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The MLS CBA Oscars: Predicting the winners of the new agreement

In the spirit of Oscar season we examine the five biggest issues in the CBA and predict the winners and losers.

ghanasoccernet.com

Major League Soccer has rolled out the red carpet this offseason for names like Kaka, Gerrard, Mix, Jozy and Giovinco - but they are all just attending the league's main event this year, the CBA negotiation. The last agreement between the league and the players' union expired on January 31st, and the American soccer world is now on pause as they wait to see how it plays out.

This CBA drama is coincidentally peaking alongside Oscar season and predictions. Why not have a little fun and predict the outcome of the CBA? I polled the staff here to rank the important issues and provide their side of the argument for each.

Without comedic preamble, free pizza or star-studded selfie, here are the five biggest issues facing the players and the owners - how they should play out, the prediction of how they will play out, and the ultimate winner.

The First Category: Minimum Player Salaries

The top issue as voted on by the staff is minimum player salaries. Eugene Rupinski explained his thinking, "That just seven players make one-third of all of the money is an absolute travesty, especially when a player making the minimum qualifies for affordable housing."

The minimum salary is indeed low at $36,500 this past season. That's more than 30 percent lower than the median household income in the United States of around $54,000. And when you factor in that most clubs are near a metropolitan area where median incomes are closer to $100,000, things look even worse. Fans have an immediate emotional reaction when thinking about athletes not getting paid enough to live a comfortable living. And the other reason to raise the minimum is to make MLS a viable destination for young athletes.

However, a reality is that the league doesn't currently make enough revenue to support the tail end of a 30 player roster. When looking at Major League Baseball's minimum salary relative to revenues - with a slightly smaller big league roster size of 24 - the MLS level is not that far off. The minimum MLB salary is 0.21 percent of league revenues while MLS' minimum salary is 0.14 percent. MLS has a slightly bigger roster so the minimum salary comparatively would be somewhere below $55,000.

MLS CBA Minimum salary

But since the league not only needs to offer an acceptable salary but to invest in young players, the number should be higher.

What should the minimum salary be? $65,000. An increase in the base salary to $65,000 will increase total league salary by $4M, an overall increase of under 4 percent. Given the new television deal is bringing in a new $60M per year, this is certainly affordable. But there is more money to be doled out to other players as well.

Prediction for the new CBA: There will be a good jump to $55,000 with annual increases in-line with the salary budget. That's still under a 2% lift in the total base salary pool. While raising the minimum isn't expensive for owners, the Players Union has to be more focused on getting money for the players who built the league. Once they get minimums to a level that isn't notably embarrassing, they will work on the next topic for the veterans.

And the CBA Oscar goes to: The owners. The minimum salary will get a large bump but not as large as it could. The players will take the increase and look to gain wins in larger issues.

The Second Category: Free Agency

The media has picked up on one of the big issues keeping the players and league far apart. The idea of free will is near and dear to the hearts of Americans because we live in democracy that encourages freedom of choice. It's an easy topic for players to focus on because it makes the owners seem, well, un-American.

Barry Evans summed up the issue this way: "The fact that the players don't have a choice where to go is the biggest thing that has to stop. I wonder how many talented players had their careers wrecked because they were sent to a crap team, in an area that the player doesn't like, and it means they give up on the sport. Players need to decide where they play."

So how might free agency work within a single-entity structure? There are plenty of sports to use as models. In the United States there tends to be a graduation process to free agency. Young players are tightly slotted into salary ranges and then graduate to a form of restricted free agency (in baseball this is arbitration) and then to full unrestricted free agency. Soccer globally has a wide open free agent market, but MLS is unlikely to go that far so quickly.

One of the big issues with a graduating process is giving credit for time played in other leagues. Would a ten year NASL player entering the league be treated like a free agent or would he have to play in the MLS first? Certainly a ten year veteran from the EPL would be considered a free agent in that case. How do you draw the line with all the leagues around the world?

Then there is the issue that owners feel that salaries will rise too quickly. Let's try to put some context around how big of a deal this really is to the owners. A reasonable time for players to earn full free agency would be five years of service. Right now about one-third of all players drafted in the SuperDraft that are still in the league will be in their sixth year or more. So let's assume that about one-third of the league would qualify. So then how much will the incremental leverage offered by a new bidding process increase a player's salary?

Major League Baseball moved to free agency in 1976. The four years after the change the average salary grew by 92% on an inflation adjusted basis. If free agency caused the same increase in MLS, today's average MLS compensation would increase from $207K to close to $400K. Just to put that kind of increase into context, if only one-third of the players were eligible for free agency, then the average free agent player would be making close to $1M per year. That seems unlikely to happen by the end of the next CBA, given the salary cap would almost certainly keep those costs in check.

How much would free agency increase player salaries? It's hard to tell. For every $100,000 more per year an eligible player earns via free agency the total league compensation would increase by $16M or 16 percent. Putting it all together, free agents could make $300K more per player and minimum salaries could increase to $65K and that would total the amount of the new revenue from the television deal. Of course free agency would unleash wage growth at a high rate beyond just the next CBA and it's likely that opening of the floodgates long term that has the owners concerned.

How would free agency work? To maintain the single-entity structure the league would have to manage the bidding process. But perhaps more importantly the owners would need to take more accountability for their actions and separate the impact of their mistakes from the other owners. How the owners of MLS split up their financial pie is certainly unknown, but it's safe to say that with more freedom at the franchise level would come with a redistribution of the profits. Not easy to coordinate. Perhaps the allocation process could stay in place and players would be able to choose from the top ten allocation teams. This would give players more choice but limit their leverage and help the cause of parity.

What will happen in the next CBA? It seems clear that players won't play without some form of free agency and owners are struggling to articulate a good reason why it's impossible to listen. The "we don't trust each other to behave when given a blank check" argument just doesn't seem hold much water, when every other sports league in the world continues to operate with some form of free agency.

A similar model to baseball with graduating levels of freedom will prevail. Players will earn close to the minimum for three years and then will be granted a large increase in years four and five, but rights will be maintained by the team. After five years the player would then be a free agent and teams could bid through the league for his services. The league would still be the single-entity and would manage the bidding process. Perhaps the NBA rule where the incumbent team can sign a player to a longer deal would work as well.

As far as calculating league service, MLS would have to list leagues who service time will count toward the three and the five year hurdles. Something along these lines could work, and while salaries would still increase quickly, the impact could be largely managed because owners could control the overall expense, through the next topic; the salary cap.

The CBA Oscar goes to: The players. This is the win the players needed and enhanced freedom will allow the veterans to get paid fairly and it will raise the player interest in the league globally.

The Third Category: Salary Cap

The salary "cap" in 2014 was $3.1M per team and total compensation for the players was just 20 percent of estimated league revenues (when using Forbes revenue numbers from the 2012 season). That 20 percent number is about half of the next lowest comparable league.

wages of soccer leagues

US sports leagues wages revenue

MLS players are paid far less than in other leagues as a percent of revenue. Much of that is due to the fact that MLS has been building out the infrastructure (USL PRO teams, practice facilities, stadiums, academies, etc) to build the foundation of a sustainable league. But with much of those investments complete or close to being in place, the investment should turn to the players.

non wage costs MLS

With the new television deal for 2015 the salary budget could increase to $6M per team and still be one of the lowest paid leagues in the world. The chart above shows that the league does need to lower it's non-wage costs ultimately to be competitive, but owners would not realistically be able to make such a jump immediately, as any number of investments are still in process.

What should the salary budget be? The salary budget won't increase much this year because most of the signings are already in place. But the salary budget should have dramatic increases each year of this CBA. Last time around the salary cap increased just 5 percent per year. That can't continue if the league wants to add quality. The players should have a map getting to 40 percent of league revenues. That would put the salary budget between $7-8M in 2020, with DP salaries accounting for the rest of the gap. That's a pretty dramatic increase, but the league should be able to absorb it eventually.

What will the salary budget be? The salary budget won't go that high and the players won't get to 40 percent of revenues by the end of this CBA. There were reports that the league and players had agreed to a 25-30 percent increase in budget which would put the new salary cap around $4M. Then there was a rumor that that number was still too low from a players perspective. The new salary budget will be $4.5M, a remarkable increase on a percentage basis, but far below where the number should be. The annual increases will be solid but not enough to get the players salary to 40 percent of revenues, the minimum competitive amount.

The CBA Oscar goes to: The owners. The players are so underpaid relative to other sports leagues, it will be very difficult to make up all that ground in one CBA.

The Fourth Category: Number of Roster Spots

Philadelphia Union Coach Jim Curtin has on multiple occasions mentioned that the number of rosters spots was an open talking point. Matt Reppert thinks the number should increase. He says, "With MLS adding more teams and pushing greater emphasis on things like the CONCACAF Champions League, the Players Union should be demanding that more players be allowed on the roster to allow teams to have greater rotation for league and cup games. Combined that with an amount of travel that few other leagues can match."

The other side of the roster size argument is that many of the players at the tail end of the roster never see meaningful time. Even with the Union's US Open Cup run there were a handful of roster players that never saw a MLS pitch last season..

The new trend of MLS teams buying and managing USL PRO teams also indicates that roster size will shrink. MLS teams will now be able to stretch their roster to their USL PRO squad, and potentially pay those players less as a result. And smaller roster sizes mean that the average salary can go up and full time MLS players will get paid more. This will be potentially worse for marginal players.

What should happen to roster sizes? Roster sizes are capped at 30 today but they should be capped at 27 going forward.

What will happen to roster sizes? The Premier League has a 25 player squad size, but they also have levels much closer to the senior team. The USL PRO partnership with MLS is a step in the right direction for MLS to have a direct system of younger players looking to join the senior team. But its not there yet. This CBA won't get the rosters down to 25 but 27 is the number they'll arrive at. Teams will still have the option of having fewer players on the roster.

The CBA Oscar goes to: The players and USL PRO. Smaller roster sizes mean more talent for USL PRO and higher salaries for the senior roster players.

The Fifth Category: Number of Designated Players

Only one staffer Frank Cobbina brought up the topic of designated players, and he thought that the league and the players should add one in the next CBA. Your perspective on this completely depends on who you root for. An additional Designated Player spot would only serve to increase the competitive distance between the rich teams and poor teams. Giving teams like the LA Galaxy one more premier player without a significant hit to the budget will only make them better than the teams that can't afford to have four designated players.

What should happen to designated players rule? The league should keep the three designated player spots but leave open room for a rule changes in the future (not that it won't happen anyway). The $150K fee for using the third DP spot should be removed. The cost of a designated player against the salary budget should be increased a higher percentage than the salary budget as there isn't enough of a penalty paid by the richer teams. All of these ideas are meant to serve at the feet of parity.

What will happen to the designated players rule? People like bright shiny objects and it will seem like a good idea to everyone to add more expensive players to the league. The new CBA will add a fourth designated player and it will not be good for league parity.

The CBA Oscar goes to: The big market owners and MLS. An added DP per team will allow much of the television money to go to new bright shiny objects. That's exactly where MLS wants the money to go right now. Teams like LA Galaxy and Seattle Sounders will benefit as they have the revenues to take advantage. But let's be clear. If the league adds a DP and fights against free agency (said another way, increase spending on just the top players) they will be indicating which players they truly care about.

The results of the new CBA will tell attentive fans a great deal about the direction of their league. Fans will find out just how committed the league is to building the quality on the field. They will find out if the league truly values parity. They will know if the league values big name players, the young players trying to make a name for themselves, or the veterans who have helped make the league what it is.

And that is where this Oscar comparison breaks apart. The real Oscars celebrate past successes while the MLS CBA Oscars will show a clear path to the future direction of the league.

Sources for this post: Forbes.com, mlsplayers.orglorenzobalbi.wordpress.com,footetfric.wordpress.comDeloitte Annual Review of Football Finance 2013,bundesliga.comusatoday.comtheguardian.com, eh.net