The Angle

In Defense of MLS Ambition

by on 3 April 2015

Is it aggressive or naive for MLS to want to compete globally? Stefan Szymanski, author of Soccernomics and professor at the University of Michigan, expressed his thoughts in a recent article on his blog. He argues that MLS cannot move from its low status as long as MLS seeks parity and team cooperation. His solution is for MLS to restructure itself to mimic European leagues, and let billionaires run loose. Otherwise, he argues, MLS will remain a “minor league” and its ambition for global relevance is simply self-delusion. This is a familiar refrain for American soccer fans – essentially a politely worded “conform or die.” However, these arguments are internally inconsistent and fail to acknowledge facts that suggest MLS growth and potential.

We know some want MLS to copy European leagues – American soccer fans hear this regularly. But it’s only fair to add some detail to Szymanski’s arguments as the best representative of the genre. The foundation for his pessimism is that MLS has been around nearly 20 years. Of course, no other US sports league reached its full potential within two decades, but Szymanski feels this is as good as MLS is going to get. And he argues the current gap with Europe is too large to bridge, and only getting wider. In his opinion, the only way to upset the status quo is to lure more billionaires by removing spending/business limits and allowing massive cash infusions. And if teams go bankrupt, or fail on a massive scale, he argues that it will probably be alright as fans may buy the team.

Based on his examples and anecdotes, he asserts that what he believes works in Europe is the prescription for the MLS. In true economist fashion, America could have a globally competitive league if only we had more capitalism and let the market work. After all, what billionaire could resist losing millions of dollars to have an American soccer team with well known players? (the sarcasm is mine).

As an initial matter, I agree with Szymanski’s general description of the current place of MLS in the world’s game. Simply MLS is not providing competition equivalent to the top European leagues. And while I believe Szymanski overstates the efficiency of the market, player salaries are highly correlated to club’s success within European leagues. MLS spends a fraction (between 6-11%) of what Euro leagues spend on player salaries. In addition, it’s true that current TV viewership and revenues are nowhere near sufficient if the league intends to compete globally. But MLS is not doomed to wallow in its current status.

MLS “Competing” With European Leagues, Not Super Clubs

Szymanski uses the top European leagues (EPL, La Liga, Serie A, Bundesliga) as the standard for global competitiveness. But these leagues consist of a couple stand-out teams and a series of dwarves used to fill out the schedule. The Global Sports Survey (GSS), published by the Sporting Intelligence, compares club salaries between teams in the top European leagues and MLS.

In England, for example, the top six teams spend 50% of the league wages. In Spain, two teams spend over 40% of the wages in La Liga. The skew in wages distorts the league averages. Only six EPL teams have wages above the league average. The top 6 teams have an average wage 2.5X the average wage of the remaining 70% of the EPL. And the EPL is one of the more egalitarian European leagues. In Spain, Real Madrid spends as much as the bottom half of La Liga combined.

Returning to the GSS, Toronto has already surpassed bottom feeders in La Liga and Serie A in terms of average salary. This is not to say MLS is currently equivalent to La Liga, or Serie A. But the gap between these leagues is closing faster than some suggest. The fact that there is already some overlap suggests that league perception is more complex than comparing simple averages. And this complexity extends into the analysis of TV ratings.

TV Ratings Do Not Equal Quality

As much as Szymanski cites TV ratings for MLS futility, the evidence is not as clear cut there either.

EPL gets better ratings than MLS (414,000 on NBCSN versus 112,000 on NBCSN respectively). But to assert these ratings reflect league quality is to engage in textbook cherry-picking of evidence.

Results undermine the perceived TV dominance of European leagues. For example, La Liga, Serie A, Ligue 1 face similar ratings issues as MLS. In 2012, ESPN reported that for these European leagues, “The ratings are going to be so low that they will be almost unmeasurable.” Indeed, if these ratings equaled quality then MLS would be better than La Liga (29,000 viewers) and Serie A (54,000 viewers).  Id.

And rays of hope abound for MLS on TV.  MLS’s Opening weekend outdrew the FA Cup fixture the same day. The 2014 MLS Cup scored impressive ratings as well with 964k English (ESPN) and 923k Spanish viewers. And Mexico’s LMX semifinal can draw about the same as the EPL record (1.3M versus EPL record of 1.38M), and higher ratings than the 823k that watched El Classico on beIN Sports. And these league figures don’t even come close to fully engaging the soccer public: World Cup viewership was 18M for the US-Portugal game, representing a decent guess for a viewership ceiling.

Does that mean LMX is better than the EPL? Is the market inefficient (because EPL salaries are much higher), or do TV ratings vary based on a multitude of other factors?  The parsimonious answer is TV viewership is not dictated by player wages in a league. And this fact destroys the tautology that low player quality leads to poor TV ratings, which leads to low revenue, which in turns leads to low player quality.

If poor ratings do not doom MLS, it would make sense that other factors like a stable time slot, and a television partner committed to quality broadcasts would improve ratings (and revenue). Why not focus – as MLS does – on geographic growth, thereby inviting hometown supporters to the league? After all, Orlando got its best MLS rating ever once they had a team, as reported by SportsBusinessDaily.

Recycled Cures

Szymanski argues that MLS should adopt the economist’s talisman: competition. Specifically, he states that MLS should make itself more attractive to billionaires, and let them spend until they declare bankruptcy. At that point – he argues – fans may have incentives to take over teams. Of course, having fan ownership (presumably without the desire to make capital calls and spend millions more than revenue allows) directly contradicts the hope-for-billionaires strategy. And aside from internal inconsistencies, and that underlying facts do not support the conclusion, there are two fatal flaws in this proposed remedy.

First, MLS already has billionaire owners. If the presence of rich people is all that’s needed, then MLS should be good already. If the billionaires (and others nearing that label) really want to engage in adolescent one-upmanship, the league owners have the ability to do so. After all, it’s the league that sets the salary cap and player signing rules.  The players would love unrestricted contracts. Reality does not support Szymanski’s psychological hypothesis.

Second, repeating the ‘free market” slogan is best left to the politicians, and out of developing soccer in the US. Suggesting that competition among teams and promotion-relegation are a “fix” denies American history. We had open competition among clubs for nearly a hundred years. And it failed: miserably. Recall the old NASL. It had globally recognizable names. Minnesota had years with attendance figures that rival the current Sounders. And the league was such as spectacular and devastating implosion that its specter dominates the sport three decades later.

Up until 1996, Szymanski’s suggestion was reality. In spite of America’s attractiveness to billionaires, or the inflation-adjusted past equivalent of billionaires, US soccer did not develop into a globally competitive league. The oft-quoted definition of insanity is doing in the same thing and expecting a different result. How does it make sense to return to a system that has already failed to advance the sport? It doesn’t.

In Part 2, we examine signs that MLS growth can, and will, continue.