MLS has a salary cap right? What is the amount each team can spend on their players? Ive heard that each year the salary cap rises by a little..is this true? If we buy tickets for DC United..does it go to the league or the team? Why dont people like Dan Snyder buy MLS teams? Thanks..
A. 1.7 million B. Used to be true, but cap hasn't gone up in two years and probably won't next season either. C. Goes to the league. D. Billionaires made and keep their money by being daring and individualistic. MLS is single entity, so the "owners" have very little control over their team. You think Snyder's going to buy into a league that tells him who he can and cannot sign? Also, very few of the deep pockets in America know much about soccer. They grew up following other sports and want to own them instead.
One small modification: Lamar Hunt isn't poor. And Phil Anschutz makes Dan Snyder look like a homeless pauper. But the league doesn't currently make money. Teams would have to average 22-26K per game to break even OR own their own stadiums (so they're not paying rent, get their own concession money, can rent the stadium out to other events like tractor pulls, concerts, WUSA teams). Also, I don't think the money the fans pay goes to the league. Technically, all money is "pooled". But I think the reality is that player salaries are paid by the league (and contracts owned by the league) but owner/operators pay other team expenses (like stadium rental) much like you would for a franchise. Thus, when United sponsors a youth team to go to France, that money for the youth team to go to a tournament isn't coming from the Kraft or Hunt but Anschutz. I'd love for the cap to go up. But when pro soccer isn't making money, it's a bit foolish to argue that spending an extra $200-$300K on the team is going to make a difference at the gate. Even with the depressed transfer market and Euro and Argie teams bleeding financially, MLS could spend $1.7 million per team on just one player and still not get really big names (ie: not aging players with only 1-2 years left but international caliber players who aren't huge stars--say, an Elber with Bayern or Cisse with Birmingham). We've got to be patient. Maybe MLS will have reserve teams soon (discount reserve teams--at $200K for 12-14 players). But I'd prefer MLS spent money on stadiums before they spent money on players. Then (when all teams have their own stadiums) we can yell out (justly) for a higher cap.
Good points, here's another. Player salaries are but one of several very expensive costs of operating a team. Consider this. Each team plays about 35 games a season (considering friendlies, playoffs, preseason trips, etc.). You figure that at least 15 of those require travel. When a team travels, it must pay for transportation, lodging and meals for 16 players, 3 coaches and 1 trainer. That makes 20 people total (at least). It's difficult to figure transportation, but let's just give it an average cost of $150 per person. Lodging also fluctuates depending upon location and time, but being a summer season it's usually a prime traveling time so costs are high. Let's figure $60 per person per night. Meals also fluctuate, and I'm not completely sure that the team pays for them, but assuming it does, let's figure $40 per day per person. That totals $250 per person per trip. $250 per person x 20 people x 15 games = $75k. I'm quite sure that's underestimating the total costs. On top of that they pay ticket salesmen, technical directors, president, other front office personnel and other things like medical expenses. These are the small fees. The big ones are renting the field, etc. The costs are tremendous. Ticket sales are only a small part of paying these expenses. Parking and concessions are often significantly more than the ticket sales. Selling those extras is where the money is made. Other things, like skyboxes or suites can net 5k to 25k each. Without your own stadium, you get zilch. New owners/investors/operators are staying away because the losses are staggering. MLS hasn't reached break-even, nor has it's losses stabilized. The salary cap is at a fine level for our niche in view of the international game. Keeping costs stable, limiting losses, and approaching financial viability, goes a long way towards attracting investors. It's really a three step process, get the stadia to make it financially viable and attract investors, then fill the stadia in the major markets to generate TV viewership, then get the games televised to attract new viewers and grow the game. Eventually generate income from TV and the league is thriving. Now if we could just get those first three steps. -Tron
Dtron, your 3 step process is spot on from my perspective. That's pretty much what has to happen and it obviously won't happen overnight. I think the good folks at WUSA are starting to understand what MLS found out in year 2-3 about the need to keep costs low, use smaller stadia, recognize your TV ratings are going to be bad until you've had a real presence. Just wish they'd stop conflicting saturday TV times with MLS and cooperate on stadia. I do think your travel estimates are definitely on the low side. Staying in NYC is going to be VERY expensive. Likewise for almost every other location than Naperville, Columbus and maybe Dallas (depending upon where they stay--near airport. Cotton Bowl or what). I saw some data from NE at one point for their preseason trip to Brazil (where they talked about how economical the trip was compared to going other places) and I believe MLS trips run significantly higher than $75K per road game.
Actually I think the losses have a lot less to do with investors staying away than the structure of the league and teams does. If one could actually buy a team, including player contracts, whether or not it has a stadium, I think more folks would do it. If one could buy the team and its player contracts, one could probably find a way to run it profitably (i run a decent sized business, i am pretty sure i could figure a way to make a soccer team work, just to blow my own horn a bit). I assume that even if one bought the management rights to a team in the current structure, they couldn't move the team at will, get rid or bring in players without the league, etc. Without control of the assets, the type of owner who could make the team profitable--the entrepreneur type--isn't likely to invest. To me, minor league baseball represents a great model for soccer. Although MLB struggles with sagging attendance and ratings, minor league baseball has had a boom, with some really great clubs that make nice profits. Anyway, my $.02
I have to disagree. The structure of the league is set up so that all receipts go to MLS to cover league expenses. Including tickets. MLS then returns to the clubs 1/2 of the ticket revenue they bring in and a significant portion of local tv ad revenues. Local sponsorships stay with the clubs. Concessions and parking are controlled by the stadiums. DCU gets 0% of concessions and a very, very small portion of the $10 per car parking fee at RFK. Merchandise is farmed out by the DCSEC to an outside group (that just so happens is part of AEG) to sell merchandise at the stadium. DCSEC takes their cut of the profits there, with the rest going to AEG, so DCU technically doesn't get anything.
Good stuff overall, but you're slightly missing the point on ownership. They've had interest from a number of American sports entrepreneurs including, supposedly, George Steinbrenner, who lives in Tampa and has been involved in soccer previously. It makes sense - if you own or control a building and a ticket marketing department, throw a modestly priced team in there on some of your dark nights. The bind is that you don't control the money. New York does. And at the end of the year they give you a call and say "Well, the league lost $50 million dollars last year, your share is $5 million. We're sending a messenger over to pick it up. Thanks" Guys like Snyder, Steinbrenner, most rich guys, are not averse to losing money at first on a project, but they'd kind of like the chance to spend it themselves, rather than fork it over to keep San Jose in business or because the MLS Management decided to sign an expensive player for one of your competitors. I think Red&Black has it right: these guys buy something, anything, they want it to be theirs. Buy a player, move to St Louis, fire the manager, whatever, not just go to meetings and hear from Ivan Gazidis who you're going to have to cut because you're going over the cap.
I think this league is mature enough to start to move away from the single entity stuff. It made sense at the beginning but I think it is time to change.
Remember also a guy like Snyder didn't just write a check for the team, he had to get help. Drasner and Mort Zuckerman supported and backed him, just like they did for Snyder Communications. Guys who buy teams like to use OPM whenever possible. This is another problem, who the hell is going to invest if you wanted to set up an investor group? They'll have the same objection, you aren't really getting much tangible. To me this is what really sucks, the league is so unattractive that most entrepreneurs couldn't get financing. I am firmly convinced that the right management in the right location could turn a profit with any of these teams, but probably no one would be willing to back a group seeking to buy in under the current structure.
I agree, and in fact the original business plan was to go away from it in 5 years or so, but we're finishing up year 8 and there's no end in sight. It's a little known fact, but originally Lamar Hunt only bought 50.1% of the Crew. The other 49.9% was spread out amongst dozens of locals, including guys like Archie Griffin (the Heisman guy, yo remember) and various luminaries, some of them for as little as 20 or 30 thou. But, as with any business, when you own a chunk and there's a cash call, if you don't belly up your share is diluted by that amount. And none of these guys, with one or two exceptions, had any intention of hanging around pumping cash into this thing. As a result, most if not all of these 1 and 2 and 3 percenters now own some miniscule fraction of the franchise (or whatever you call it) while Lamar's share has increased by the same amount. I don't recall there being another arrangement like this anywhere in the league.
I think the league splits it with the teams' I/O, but doesn't give the percentage. They don't believe soccer is profitable. There are few pro owners who wouldn't switch their league structure to single-entity if they could do so legaly.
article on player salaries In case you didn't see this, there is a great article on DC's salary cap issue and the re-makingof the team during the offseason on UnitedMania.com http://unitedmania.mlsfansites.com/...90&PHPSESSID=8ed9d5bf19c3fb02b6e5df639b321e9d