In exchange for letting them keep more money, expenses also shifted to the investor operators after contraction. Whereas once MLS paid all the travel and local broadcast costs and half the stadium rent and game day costs, that all now must be paid for by the investor operators. (page 17). MLS retained the obligation to pay the player salaries -- the cornerstone of any single entity model -- which it does to the day, save a handful of designated players. I can understand why people get confused over all of this, but MLS is not, as widely claimed, a single "purse." It doesn't lump all the profits and losses from all of the teams together and distribute what's left to the owners. Each owner keeps the money his team -- and when I say his team, there are separate corporate entities that the owners control that operate the teams -- makes, just as he absorbs the losses. The investor operators are basically paying a 30% royalty (share of ticket sales) for the right to operate the teams, along with MLS keeping the national TV and sponsorship money, which really seems to flow through Soccer United Marketing anyway. The single entity structure is something of a mixed bag. It does allow a league to keep player costs very low without running afoul of Section 1 of the Sherman Act -- a single entity cannot conspire to monopolize with itself -- but other leagues have found that they had trouble adapting to local markets if they didn't have an operator with "skin in the game." The WUSA was a single entity league, but the new women's league will not be. The WNBA has chucked its single entity format, while the Arena Football League considered adopting it, just as the ill fated XFL was a single entity league. Link: http://www.sportsbusinessjournal.com/article/59720 So there you have it. MLS continues to operate with centralized control over player salaries, but in many respects it has modified the single entity structure to give owners more control over the teams they operate.
triplet 1... Are you sure each team picks up the entire stadium rental cost? Not sure of exact amount, but the conventional wisdom for years has been that RFK like the Meadowlands costs a fortune to open. If Macfarlane and Chang are picking up the full tab that changes my thinking about DC's future. If true they need a stadium plan sooner rather than later.
Somewhere on the Delaware state website, you can pay to view the incorporation documents of Major League Soccer, L.L.C. That may help you.
That's what the CSL report indicates on page 17. Prior to contraction in 2002, the stadium rental costs were shared 50/50 between the investor operators and MLS, and now the I/Os are responsible for 100% of the costs. Yes, it makes a stadium critical for DC United IMO.
So the purpose of the single entity system is just to keep player's salaries low, not to level the playing field right? The salary cap is in place to level the competition, however, you can have a salary cap without having a single entity league. I know that MLS takes care of sponsorships, national TV deals and player salaries, but is there ever any cash flowing from the MLS to particular teams? So the front office and administrators of the different teams are not employees of the MLS, they receive their paycheck from the investors, right? Thanks for your help.
No, and I;m not sure how you got that out of what everyone responded. From the league to a particular team? I guess performance based allocation money could fall under that category. Asi parece.
How do you not come to that conclusion based on what triplet1 posted? His post and your post differ a lot, but he offered more supporting evidence, so I was responding to his post.
I read his post. So I don't see how you could've possibly drawn that conclusion...at all. Unless you're just twisting or misreading this statement...
Certainly a single entity structure allows a league to exercise some control over salaries without running afoul of antitrust laws (although the same protection can be had if a league collectively bargains for those rights). So yes, cost control is part of the appeal of the single entity structure. That said, I think MLS views the marketing advantages as equally important because they can likewise sell exclusive sponsorships and apparel rights league wide, which is easier and more lucrative for a young league and again shields the league from antitrust liability. There is an interesting recent court decision involving NFL Properties, which was sued for granting exclusive licensing arrangements on jerseys etc. to Reebok, where the court held the NFL and NFL Properties were a single entity, despite the fact that the NFL certainly isn't a single entity in other facets of its operations. "The Seventh Circuit explained that sports leagues are difficult to classify because they display elements of a single entity, as well as elements of a joint venture made up of independent owners. The Seventh Circuit, therefore, determines whether a sports league is a single entity "one league at a time" and "one facet of a league at a time."" Link: http://www.chicagoiplitigation.com/...venth-circuit-affirms-nfl-is-a-single-entity/ My guess is that will turn out to be an important decision if it stands, potentially allowing leagues to push the envelope a bit and take on characteristics allowing greater owner control over some aspects of league activities without losing the single entity concept (and defense) in other aspects of its operations. In other words, the courts now seem to recognize that most leagues are hybrids, some with more "single entity" characteristics than others, which accurately describes MLS at this point IMO. Finally, a word of caution: MLS has always been cautious about putting too much of its corporate structure in the public domain, and given the potential for litigation with the players union you can understand their hesitancy. As a result, much of our understanding is pieced together from years of newspaper accounts and occasional documents like the CSL study where the league cooperates with the consultants. I don't think anyone not involved with the league pretends to know exactly how it all works, particularly with respect to SUM, and you should take these discussions with a grain of salt representing a best guess from available information. But likewise be cautious of anyone who claims the owners act as one pure single entity in all aspects of MLS activities. Clearly, we know enough to at least debunk that.
One other note to add: Some "clubs" also have minority investors that may or may not be investors in MLS LLC.
The only way that a league that is not structured as a single entity can have a salary cap is if the players union agrees to it... if a league of independent entities sets a cap without agreement of the players, this is illegal collusion... in a single entity, this cap ("budget" in the parlance of a single entity) is determined by the single entity and is not subject to collective bargaining... The union can't tell General Electric how much money it must spend on salaries in one plant versus another...
Yeah, but cost control is different then a rather simplified statement like "keeping player's salaries low".
Those wont tell you anything of value IMO as the requirments for articles of incorporation are few and designed to be vague.