My argument that MLS is really “Minor League Soccer” continued to stoke some controversy over here in the US last week. Judging by the reactions on twitter, most of those who follow MLS do not really contest the point. Serious football fans in the US know their soccer, they watch games in leagues from other countries even if there are no Americans playing in the games, they know all about the Champions League, the EPL, La Liga and more besides.

In short, they are not guilty of the parochialism that is so common in the rest of the rest of the world. Mostly they know that the quality of the football played in MLS is not high, and they accept that this is inevitable in a league where on average each team spends only $5 million on player salaries, a figure maybe thirty times smaller than in the big European leagues, and smaller than probably about 30 other leagues worldwide. As I have said all my career, and as I think most fans have largely come to accept (thanks in no small measure to fantasy games and video games such as FIFA and Football Manager), spending is a fairly good indicator of quality.

There was a fun to-and-fro between myself and Alexi Lalas last week on the issue since he demanded to know what else other than spending demonstrated that MLS is a minor league. My response was that objectively teams with low spending consistently lose more often than win against teams with high spending. The players on teams that win are thus objectively “better”. No doubt there are other statistics one could cite to show that players in better leagues do more – but that is missing the point.

Subjectively, you can still enjoy watching a league where the players are objectively worse in the sense I describe, and a good example in the US is the sustained popularity of college (American) football compared to the NFL. Perhaps if MLS spent half as much as the big European leagues (e.g. 3 times as much as Belgium instead of one third as much) then this point would become moot. As it is, the gap is too large, especially for the TV audience, so that viewing figures for MLS even in the US are on average below the EPL, the Liga MX (Mexico), and no doubt a long way behind the viewing for El Clasico.

So right now we are in a situation where MLS has developed a respectable following in the stadiums, negligible penetration on TV, and is thus unable to generate the revenues necessary to acquire the players that would make it truly Major, while at the same time making a profit. MLS makes in the region of 10% of its revenue from TV contracts – major leagues (in any sport) make in the region of 50% of their revenue from broadcasting nowadays.

A good comparison is the JLeague in Japan. Launched at the same time, with a similar number of teams, a similar level of annual average attendance and a similar problem of limited TV acceptance by viewers who can easily watch better quality football from other leagues. And both leagues could go on like this forever. No problem.

But, the issue, as it seems to me, is that most MLS fans want it to be truly Major- to rival the quality of La Liga, the EPL, the Bundesliga, Serie A and so on. So how could that happen? What most fans seem to say is that MLS is still only young, has done well to get this far, and is set for further rapid growth as the game gains more acceptance in the US.

I don’t buy this theory. First, it is now nearly 20 years old, plenty of time to generate loyalty and interest. The problem is that US TV audiences are not warming to the product and that will not change so long as quality is low. Moroever, this theory seems to rely on the idea that the rest of the world is just standing still – when nothing could be further than the truth. 20 years ago the only rival on TV for MLS was Mexican soccer – there were few other live games shown on mainstream US TV. Now fans can tune into several other leagues, almost all playing at a much higher standard. These leagues spend more heavily than MLS and the amount they spend is growing as fast or faster, from a higher base.

Even worse, new leagues are developing- take the Indian Super League that started last season. Asia is a huge market for football with few leagues of any standing. Historically they had limited spending power- now that these regions are becoming wealthier their domestic leagues may also strengthen. Thus the demand for talent globally is expanding and the US is becoming a smaller part of that global market, not a larger one.

What to do? Like I say, MLS could stick with its current strategy and remain “minor” – after all, as others have observed, in some sense this is just semantics. But if it genuinely wants to grow the market then I think it needs to open itself up to competition. The single-entity (SE) structure that it has adopted makes it more like a workers co-operative – not a business model that has dominated any global market outside of sports. And in the world of sports it only works in leagues like the NFL, MLB and NBA which are unquestionably the dominant leagues in their sport and have long been so. Because football is global market with dozens of seriously competitive leagues, the cosy arrangements of the majors will not work for soccer.

If the SE model were abolished then some owners would seek to make their team dominant. Other wealthy individuals would show an interest in buying a franchise and pump millions into buying the talent. This is what happens, and has always happened everywhere else in the world of football. Most people are familiar with the examples of Chelsea, Manchester City, PSG and Monaco in recent seasons- but there are examples going back more than a century.

Why do these people do it? The sports historian Derek Birley, when talking about the investors in English clubs in late nineteenth century put it thus: “It was more often civic pride, particularly in the smaller towns, and the desire to be someone in the community, that led people to take shares in a soccer club.”

To be someone in the community- only today it is a global community. Bring Lionel Messi to your club and the whole planet will know who you are. And there are now literally thousands of billionaires on the planet with the money and the ego to do just that, or something like it. The US would be very attractive to such individuals, since making it in the US remains the gold standard for business success.

So why not abolish SE, let competition rip and egos soar? The response of American fans seems very timid, and very un-American. American owners, uniquely, have to be in a position to make profits, they say. Let’s be clear, football clubs around the world almost uniformly do not make money. UEFA reports that in most years over 50% of the 700 or so clubs in the top divisions do not declare a profit- and at the lower levels and in other parts of the world matters are probably even worse. But this does not lead either to (a) leagues folding or (b) investors refusing to invest. Even in the US, most colleges seem to not make a profit on their American football team- it’s a recognized loss leader.

But even if the league might not fold if some teams lose money, many fans seem to worry that their team might, losing access to top level competition. One of the facts that Simon and I were at pains to point out in Soccernomics is that even if teams owners lose money and declare bankruptcy, the football club almost never disappears. In the last thirty years there have been literally hundreds of football business bankruptcies in Europe, but almost none of the clubs have disappeared. The reason is that there is always someone willing to invest to resurrect the team, and often the fans themselves do the job (there is now a lot of experience in doing this in Europe – look at the track record of Supporters Direct). Ultimately clubs represent communities, and a bankruptcy cannot dissolve a community. It seems ironic that MLS fans don’t see this, since they are in fact some of the best examples of soccer communities in the world.

To be sure, if an MLS team today folded it might be hard to find an investor, but then what’s the incentive? You can’t become a hero by building a stellar team in the SE system, all you can do is maintain yet another mediocre franchise.

One issue that people raise at this point is promotion and relegation. I have written several times over the years that fans in aggregate benefit from promotion and relegation. But then I have also pointed out that the system is not without flaws. This is a separate debate, but an important aspect of the system is that it allows investors to enter at lower levels and build up a club over time.

The bigger point, I think, is that owners are capitalists whom we want to encourage because they risk their money to create better products and services for us. They are our servants, not the other way around. We should celebrate them when they take risks on our behalf, but not create a world without risk for them for fear they might lose some money and take our ball away. Capitalism works best (for us) when capitalists compete. MLS is not doing the job for us.

Finally, if the SE system was done away with and competition let rip, many MLS fans worry that parity would suffer and this would reduce interest. There is now a mountain of published research on the effect of parity on demand in the US and across the world. I wrote a review paper in 2003 and found very few papers provided strong confirmation that parity enhanced demand. In a recent paper Jason Winfree and I reviewed the literature since 2003 and found a similar result. The only conclusive evidence about fan demand, which shows up consistently in the data, is that fans want the home team to win- which is kind of obvious, since most fans at the stadium are home team fans.

No doubt fans in cities where there was less investment in the team would suffer in a truly competitive market, but even then those fans would get to see the strong teams play when they came to town- the Chicago Cubs have never had an attendance problem.

In the end, you will still not find my arguments convincing if you believe that America is just different. This is not just about American exceptionalism. I have taught economics all over the world, and the one reaction that you get consistently is “ah, great theory, works everywhere else, but just not here”. Everyone thinks they are an exception. But, like the vast majority of economists, my view is that when it comes to markets, we all bend to the same forces.

So, the point of this essay is this: MLS could become a truly major league if it allowed the forces of competition to play out. Probably that means dropping the SE structure. Possibly it means adopting a promotion and relegation system. But above all, it means allowing the capitalist system to operate as the capitalist system is meant to work.