Under UEFA salary cap, top MLS teams could be on par with top Mexican teams in 5 years time

http://www.uefa.com/uefa/footballfirst/protectingthegame/financialfairplay/news/newsid=1494481.html

UEFA will be using a fair market value test to prevent rich owners from gaming the system.

http://www.telegraph.co.uk/sport/fo...ncial-fair-play-rules-set-to-be-approved.html

The financial fair play is a salary cap at the club level in which each club can't spend more than it makes. In essence, it is a salary cap that is tailored to each individual club. The beauty of it is that each club is required to break-even/make a profit. So if MLS adopts UEFA financial fair play as its salary structure, it means that all MLS teams are required to be profitable. Clubs with the most revenue will have the most money to spend so long as they live within their means.

To affect a fundalmental rule change such as this will require at least 2/3 majority approval (if not more) from MLS board of owners. I believe more revenue sharing will get more owners on board. Revenue sharing will also help lessen the growing gap between the haves and have-nots of MLS.

All MLS clubs will share these revenue equally:

100% of national tv revenue
100% of national sponsorship
50% of each club gate receipts (currently only 30% is shared equally)
25% of each club shirt sponsorship

 

This is my speculation on what would happen if MLS adopt a salary cap that tailor to each individual team.

In part 1, I will focus on the 3 main revenue drivers: ticket revenue, television revenue and sponsorship revenue. In part 2, I will examine how this policy change will effect MLS image, perception and credibility and how it will also help MLS do better in the Champions League. In part 3, I will speculate on why small clubs with low revenue might be in favor of this policy change, especially if the "30% gate receipts revenue sharing" is increased to 50%.


PART I



EFFECT ON ATTENDANCE

Seattle Sounders FC----- 36,145.75
Philadelphia Union------- 29,954.00
Toronto FC----------------20,537.40
Los Angeles Galaxy------19,635.17
Houston Dynamo--------16,685.43
New York Red Bulls----16,282.14
Real Salt Lake------------15,816.50
D.C. United---------------14,734.14
Chivas USA--------------14,500.60
Chicago Fire-------------14,266.50
Columbus Crew---------14,244.20
Colorado Rapids---------12,787.00
FC Dallas------------------10,447.50
NE Revolution-----------10,319.00
Kansas City Wizards-----9,895.67
San Jose Earthquake------9,383.83

The above 2010 attendance is from a parity-obsessed league. Without parity, the top teams in attendance would average even more. I predict that the gain in attendance from the top teams would more than offset the loss in attendance from the bottom teams. Overall, MLS will experience an increase in average attendance. Take Seattle for example, with a $15 mil team instead of a $2.55 mil team, they could average more than 46,000 within 2-3 years.


EFFECT ON NATIONAL TV RATING

It’s almost a certainty that tv rating would rise. MLS is suffering from a 23% decline in TV rating at the moment and it doesn’t look like tv rating will increase much in the next 4-5 years. MLS needs a change. Higher profile teams with better talents will bring the tv rating that MLS desire. We know that there are many soccer fans living in the U.S. that don't follow MLS. According to Garber, only a third follow MLS. With better talents and higher profile teams, MLS is certain to experience an increase in television rating.

EFFECT ON SPONSORSHIP

MLS will command a higher national sponsorship revenue because the league will be more visible. Shirt sponsorship and the local sponsorship for the high profile teams will increase by a good margin.

 

PART II



EFFECT ON THE CONCACAF CHAMPIONS LEAGUE

It’s almost a certainty that MLS would do better in the Champions League because top MLS teams will have more depth and better talents. MLS teams will also focus more on the Champions League because they will be in a pretty good position to make the playoff domestically. A $15 mil Seattle would have much higher chance of winning the Champions League compare to a $2.2 mil + Jlungberg Seattle. Under UEFA financial fair play, I believe that the top MLS teams could be on par with the top Mexican teams 5 years from now. Teams like Seattle, Los Angeles, New York, Toronto, Vancouver have huge growth potential.


MLS IMAGE, CREDIBILITY, PERCEPTION

MLS faces an uphill battle in many markets. Luckily, MLS has been done right by Toronto, Seattle, Philadelphia, Vancouver, Portland and Montreal, the so called MLS 2.0. MLS needs to nurture these teams, not hinder them from growing. With a salary structure that reward teams for financial success, teams with the most growth potential can grow. The current system is artifically holding back teams from achieving their natural potential, the very same teams that could take MLS to the next level. Think a $2.55 mil Seattle averaging 36,000 today under parity/mediocrity. Think of what Seattle can achieve if they can put their $40 mil a year revenue to good use.


Is the DP efficient way to build a team?

Which would be a better team?

$1.8 mil Galaxy + Beckham ($6 mil) + Donovan ($2 mil) or a $9.8 mil Galaxy?

I believe LA can put together a much better team with $9.8 mil rather than $1.8 mil + Beckham and Donovan. With a salary cap that tailor to each club total revenue, each team can use their player budget more efficiently.


WHAT IF: something to ponder

What if NASL install something like this back in 1980 that require each team to at least break-even?

NASL top 16 teams in attendance back in 1980:

1. New York 42,754
2. Tampa 28,435
3. Vancouver 26,834
4. Seattle 24,246
5. Tulsa Roughnecks 19,787
6. Washington 19,205
7. Minnesota Kicks 18,279
8. Toronto Blizzard 15,043
9. Fort Lauderdale Strikers 14,279
10. San Jose Earthquakes 13,169
11. San Diego Sockers 12,690
12. Los Angeles Aztecs 12,057
13. Chicago Sting 11,672
14. Detroit Express 11,198
15. Edmonton Drillers 10,920
16. Portland Timbers 10,210


Would the league survive, thrive, and become a pretty damn good league today? NASL started in 1968. 2010 would be its 43rd season. Who know, maybe the top 6 leagues in the world today would be Premiership, La Liga, Serie A, Bundesliga, Ligue 1 and NASL.

 

PART III


Why this will get the support of the owners of low revenue teams?

1. Profits. Many owners would be tired of losing money every year with no end in sight.

2.Revenue sharing. MLS divide national television deal (about $20 mil a year) and national sponsorship (about $30-40 mil a year per my estimate) equally.

3. 50% of every club gate receipts is shared equally. That mean that Dallas, San Jose Colorado get to share Seattle, Toronto, LA, New York, Vancouver attendance success. [***see my hypothetical example in the next post***]

This policy change will benefit big clubs more than small clubs. That's why I believe the like of Seattle, Los Angeles, New York, Toronto, Vancouver, Philadelphia will be willing to share 50% of their gate receipts. In return, they are much more competitive on the field and generate more revenue off the field. Their franchise value will increase substantially.

4.Attendance would increase when high profile teams visit. Similarly to how home attendance increase whenever the Redsox or Yankees come to town.

5.A rising tide lifts all boats. MLS becomes a better league. Their franchise value increases, especially now that their business is guaranteed a profit each year per league policy.

If you are the supporters of low revenue teams, you won’t likely support an initiative that limit your competitiveness. But for an owner who is losing money, it might be a very attractive opportunity. I will paraphrase what I wrote in the first post. Which is more important to the owners? Parity or profitability?

 

What attendance revenue sharing might looks like right now with 30%:

https://www.bigsoccer.com/forum/showthread.php?t=1466799
MLS 2010 revenue sharing projection

Seattle -------- 36,145.75------36,000 paid attn. x 30% x 15 games x $32 = $5,184,000
Toronto FC-----20,537.40 -----20,500 paid attn. x 30% x 15 games x $32 = $2,952,000
Los Angeles ---19,635.17------19,000 paid attn. x 30% x 15 games x $32 = $2,736,000
Philadelphia--- 29,954.00------20,000 paid attn. x 30% x 15 games x 27 = $2,430,000
New York -----16,282.14------15,500 paid attn x 30% x 15 games x $27 = $1,883,250
D.C. United---14,734.14------13,500 paid attn x 30% x 15 games x $29 = $1,761,750
Houston -------16,685.43------16,000 paid attn x 30% x 15 games x $24 = $1,728,000
Salt Lake------15,816.50------15,000 paid attn x 30% x 15 games x $22 = $1,485,000

Chicago-------14,266.50------13,200 paid attn x 30% x 15 games x $25 = $1,485,000
Columbus ----14,244.20------13,200 paid attn x 30% x 15 games x $22 = $1,306,800
Chivas USA---14,500.60------13,000 paid attn x 30% x 15 games x $22 = $1,287,000
Colorado -----12,787.00------11,700 paid attn x 30% x 15 games x $22 = $1,158,300
NE ------------10,319.00------8,500 paid attn x 30% x 15 games x $25 = $956,200
Kansas City---9,895.67-------9,000 paid attn x 30% x 15 games x $22 = $891,000
FC Dallas------10,447.50------8,500 paid attn x 30% x 15 games x $22 = $841,500
San Jose ------9,383.83-------8,500 paid attn x 30% x 15 games x $22 = $841,500


What it might look like with 50% revenue sharing of gate receipts (assume attendance does not increase for the top teams):

Seattle -------- 36,145.75------36,000 paid attn. x 50% x 15 games x $32 = $8,640,000
Toronto FC-----20,537.40 -----20,500 paid attn. x 50% x 15 games x $32 = $4,920,000
Los Angeles ---19,635.17------19,000 paid attn. x 50% x 15 games x $32 = $4,560,000
Philadelphia--- 29,954.00------20,000 paid attn. x 50% x 15 games x 27 = $4,050,000
New York -----16,282.14------15,500 paid attn x 50% x 15 games x $27 = $3,138,749


More than likely, the attendance of top MLS teams and their ticket prices will increase under the UEFA salary cap because:

1) top teams will field much better talents. For example, Seattle could put out a $15 mil team and still be profitable.
2) because they have higher quality of players, they are more likely to win more often.


What it might look like with 50% gate receipts revenue sharing and these teams attendance increase by 20% and ticket prices increase by 20%

Seattle -------- $12,096,000
Toronto FC----- $6,888,000
Los Angeles ---$6,384,000
Philadelphia--- $5,670,000
New York ----- $4,394,248

 

Likely candidates for MLS top teams under "UEFA financial fair play" salary cap structure are the Seattle Sounders, Los Angeles Galaxy, New York Red Bulls, Toronto FC, Vancouver Whitecaps, Philadelphia Union, and Portland Timbers:



Seattle Sounders
2009 metro population: 3,407,848


Current average attendance: 36,146


Los Angeles Galaxy

2009 metro population: 12,874,797




Stadium capacity: 27,000 + lawn seating

2007 attendance: 24,252
2008 attendance: 26,050
2009 attendance: 20,827
2010 attendance: 19,635

Forbes estimate that the Galaxy made $34 million in revenue in 2007.



New York Red Bulls

2009 metro population: 19,069,796



Stadium capacity: 25,000

2010 average attendance: 16,282

 

Toronto FC

2006 metro population: 5,113,149



2010 attendance: 20,537 with 15,000+ on the season ticket waiting list


Other teams that have the potential to be the top 3-4 clubs in MLS:

Vancouver Whitecaps



will start in 2011. The goal is to have 16,500 season tickets. Already sold over 10,000 season ticket deposits with the first 5000 sold within 24 hours. Signed a shirt sponsorship deal that is worth about $4 mil a year.

Philadelphia Union



2009 metro population: 5,968,252

sold 12,000 season tickets for 2010 (it was cap at 12,000). A waiting list for season tickets is under way. That waiting list is now over 100 people.

Other teams with potential to be MLS top teams:

Portland Timbers
Montreal Impact
Houston Dynamo
Chicago Fire


If MLS adopts the UEFA salary cap structure, I believe MLS top 3-4 teams have a very good chance of being on par with FMF top 3-4 teams 5 years from now. The top 3-4 MLS teams can also build upon their success and grow. Take Seattle for example, with a $15 mil team instead of a $2.55 mil team, they could average more than 46,000 within 3-4 years especially when that team should win a lot more often.



Unlike many other soccer leagues, MLS has the playoff, in which many teams have a chance at the league title. MLS will have its disparity, but the playoff is a great equalizer. With a good run nears the end of the year anything could happen.

 

MLS can still be single entity and own the player contracts under this system. No reason to abolish single entity when MLS switch to a different salary cap structure.

 

I hope you're trying to be funny because you have it backward. The new teams are the teams with the most advantage under the UEFA salary cap. Under the current MLS system, the new expansion teams are the ones destined to lose.

Recent new teams to MLS: Toronto, Seattle, Philadelphia, Vancouver, Portland, Montreal would have no trouble competiting. In fact, they will be nearer to the top of the table instead of the bottom.

My idea is to allow teams with the most growth potential to GROW. The very teams that could take MLS to the next level. The current MLS system is holding them back by artifical means and this is to the detriment of the league.

 

Seattle will have a spending advantage over Philadelphia and every other teams in MLS. However, Philadelphia will have a spending advantage over just about everybody else and probably on par in spending power with Los Angeles and Toronto.

Seattle Sounders FC-----36,145
Philadelphia Union--------26,221
Toronto FC--------------20,249
Los Angeles Galaxy------19,635

Philadelphia Union president said PPL Park was built with expansion in mind. It can be expanded up to 30,000. They can do it in 2 phases. Phase 1: 25,000 Phase 2: 30,000. Expansion of PPL Park will depend on demand. And demand is much more likely to be higher under UEFA spending cap system because the Union know they will be among the top teams in MLS in term of spending power. They can build upon their success.

Seattle 2009 metro population: 3,407,848
Philadelpha 2009 metro population: 5,968,252



Remember what you wrote? "New teams would be entering a league with a disadvantage. How would you convince new investors to start a team destined to lose?"

Do you still believe that new teams like Toronto, Seattle, Philadelphia, Vancouver, Portland, Montreal are destined to lose under UEFA "spending" cap?

If you do, I have a very nice bridge to sell you.

 

http://www.chicagolandsoccernews.com/sections/mls2.php?article_id=6693

CONCACAF CL (3 pts for win, 1 pts for draw)

Mexico: 67% (W44 D13 L15)
Panama: 50% (W11 D6 L9)
Honduras: 49% (W12 D1 L12)
Guatemala: 38% (W5 D3 L8)
MLS: 34% (W10 D13 L19)
El Salvador: 29% (W3 D5 L8)
Costa Rica: 28% (W3 D6 L9)

As of Feb 21, 2010. This is before Columbus Crew got eliminated in March 2010.




Which salary cap system is much more likely to allow MLS to win the CONCACAF Champions League sooner and after that on a consistent basis?

A. MLS league-level salary cap system where MLS is only as good as its weakest teams

B. MLS club-level salary cap system where MLS is as good as its strongest teams

 

Resorting to personal attack now? How very low of you.

In that other thread, I argue that the big clubs should give more money to the smaller clubs SO THAT the smaller clubs would vote IN FAVOR of letting the big clubs have a spending advantage ($300,000). It's a compromise.

Would you rather NY/LA/Sea/Tor get $300,000 spending advantage or no advantage at all?




Likewise, in this thread, I argue that the big clubs should share more revenue with the small clubs so that they would vote in favor of UEFA spending cap/financial fair play. After all, the small clubs would suffer financially from this fundalmental change because they won't be as competitive on the field. The UEFA spending cap favors the big clubs and allow the big clubs to grow to their full potential, something that the current MLS hard cap is denying them. If I'm Seattle/LA/NY/Tor, I might even go as far as sharing 50% shirt sponsorship and 50% of gate receipts to get THE DEAL DONE.

Handicapping the strong ones is EXACTLY what the current MLS structure is doing right now. My proposal is aim to change all that. However, I'm a realist not an idealist. I know that in order to change, compromise is required if there is any hope of getting 70% approval from MLS owners.

Right now, Seattle/NY/LA/Toronto/Vancouver can only be good as the amount of money that Dallas/Columbus/NE/Colorado can afford to spend on players. The $2.55 mil cap is tailored to MLS smallest clubs.


Here's my view summarize:

I want the big clubs to win more often. However, owners of the smaller clubs don't. And unfortunately, owners of small clubs are the one in control of MLS.

My solution: BRIBE THEM.