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Oct 212013

So Alexi Lalas and Taylor Twellman spent a whopping two minutes talking about promotion and relegation the other night during the broadcast for an LA Galaxy-San Jose Earthquakes game. Naturally, there was plenty of reaction the next day. Proponents of the system argued for it and opponents argued against it. Insults were hurled, names were called.

Life goes on.

There are a lot of objections for why it can’t work. Some say Americans just don’t understand it. Some say it won’t accomplish anything. Then there’s the biggest objection of all: the teams that get relegated won’t survive. I don’t believe this is the case, at least not for every team in MLS. I have my reasons and I’m going to attempt to state them as clearly and as objectively as possible. I do support the cause after all.

The theory goes something like this: MLS Team X gets relegated, fans stop showing up, the team loses its cut of MLS’s “lucrative” TV deal, the owners run out of money, and the team is forced to fold because they can’t make enough money to keep the lights turned on. Let’s take this one step at a time.

Step 1: Fans Would Stop Showing Up

I do not believe every team in the league would see its attendance suddenly plummet 90% because they started playing in the NASL. Portland and Seattle in particular have extremely loyal fan bases. Would their fans also be the most distraught at the reality of being relegated? Absolutely. But their loyalty to their team is also the strongest and they would still be able to bring 10,000-15,000 fans through the gates for each NASL game.

Not every team would bring that many fans through the gates though. The two most viable relegation candidates over the past couple seasons have been Chivas USA and Toronto FC. The former has averaged roughly 8,200 fans per game this season while the latter is approximately 18,400 (Source: here). Chivas USA probably would see such a drop off as to render themselves financially unstable. But then again, nobody seems to think they should continue to exist in their current form. Without relegation, they continue to be propped up by the sweat of other fan bases.

Now let’s say Toronto’s attendance drops by 50%. That’s still roughly 9,000 fans per game in the second division where the average attendance is about 3,000-4,000. They can afford to stay just competitive enough to win their promotion back into MLS a year later. Are the fans upset? Sure. But it only takes one season to get promoted and win them back.

The overall average in MLS is approximately 18,500 so that argument for Toronto should work for most of the middle-of-the-road teams. Again, you just need enough fans to get you through one season. If your favorite team can’t even pull that off, then perhaps soccer is not as popular in your area as you’ve been led to believe. Perhaps the sport hasn’t grown nearly as much as we’re constantly told.

Step 2: The Team Loses Its Cut Of The MLS TV Deal

This is actually true, but let’s put into perspective just how much money this amounts to if the deal is split evenly among the 19 teams. The three year deal signed in August of 2011 is reportedly worth $10 million per year. That’s a total of $30 million for 19 teams. That comes out to $1.58 million per team. The salary cap is approximately $3 million. So before you take into consideration the amount of income made from attendance, a jersey sponsor, a stadium sponsor, etc you can pay for half of your roster if you’re coming in under the cap. Assuming your favorite team is smart and has ironclad sponsorship deals for the jersey and stadium, you’ve still got a steady source of income and you only need to bank on about 8,000-9,000 fans in attendance to help keep things afloat for one year.

But what about DP salaries? Someone has to pay those right even if they don’t count against the cap, right? True. Plenty of relegated teams all over the world deal with selling off their star players to make ends meet. MLS teams can man up and do the same. Not only that, but you can make a legitimate argument that the LA Galaxy and New York Red Bulls (your multi-DP powerhouses) will never be in danger of relegation. That’s how this whole thing works. You spend on good players, you win, and you don’t get relegated.

Now, MLS has struggled mightily against lower division teams in the past during the US Open Cup, but I think it’s fair to say that if an MLS team was forced to hold onto what would essentially amount to its reserve team, they would still have enough talent to compete for their spot back into MLS a year later.

And of course, all of this assumes you’re getting zero TV dollars from the NASL because they technically don’t have a TV deal. But if your team has been relegated, then that means there must be promotion as well. The Championship over in England’s second division has a TV deal with BeInSport to show their games regularly in the US. Why? Because at the end of the season, there are promotion spots on the line and there’s nothing like watching teams battle for those precious few spots. I truly believe within a year or two of implementing promotion/relegation, the NASL would be attractive enough to earn a national TV deal.

Step 3: The Owners Run Out Of Money And Can’t Afford To Keep The Lights On

This is the big one. This is the one everyone likes to harp on.

“But if the team gets relegated, the owners will stop making money! This is why we can’t have relegation! It’s too much risk!”

It is true there is a risk of losing money as a result of being relegated. I’ve addressed that concern for the most part in the first two “steps”. But would the teams lose so much that the owners run out of money? Let’s recap who some of the current owners in MLS are…

Seattle: Hollywood Producer Joe Roth (Majority), Microsoft Co-Founder Paul Allen (Minority)

LA Galaxy: Anschutz Entertainment Group (Majority of LA, 50% of Houston Dynamo)

New York Red Bulls: Red Bull GmbH (Red Bull Energy Drink)

Toronto FC: Maple Leaf Sports & Entertainment

Chivas USA: Jorge Vergara (Founder of Omnilife/Herbalife supplements and movie producer)

New England Revolution: Bob Kraft (Owner of the New England Patriots)

Portland Timbers: Merritt Paulson (Son of former Goldman Sachs CEO “Hank” Paulson)

FC Dallas: Hunt Sports Group (Owners of the Kansas City Chiefs)

Look closely at that group of people? Do these people/groups have their entire wealth tied up in an MLS team? No. They bought their respective teams with the change leftover from their actual sources of wealth and income. The same holds true for individual owners like new Columbus Crew owner Anthony Precourt, who, like most MLS owners, makes his fortune in venture capitalism.

None of these owners bought into MLS to make money. They bought into it because they wanted to buy something fun with the money they earned from the more profitable ventures they own and operate. We’ll never know for sure, but it’s very likely half the teams in MLS don’t actually turn a profit. That means some of these people/groups are losing money on their “investment” in their respective MLS teams. Yet the teams still exist and the players still collect their paychecks on time. That’s because they can dip into their other ventures for the money to sign the checks and keep the lights on. This is especially true for MLS owners who also own NFL teams. You don’t have to be a business major to see that someone like Bob Kraft could own nothing but the Patriots and the Revolution and still make enough from the former to keep the latter afloat for several years.

Now, do these rich men and women enjoy losing money on their MLS teams? Not at all. That’s why they set up MLS in its current closed, single entity format. If they’re going to lose money, they want help from their fellow millionaire/billionaire pals to recoup their losses. They can afford to take losses on their MLS teams, but why should they have to?

The point is they have the ability to, even if they don’t want to. They could easily see their MLS team get relegated to the NASL and start bleeding money. But most of them have enough to keep their current rosters intact for one season which, again, is all it takes to play your way back into the top if you’re good enough. If they choose not to do so and instantly decide to cut their losses they can sell their team to another wealthy person/group willing to buy the team on the cheap, invest just enough to play their way back into MLS in one season, and find themselves back in the black shortly.

Am I oversimplifying this? Yeah, I probably am. Does my theory work for every single soccer team in the US? No, it probably does not. But that doesn’t make it any less valid. Sports teams are backed by some of the wealthiest people/groups in the world. That’s how they’re able to exist. Then there’s teams like Nashville FC, who are simply owned by their most loyal fans. They’ll pay to see their team play no matter what division they’re in. We don’t need to worry about them either.

The implementation of promotion/relegation would open a whole new world for soccer in the United States. Promotion creates new investment opportunities for men and women looking to do something productive with their hard earned dollars. Relegation maintains the integrity of the competition being put on display before our eyes. It holds those same men and women accountable for the performance of their teams and their treatment of the local fans whose HARD earned money brings the sport to all corners of this vast, great nation of ours.

It is the key to realizing our dream of joining the ranks of the greatest soccer nations on Earth. Don’t let anyone tell you otherwise. It can and, with a little luck and commitment from the right people, it will be done.


Adam Uthe

VP of Content Development for GFT and proud supporter of Columbus Crew (MLS) and Liverpool FC (EPL). @AUtheGFT

  2 Responses to “MLS Teams Can Survive Relegation”

  1. Pro/rel could work in a closed system as well. Current MLS owners could benefit from it in a big way…
    Someday MLS will be forced to expand to 30 teams as there will be too many major TV markets left out and those who are will be picked up by rival leagues.Of course then they will have to resort to a regionally based schedule which will be a disaster for fans.
    Why not create an MLS 2 (closed system) with cheaper franchise fees? Pro/rel 2 or 3 teams per year. MLS will then fly its flag in 40 to 50 markets in N.A. instead of just 24 to 30. It would surely devastate its competitor ( NASL)..and put more franchise fee dollars in current owners pockets.
    If I had an opportunity to buy into MLS 2 or the NASL? ,
    I think the answer is obvious.

  2. Probably the bigger concern is not the teams falling down and losing precious “franchise value” in their “investment,” it’s teams that might spend themselves into extinction chasing the MLS dream. In Europe, it’s always the lower level clubs going into administration, whether or not they are on the way up or down, not the top level teams.

    Before we start moving teams up and down, the NASL probably needs to get to at least 16 stable teams first, and it wouldn’t hurt if USL Pro had at least 16 as well. Maybe a trial balloon of pro/rel between the NASL and USL Pro would be a good idea, except they are completely different entities who are unlikely to agree on anything.

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