The MLS CBA: The Growing Divide Between the MLS Haves and Have Nots

I went on a backpacking trip around the Black Forest Trail in Northern Pennsylvania a few years back. I was in the middle of reading Ernest Hemingway's To Have And Have Not and brought it with me on the three night hike. Even though the book would add a little weight to my pack, I had a dream of finding a few moments of solace with a rock and the book; a beautiful triumvirate if only because of its scarcity. The book turned out to be more vital than that.

It poured rain the entire first day of the hike. When we finally settled in to camp for the night every single thing in the forest was soaking wet. Getting a fire started to eat dinner was going to be a challenge. We also desperately needed to dry out our clothes. We had a fire starter block but there was no kindling at all dry enough to help get it lit.

After many attempts to get the starter lit and matches running low, I offered up the pages of my book. I was about halfway through, leaving pages to spare. Not eating a warm dinner at that time seemed more tragic than a torn book. We judiciously started to use pages from the beginning of the book, and after using about seventy we got a fire started. Ultimately we got enough sticks to dry out and light. We had dinner that night only thanks to Hemingway and my dream of the rock. We knew what it was to Have and Have Not.

It feels to me like Major League Soccer is on the Black Forest Trail on a soaking wet day. Those teams who have their Hemingway book will eat, and those that have not will go hungry. Despite all the praise of MLS' parity, there is a growing divide between the Haves and Have Nots and it's a concern that should be looked at as the league draws up another CBA.

The growing divide of MLS salaries

The designated player rule, instituted in 2007, was the first mechanism where teams could invest in players and circumvent the salary budget. As the rule has been expanded the teams in larger markets have taken advantage. In 2008 only one of the MLS teams had a player payroll more than two times the league's median level. Fast forward to 2014 and four of the nineteen teams in the league have significantly higher payrolls. In fact, there are many players now who get paid more than entire teams. Here is a graph of that trend over time.

source: USAToday.com and MLS Players Union

Teams that have a payroll at least 10% lower than the median are also increasing. In 2008 there was one such team and in the 2014 there were five. All told 47% of the teams meet my criteria as either a Have or Have Not (Have = greater than 2 times median payroll / Have Not = less than 90% of median payroll).

There is another major league in the United States that has a greater divide in player salaries due to a soft salary cap, Major League Baseball. Currently 50% of the teams qualify as either a Have or Have Not by my definition, just a little higher than MLS. Major League Baseball payroll is becoming more spread as well, as just 37% of the teams fit that criteria in 2009.

Okay, so some teams spend a lot more money than others. Does that matter when it comes to competitive balance?

Where MLS parity isn't working

Fifteen teams since 2008 have had a team payroll greater than two times the league median payroll. Thirteen of those teams, or 87%, have made the playoffs. In a perfectly competitive league where salaries don't matter and each team had a completely even chance of making the playoffs, just 8 teams would have been expected to make the playoffs.

That necessarily means the other teams have a lower probability of making the playoffs. If your team doesn't spend more than two times the league median than they have just a 49% chance of making the playoffs. The lines in the graph below represent the likelihood of making the playoffs and then an MLS Cup Final appearance assuming salary was not a factor, and each team had an even chance.

The good news is that the salary gap mostly disappears when it comes to making it to the MLS Cup Final. Playoffs in any league are little more than a crapshoot, and MLS is no different. Nevertheless when you factor in that high salary teams are almost twice as likely to get into the playoffs, they are also almost twice as likely to win the MLS Cup as well.

When it comes to playoffs, MLS is in an equally concerning situation compared to baseball. Since 2009 MLB teams with a payroll more than two times the median make the playoffs 60% of the time. Keep in mind just 30% of the teams make the playoffs in baseball compared to 53% in soccer. In baseball, teams that spend less than 90% of the median payroll make the playoffs just 21% of the time.  The Haves in baseball have a 39% higher chance to make the playoffs than the Have Nots. In Soccer, the Haves are 38% more likely to make the playoffs than any other team.

MLS isn't in panic mode, but's showing similar patterns to Major League Baseball. It should be a concern for the fans of 15 teams who aren't in the Have category.

What can Don Garber do?

There is talk that the next CBA will expand the use of the Designated Player rules and potentially add a fourth roster spot for this designation. This would only serve to increase the spread between the Haves and Have Nots of the League.

One change the league could make would be to increase the hit that a Designated Player makes on the salary budget. In 2014 a Designated Player counted $387,500 against a team's budget. Increasing the cost of a DP would force the team to fill the rest of the roster with cheaper, potentially lower quality players. If a Designated Player must be added to attract more big name talent to the league, perhaps a $1M cap (for example) can be placed on the signing of the fourth DP.

Managing the DP rules is one way to mitigate the issue, but the reality is the league's hidden single-entity structure is likely where the parity will have to be managed. How the owners share revenues across the league will drive the owner's willingness to spend on their own team. The NFL is able to have a league with parity and successful small market teams like the Steelers and Packers because the largest revenue stream, the television deals, is shared equally across the teams.

Major League Soccer needs to find a way to allow individual markets to prosper but have enough revenue shared across the league to maintain parity. Given league finances are not publicly discussed it's unlikely that fans will truly know how the money is handled behind the scenes.

Putting the Haves and Have Nots at the mercy of the single-entity structure means that fans will only be able to see the end result from their seats. Do the Sounders and Galaxy, two consistently high payroll teams, continue to expand their place atop the Western Conference table and make the playoffs annually? Do the smaller franchises begin to fight it out at the bottom of the table?

If Don Garber can't manage league parity during this CBA negotiation, he risks that the fire in the heart of the fans will get all wet. After all, he needs soccer to grow nationwide, not just in a few large markets. I still have that mangled half book on my bookshelf; a reminder of how fine a line having or not having can be.