MLS single-entity and the issue of trust

Those of you readers who recognize the "unionoscopy" byline and have read my stuff before know that I desperately try to support any assertion I make with numbers. I collect data from the far reaches of the soccer web to learn about the machine beneath the game and then present what I find.

But today I write without any data, basically because there is no data to be found on this topic. The lack of data is in fact the nature of the issue. The topic is single-entity and how it impacts the league from a fan's point of view. I am going to argue that single-entity is potentially more damaging to the game than we all walk around thinking. But I'm also going to write it with love in my heart for MLS - good old-fashioned dataless love. Because my hope for this league is to grow up and be everything a top flight American soccer league should be.

First of all, what is single-entity? Single-entity is a term used to define the ownership structure of Major League Soccer. It essentially means that all owners own shares of one company, Major League Soccer. There are no shares of each franchise. Owners run franchises that are simply a part of the whole.

There is (almost) no doubt that single-entity has been critical to the success of the league and has helped the league get to the status it has today. Soccer is a very competitive global market, and paying full price for talent could have crushed a league not ready to support the tremendous salaries world-wide. Single-entity played a key role is stopping franchises from competing on that open market. The most important outcome of single-entity was to create leverage for the league when it comes to negotiating and setting salaries. Rather than multiple owners getting in a bidding war for a player's services, that player could only negotiate with the league, which ends up being a 'take it or leave it' kind of situation for most players, unless they have tremendous leverage themselves. And for a league that hasn't historically been that strong, those players were few and far between.

This allowed the league to manage costs as revenues grew. It may have stunted growth but it also assured growth. Think of it as MLS being a T-Bill rather than a speculative stock. Much lower risk and probably lower reward but the benefit is the league still exists today. Many speculative companies disappear.

What the league wants everyone to think is that single-entity has allowed the league to survive and thankfully flourish. Single-entity is criticized for driving unfair wages for a portion of the player pool, specifically the American players that don't have international potential, as well as the perception that it limits the signing of premier talent. But there is little criticism about how it might limit the motivation of teams to win.

Let's chew on a recent quote from Don Garber in this interview with Grant Wahl of SI, where Garber is asked if they could expect big name signings in MLS in 2016.

It's interesting: There was a time when the league was driving this process, and that's not the case anymore. There was a time many years ago when Didier Drogba's agent would reach out to the league and the discussion would start out at the league level, and then ultimately we would try to figure out what clubs were interested in a player with Didier's experience. While those negotiations are still held at the league level, all these relationships have been developed by our clubs, who in addition to bringing in and developing great coaches are now becoming far more expert in the technical side and having scouting programs and having a wide variety of outreach efforts so that our league and our clubs are mentioned when big players around the world are thinking of what their next move in their career is at all age levels.

What jumps out to me is how teams are just now, in the last few years of a 20 year old league, sourcing players on their own. In other sports leagues this practice is common place. The central league office provides none of these services in fact. But imagine being an owner or coach sitting around waiting for the league to ask if you want a player. Times have changed and now teams are more in control of their personnel, but this example raises the crux of a key issue. Just how committed to winning are owners? How active are they? And in fact, how much control over their ability to win do they have?

We are all motivated to some extent by money, but owners are a special lot in this regard. They have special skills in the art of making money. They excel at it. And where do their financial motivations with their franchise lie? They lie in the success of the overall league for sure. To some extent they may be motivated by success of their individual franchise, but fans have no idea just how this fracture of funds works. What revenues are pocketed by the franchises individually and what revenues go to the single-entity and benefit the whole? Even when Forbes publishes their estimate of franchise income there is no way to know what that income statement really looks like.

MLS just landed a new television contract that would bring an estimated $3M in incremental revenue per team. However, no average fan has any clue if the franchises are actually seeing any of that money. We know for absolute certain that the salary budget didn't increase by $3M after the television deal. It didn't even increase a million.

At the center of this issue is of course trust. Trust is critical to the success of any relationship and that includes the relationship between the fans and their team. Can fans trust that owners are purely motivated to win, which is what every paying fan wants their team to do? I have no doubt that owners want to win. That is not the issue. The question is how strong is that drive to win given their incentives may conflict with that drive?

How does this manifest itself? Take last season's introduction of Targeted Allocation Money which many believe was brought into existence so that the LA Galaxy could sign Giovani Dos Santos despite already having the maximum of three Designated Players. This change in the way the league works was clearly not only a biased change for the Galaxy but also an effort to boost the overall league is well.

Owners that couldn't take full advantage of this odd rule should normally be irate that the league had effectively taken money from their pocket and given it to the Galaxy, after all the Galaxy just saw their chances of winning increase. But in this case, since the overall health of the league just improved, all of the owners won. The owners just raised a toast to Giovani being added to the league. Hard to trust your team when that might be true, right?

The Board of Governors, consisting of league owners, recently voted for a new round of Targeted Allocation Money for all teams, which implies that those same owners jointly approved the original TAM allocation, which only certain teams, like the Galaxy, could take immediate advantage of. It's an example of an owner acting in his or her best interest but necessarily in the best interest of their team.

MLS has its issues with transparency; how homegrown rules work from player to player, who is a "select" U.S. Men's National Team player or an "elite" youth player, and what transfer fees are and how they impact the salary budget are just a nagging few. But the real issue that undermines the trust between fan and league is how the money is split between the single-entity and the franchises. How much are owners incented to build a winner versus raise the overall value of the league? Owners unquestionably could have conflicting goals.

The league has made a purposeful choice to sacrifice this trust for the overall stability of the league. Owners will say all the right things about their commitment to winning, and the league will back them up because they realize how important this perception is. But when it comes down to it and an owner has to reach into their pocket or vote to do anything that might make the difference between winning and losing, will they? In other leagues, if an owner doesn't do what it takes to win fans feel pretty confident it will cost them in the long run. Interests of fans and owners are aligned. In the case of MLS, fans can't be so sure, and just how long do you stay in a relationship with someone you don't trust?