For almost its entire existence, Major League Soccer has struggled with one fundamental quandary: how does it compete with the world’s best leagues — and how does it do so while remaining financially responsible, a facet of the league’s modus operandi that has kept it around longer than any professional soccer league in U.S. or Canadian history.

Four years ago, MLS went looking for a definitive answer to that question. They turned to the Boston Consulting Group for help, commissioning a wide-ranging, top-to-bottom look at nearly every element of league operations.

The study, a copy of which has been obtained by The Athletic, is a fascinating peek into the financial inner-workings of the league. It is full of detailed market research and confidential financial data that helps to explain the thinking underpinning some of the league’s decisions in recent years. It’s also a roadmap of sorts, as BCG’s recommendations in all areas of the study have informed the league’s business and competitive moves in the years following its completion.

One of the key findings that drove a number of the study’s recommendations: Fans of MLS believed that its quality of play was lacking compared to its regional and global competition.

The study offered up multiple options: Change nothing, and risk both losing fans and falling further behind the competition; lift restrictions on teams that want to spend more, enabling them to thrive while making it harder for thriftier teams to compete; or find a hybrid model that could simultaneously improve the on-field product while maintaining the parity valued by many of the league’s fans, but at the expense of competing regularly with Liga MX and other global leagues.

If the league wanted to choose the hybrid option, the study offered a way forward: spend more on roster spots four through 11, and potentially integrate a system with a higher cap ceiling and spending floor that would allow higher-spending teams to compete on a more level playing field with their Mexican counterparts.

The league followed this recommendation, but not to the letter. While no spending floor was created and the ceiling was not lifted substantially, the league introduced targeted allocation money (TAM) in 2015. The new funds would eventually add up to $4 million more for teams to spend on players. As the study predicted, it increased the quality of play while maintaining some level of parity.

That decision was one of many that show how the league has acted on, or is still contemplating, BCG’s guidance as it seeks to improve its product and its bottom line. Those choices — which include altering the league’s schedule, centralizing local television rights, creating new competitions with Liga MX and potentially merging the leagues and re-prioritizing U.S. Open Cup — may help MLS compete in the business sector, the prism through which BCG studied the league.

And that’s important, because the report acknowledges some of the harsh realities facing MLS at the time, revealing, for instance, that the league was projected to lose a massive amount of money in 2015 while barely registering an audience in its local TV broadcasts. It also lays out plans for growth for MLS through 2021 in sectors including media, scheduling, quality of play and stadium experience.

Financial losses, but massive growth potential

The league’s nine-figure losses paint a picture of the investment mode in which MLS still operates.

The study indicates an estimated league-wide loss of $177 million in 2015. Included in the debits is spending on academies, something that has begun to pay dividends in the years since it was published. Vancouver’s academy spending in 2015, for example, was offset by a $13 million sale of Alphonso Davies to Bayern Munich in 2018, a deal that could reach as high as $19 million with certain triggers.

Among the central points of the study’s analysis of the league’s current financial state:

Operating costs, including travel, stadium operations and the development academy, were 2.25 times higher than player spending, but the numbers are skewed toward certain teams. Stadium operations for three unnamed clubs, for instance, accounted for 36% of spending in that category.

The study notes that 65% of the league’s overall spending was done by seven clubs, four of which were the highest spenders on players. (Spending on DPs was included in the study’s league-wide expenditures even though, in practice, it is an out-of-pocket expense for individual team owners.)

Three unnamed clubs were each projected to lose more than $20 million in 2015, a year in which two expansion clubs entered the league and would thus spend significantly more on operations than established teams, while a third club — likely Toronto FC — spent $25 million on players, a model that would end up yielding increased fan attention and three appearances in MLS Cup. Those three clubs accounted for 44% of MLS’s projected losses in 2015.

Only four teams broke even or profited in 2015, according to the study: Real Salt Lake, the Seattle Sounders, Sporting KC and the Portland Timbers.

The study notes that its financial assessment does not include revenue driven by non-MLS SUM properties, profits that could largely offset the losses of some owners.

It is noteworthy that the BCG study pegs the highest sale of an MLS team through 2015 at $110 million. That figure was nearly tripled this year when Joe Mansueto bought the Chicago Fire for a reported $320 million.

The study also helps to explain why billionaires continue to buy into the league despite those losses. In 2015, MLS had just a 10% share of broadcast revenue, a 20% share of sponsor revenue and a 10% share of merchandise revenue across soccer in the United States, indicating significant growth potential.

Broadcast quality

Among the league’s biggest concerns, historically, has been its stagnant television ratings. This is no secret; despite skyrocketing expansion fees and team valuations, viewership for Major League Soccer has grown very little over the years. This is a major concern for the league as it approaches the expiration of its current national media rights deal in 2022. The league’s current package, signed in 2015, is worth about $90 million per year between ESPN, Fox and Univision. Privately, league officials have speculated that the upcoming deal could be worth closer to a billion dollars over the term of the deal.

The league has instructed its teams not to sign any local rights deals that run beyond the end of the current national agreement, and industry insiders have speculated that the league is preparing to centralize all of its media rights, bringing “local” production in-house in order to give it a uniform feel and quality — an idea that appears in the Boston Consulting Group study.

A look at where things stood, TV-wise, at the time of the study:

The study points out in no uncertain terms that consumers in 2015 perceived the quality of the league’s broadcasts to be very low. “Relative to other sports leagues,” it reads, “consumers have negative perceptions of MLS commentary, pre/post-game analysis and production.”

The study also notes that as of 2015, 80% of the league’s telecasts aired on regional networks but that 80% of the league’s total viewership came from the 20% of games that were nationally televised. Regional broadcasts at the time of the study were averaging a scant 17,000 viewers per game . Those same regional broadcasts, BCG suggests, vary widely in quality, and do not offer anywhere near the same broadcast or production consistency as the national ones.

One area the league received at least a passing mark in was delivering a “stadium atmosphere” on TV, which the study calls a key driver of consumption.

As of 2015, the lowest-rated local markets in MLS were among the nation’s largest media markets — Los Angeles, Chicago and Houston were the lowest-rated of all the league’s clubs (this was before the addition of LAFC, of course). Seattle, Portland and Kansas City were the top three. While the Premier League, NBA and NHL all draw close to 50% of their viewership from the U.S.’s top 10 media markets, MLS was only drawing 28%.

In the short-term, the study recommends setting best practices for the league’s broadcasts, for example, mimicking the angles and number of cameras used on English Premier League productions. It directed the league to create a robust broadcast manual to establish a uniform look and feel for its broadcasts and also a mechanism to monitor and enforce deviations from that standard. Several years after the report was produced, MLS’s regional broadcasts continue to vary in quality, with one team — D.C. United — having just pulled the plug on a disastrous relationship with streaming service FloSports.

The study’s long-term recommendations, though, mirror speculation among industry insiders that MLS may be headed toward a centralized production setup.

The study suggests that MLS look to more established entities such as the NBA, Premier League and even the PAC12 Network to provide inspiration for a centralized broadcast model. It’s worth noting that the PAC12 Network was spearheaded in part by Gary Stevenson, who currently works as Major League Soccer’s deputy commissioner and president of business ventures.

Adapting this model, the BCG says, would maximize quality and consistency. It would also give the league greater negotiating leverage. MLS could, for example, bundle all of its national and local rights into one massive deal and sell them to a streaming service.

Centralizing production would allow the league to cut down on production costs, the study says. Each MLS stadium could make use of fixed infrastructure — cameras, wiring, a control room and the like — allowing only a skeleton crew of cameramen, commentators and producers to show up and broadcast the matches.

Stadium experience

The in-stadium experience has long been one of MLS’s strengths. While many consumers continue to choose to watch higher-caliber soccer overseas, MLS’s proximity remains a primary selling point to local fans. Supporters groups in MLS stadia offer fans a degree of interaction and energy that is unique in pro sports.

Yet many MLS clubs continue to struggle at the gate. In 2019, a half-dozen or so of the league’s clubs faced serious attendance issues, drastically underfilling their home venues.

Major League Soccer has in recent years stressed the importance of having its clubs play in “urban centers,” a talking point that has echoes in the BCG study, in which it is possible to see the thinking that led to the recent relocation of the Chicago Fire and the constant rumblings of a potential downtown relocation of the Philadelphia Union.

On the “in-stadium experience,” the BCG study offers some analysis and a basic path forward:

“MLS utilization” — defined as paid attendance versus capacity — was at 70% in 2015. The league also had a significant issue with “no-shows.” The study lays out several reasons for this, suggesting that some clubs “don’t deliver the basic standards of a pro sports organization,” going on to briefly touch on issues with parking congestion, operations and safety standards. It’s worth noting that several new MLS facilities have opened since the study was compiled.

The study suggests that the atmosphere at MLS matches could be improved by positioning supporters in highly-visible areas of the stadium (like end zones, where the large majority of supporters’ groups are already located). They suggest providing infrastructure for tifo, such as pulleys, and that supporters be featured on television and in-stadium; both Fox and ESPN now regularly feature the unveiling of large-scale tifo on their national broadcasts.

The study recommends that MLS clubs carve out areas in their home stadiums for “social experiences,” offering the example of Avaya Stadium’s outdoor bar. Many stadiums across the league have added these areas in recent years. The study also offers suggestions for how clubs can leverage mobile technology and in-stadium WiFi to give fans better access to digital content during matches.

Longer term, the study suggests that the league find ways to ensure that each of its teams is located in an urban center — likely a suggestion aimed (at the time) at underperforming teams, attendance-wise, in Chicago, Colorado, Dallas and Philadelphia.

The study says that urban stadiums allow supporters’ groups to easily connect before and after matches, reduce hurdles for locals to attend games and help embed the club within the “culture of the city.”

The study suggests that, in order to make the capital investment in a new stadium “economically viable and attractive” to MLS ownership, the league’s clubs should seek partnerships in stadium construction — public funding or a partnership with a local college or university, for example.

Quality of play

Major League Soccer has long desired to be, as commissioner Don Garber has put it, a “league of choice” for players and fans alike. Yet 25 years in, it is still widely perceived as a cut below the world’s best.

The Boston Consulting Group speculates on why this is the case, concluding that the league’s clubs must alter the way they spend on their rosters if they hope to compete with traditional powers. The study also points out issues with perceived quality, suggesting that MLS’s broadcast partners are too negative in their match commentary.

The study says that “quality of play” is a key driver for multiple segments of MLS’s audience, yet at the time of the study, 45% of “current MLS fans” had a neutral or negative perception of the league’s quality of play while 85% of “MLS markets” perceived the quality of play in other leagues to be superior to that of MLS. That number “appears to be a combination of technical quality and consumer perception.”

At the time of the study, MLS’s roster spending was comparable to that of the Turkish SuperLiga, English Championship, Brazil’s Campeonato Serie A and the Russian Premier League, but the focus of that spending was different; some 35% of total spending was focused on the top three roster spots across the league, and the league’s five highest-spending clubs accounted for roughly half of the total outlay.

Despite the fact that the bulk of spending was focused on the top three roster spots — designated players, usually — the study concludes that “many DPs are not providing technical quality, perceived quality or commercial upside, commensurate with the significant spend on them.”

In addition to a lack of technical quality and issues with roster spending, the study dives into other factors that drive the public’s perception of MLS as a lower-quality league. It says that the lack of technical quality is “amplified by media… (which showcases) name-brand players and commentates on poor play rather than quality players and quality plays.”

They offer a path forward:

With regard to perceived quality, the study suggests that MLS would be better off de-emphasizing a high-profile player’s footprint and focusing more on the quality of their play. They recommend coaching the league’s broadcast partners to “reinforce quality in broadcasts,” even suggesting that the league might launch a national “play quality” campaign to change its perception.

With regard to actual quality, they suggest employing fewer DPs in their current form and “targeting quality over big names.” Teams should choose DPs judiciously, the study says, taking into account not only whether a particular player will make a difference on the field but also what sort of a difference the player can make on social media, for example, or in the perception of the club.

Over the last four years, three of MLS’s highest spending teams — the Seattle Sounders, Toronto FC and Atlanta United — have won MLS Cup with younger, less heralded DPs. The fourth, Portland, has also spent wisely on DPs.

The study correctly identifies the weakness of MLS’s imbalanced spending and offers a transformative suggestion, ushering the league toward the era of TAM. That recommendation — to put more dollars toward roster spots four through 11 — has been essential to improving MLS.

Meanwhile, the study recommends filling roster spots 11 through 18 by sourcing talent globally instead of locally. “Fans prioritize quality over ‘native sons,’” it reads.

Competitive model

One issue that has always loomed as a challenge for MLS is how to grow without spending so much money that it upends the business model. Spend willy-nilly and risk following the old NASL into the grave. Spend too little and MLS will never truly break into a competitive global market.

The BCG study confronts this issue. The report acknowledges the reality that the league is losing a substantial amount of money every year, but it also references statistics that suggest more spending will lead to a broader fan base, and looks into ways MLS can satisfy those fans without adding significantly to its annual losses. It boils down to one idea: How far will MLS go to protect parity and “competitive balance” at the expense of the competitiveness of the league worldwide?

BCG recognizes that two key groups of fans — soccer enthusiasts and large market fairweathers — prioritize different competitive models. Enthusiasts want closely-contested games; in other words, parity. Fairweathers prefer a local championship contender. BCG suggests that moving to an unrestrained spending system would sacrifice soccer enthusiasts by making MLS less competitive from top-to-bottom. Meanwhile, full parity would sacrifice the larger swath of big-market fairweather fans.

BCG suggests a hybrid model that would allow all markets to be competitive but also increase the likelihood that “large-market” teams will win. They offer two potential solutions. Option one would introduce a higher “spend ceiling” paired with a “spend floor,” a minimum amount all teams must spend on the roster, which would force smaller-market teams to narrow the gap with higher-spending teams. Option two would minimally increase overall roster spending, but prioritize spreading the money over the entire roster.

A higher spend ceiling, the report says, “enables large market/high spend teams to invest more and attract more fans,” while a spend floor “aligns the interest of the league and ensures the desired level of quality from every team.”

So far, the league has opted to ignore the cap floor suggestion — to the benefit, at least in the short term, of the lowest-spending teams in the league.

Schedule and structure of the season

MLS fans have long debated the league’s scheduling constraints. Some would like to see MLS align its schedule with European leagues, a move that would eliminate the need to play through FIFA-mandated international breaks and ensure a shorter off-season, potentially increasing the quality of play. MLS has suggested that such a move is impossible given the fact that a number of its teams play in bitterly cold climates and others share stadiums with American football teams, which means further scheduling complications.

The BCG study offers a multi-tiered approach to refining MLS’s schedule, with the primary goal of maximizing television ratings. As with other areas of the study, some of the recommendations — like adjusting the length of the league’s schedule to avoid an international break during playoff play — have already been implemented. But the study contains significantly more aggressive recommendations that have yet to be rolled out, and that could dramatically change the league’s schedule, taking it even further away from the European standard.

And there are other hints, too, about where the league’s priorities might lie when it comes to secondary competitions and awards — the U.S. Open Cup and the Supporters’ Shield.

As noted, MLS has already shortened its regular season. The study recommends doing this by eliminating one game from the regular season schedule. Instead, the league condensed its existing schedule to include more midweek games in order to achieve the same result.

The study also recommends airing MLS playoff matches on Tuesday and Wednesday evenings, reasoning that doing so would eliminate overlap with competing sports. These recommendations, too, have at least partially been taken onboard. Though opening-round matches were played on Saturday and Sunday this year, the conference semifinals and finals all fell on Tuesdays, Wednesdays and Thursdays. This has not entirely eliminated the league’s issues with conflicting programming; this year, the conference finals were played during games six and seven of the World Series. MLS Cup remains on a Sunday.

BCG recommended eliminating all focus on the Supporters’ Shield, suggesting that the league not “utilize (its) marketing budget or human resource time promoting (it).” The study finds that only 6% of MLS consumers view it as meaningful. It also suggests that the league coach its broadcast partners to focus their talking points away from the Shield and toward the playoffs and MLS Cup, going so far as to suggest that the league not broadcast the presentation of the Shield itself. It is worth noting that the league’s website and social media accounts actively covered LAFC’s Shield-clinching victory this year.

The study recommends amplifying U.S. Open Cup and CONCACAF Champions League play, suggesting the league and its clubs pump more marketing muscle into those two competitions, highlighting the “drama and uncertainty” of knockout-style tournaments.

The study’s longer-term recommendations are drastic, and would greatly change the structure of play in the years to come:

BCG’s research suggests dramatically altering MLS’s regular-season schedule so that the league would start play in late February or early March and conclude the playoffs at the end of August.

The U.S. Open Cup — the latter stages of which are currently spread throughout the MLS regular season — would potentially be condensed and played in February.

The month after MLS Cup, September, would be filled with a “post-season international inter-league tournament,” ostensibly between MLS and Mexican sides. That tournament would help “engage viewers of LigaMX and other (Latin American) consumers.” The study also suggests it could test the benefits of a long-term partnership or merger with LigaMX while reducing the length of MLS’s off-season. In 2019, the two leagues introduced a competition that includes elements of this concept, the Leagues Cup .

These adjustments, the study claims, would allow the league to take advantage of lulls in TV viewership in February and August created by other sports, and to schedule its marquee events after the initial excitement of early-season Premier League and LigaMX play dies down. Hosting the MLS Cup playoffs and the cup itself in August would allow MLS to “own the sports narrative,” the study says.

Operating effectiveness and cost scale

BCG sees outsized operations spending as a major issue for MLS, and it looks at diagnosing the problem areas and how to solve them. Strikingly, the study recommends that MLS significantly reduce its investment in youth development.

The BCG study sees team operations and talent development as “cost buckets not scaling” and “are not areas critical to the go-forward strategy.” It suggests a rigorous review of those buckets to set strategies and save cost.

The study suggests that teams “pull out additional cost” from development. It does not examine whether MLS could more effectively profit from development in order to open up a new revenue stream, though in recent years the league has begun to sell more players in order to do just that.

In the years after the study, some MLS teams decreased investment or looked to redirect funding to the first team. Despite the league’s new openness to selling talented young players, many MLS teams have not yet grasped the value of that revenue stream.

The BCG study provided an outline that MLS has followed to varying degrees, in some instances taking its advice directly and in others using the findings as a guide to orient league strategy in a general direction. Over the past few years, MLS leaders have frequently floated ideas from the study — such as adjusting the league’s schedule, or a potential merger with LigaMX — and in a number of cases, those ideas have come to fruition in one form or another.

The study also shows that the league has deliberately slowed its approach to improving the on-field product, despite public declarations by commissioner Don Garber that MLS wants to be one of the top leagues in the world by 2026 and compete more vigorously with Liga MX in the short term. Presented with options that would have accelerated the ability for top teams to compete with the best regional competition, MLS instead chose to keep relatively tight limits on spending. That decision has ensured a higher degree of parity, but it has also sacrificed the top-end growth of the league.

It’s worth asking, as well, whether adjustments to the league’s schedule and other tweaks can truly solve issues with public interest in the league that have been around for decades, issues that will likely take much longer than half a decade to resolve.

As MLS continues to chart its course over a period of time that will include CBA negotiations, a new media rights deal and the 2026 World Cup, it’s likely we’ll continue to see the effects of the study as it shapes the league.

(Photo: Andy Mead/YCJ/Icon Sportswire via Getty Images)