Parity is failing Major League Soccer

Major League Soccer boasts one virtue that other soccer leagues around the world can't claim, and that is parity. But how important is parity? Parity is a state where all of the teams have an equal chance of winning a championship, and the benefit is that uncertainty breeds excitement all across the league. The flip side of parity of course is a lopsided league or one where only a few teams have a legitimate shot at winning a championship. This can be exciting for fans because dominance is attractive to watch. Take the Golden State Warriors for example. They took the NBA and sporting world by storm this season and brought new interest to the league. If a league has parity the likelihood of a team winning 89% of their games, like the Warriors, is low. Lopsided leagues also create "David and Goliath" opportunities. Take Leicester City. Their sensational run is really only a sensation because they tackled the usually dominant clubs. The Leicester City and Golden State Warriors stories can't happen in a league with strong parity, and yet they are attracting unprecedented interest in their leagues.

So which is better, a league with parity or one that is lopsided? As with almost everything in life, it's probably about striking the right balance, and there's no clear cut proof of cause and effect. A league like the NFL, with a hard salary cap and even distribution of large television revenues to promote equality, is the most popular league in America. At the same time lopsided soccer leagues like the English Premier League and La Liga are tremendously successful globally.

Where does Major League Soccer fit in this spectrum, and is it the right place given it's place in the sports landscape?

Does MLS want parity?

MLS commissioner Don Garber was a protégé of Pete Rozelle, former commissioner of the NFL, who famously shared the television revenues across all teams in an effort to equalize the competition on the field. The move was controversial but proved to be a master stroke. Don Garber has internalized that lesson, and believes parity is the key to a successful league. He said in 2010:

I believe the NFL is the most popular league in the world for a reason. And that's that every fan knows at the beginning of the season that their team has a chance to go to the Super Bowl. And I believe that belief is an important quality for any league to be successful. Therefore I certainly subscribe more to the NFL's approach to parity than I do perhaps to the structure of the English Premier League, where for the most part only a handful of clubs really have a chance of winning the league each year.

Garber has set up his league to keep teams as even as possible. The salary budget, player allocation processes and allocation money are all designed to maintain parity. The designated player mechanism is the only one that truly allows the financial power of clubs to differentiate talent, but with only three designated players allowed per team the opportunity is limited.

Does MLS have parity?

Having a league designed for parity and actually having it are of course two different things. And in the case of MLS it's not an easy answer. The designated player rule has been steadily opening up the salary gap between clubs, weakening the grip on parity. Here is a chart that shows that widening gap.

In 2008 just 7% of the teams paid salaries more than two times the median and that number was 20% in 2015. And having a significantly higher payroll does have it's advantages. Since 2008, 84% of teams that pay more than 2 times the median made the playoffs. The other clubs made the playoffs 50% of the time and league average qualification has been 55%. Because the number of teams that spend so much is relatively small the advantage is barely noticeable to the fans, but it exists.

And then there was the 2015 season, which brought the term parity to the forefront of the league yet again. The league was wide open last year. One way to think about parity is comparing the actual table with a league that is completely random. What does a random MLS table look like? If you assume standard home field advantage which has historically been home teams win 54% of the time and draw 21% of the time, and you run a sample season many many times you get the following average outcomes: The average last place points per game is 1.01 and the average Supporter's Shield points per game is 1.83. The variance of points per game for a whole season is 0.047. Now let's take a look at the 2015 season. The low points per game was Chicago with 0.88 and the high was the New York Red Bulls and FC Dallas with 1.76. The spread (0.88) is just slightly more than the random spread (0.82). The variance in the table last season was .051, less than 10% more variance than random. Not much at all.

It's too early to make a call this year, but the turnarounds by the Philadelphia Union and the Colorado Rapids certainly indicate that teams can turn their fortunes around quickly - another sign of a league with parity.

But you can't talk about league parity without bringing up the LA Galaxy. When it comes to parity and championships, the LA Galaxy create dissonance. Of the 20 MLS Cup Finals, the LA Galaxy have appeared in nine. Imagine if there was an NFL team that had appeared in 22 Super Bowls. The NFL would have a hard time claiming parity if the Philadelphia Eagles has been in nearly half the Super Bowls. The Galaxy are the counter argument to MLS' parity claims, but they appear to be an anomaly, and the league does appear to be in a golden age of even play.

Does parity lead to league success?

In order to judge Don Garber's strategy, let's examine the recent growth of the league. There are a number of ways that success can be measured, but the bottom line should be that the league is clearly growing. I chose to assess the league by looking at growth across a range of metrics. The first is in general interest. The second are third measure active engagement by looking at tv ratings and attendance, and the fourth is revenue growth. Let's go through each category.

Growth in terms of general interest

A reasonable way to examine general interest is to look at the number of Google searches on a particular topic. Take a look at this chart of Google searches in the United States since 2004 of the major soccer leagues around the world.

The English Premier League is far and away the most searched league in the United States. That recent rise in interest is no doubt driven by NBC Sports' complete coverage that began in 2013. La Liga has also grown dramatically since 2013. La Liga, Liga MX and Bundesliga all barely registered any searches in the United States a decade ago, but only Bundesliga gets lower search levels than MLS so far this year. The Bundesliga trend is growing however, while Major League Soccer's is not. Interest in soccer is clearly growing in the United States, but Major League Soccer is not receiving any of that increased interest, at least as far as internet searches go.

Based on these results there is the possibility that the interest is just an international one. However, looking at the search results of the United States National teams reveals similar growth in soccer searches.

To get a clear read of growth the World Cup years need to be separated from the rest, and while the World Cup growth is very strong, there is still growth in years with the CONCACAF tournaments.

Major League Soccer is the only aspect of soccer not growing online.

Growth in terms of television viewers

Searching is one thing but actually watching matches is certainly another. The online soccer community BigSoccer has an unbelievable resource of viewership for nationally televised MLS games back to 2006. The league's nationally televised games have changed channels over the years but they have consistently been on the ESPN Network and to some extent the Spanish language channel Unimas (formerly Telefutura). Here is what the viewership looks like over the last decade.

As you can see that viewership has not grown on ESPN and has declined on ESPN2. But we know that ESPN is losing subscribers so perhaps this is not a complete surprise. And now the league Spanish language viewers:

There was a three year break but the new Unimas viewership hasn't increased from 10 years ago either.

Meanwhile NBC Sports is seeing growth in viewers in it's first three seasons of covering the EPL.

NBC changed the metric that they publicly release after the 2014 EPL season, so its difficult to know the true growth but they've certainly improved viewership dramatically over ESPN and Fox, which covered the 2012-13 season.

The growth in online streaming should be noted as TV watching is no longer the only way to consume live content. Major League Soccer announced before the 2016 season that the MLS Live streaming service had grown their subscriber base by 60%. That's an impressive number and can't be discounted even as digital video consumption is booming. Just a few years back Major League Baseball had announced that streaming had increased 60% year over year. Nevertheless, this data suggests there is a strong core fan base willing to pay for more content than just the nationally televised games.

The fact that EPL games draw more than twice the viewers as MLS' best games is still a concern for the league. It also appears that the interest in EPL is growing when looking at TV ratings, and the same can't be said for MLS.

Attendance is growing well

If there is a positive growth story for MLS it is in attendance. While smart expansion to places like Seattle and Toronto and new stadiums have helped, there have been strong original market stories in Kansas City and New York as well. Here is a look at the attendance growth in MLS which reached a record high in 2015.

So far in 2016 attendance is down 1.6% compared to 2015 but perhaps that's too be expected following an expansion year. Last season followed the biggest offseason in league history adding stars like Sebastian Giovinco, Kaka, David Villa, Jozy Altidore and others. The 2016 offseason was not nearly as dramatic from the perspective of signing big players.

Revenue growth is strong but uninspiring

The attendance growth has helped drive revenue growth for Major League Soccer as well. According to Forbes, the average revenue per club in 2007 was $13 million and in 2014 it grew to $26 million. While doubling revenues might seem impressive it represents about 10.5% revenue growth per year over that period, which is nice, but not exactly what you'd expect from a relatively small company touting impressive growth. The top ten most valuable soccer clubs in the world according to Forbes grew revenues 8% annually over the same period. Those teams have much higher revenues to start with and growth is more challenging.

The MLS numbers don't include the new television deal that MLS recently signed. Spreading that incremental revenue across all of the teams would give them roughly $3 million more per season. That 10%+ increase is welcome but when you consider that increase will be fixed for the next eight years, it doesn't provide booming long term growth.

Overall, these results are distressing for a league that is relatively small in such a large market, and is failing to capitalize on the exciting growth of soccer in the United States. They do appear to have a solid core fan base willing to pay for subscription packages and attend games, but the non-core fan is clearly looking elsewhere for their soccer. Perhaps that is why Don Garber is so focused on league expansion, because entering new markets and unearthing those core fans that will be committed to a domestic league is so critical to the prospects for growth.

Is parity the problem?

The main difference between MLS and the rest of the soccer world discussed above is the quality of play, and it's not a stretch to assume that the lack of growth is mostly due to that clear gap. It's no secret that Liga MX is a good step ahead of MLS, as all of the major European leagues certainly are.

The core MLS fans accept this quality gap because they are attracted by the fact that their club is local and that their league is domestic. They are probably also fans of the league's parity relative to other soccer leagues. However, the rest of the soccer community prefers the quality of play to the local aspects of the game. If this is the case then it must be the quality of play that is limiting the growth of MLS relative to soccer in the United States.

Which brings us back to parity. If clubs can only acquire talent at the rate that the bottom half of the league can afford then the quality will improve at a slower pace. If the league wanted to improve quality more quickly, and grow more quickly, they would necessarily have to allow the teams with more resources to invest disproportionately to the rest of the clubs, and Garber's grip on parity would begin to loosen further.

The key for fans it to understand the price of parity. If the league is to value parity and strive to maintain it, then the growth of the league and of the quality of play will be slower. Becoming one of the top leagues in the world will be a long haul and may never happen as other leagues with different models will be improving as well. There's a reasonable chance that new soccer fans in the United States will find their affinity globally. After all, United States fans have unbelievable online access to soccer matches all over the world.

On the flip side perhaps that patience will pay off like it did for the NFL. When Pete Rozelle originally split the television revenues evenly baseball was clearly America's pastime. Now the NFL rules the American sports show and league balance is definitely one of the reasons why. Perhaps over the long haul this strategy for MLS will prove to be a great one. You just need to realize, it's going to take a long time to find out and it doesn't appear to be going well.