The Catch All CBA (Collective Bargaining Agreement) Thread

Discussion in 'MLS: News & Analysis' started by MLSFan123, Feb 24, 2014.

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  1. tab5g

    tab5g Member+

    May 17, 2002
    PRO was founded and is funded by MLS and US Soccer. PRO is housed in and operated out of MLS HQ's offices in NYC.

    PSRA seeking information on how much financial backing is made available (or could/should be made available) to PRO seems like a reasonable step in the current collective bargaining that is on hold while the replacement refs were called in during the lock-out of March 8-9.

    Not sure how much of a look (if any) PRSA will get at some of MLS's books -- but I would guess that this lock-out of the PSRA refs won't be all that long-term and it could indeed just be in part an instructive "warning shot" that ownership is willing to launch as the MLSPU collective bargaining will unfold across 2014.
     
  2. deejay

    deejay Member+

    Feb 14, 2000
    Tarpon Springs, FL
    Club:
    Jorge Wilstermann
    Nat'l Team:
    Bolivia
    I know about their relationship with MLS but PRO is still independent. Their website is very specific about this and I don't think that this is something that you can lie about. This is where it gets hazy. PSRA wants to treat this issue as PRO belonging to MLS and that they are looking for a fair share of MLS money just like NFL or NBA officials do. This is completely different then what PRO is saying that the relationship is.
     
  3. tab5g

    tab5g Member+

    May 17, 2002
    Welcome, Will Kuntz, the new Director of Player Relations for Major League Soccer.

     
  4. tab5g

    tab5g Member+

    May 17, 2002
    John Thorrington joins the players' union executive team.

    http://www.washingtonpost.com/blogs/soccer-insider/wp/2014/03/19/d-c-united-tv-deal-and-notes/
    Soccer Insider, By Steven Goff
    March 19 at 2:50 pm

     
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  5. LordRobin

    LordRobin Member+

    Sep 1, 2006
    Akron, OH
    Club:
    Cleveland C. S.
    Nat'l Team:
    United States
    I do hope both sides go into the negotiations with the intention of getting a deal worked out, not with throwing their weight around to make a point. Is that too much to ask?

    Next year is a huge year, perhaps a milestone year, in the growth of the league. Two big new teams and a new TV deal. I know this fact will play into the negotiations. What I wonder is whether the two sides will use the new landscape as an inspiration to make large demands, or whether they'll want to settle as soon as possible, so as not to risk killing the golden goose.

    ------RM
     
  6. MLSFan123

    MLSFan123 Member+

    Mar 21, 2011
    Boston Area
    Club:
    New England Revolution
    Nat'l Team:
    United States
    And SJ opens new digs and Chivas might get the rebrand with new owner.

    There are plenty of reasons to get this deal done in a timely manner but don't let that fool you. This is going to be a long and probably ugly at times battle.
     
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  7. Westside Cosmo

    Westside Cosmo Member+

    Oct 4, 2007
    H-Town
    Club:
    Houston Dynamo
    Nat'l Team:
    United States
    Players are going to make large demands. Just look at the article or letter that the union counsel or advisor wrote last week in supporting the refs (really just bashing MLS). Lawyers for union would love to bust single-entity but that won't happen so expect this to go to the deadline. Players probably will feel they have some leverage due to a new TV contract likely starting and owners have more owner-controlled SSSs that they have debt service on that can't sit empty a whole year.
     
  8. El Naranja

    El Naranja Member+

    Sep 5, 2006
    Alief
    Club:
    Houston Dynamo
    Nat'l Team:
    United States
    With the numbers being tossed around about SUM's TV deal (low end $100M/yr total...high end closer to double total), and with @triplet1 great guess work on the finances (currently) of MLS re: the cap, I'm wondering just how hard the players will fight for more money overall. I'm thinking there might not be all that much $, relatively speaking, to give the rank-and-file a huge payraise. Or if that's what they're looking for, per se.

    Love to know if they'll fight for benefits like charter planes, 401K, etc over a large payraise.
     
  9. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    I hope so, but I'm not optimistic.

    The problem is the disparity in financial performance. I assume the players can read Forbes just like the rest of us, and what they'll see is evidence that some teams are doing well, while others aren't.

    Seattle Sounders $18.2m
    Portland Timbers $9.4m
    Houston Dynamo $8.2m
    LA Galaxy $7.8m
    Sporting Kansas City $5.1m
    Toronto FC $4.5m

    Montreal Impact $3.4m
    New England Revolution $2.6m
    Philadelphia Union $1.1m
    FC Dallas $0.6m
    Vancouver Whitecaps $0.0m
    Real Salt Lake -$0.1m

    Columbus Crew -$1.6m
    DC United -$2.8m
    Colorado Rapids -$2.9m
    Chicago Fire -$3.2m
    San Jose Earthquakes -$4.5m
    Chivas USA -$5.5m
    New York Red Bulls -$6.3m

    Again, even if we assume that a lot more TV money is coming into MLS -- say even another $2m - $3m per team -- I think many I/Os will look at their own finances and be very, very reluctant to part with that money and just give it to the players to bump up the cap significantly. With the possible exception of RBNY (which has shown a willingness to spend even if it means big losses), I would be surprised if any team from Montreal downward to now league controlled Chivas USA would support a big jump in spending that some posters seem to think is inevitable. They need that TV windfall to stem the flow of red ink on their financials statements, and I expect them to fight to keep as much of it as they can.

    But a handful of teams could spend every penny of the additional TV money on players without feeling it much and, perhaps, even benefit from putting a better product on the field -- at most that's seven teams IMO, probably less. So while there is enough success at the top of the financial table that the rank and file players may be encouraged to try and get a lot more money (sentiment that the DP spending may further fuel), again I'd be surprised if the votes are there among the I/Os to do so.

    I fear this has the ingredients of a nasty impasse.
     
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  10. fuzzx

    fuzzx Member+

    Feb 4, 2012
    Brossard
    Club:
    Montreal Impact
    Nat'l Team:
    Canada
    What's the difference between having more DPs vs increasing the cap and having certain teams not spent to the max?

    I mean, without changing the payment structure, you could have a (example) $5 million cap and if a team like Chicago does not want to spend to that level, they can just get their money back.


    I draw inspiration from the NHL. They have a cap with a maximum and minimum level calculated from total revenue. Some teams spend to the cap, other are midrange, while a few struggle to meet the minimum. The system works reasonably well.
     
  11. Westside Cosmo

    Westside Cosmo Member+

    Oct 4, 2007
    H-Town
    Club:
    Houston Dynamo
    Nat'l Team:
    United States
    Good work, but I believe the Forbes figures exclude any stadium debt costs, which would take the cash flow down for several teams that appear to be making money.
     
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  12. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    #37 triplet1, Mar 22, 2014
    Last edited: Mar 22, 2014
    That's true. Taxes too. (I'm guessing amortization and depreciation probably aren't major numbers here, but they aren't included either). So, yes, there's a lot less "spendable cash" here than Forbes suggests. OTOH, it isn't clear Forbes included income the owners get from SUM either, so while there's undoubtedly less cash than EBITDA measures, there may be some additional revenue that might be added in too.

    I wouldn't get too hung up on the specific numbers -- even Forbes says they are estimates -- but I do think they present a reasonably accurate big picture view, which is that a lot of the money being made in MLS is concentrated in the pockets of a handful of teams. That's what makes this CBA a real challenge IMO.
     
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  13. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    Philosophically, that would be a big change for MLS though. MLS owners accepted unbalanced payrolls, but the DP rule was intended to concentrate that spending so it wouldn't give big spending teams a clear competitive advantage. We can debate how well that's worked, but clearly that was the intent. What you're suggesting would allow big spending teams to elevate the quality of their overall roster, in theory presenting a much bigger challenge to those who can't (or won't) match that spending to compete with them.
     
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  14. scoachd1

    scoachd1 Member+

    Jun 2, 2004
    Southern California
    As I have stated in other threads, I think differences within the ownership might be greater than the differences between the players and MLS ownership as a whole. However, if you look at your numbers only 5 of the 18 non-league owned teams are really losing money (Vancouver and RSL are essentially at break even - and I think Red Bull considers the $6.3M as as a very cost effective advertising expense for their core business). I also think the Quakes finances will change once they open their own stadium.

    The other factor is that unlike the NFL, MLB, NBA and even NHL, the market for soccer players is a global one. As the quality of MLS teams continues to rise the global market will increasingly come into play. If you want to beat Liga MX teams as most MLS execs surely want to do, the Galaxy can't a field 4th tier Brazilian center back around their better players because of the an extremely low salary cap like the Galaxy did and KC can't have USL level backups. As a result I believe the negotiations will be far less about money and salary cap and far more about player movement. MLS execs know they need to spend more and they will. Instead I think their focus will be on continuing to restrict the movement of North American players as much as possible in order to keep their wages as low as possible. In contrast the players the North American players that make up the majority of the players are going to want to want their pay to reflect what they contribute on the field as compared to the non-north American based players. Why do they care if the cap goes up and they are restricted from benefiting from it?
     
  15. scoachd1

    scoachd1 Member+

    Jun 2, 2004
    Southern California
    Competitiveness. In May 2012 Seattle total salaries were about $4M. I haven't seen the latest numbers but Dempsey's contract alone was more than that. Yet in order to sign Dempsey, Seattle had to let go Eddie Johnson for cap reasons. Is Dempsey going to make Seattle's attack more dangerous than it would with Johnson? Many probably think so. But does doubling Seattle payroll significantly change their competitiveness with Chicago's, Chivas USA's, Colorado's of the league - not to a significant extent. But if that same money was spent on Higuain, Diaz, Di Vaio, Valarie, Soborio and a couple of defenders it sure would.
     
  16. fuzzx

    fuzzx Member+

    Feb 4, 2012
    Brossard
    Club:
    Montreal Impact
    Nat'l Team:
    Canada
    Let me amend my point, Why not increase the cap, maintain the DP regime AND allow weaker teams to not spend to the top?
     
  17. tab5g

    tab5g Member+

    May 17, 2002
    MLS doesn't want "weaker" teams.

    (But in some attempts to not try to create those individually weaker teams, the BoG may at times be making decisions that arguably create a "weaker" league within the regional/global context.)
     
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  18. blacksun

    blacksun Member+

    Mar 30, 2006
    Seoul, Korea
    Club:
    San Jose Earthquakes
    Nat'l Team:
    United States
    The difference is that the league doesn't have a salary cap, it has a salary budget. That is not just a semantic distinction. If Chicago chooses not to spend all their budgeted amount, they don't end up getting money back. Indeed, if the cap is increased Chicago is on the hook for 1/19 of the increase for each team in the league (either through decreased payments from the league or increased capital calls). Contrast that with adding an extra DP slot which costs Chicago nothing if they don't use theirs.
     
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  19. fuzzx

    fuzzx Member+

    Feb 4, 2012
    Brossard
    Club:
    Montreal Impact
    Nat'l Team:
    Canada
    I am well aware of the distinction, my question is more in terms of what the barriers are to go from the current budget system to a modified one with reimbursable credit or similar.
     
  20. Baysider

    Baysider Member+

    Jul 16, 2004
    Santa Monica
    Club:
    Los Angeles Galaxy
    I think part of it is that the system gives cheap owners "cover". Chicago's owner can get away with not spending money on DPs because he can always say that he hasn't found the "right player". But if he's not even spending on the basic roster he's going to look bad.

    My impression is that the majority of the owners are not particularly ambitious and are mostly happy with how things are now. What makes the negotiations complicated is that it's not just players vs. owners, it's some players vs. other players vs. some owners vs. other owners.
     
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  21. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    I agree and I see a lot of parallels to the contentious NFL CBA deal in 2011.

    I've mentioned it before, but I strongly recommend this three part series about the issues surrounding the 2011 NFL CBA; it's one of the best I've read on the topic:

    http://www.bloggingtheboys.com/2011/2/18/2000707/nfl-lockout-cba-2011-revenue-sharing

    The series makes a very strong case that it wasn't that salaries were growing as a percentage of revenue that caused the owners to push hard for a new deal, but rather NFL revenue sharing policies. Read part two carefully, and you'll see that NFL revenue sharing policies are virtually identical to MLS revenue sharing policies: national TV money, national sponsorship money and about a third of gate receipts are shared, but luxury box money, local media money, and local sponsorship money is not. MLS goes even farther by including shirt deals as local sponsorship money and lowering the percentage of general admission gate receipts that are shared.

    In the NFL, owners were incentivized to grow unshared revenues. As a result, the salary cap, pegged to both shared and unshared revenue, was growing beyond the low revenue teams' ability to fund it.

    The unnamed author notes that operating costs for low-revenue teams would eventually surpass their revenue streams and that "this is issue at the core of the current labor situation. In the last CBA, the owners agreed to a deal that didn't include enough revenue-sharing to make specifically the small market teams viable in the long run."

    http://www.bloggingtheboys.com/2011/2/21/2005431/nfl-lockout-2011-the-haves-and-have-nots-of-the-nfl

    MLS salary budgets aren't pegged to a percentage of revenue as specifically as in the NFL, but MLS revenue sharing certainly doesn't allow all of the teams to cover operating expenses. Look at the Forbes numbers again, and you'll see Vancouver was break even, 10 teams collectively made $60.9m, while the remaining 8 lost $26.9m. What's more, Seattle alone made about 30% of that $60.9m. Prosperity hasn't reached many MLS teams.

    Faced with a similar disparity, prior to 2011 the NFL had initiated a supplemental revenue sharing program that transferred about $100m annually from the coffers of the NFL "haves" to the "have-nots" which was, predictably, incredibly unpopular with the high revenue clubs. The NFL's solution under the new CBA was to lower the players' percentage of the revenue and effectively take it out of them instead. The new formula will require teams to share more previously unshared revenue, but the amounts are now capped and the formula with the players has been adjusted to virtually eliminate any transfers between the teams over the ten year term of the current CBA.

    http://www.sportsbusinessdaily.com/Journal/Issues/2011/08/01/NFL-Special-Report/NFL-league.aspx

    I think the NFL deal foreshadows what we'll see for MLS, with a twist. The NFL chose to help the struggling low revenue teams by taking money from the players (persuading them as long as the pie continue to grow they wouldn't be harmed). If the top revenue MLS teams see a need to jump payrolls significantly, IMO the struggling MLS teams are going to press MLS to fund a good part of that increase from the revenues the big revenue teams don't currently share. Shared revenue through a bump in the TV deal may be part of the solution, but again the struggling teams can't and won't give all of that to the players. At least in the near term, unshared revenues will have to be used to fund part of any significant jump in the salary budget.

    In other words, we're talking primarily about Seattle, LA, Portland, Houston, SKC and TFC giving up part of their net operating income. A good part of it, perhaps.

    Will they really do that?

    Or, when push comes to shove, like the small revenue teams would they rather keep most of the cash from the new TV deal for themselves, keep payrolls lower and use their unshared cash on DPs for their own rosters instead?

    I'm guessing the later.
     
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  22. holiday

    holiday Member+

    Oct 16, 2007
    i'm an islander fan. i don't.
     
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  23. Matt Hall

    Matt Hall Member+

    Sep 26, 2012
    Club:
    Philadelphia Union
    Interesting take, but increased sharing going forward is baked into the cake, insofar as the national TV money increases as a share of top line revenues (and I think we both agree it will). Otherwise, I don't agree with all of your predictions, but they are as plausible as my own.

    You've made a troubling conceptual claim here, however, and that is regarding the translation of ownership redistribution towards player compensation (in the NFL). I don't know a mechanism whereby that happens. Obviously the owners did very well in their negotiations, but it was in their interest to take this line against the players either way. In fact, if the redistribution helped solvency of the league, then it should have strengthened rather than weakened the players' hands. Perhaps this disagreement partly explains our past difference of opinion on how CBA negotiations are going to go.

    If I had to guess about how this plays out on the owners' end, I'd put my bet on things like a percentage of local TV deals being shared, perhaps a conversion of shirt sponsor money to a percentage basis, less league help on transfer fees, and (maybe) very slightly increased gate sharing. Then just let the TV money ramp up and do its thing.
     
  24. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    #49 triplet1, Mar 24, 2014
    Last edited: Mar 24, 2014
    Just to be clear, I really don't expect any of the local revenue to be shared. But I'll provide an illustration of how it might be appealing to a low revenue team using the 2012 Forbes data.

    To re-set this, again in 2012 Forbes estimates that 10 teams posted revenues of $60.9m (EBITDA), one broke even and 8 lost $26.9m (EBITDA).

    There are all sorts of reports of the new TV deal, but let's assume it's just over $61m, meaning about $34m in new money is available to bump salaries or for the owners to keep. Let's also assume the owners really do see benefit in jumping the cap $2m per team. Clearly the $34m in new national TV money isn't enough to do that, but there are really two pots of money, the $60.9m the high revenue teams made and the $34m.

    Let's assume takes that $34 million and it first gives each and every team $1m (remembering there were 19 teams in 2012), and it puts the remaining $15m in a pot for the players.

    Next, assume MLS changes the rules (as it did in 2002) so that more local revenue gets turned back to MLS to fund salaries. Note, I'm not talking about the capital call -- that would simply increase the amount each team has to pay. I'm talking about high revenue teams turning over more of their unshared revenue to MLS.

    To raise $45m, MLS would have to claw back this amount from currently unshared revenues (again from the 2012 numbers) from the teams that had positive cash flow:

    Contribution to Payroll (Claw Back of Local Revenues)

    Seattle Sounders $13.5m
    Portland Timbers $7.0m
    Houston Dynamo $6.0m
    LA Galaxy $5.8m
    Sporting Kansas City $3.8m
    Toronto FC $3.3m
    Montreal Impact $2.5m
    New England Revolution $1.9m
    Philadelphia Union $.8m
    FC Dallas $0.4m

    Total -- $45m

    Add that to the $15m I've set aside from the TV deal, and we just funded a $60m jump in the salary budget. An equal $2m per team.

    So what does that do to each team's EBITDA? By giving each team an equal $1m share of the TV money, even after the claw back the profits are much closer and the losers look much better:


    Seattle Sounders $5.7m
    Portland Timbers $3.4m
    Houston Dynamo $3.2m
    LA Galaxy $3.0m
    Sporting Kansas City $2.3m
    Toronto FC $2.2m
    Montreal Impact $1.9m
    New England Revolution $1.7m

    Philadelphia Union $1.3m
    FC Dallas $1.2m
    Vancouver Whitecaps $1.0m
    Real Salt Lake $0.9m
    Columbus Crew -$0.6m
    DC United -$1.8m
    Colorado Rapids -$1.9m
    Chicago Fire -$2.2m
    San Jose Earthquakes -$3.5m
    Chivas USA -$4.5m
    New York Red Bulls -$5.3m

    Every team below New England is $1m better off now, every team now has a $5m salary budget with which to compete, and the high revenue teams are hardly doing poorly even after the claw back. What's more, the Forbes numbers should be net of DP expenses, so that's not changed here either.

    Again, I'm not saying they'll do this, but I think a case can be made that part of the reason the salary budgets are so compressed is that the retained local revenue number for revenue sharing purposes is out of whack. Remember, it wasn't always so, it changed in 2002. Especially for MLS, where the league owns the teams and they are operated under management agreements that define what the operators get to keep, you would think that could be adjusted.

    If there was the will to do so.

    Which I don't think there is.

    So they'll keep the salaries low instead.
     
  25. Matt Hall

    Matt Hall Member+

    Sep 26, 2012
    Club:
    Philadelphia Union
    Well, you doubled down on the connection so I guess I won't try to dissuade you.

    As for local TV, it certainly seems like a potential confounder. Is soccer baseball? Or is it football? Kind of feels in between. I can imagine it going either way.
     

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