If you’ve just read that headline and the first thought that went through your head was “but that’s not how American sport works” then welcome to the club.
Sadly the club you’ve just joined is one consisting of people who tout that exact response to a huge array of comments about football in North America, but then decide that at that point they’ll fold their arms and just stand there as if I’m meant to just accept it as an absolute fact. Oh sure, don’t worry about providing any evidence, don’t worry about putting forward any sort of rationale, that’s your answer, and you’re sticking to it.
Operating With MLS Clubs Not Franchises?
You’ll probably have guessed what the other questions are; the inevitable discussions about building a pyramid, replacing play-offs with a balanced schedule, and allowing dominance in the more talented squads to evolve.
I’ll leave those aside, for now, although they’ll crop up in a later discussion without doubt. For now, let’s return to the subject in hand. I often think that one of the failings of MLS is that it’s sometimes hard to suspend the nagging doubt that the league might, for the purposes of creating “entertainment” let’s say, have a hand in affecting results. After all it is definitely in the league’s interest that the last day of the season still has plenty of opportunity for something to happen whether it be a team scraping into the play-offs or a conference title being up for grabs if the leaders slip up.
Although suggesting that a league might be involved in match-fixing is perhaps a little far-fetched, there is certainly a case being made for the current single entity structure being carved up. The two main simple questions that need answering are how, and why.
How. Part One.
At the present time MLS is the central pivot of the existing sanctioned “division one” and all the teams playing in it are owned by the LLC. Investors into the league also have the right to operate a team within the structure, but they do not specifically own that team. MLS also has a subsidiary called Soccer United Marketing (SUM). Now this is where huge parts of the revenue for the league get driven into. Have you found yourself wondering why the league “loses money” each year? Well that might have something to do with the fact the revenues go into one company and the costs come out of another. Want to “make a loss” to help keep salaries down? Easy – don’t take enough revenue out of one company to cover the costs in the other. The shareholders are still as wealthy because it matters not where the money sits, but the poor saps who have to accept “losses” know no different.
So the first part of my plan is that SUM needs to be eradicated from the equation. Everything that was contracted to it can be contracted through MLS, or nearly everything. SUM holds the rights to market some of the IP of the USSF. I would argue this is a colossal conflict of interest, and the league should not have the ability to influence what is meant to be its regulatory body. USSF should therefore be handed back the rights to its own events and property, and be allowed to invest those proceeds how it sees fit. If they require assistance then I am sure there are plenty of specialist companies who will handle the sale of rights without causing prejudice.
How. Part Two.
So now we’ve simplified things at the top. There’s less opportunity for “losses” being incurred, although the practice of having to do so will get eradicated by the next step.
One of the big concerns mentioned is that investors in the league don’t like risk. Well, as an accountant I can pretty safely say that an investment without risk is called cash. There’s actually no such thing as a risk-free investment if you’ve got your money tied up in anything else so the notion that these people have invested money without knowing there is risk is a total fallacy.
The big question is how we can arrive at our goal and still have independent clubs? Let’s break this down. If you’ve invested in a league, then that league should be pretty stable. Problem is right now, that league is also taking many of the risks as it has to contract all the players for one thing. We need to create a structure where the risk/reward profiles become very different to what they are today.
So the second stage is to split each individual team out from MLS to become its own legal entity. Each individual team will then have to take responsibility for the contracts of all of the players it currently holds in its registered squad. There are a few other considerations but these will be handled later.
The most interesting part is that each MLS investor will then receive the team that they operate for free. Yes. Free.
A Different Type of Decision Day
The reason for this is simple. Each original investor will retain a stake in MLS the league, and become the individual owner of a team. Given that MLS has just divested itself of the largest part of its contractual liabilities, but still owns the rights to the centralised contracts for the league as a whole, you’ve suddenly become the owner of one much lower risk shareholding with a large income and not too much of the cost, and one much higher one which does not have any guaranteed income and a lot of guaranteed cost.
Here is the point at which the investors need to make a decision. The new structure means they could, if they so wished, opt to sell part of their assets. If they are totally averse to risk they can sell both, slightly less averse and they may opt to sell the team but retain the stake in the league.
Should they take the approach of selling the team, they could find that they’re able to recoup much or all of their initial franchise fee, but they’ll be left with part ownership of MLS. I am sure there will be potential team owners who aren’t bothered by this new structure, in fact perhaps they like the idea of having control over a team in a situation whereby they are not having to plough all their money into a central fund.
In the next part of this article I’ll paint a picture of exactly how this becomes viable by examining how the finances will be structured between the new independent clubs and the league they’re playing in.
