MLS Cautious of Long-Term Finances Amid CBA Talks but Won't Turn to Expansion As Quick Fix
Although Major League Soccer claims to have lost around $1 billion in 2020 and very well may be facing a similar shortfall in 2021, it isn’t seeking the quickest fix to its financial challenges. This is a league that has always been about gradual growth and the long term, and that philosophy remains evident as it tries to mitigate the pandemic’s impact.
MLS remains focused on a March kickoff for its 26th season but accepts the fact that it’s unlikely fans will be back in the stands anytime soon. The U.S. government’s coronavirus point man, Dr. Anthony Fauci, told Yahoo last month that, “It probably will be well into the end of the summer before you can really feel comfortable [with full stadiums], if a lot of people get vaccinated.”
Even then, just because fans can come back doesn’t mean they will en masse. Many will remain cautious. So MLS, which depends on game-day revenue far more than other major leagues in the U.S., expects steep deficits to continue in 2021. Nevertheless, it’s willing to wait to recoup those earnings.
“We are prepared to absorb the massive economic losses in 2020 as long as we can generate some value in the future through extending the CBA," league president Mark Abbott told Sports Illustrated.
To that end, the league sent a proposal to the MLS Players Association this week offering to pay full salaries this year in exchange for a two-year extension to the collective bargaining agreement reached over the summer. In 2020, players agreed to a 5% pay cut and a significant reduction in bonuses while the league reduced front-office salaries and then laid off around 20% of its full-time staff in November. Abbott said MLS is willing to return players to full pay in exchange for flatter growth and cost certainty through the 2027 season.
He said the proposal would save the league $100 million to $110 million. The current CBA expires after the 2025 campaign.
“Discussions [in June] over the pay cut portion in the deal were very contentious. The players were clear that they were incapable of withstanding significant pay cuts based on their own economics and the challenges they were facing in the pandemic," Abbott said. "Given that 2021 will be as much of a challenge as 2020, we have to find a way to deal with the impact of two years of the pandemic. We’re prepared to absorb the immediate [costs] but have the opportunity to generate future value in exchange.”
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When MLS and the players’ union renegotiated and then ratified a new CBA in June, allowing for the return to play at the MLS Is Back Tournament in Orlando, a force majeure clause was negotiated that allowed either side to force at least 30 days of renegotiation if economic conditions failed to improve. Following that 30 days, the current CBA can be terminated. MLS invoked that force majeure clause last week, to the MLSPA’s dismay.
"After a 2020 season of extreme sacrifice, immeasurable risk to personal health, and a remarkable league-wide effort to successfully return to play, this tone-deaf action by the league discredits the previous sacrifices made by players and the enormous challenges they overcame in 2020," the MLSPA said in a written statement.
This week’s MLS offer represents the opening of those negotiations. The union hasn’t responded publicly.
Under the current CBA, the league’s overall annual salary spend (minus discretionary spending like designated players) was pegged to rise from $8.5 million in 2019 to $11.6 million in 2025. If MLS gets its way, that increase will drag out for an additional two years, saving it money over the raises the players would have expected under a new CBA negotiated in 2026. The rate of increase in shared TV revenue starting with the league’s new broadcast rights deal in 2023 also will slow down. But players will be paid in full next year.
“We believe it’s a fair deal. It’s fair to the players and fair to us and I think it recognizes the different positions people are in,” Abbott said. “We decided that if reducing player compensation in 2021 will be a significant challenge and very difficult to achieve, we would commit to pay the players 100% of their compensation in 2021 and absorb the entire economic loss for this, which is going to be enormous.”
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Another potential short-term, bottom-line bump MLS is willing to forgo is additional expansion fees. Last month, NBA commissioner Adam Silver acknowledged that the league was “spending a little bit more time on [studying expansion] than we were pre-pandemic.” Expansion fees typically aren’t shared with players. Although MLS had committed to pausing its recent round of expansion at 30 clubs (Charlotte FC was admitted as team No. 30 in December 2019), reopening it and selling two additional slots likely would net the league more than half a billion dollars.
Abbott said MLS wasn’t prepared to go that route.
“We pride ourselves on being very strategic about expansion,” he said. “We have no plans to go beyond what we have announced now, which isn’t to say that at some point in the future the league wouldn’t expand beyond what it is. But there’s no plan to go beyond the clubs we have now. We wouldn’t expand to deal with a pandemic crisis. We would expand if we think there’s a market and ownership group that’s additive and brings value to the league overall. We never look at it from a ‘How do you fix a specific problem?’ perspective.”
There currently are three existing MLS teams for sale: Houston Dynamo, Orlando City and Real Salt Lake. Abbott said the league hasn’t seen any evidence that the pandemic has reduced franchise values and that there’s interest in buying in.
“People still want to be involved,” he said.
