A Look At Income Inequality in MLS

Income Inequality

BY BILL REESE
Staff Writer

There is a lot in Major League Soccer to be excited about in 2015. The league will add two new franchises, including one in the New York area. The league will reportedly be watched on new television networks that paid lucratively for the rights. Big stars — young and old, foreign and domestic — will don shirts with the U.S. or Canadian flag on one bicep and the MLS logo on the opposite arm.

But all of this excitement is reliant upon the league and its players settling the age-old sports dilemma of balancing player salaries with franchise profits.

The MLS collective bargaining agreement expires before the 2015 season begins, and as things currently stand, many MLS players experience the greatest income inequality in American professional sports.

Graphic 1

An analysis of the most recent public MLS salary data from September 2013 shows that the salaries of the league’s 28 highest paid players — the top 5% of earners — account for 37.3% of all money paid to MLS players:

Graphic 2

If you break down those numbers further, the gap becomes even wider. As of last September, the top five highest paid players — Clint Dempsey (SEA), Thierry Henry (RBNY), Tim Cahill (RBNY), Robbie Keane (LA), and Landon Donovan (LA) — accounted for 20.6% of every dollar teams paid to players. Again, one out of every five player salary dollars goes to just five guys.

Mind you, this data was compiled prior to Jermain Defoe and Michael Bradley joining Toronto FC. It is safe to say that the income gap in MLS will widen considerably in 2014.

Graphic 3

It’s no surprise that MLS’ highest paid players make a significant chunk of the total money paid to the league’s athletes. However, when compared to the other three major North American sports leagues with a salary cap (the NFL, NBA and NHL), the income gap is the widest in MLS.

The NHL is probably the most similar league to MLS as far as roster sizes go, but the NHL’s recent labor issues have created a system where the players’ salaries are relatively flat from top to bottom. In no league do you see such a dramatic spike from the top 90% of earners to the top 95% of earners as you do in Major League Soccer.

Graphic 4

Clint Dempsey, the league’s richest contract as of last September’s data, earns $5.04 million per season. However, when compared to the league’s average salary of $165,066, Deuce is making more than 30 times the league average. “Deuce face” indeed! The addition of big-money contracts of Defoe and Bradley will artificially inflate the league’s average salary (as will the hefty price Philly will pay Mo Edu on a “loan”), but it’ll be little comfort to the 250 or so MLS players who likely make less money than some members of their club’s sales staff.

Compared to the other three major salary cap leagues, the top earners in the NFL, NBA and NHL do not have salaries exponentially higher than the average athlete in their sport. New York Giants QB Eli Manning — despite almost setting the record for interceptions (but smashing the record for “Manning-faces”) — brought home the biggest paycheck in the entire NFL at $20.85 million; 11.7 times the average NFL salary. L.A. Lakers legend Kobe Bryant’s $30 million contract was 7.9 times the NBA average. In the NHL, Capitals forward Alex Ovechkin’s league-high contract is shockingly only 3.95 times the average pay for NHLers.

Graphic 5

Next season not only marks the end of Major League Soccer’s current CBA, but the current television deal with NBC and ESPN is also set to expire. The league’s expansion ambitions have been part of a larger plan to obtain the most lucrative broadcast rights deal possible. Let’s say — for the sake of argument — that MLS clubs split 100% of the TV revenues. That’s the way the NFL does it, but I suspect that MLS’ central bureaucracy (which pays for transfers and some player salaries) takes some off the top. The 2014 total TV revenues for MLS are reportedly around $28 million annually. The 19 clubs in MLS would have to split that $28 million evenly, netting each club about $1.47 million per season.

Now, let’s look at the new TV deal. Jonathan Tannenwald at Philly.com reported that Fox and ESPN could pay up to $70 million for MLS’ American TV rights. Let’s assume the U.S. Spanish and Canadian rights add in another $8 million, bringing that total to $78 million. That figure — divided by the now-21 team MLS — would net each club $3.71 million annually beginning in 2015; a significant increase.

What could an MLS franchise do with an extra $2.2 million a year? Maybe pay down some outstanding debts? Permanently eradicate the raccoons from your cavernous 50-year old stadium? Or maybe the team could invest in some new players? Look at it another way; the purported TV revenue share in 2015 would be larger than the league salary cap figure — an artificial figure, considering that DP contracts only account for $368k towards the cap. — but still, it means that a number of clubs could pay their players with TV revenue alone, regardless of how many tickets they sell or how much they bring in with shirt sponsorships.

No matter what, the status quo for MLS’ salary cap and labor relations can not continue in 2015. The league’s economics — both lucrative and unequal — are changing too rapidly for things to keep on keepin’ on. MLS clubs may have the opportunity to sign the long-rumored “4th DP” or there may be a higher spending threshold.

Sadly, the players who are likely to benefit the most from a new CBA are the players who are already getting paid the big bucks, eating the biggest slice from my earlier pie chart. The players who will likely get the rawest deal would be the players in the 80th percentile of salaries — guys making around $200k such as Nick Rimando, Jack Jewsbury, Robbie Findley, or the departed Markus Holgersson. These are guys whose salaries put them on the bubble in the current MLS salary cap structure. These are useful players who might be worth $200k, but not when clubs only have a limit of $2.95 million to spend. Will the MLS Players Union go to bat for these guys, or will they fight so that the Deuces and Titis of MLS can bring home an extra few million counted against the cap?

One thing’s for sure, the biggest clash in the 2015 MLS pre-season will be played out in some Manhattan board room. Predicting the winner of this labor dispute is about as easy as predicting the winner of a penalty shootout. Nervous, tense excitement … perfect for television …

Sources:
MLS Salaries: MLSPlayers.org http://www.mlsplayers.org/files/September%2015,%202013%20Salary%20Information%20-%20Alphabetical.pdf
NFL Salaries: SportsCity.com http://www.sportscity.com/nfl/salaries/
NBA Salaries: Basketball-Reference.com http://www.basketball-reference.com/contracts/players.html
NHL Salaries: CapGeek.com http://www.capgeek.com/payrolls/

25 Comments

  1. Dave from Dix Hills

    01/30/2014 at 5:19 pm

    Somebody CC Eddie Pope on twitter or Facebook!!!

  2. Stan

    01/30/2014 at 7:54 pm

    Another bash MLS piece Dave? How about an article stating income inequality between the cosmos and the rest of the NASL, last I checked it’s so bad that they’re trading players for travel expenses. When MLS starts bringing in tv ratings that’s when I’ll agree with a story like this but untill then give them a brake, the league is doing what it can, and if the players in MLS have an issue let them goto a league that will pay them, wait a sec one doesn’t exist

    • Dave Martinez

      01/30/2014 at 9:52 pm

      First off Stan, this is Bill’s piece – and he does a great job of delineating the details of what is an important topic in MLS during a CBA year — and it isn’t a hit piece. I don’t recall any MLS hit pieces — feel free to point them out. Keep in mind – the majority of our work is MLS based. This just highlights a relevant problem at the root of the league’s system.

      • Sonny

        01/30/2014 at 11:10 pm

        Great article, exciting times in MLS, and empireofsoccer has become by go to source to follow it… and the rbny coverage is second to none.

  3. broadsthooligans

    01/30/2014 at 11:36 pm

    That percentage comparison is super interesting. I’d be interested to see the comparison with other soccer leagues instead of with other American leagues. Presumably the salary cap plus DP structure skews things. I would assume that, seeing as a pure salary cap keeps things within a tighter range, that eliminating the salary cap entirely makes this even more drastic.

    • Bill Reese

      01/31/2014 at 8:36 am

      No two salary caps are alike, but as far as pro soccer leagues go, MLS is fairly unique in the ways it limits its “top flight” teams spending. There are salary caps in rugby union and in the KHL in Europe, but association football leagues have been resistant to it. Even the pending “Financial Fair Play” rules aren’t limits on how much a club can spend, they’re limits on how much a club can lose.

      So, that’s why I drew the comparisons to the other American pro sports leagues, as they’re the organizations MLS wants most to emulate, Garber, after all, being a ex-NFL guy.

      As far as salaries go worldwide, not all leagues release their salary data. From what I understand, Liga MX does not release any player salary data.

      • Anonymous

        01/31/2014 at 7:21 pm

        If you’re going to compare salary caps then compare the tv revenue that keeps these leagues afloat, not a bad article but if you want to talk income inequality focusing on the main source of income for any league

  4. John From America

    01/31/2014 at 9:51 am

    Seems a writer needs to be brought up to speed. It is NEVER what you are worth, it is ONLY what you can negotiate. Good for the guys who got paid, the way our free market works. Don’t like it? Sure there’s a flight to Caracas you can catch.

    • Dave Martinez

      01/31/2014 at 10:00 am

      It makes me smile a bit to see the free market system used in defense of the current MLS structure. I agree with your premise – you should get paid what you are worth – but MLS restricts that across the board and makes exceptions for a select few.

      • Anonymous

        02/03/2014 at 2:59 am

        Your an idiot if you think that’s true. The point is if the player is good enough to make more he can go anywhere in the world. It’s a global market. The guys getting paid big is a product of global demand vs the global demand for the average American player. Will it get better, yes. As Americans get better and the league earns more, but as in all thing the us rewards the top 1% the most. Just like vt rating wise there is probably a tipping point in quality where all of a sudden MLS will get much better ratings, like epl numbers in America.

        • Frank Rizzo

          03/05/2014 at 10:07 pm

          If you’re going to call one an idiot, please ensure you have the proper grasp of your and you’re.

  5. @ReeseCommaBill

    01/31/2014 at 10:05 am

    If anything, I advocate for a much higher salary cap, which the bigger teams (NY, LA, SEA) would jump at the chance for. A guy like Holgersson is a perfect example of why the cap should be raised. A rising tide will raise all boats. It’s not that the players deserve more cash, it’s that the cap prevents clubs from keeping players in that 80th to 90th percentile of salaries. It shouldn’t matter how much the guys at the top make, but it does matter because the cap is so low that most MLS clubs need to find players on the cheap to fill out their rosters.

    The result is some pretty egregious income inequality (which I say in “relative” terms, because most of us would be thrilled to bring home $65k for playing soccer).

  6. JerichoWhiskey

    01/31/2014 at 11:12 am

    Raising the salary cap alone will not solve the issue as it will only raise the ceiling players will crowd under. Espindola and Holgersson account for at least $500k and any amount in raising the cap will change the fact that they were around 1/6th of the cap alone. They will also need to put a mechanism in place where the cap will account for the salary increases players will receive in order to keep them around.

    However, I do not really see this changing as MLS seems to want this “issue” to happen so other teams can try to snap up the players in the re-entry draft and keep the league as equalized as possible.

    • JerichoWhiskey

      01/31/2014 at 11:13 am

      Should read “will not change the fact” in the second sentence.

  7. Rich

    01/31/2014 at 11:20 am

    Surely, these players were brought in a select soccer system that required them to perform in order to make a team. Thus, they can understand a free market system that allows for performance leading to a better negotiation.

  8. Pablo Chicago

    02/01/2014 at 8:11 am

    Wow! MLS has the greatest income disparity? Who would have thought the youngest pro league in the country, you know, the one that waited until 2007 to introduce a Designated Player rule would have the greatest income disparity? Fascinating piece of journalism. Keep up the great work. [insert sarcastic smiley face here]

  9. Frank

    02/02/2014 at 2:01 pm

    Teams like Columbus, KC, Houston, Dallas can’t compete with LA or NY for marquee stars like Henry or Keane. But those teams could be much more competitive if they could sign say 5 players on $1.5m salaries.

    So maybe MLS should change the DP rule to a luxury salary rule, say a max of 5 players counting to a luxury salary of $8m.

    Therefore you could have a team with Henry and Cahill or a team with F.Montero, G.Schelotto, K. Miller, M. Edu and D. Ricketts.

    • Frank

      02/02/2014 at 5:44 pm

      When I say sign 5 players at $1.5m I meant more to have the flexability to sign 5 players outside the normal cap.

      So the likes of Columbus who can’t attract a $3m+ player could instead for example sign 5 players on $0.5m, thus making them more competitive and making a DP slot less attractive to trade.

      At the moment it seems smaller teams would sometimes rather trade a DP slot then take 2 mid level DP players aren’t really going to make the team a contender.

      The DP rule gives clubs 2 slots with around $350,000 for each DP paid by MLS. So give teams $700,000 each towards a lux cap, and let those smaller market teams have the flex to get 4 or 5 mid level DP’s rather then 2 high paid DP’s.

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