Even compared against the American sports behemoths and the English Premier League, MLS is in relatively good health

MLS vs the major leagues: can soccer compete when it comes to big business?

As the 2014 Major League Soccer season starts up, the league will soon enter into collective bargaining negotiations with the players’ union. It’s no secret that the last round was particularly nasty, and almost ended in a strike. Negotiations with the referees have already led to a lockout. What is a big secret, though, is the actual state of MLS.

The answer, of course, depends not on what you ask but on what comparisons you make.

Recently, MLS commissioner Don Garber has issued some cryptic remarks about deficits. While a few teams are profitable, the league still burns cash. It also had to take over Chivas USA, buying out Jorge Vergara’s stake.

Still, a decade of expansion and eager new owners elsewhere seems to indicate positive momentum. Club owners have also been willing to spend money on star players, as evidenced by the payment of transfer fees for players like Jermain Defoe and Clint Dempsey and the steady expansion of the designated player (DP) rule. The league has also signed a sizeable TV deal.

The first temptation is to compare the league to other North American professional sports, like the NFL, MLB, NBA and NHL. Of course, any comparison has to keep in mind that MLS is only 19 years old, a baby compared to the NFL (94), NHL (97) and MLB (145), and still many decades younger than the NBA, which was formed 68 years ago. Also, MLS has only 19 teams, compared to 32 NFL teams, 30 MLB, 30 NBA and 30 NHL.

So, MLS has two thirds as many teams as other North American leagues and either one third or one seventh of the history. One would thus expect its business fundamentals – profits, revenue, wages, TV deals – to lag behind.

Let’s first look at professional sports’ cashcow: television. The NFL’s most recent TV deal was for $27bn. The MLB gets $800m annually; the NBA about $930m. The NHL looks much weaker, at about $200m annually. However, the NHL also has a lucrative Canadian TV deal, worth about $400m a year. So how does MLS stack up?

The league’s new TV deal is for $70m a year. That’s about a ninth of the NHL’s combined TV revenue, an 11th of the MLB deal, a 13th of the NBA deal … and way behind the NFL. So if the MLS has two thirds of the teams and about a fifth of the history, why such a big disparity?

The answer lies in the other major difference between the MLS and NFL, MLB, NBA, and NHL. Those leagues largely have monopolies on talent. Yes, some good baseball players play in Japan and Cuba, but most make their way to MLB. European basketball has grown by leaps and bounds, but the NBA is the destination point. Russia has a good hockey league but the best Russian player, Alex Ovechkin, laces up his skates for Washington, not St Petersburg.

In comparison, MLS has to compete with the leagues of Europe and the riches of Mexico.

MLS has a pretty good average attendance – higher than the NHL and NBA but less than MLB and way less than the NFL. MLS also has a good share of Hispanics compared to other sports, even if the average income for MLS fans is pretty low.

In terms of player wages, MLS salaries are readily available – the union publishes them every year for every player. The average salary is $160,000 and the median salary is $100,000. By comparison, the median income for an American household in 2012 was $51,000.

Still, there are two sad facts. Rookies only earn about $35,000 a year. And, because of MLS’s unique wage structure – a salary cap but three exceptions for “designated players” – there is staggering inequality. The league’s top 28 players earn more than 33% of the wages.

By comparison to other North American sports, MLS’s average and median salaries are a pittance. On average, NFL players earn $1.9m a year, NHL players $2.4m, MLB players $3.2m and NBA players $5.15m. So MLS players earn about an 11th of their counterparts in NFL and one 32nd of those in NBA. The NFL’s minimum base salary for a rookie is $375,000. That’s 10 times an MLS rookie’s average.

So, MLS is at the bottom of the totem pole in North America in terms of TV revenue and wages, though it has good gates. That isn’t surprising, given the time it’s been operating, its lower number of teams, and its international competitive pressure.

Now we turn to the interesting part: the Eurosnobs who prefer to compare the league to, say, the English Premier League rather than other North American sports leagues.

The EPL has an $80m-a year-TV deal with NBC for North America. MLS is only $10m a year behind that.

However, when you compare the top earners in the EPL with the DPs of MLS, things don’t stack up. When you look at average wages, it’s even worse. The average EPL player earns £22,000 ($36,700) a week. In five weeks, an average EPL player earns more than an average MLS player in an entire year.

Jermain Defoe and Michael Bradley have joined Toronto. Photo: QMI Agency/REX

But here’s the interesting part about comparisons to European leagues: by North American standards, they’re not particularly good businesses. Yes, EPL clubs attract foreign owners, but Uefa has adopted Financial Fair Play regulations because deficit-spending is rampant.

The EPL and other leagues sell shirts the world over and sign big TV deals, but largely operate close to the break-even point or in the red. Thus many top leagues, which operate without a salary cap, can sign top players because they spend more than they earn. That’s not a recipe for sustainability.

Thus, Garber’s remarks about deficits, the general view is that MLS is improving as compared to itself. It’s in good shape (especially when you compare it to, say, the old North American Soccer League). It’s expanding, TV revenue is going up and so have players’ wages. Compared to NFL or MLB in year 20, MLS would probably stack up nicely.

The problem comes when you look across the Atlantic, at the league’s free-spending competitors. If Financial Fair Play falls flat and deficit-spending continues, in a decade or so the steady growth of MLS will probably put it in a realm between the “selling leagues” like Argentina and Brazil and the “destination leagues” like Spain or England. That’s not super exciting.

But it’s also not a bad place to be. Think of it as a Dutch Eredivisie Light.

Elliott blogs about soccer at Futfanatico.com. He is the author of An Illustrated Guide to Soccer & Spanish