What type of salary cap is best for MLS?

You said 2000 less fans in a small market to get a 2500 fan gain in a bigger market. Never mind the fact that you're just pulling numbers out of your ass, a market that's already struggling losing 2000 fans for the betterment of a club that is already doing well is a recipe for destruction.

I'm in a metaphor mood right now, so here it goes.

You have twins. One has a healthy heart. The other one does not. The one with the unhealthy heart isn't in danger of dying so long as it's given medicine and proper care.

But you decide that you are going to pour all your resources into the healthy child, because one child with an extra strong heart is better than maintaining one child's quality of life at the expense of the other child becoming super human.

You're talking about letting one franchise slowly crumble so other franchises can grow. Don't you think that as the gulf in class continues to grow, that the struggling team will lose more and more fans until they eventually are forced to relocate or fold?

Ticket revenue is the largest chunk of money that MLS teams pull in.

 

+1.

 

Anyone care to explain to me how LA or NY can possibly average more than 30k when the Home Depot Center only holds 27,000 and Red Bull Arena will only hold 25,000.

Or do your wild assumptions include both AEG and Red Bull building brand new bigger stadiums in the next few years?

 

demand > supply, price of ticket go uppie... result same, ie increased revenue.

 

So you're changing your argument based on the fact that I debunked the first one. It's cool.

Before you could raise prices because demand exceded supply you need the games to start selling out every single game. Even you can't be dilusional enough to think that will happen overnight, or inside of one season.

Lets say it happens in two seasons, and that's being generous. In year three revenues will have to have gone up by $2.5 million to cover the cap increase or the money will officially have run out.

That's not a very large margin for error. But hey, it's not your money. And you have absolutely no business acumen whatsoever, so why the hell not. Especially since we're all just assuming that doubling the cap is going to cause games to sellout leaguewide within two years to make this whole scheme work.

Now that I really think about it, this is the most awesome idea ever.

 

hard to make any money in business without taking risks. Your argument is not exactly fair either. It would be my guess that if all stadiums sold out for every game they would make a lot more than 2.5 million per year more, so that is not the ask of the scheme.

 

Yes, if all stadiums sold out, it would more than likely bring in an extra $2.5 million.

That's a massively dangerous assumption to make.

Risks are absolutely o.k. if they are calculated risks. The only two players that have been able to tip the scales in terms of attendance are Beckham and Blanco. An extra 2.5 million per team isn't going to get you one of those players. And I'm not sure if a team full of De Ro talents (nothing against De Rosario) is going to bring out a significantly higher number of fans to games.

 

thats not what I said, I said MORE THAN. But I would agree that it is probably not a linear relationship between payroll and attendance. I am not exactly sure what the perfect way to describe it would be, but I do know that its is certainly some sort of positive relationship.

 

It wasn't me who made the original argument. Just clarifying for another.

I noticed you seem to misquote people a lot; extend their position to an extreme and then argue against that extreme position. It's as if you are having an argument with yourself. Good luck with that.

Just to clarify again. Pc4th's position was that the bigger market teams are being held back from increasing revenues because the small market teams are holding them back. Essentially.

The counter argument was stadium size is limited, so it doesn't matter if demand for the bigger market teams were to increase, because can only sell so many seats.

But there are two ways to increase revenue when demand > supply. Either increase the supply to meet the demand, in this case, extend the stadium seating. Or you can raise ticket prices.

Let me guess, you're going to argue that my position here is a salary cap of $20M and how that would destroy the league.

 

I don't misquote people at all. I just point out how retarded their argumets are. For example. PC4th did indeed claim that NY and LA could average more than 30k if the smaller markets weren't holding them back. Unless both teams build new stadiums, that's impossible. Yet you decided to jump in and support his position.

PC4th's original argument was that Larger market teams canabalizing smaller market teams is good for the league.

Then he brought up the 'Imagine NY and LA averageing over 30k per game' to say how awesome that would be, even though the smaller market teams would be losing fans.

That's when I brought up the small fact that neither NY or LA play in stadiums large enough to reach those averages anyway.

That's when you decided to stick your nose in and make a point that was irrelevent to the original argument regarding supply and demand.

That's when I debunked your claim that increased revenues through raising ticket prices wouldn't be a viable option to maintaining the salary cap if the original plan was to use expansion fees to double the cap.

You changed the argument, I ran with it. I'm really not sure how using simple math is taking a person's argument to an extreme or misquoting them. Maybe if I'm arguing against a point you weren't actually trying to make, you need to be a bit more coherent with expressing your points. But I'm going to go ahead and spell out everything for you.

Approx $130 million in expansion fees from Seattle, Philly, Portland, Vancouver. This is of course assuming that each team is paying everything up front, which has been revealed in articles with quotes from Paulson that this isn't the case.

But still, assuming that the league is sitting on a pile of cash, your contention, and the contention of a handful of posters is that using this pile of case to double the salary cap is reasonable.

So lets look at the math. 18 teams come 2011. People are asking for a doubling of the cap using expansion money, which is about 2.5 million per team. 18 x 2.5 = 45 million. 45 x 3 years = $135 million. Simple math says that unless league revenues increase enough to cover the cap increase, the expansion money will run out in three years.

Lets say the average person spends about $50 per game on ticket, concessions, parking, ect. I'm pulling that number out of my ass, I'll admit it, but it is an educated guess based on average ticket prices, the fact that most people carpool to games, most people don't drink 10 $8 beers per game.

$2.5 million/$50 = 50,000 fans new fans per season per team that would need to come to games on average. 50,000 / 15 home games = 3,333 new fans per game. Based on leaguewide attendance figures over the past several seasons, that is approx a 20% increase in leaguewide average attendance in less than three years to keep revenues at a level to maintain a doubling of the cap.

But here's the kicker. The league pays salaries, not the teams. And since you guys are arguing that increased attendances will pay for the cap increase, it is important to remember that the revenue streams affected by attendance go to the clubs first, with the league only taking a percentage. Now I believe that percentage is 33%. That means for the league to actualy collect $2.5 million in extra revenues, clubs would actually have to bring in $7.5 million in extra revenues to cover. It also important to note that not every team gets to keep 100% of their parking or concession revenues, so the number required to cover costs is actually higher. But we'll keep this as simple as we can.

So in reality, we would need to see on average an increase of 10,000 fans per game leaguewide within three years for the cap to be maintained based on attendance increases if the original plan was to use expansion money to raise the cap. That's a 63% jump, give or take 1 percent.

Call me pessimistic, but I say that is absolutely impossible to accomplish. Especially considering the size of most MLS stadiums aren't even large enough to accomodate a 10,000 fan per game increase. In the case of Toronto FC, which already sells out every game, in order to meet their revenue increase quota, they'd have to increase ticket prices by close to 50%. How long do you think the season ticket waiting list will be up in Toronto if prices get hiked by that much in under three years?

This isn't jumping to an extreme. This is basic math. The numbers don't add up to a figure that justifies using a one time bonanza of cash to drastically alter the salary cap.

And if you are trying to argue that the decline of a smaller market team for the betterment of a larger market team is for the good of the league, well I disagre wholeheartedly. You can't have three or four strong teams prop up an entire league. It's a house of cards waiting to fall.

 

You are also basing your "numbers" on teams only makin money through ticket sales, parking, and concessions. WIth more interest in the league it is likely that MLS will be able to sell a lot more advertising, as well as draw bigger tv audiences (not only because there will be more talent, but also teams in more cities throughout the country). You also assume that MLS will continue to operate with the same business model, and somehow would need to bring in many times more money that it invests in order to break even.

You also assume that it would be a short 3 year experiment that the owners would simply give up after 3 years if they didn't make every penny back. Aren't most clubs losing money anyway? so maybe they should lower the cap? You have to be prepared to lose money to make money. You also assumed that there would be no further expansion past this 130 million. Teams 19 and 20 could quite possible command 50 million dollar fees which could keep the experiment going for another year or so. You are also assuming that all teams would spend up to the cap limit, which may or may not be the case (again dependent on how MLS decides to structure itself in the future)


Flagship teams usually carry their leagues. Pretty hard to gain the respect of mexican americans if we cannot beat their top teams in competitive play. Also I think if we let the reigns completly loose on the system, I think we would end up with something similar to Brazil, with seperate state/regional championships and then a national championship of all the big dogs, which is sort of what goes on with the BCS, and that seems to get a lot of viewers. But again that is an exteme situation.

 

Go back and re-read the entire conversation, and then come back to me.

My argument is against using the expansion fee money to double the salary cap. The people advocating this plan of action are assuming that attendance increases and the increased demand for tickets (hence higher ticket prices) will cover the cost of a cap increase before the expansion money runs out.

I based my argument on that concept and that concept alone.

Also, TV contracts are already in place, and can't be changed mid-contract if TV viewership goes up. Second, ad revenue is sold by ESPN, FSC, Univision, and that is there money. That is how they recoup the costs of paying for the MLS rights. The league doesn't see a penny of increased advertising on TV.

I also feel that it's a safe assumption that the single entity business model will still be in place come 2011.

Understand the nature of the argument that you are sticking your nose in before you interject. Like we've said before, you love to argue, but you rarely make a point germaine to the actual argument being made.

I thought you said you studied business at Maryland...am I remembering that correctly? Then you suggest that future expansion could maintain the cap. Well eventually revenues are going to have to justify cap spending or you would have to expand indefinitely to maintain the status quo. that is the very definition of a Ponzi scheme.

 

I did read the entire conversation

And I am well aware of how tv contracts work, but also, no solid business plan of this magnitude would look soley at whether or not it became profitable in a short 3 year period. If the viewship numbers rose by a significant amount, the owners would be able to expect to make more money in the next tv deal. And like I said earlier, more eyes on the product is going to increase the amount you can sell any advertising related product (i.e. a shirt sponsorship)

I don't think it is out of the question for the league to become less centralized over time, especially as it become more stable, which is the main reason why it started off so centrally.

And it is not the very definition of a Ponzi scheme, because a Ponzi scheme is a fraud that never has any chance of working because there is no real product. Also, you are ignoring the possibility of returning to the old cap.

 

Look at Sportie1's plan. My argument is based soley on his idea on how the expansion money should be used to raise the cap. His contention is that revenues from increased attendance will be enough to justify using expansion money to double the cap.

Every post I've made in response to Sportie and BSGuy have been in response to that argument, and that argument alone.

p.s. You go ahead and try and tell the players union that they will all have to take a pay cut because the owners took a risk that didn't pan out. How do you think that would go?

You're trying to expand the argument to subjects that were never on the table to prove me wrong. Just give it a rest.

 

I agree that a one time windfall -- which is what an expansion fee is -- should not be used for reoccurring expenses like payroll. That said, I think it's a false choice.

I'm not going to keep boring you all with the same posts, but personally I do think the money is there to bump the cap to something between $3 - $4 million.

Whether they wish to spend it is up to them.

 

For the record, I never made that argument once. Never.

Simply made the argument for splitting the cap ala Snowden's article. Imo, it's a much better model than the DP rule in terms of allowing teams to spend above the cap to improve quality of play.

Here is snowden's article again for the record. The second half of it is sheer brilliance imo. And no, I'm not Snowden in disguise.

http://soccer365.com/features/story_81208190400.php

 

Generally, I agree with Snowden too. There are ways to boost the cap for everyone by a million dollars, perhaps a bit more, but I just can't see where the money comes from to get every team to $10 million. RBNY Managing Director Erik Stover has said as much.

I do think several teams would jump their payrolls to something in the $5 million range, and LA and RBNY might even go much higher. Personally, I'd love to see MLS try it, even on an experimental basis for three years, I just don't think the more frugal teams will ever allow it.

My hope is that MLS will jump the payrolls over $3 million, but honestly I'm lowering my expectations for anything more than that.

 

Under the current system of rigid equalization, fans will eventually stop attending in the so-called "big markets," places like LA. Sure the attendance drop seen in LA may be due, in part, to the economy, but it may also have to do with the fact that LA hasn't made the playoffs in 4 years. A team that supposedly tried to raise their quality of play by bringing in a couple of DPs. Weird: you spend millions to improve, and the team gets noticeably worse.

And the so-called "small market" teams aren't improving under the current system. The defending champs are seeing a decline in attendance. The defending champs.

The league needs some flagship teams, as Snowden suggests.

 

Good point. Thats why a new salary cap range should keep the current DP
rules (only 400k towards team cap). If not, then a new rule hard cap of say 10mil wouldnt help the galaxy at all since their payroll is already close to that (3mil + the 6.1mil for beckham). It should also be tied to revenue, somewhat. Only when certain revenue benchmarks have been reached, then a team can mover closer and closer to higher range of the cap (say between 3 to 5mil).

 

Well any argument can be made if you twist the facts.

The defending champs attendance after two home games is actually up almost 800 from their attendance after two home games last year. The defending champs.

2008: 10,288
2009: 11,076

LA did not bring in "a couple of DPs", they brought in 1, Beckham, and due to the decisions LA made he's played for them for half the 07 season, the 08 season, and half the 09 season. Hard to say they're trying to improve the quality of the team when their DP is allowed to miss half the season. Donovan is not a DP and was on the team prior to the DP rule existing.

Meanwhile teams who actually put together a team by bringing in a DP (Chicago, NY, Columbus, etc.) instead of making a media circus like LA did actually improve. People like to blame the DP rule on LA's fall, but it was actually bad management by the likes of Alexi Lalas and company(Cannon for Gomez and Ihemelu, signing Arena's 2001 National team squad, getting Ruiz on top of Beckham and Donovan, etc.) that did it.

 

Schelotto, like Emilio was not brought in as a DP.

 

But (like Emilio) he is one now. And he was making DP money, Columbus just had enough allocation money stored up to avoid using the DP slot for a year.

 

Thank you for the particulars.

Bottom line, I agree, winning and losing comes down to team management. Even more reason to support the split cap model proposed by Snowden. Any payroll differential can be offset by good team management.

 

Retaining a playoff system mitigates against this. If you can just get to the playoffs, really, as last season demonstrated with New York, anything can happen. You can look to a bunch of other American sports for examples as well.

If the EPL had playoffs, the big 4's grip on the title would diminish to an extent. If a reasonable salary cap was added, fans of mid-table teams could realistically think about challenging for the title.