With the first overall pick, Inter Miami selected the 2019 Mac Hermann winning striker Robbie Robinson, 21, from Clemson University. With the third pick, they went with the 2019 NCAA Division I Men’s champion full-back Dylan Nealis, 21, from Georgetown University.
More on today’s selections including sporting director Paul McDonough’s assessment and what to expect next on Inter Miami Hoy.
With negotiations for a new collective bargaining agreement (” CBA”) ongoing between the MLSPA and the league, it seems like a good time to compare salaries in MLS in relation to other North American sports leagues and, perhaps more relevant, to other football leagues in the world.
As a preface before going into this discussion, it must be pointed out that salaries have risen in MLS. Even statistics displayed on the MLSPA’s web site demonstrate that players’ salaries have consistently risen in the league over the past five years.
Before going further, it must be noted that the research upon which this piece is based first appeared in an article by Jared Young of American Soccer Analysis, who did extensive research and published a detailed study on this subject in Spring 2019.
With that as a backdrop, how do salaries in MLS look when compared with other professional athletes (non-soccer) in North America? What about how MLS players are paid relative to their football playing peers in Europe? These are the questions no doubt MLS players and their union should be examining.
Comparison To The Other Four Major North American Sports
In the four main North American professional sports (American/Canadian Football, Basketball, Hockey and Baseball) player compensation is tightly tied to league revenue. Essentially, the players unions are negotiating as to how much of that revenue the players should receive in the form of salaries.
Note: A discussion of the data sources and compilation decisions is located after the conclusion.
Using data from 2017, it was revealed that MLS spent $271 million on player compensation that year, a figure that includes net income via transfer fees, and had an estimated revenue of $963 million. Thus, net player spending was 28% of revenue in 2017.
The four major domestic leagues range between 37% and 46% using the data compiled, 9% to 18% higher than in MLS. If MLS players were paid between 37% and 46% of league revenue, this would mean $87 million to $174 million in higher compensation, or $150,000 to $300,000 more per player in order to approach what their fellow athletes earn in competing domestic sports.
No one, and certainly not the MLS Players Association, is arguing for such an increase. For one things, despite experiencing rapid expansion over the last few years, MLS will field 26 teams in 2020. That number will increase to 30 by 2022. Moreover, MLS was only began playing in 1996 and is still considered a young league. Owner/operators are still investing in infrastructure, with shiny new training centres, academies, and soccer specific stadiums. At the end of the day, to the defense of the owners, there is only so much revenue to spend. The league also is still growing fans and has a lower media rights deals than the other major sports. Over time, these factors will be less of an impediment to providing players with a higher percentage of league revenue in the form of salaries.
Comparison To The Other Major Football Leagues
Taking a look at where MLS stands relative to other football leagues in terms of revenue, the numbers are more encouraging.
As of 2017, MLS finds itself ranked sixth in the survey of fourteen major football leagues. In fact, MLS sits comfortably just behind the “Big Five” leagues: The Premier League, La Liga, Bundesliga, Serie A and Ligue 1, and barely behind the Brasilierão. That a league that is about to celebrate its twenty-fifth anniversary season has already climbed inside the top ten best revenue generating leagues is certainly a credit to its owner/investors and the league’s management.
Despite its high rank in revenue compared to the world’s biggest football leagues, a comparison of the ratio of salaries to revenue demonstrates that MLS ranks lower than other leagues.
The above chart shows that other leagues have a range of 52 % to 72% of revenue going into salaries.
As shown in the above graphic, the English Championship, the second tier of English football, showed a figure of close to 99% of revenue being spent on player compensation. The most logical explanation for this extreme figure is the impact that promotion and relegation have on the Championship, where the financial benefits of being promoted to the Premier League give clubs an incentive to spend greatly on players’ wages in order to give themselves the best chance at promotion. It also could demonstrate why financial problems have often been associated with the lower divisions.
It must be pointed out that the other top leagues do not have salary cap restrictions, beyond rules imposed by UEFA’s Financial Fair Play, which was designed to improve the overall financial health of European club football. Thus, there is an open competitive market to secure the services of the top players, resulting in more spending on wages.
Using the 2017 figures, the MLS ratio of salaries as a percentage of revenue is 28%. Factors that explain this include the single-entity structure of the league, which allows the league to dicate what can be spent on players. In MLS, a player’s contract is entered into between the player and the league, rather than with a particular club. Another factor is the lack of promotion and relegation in US and Canadian soccer, which tends to lessen insecurity around future revenue, and therefore can limit a feeling that there is a need to spend in the short term in order to reap future financial benefits. Another relevant factor is the fact that soccer is not the primary sport in North America, as it is in the other countries where the most profitable leagues are located. The pressure to succeed is simply greater where soccer is the top sport, therefore putting pressure on owners to spend to win.
The compensation to revenue data revealed that MLS’ level of 28% is very close to that of the J League in Japan. The J League has estimated revenues of $650 million in 2017 combined with player expenses of $175 million, resulting in a ratio of 27%. One commonality is that football is also not the top sport in Japan.
Again, the argument that the MLS owner-investors are still investing in infrastructure beyond player salaries is a viable argument given the relatively early stages of the league.
In comparison to the top leagues, MLS players compensation will need continued increases to close the gap. This is one of the main issues for the MLSPA in the next CBA.
Using data from Forbes, for the two years available prior to the current CBA, the league the average was 19%, and since the 2015 CBA was put in place the average has been 25%. It seems reasonable to assume the players should get at least an increase of 6% again, which would put them in the low 30% range or perhaps a little higher.
MLS will soon achieve the $1 billion in revenue milestone. For most other sports leagues that would mean the players are taking roughly $500 million, yet MLS players are barely receiving half of that amount. That may be a necessity for the owners at this relatively early stage of the league, but at some point it seems likely the league could run out of fans willing to pay higher prices to watch a local soccer team. It is easier than ever for fans to watch any number of the best leagues right from their mobile devices, not only their living rooms. Soccer is a world sport and MLS’ real competition is not the NFL, NBA, NHL or MLB, but rather the Premier League, La Liga, etc. To achieve the stated goal of becoming one of the top leagues, MLS owners will need to compete with the leagues that are already there. That is why the subject of salaries is a critical issue in the current CBA negotiations.
Notes on the data sources
For MLS information, the Major League Soccer Players Union publicly releases player salaries, but the league also invests in players by way of transfer fees. While these fees are typically not released, transfermarkt.com tracks such fees paid to the extent possible. To attain net wages spent on players, the net transfer fees paid/received in each season was added/subtracted from the total amount of compensation paid to the players.
Revenues were compiled from Forbes annual publications, the best consistent source of these estimates. There is one key issue in the case of Major League Soccer, due to the way the league is structured. While Forbes’ estimates revolve around net team revenues, a good portion of the league revenues never make it to the teams. The media rights agreements are the most important example. Those revenues go to fund the player salaries, which the league funds within a certain budget. So additional research and assumptions needed to be made to get a complete picture of MLS.
These estimates include the television deals, the agreement with Adidas and their other top three league level sponsorship deals. In 2017 these league level agreements reached an estimated total of $150 million, that was added to the Forbes team level estimates for revenue. Similar estimates were made for all of the years in the trend graph that dated back until 2007, the first year that Forbes estimated MLS team revenues. No such additions were made to the other American sports leagues.
For the European soccer leagues Deloitte produces a report that publishes the wages including net transfer fees and revenues for each league. For the data from Brazil a research paper was used.
The American sports leagues analysis used more diverse sources. The American leagues have contractual levels of wage to revenue ratios but those are difficult to match with publicly available data. For example, NHL player wages are tied as precisely as possible to a 50% target, but the reality can often appear different. Still we can use these targets as context to determine if the data available is reasonable. The NFL salaries were taken from here, the MLB from here, the NBA from here, and the NHL from here. From a revenue perspective, all of the data was taken from Forbes and aligned with the season starting in 2017. Not all of the leagues have 2018 data yet, so that is the last point of comparison.
The other leagues either contractually or publicly target a 50% wage to revenue ratio so the discrepancy in this data can come down to a few more factors: 1) Forbes estimates are systematically too high; 2) Some revenues that Forbes includes are not included by the leagues in the official calculation, and 3) There are ancillary expenses, like contract insurance, that the leagues include as wage expenses that publicly available salary databases do not.