In the two years available prior to the current CBA, the league the average was 19%, and since the 2014 CBA was put in place the average has been 25%. It seems reasonable to assume the players could get at least that lift of 6% again, which would put them in the low 30% range or perhaps a little higher.

A different lens to take with this data is to look from a fans point of view. The revenues the league earns, whether directly (via tickets sales) or indirectly (via advertisements), is the price paid for the league by the fans. The player compensation reflects, by and large, the quality of the entertainment they are paying for. MLS has put themselves at a disadvantage in this regard, as the entertainment to price ratio looks poor for fans of the league, relative to other entertainment dollars they could spend. MLS is literally banking onto its core base of fans willing to pay this higher premium, while they continue to attract and convert other sports fans to the league who are expecting a higher entertainment return for their dollar.

The $1 billion in revenue milestone is imminent for Major League Soccer, even if that will never be publicly declared. 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 early stage of the league, but at some point the league will run out of fans willing to pay a premium to watch a local soccer team. The owners will need to compete with the quality of the leagues many soccer fans watch through a device. How close the numbers get will depend on how hard the players push in this next round of the CBA. Just how hungry for pie are they?

The next CBA Talk will focus on the negotiation from the owners’ perspective

Notes on the data sources

For MLS information, the Major League Soccer Players Union has been publicly releasing player salaries for over a decade, 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 television 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. This is where Chris Smith of Forbes (@ChrisSmith813) was very helpful. 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 as those league only revenues are assumed to be immaterial relative to the purpose of the analysis. That’s clearly not the case with MLS.

Related to the accuracy of Forbes’ estimates there is one point of comparison thanks to City Group, the ownership group of NYCFC. In Europe the financials of football clubs are routinely made public, as is the case of the company that owns Manchester City. The fiscal year doesn’t exactly matchup with the calendar years in this article, but revenues for NYCFC are made public in the document. In FY2017 NYCFC is reported to have earned £30.1 million, or approximately $39 million adjusted. Forbes estimated their revenues at $42 million for the 2017 season. The FY2018 number was substantially higher at £40.4 million, or $53.3 million comparably, but a portion of that increase was attributed to Stadium Naming Rights. The Forbes estimate in this case seems very reasonable.

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 NFL CBA targets a 48.5% wage to revenue ratio but the numbers in the chart reflect something much lower. The numbers in the chart reflect active cap spend plus dead money in the 2017 season. This obviously ignores money spent in year on bonuses that would be prorated as active cap hits to later years. Including the dead money from prior signing bonuses mitigates this issue somewhat but the spending in year is likely higher than the dead money which would result is some of the understatement.

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

3) There are ancillary expenses, like contract insurance, that the leagues include as wage expenses that publicly available salary databases do not.

The goal for this analysis was to find as consistent a method as possible to the estimate these numbers for both the soccer leagues, including MLS, and the American leagues and that search for consistency guided the decisions.