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/