Major League Soccer (“MLS”) has two distinct, and intertwined, defining features that set it apart from the rest of global soccer: Its single-entity structure, and its salary cap.
While standard in most major American sports leagues, salary caps are near-nonexistent in soccer elsewhere in the world. Earlier this year (2021), an arbitration panel threw out the English Football League’s attempt to establish a salary cap for League 1 and League 2 (the third and fourth tier of professional soccer in England), after the English player’s union (the PFA) challenged the regime.
One of the central philosophies behind MLS’s American-style salary cap is to maintain competitive balance amongst its clubs. This balance, to MLS, is fundamental to its growth strategy for North American soccer, and the league writ large.
To MLS, parity reduces the predictability of competitive results, which creates a more interesting product for prospective fans and neutrals, which in return will lead to growth in popularity of the sport and the league —or so the theory goes.
For MLS clubs, however, competitive dominance -not balance- is top of mind. The fundamental basis of the parity theory is that it creates a potential for all teams to win. Essentially the draw for fans is the hope that there is a possibility in every matchthat their team will win. So, a club on an individual basis will grow interest, fan support, market share, and revenue faster if they increase their likelihood of winningby become consistent winners.
This makes sense. The biggest clubs and teams in the world are the ones that have the biggest histories of winning. Real Madrid, Liverpool, the Yankees, the Lakers, all built their global fanbases with the contents of their trophy cabinets, not the fact that their matches and games had extremely unpredictable outcomes.
Therefore, soccer clubs, including those in MLS, should fight to maintain competitive dominance, not balance to grow their fanbase and improve their bottom line.
This is the first piece in a series discussing strategies MLS clubs can leverage to break the league’s competitive balance and create a model for sustained sporting (and therefore, hopefully, commercial) success in MLS. You can read the subsequent pieces here: II.
As the 2021 MLS season kicks off this weekend, it makes the most sense to start by breaking down MLS’s Salary cap in straight forward terms, to better understand the constraints by which MLS Clubs must follow as they build their rosters.
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