On Nov. 21, 2009, the LA Galaxy were practicing in Seattle in preparation for the MLS Cup with Real Salt Lake the following evening. Sounders FC GK Kasey Keller and team owner Drew Carey were watching the workout when they were approached by Galaxy owner Phil Anschutz.
Anschutz, along with Lamar Hunt, were the fathers of MLS. Not only were they founding members of the league but at one point Anschutz owned six franchises and Hunt three, taking the concept of “single-entity ownership” to a ridiculously personal level. Both men loved soccer and were willing to lose lots of money to help the league grow.
Anschutz came over to thank Keller and Carey for everything they had done in their first year in Seattle.
“He said we had kicked everybody in the butt and made them think about how they had to do things forward,” Keller said. He and Carey both reminded Anschutz that without his commitment to soccer in the league’s earlier days, MLS would have ceased to exist.
“I think the cool part that I took from that conversation is that there was definitely a learning curve from the hierarchy like Anschutz, who was able to see what Seattle had done and knew the rest of the owners needed to adapt,” Keller said. “That’s what you’ve seen over the progression of these last couple of collective bargaining sgreements: Ownership knowing that as they become more successful as a league, they need to change their hardline structure a little bit.”
Keller was thinking about that conversation Thursday morning, after the announcement late Wednesday that MLS owners and players had reached agreement on a new CBA, avoiding a strike and ensuring an on-time start Friday to the league’s 20th season.
The willingness in the new deal to grant players limited free agency, as well as raising minimum salaries and overall cap numbers, were signs of the adaptation that Keller first noticed that day in 2009. The timing of the deal couldn’t be more appropriate given not only this weekend’s opening games, but also where the league sits in 2015.
Everything with MLS has to be put in proportion. They have a new TV deal, but it’s much smaller than similar deals for pro baseball, football, basketball and even hockey. Nevertheless, the reported $90 million annually they will earn from ESPN, Fox and Univision is triple the amount of the expired deal. The new agreement runs for seven years and gives MLS leverage in sponsorship sales, league wide and for each team.
MLS claims to be losing around $100 million per year, which is not good. But divide that loss by 20 franchises and it’s a little more palatable $5 million per franchise. It’s also worth noting that during labor negotiations, leagues traditionally bemoan their financial fate, despite evidence to the contrary. It’s reasonable to assume the number was inflated a little for negotiation leverage.
“The networks that did the new TV contracts obviously see a future in this sport,” Keller said. “You’re selling franchises for $100 million and you’re paying certain players four to six million dollars a year. It’s hard to plead poverty.”
Even if the league did lose $100 million last year, a bigger question is which way is that number trending? Will MLS teams keep losing this much, or is the number changing and if so, in which direction? Signs point to the positive.
There’s the TV deal. But above that, see MLS for what it is: An exclusive club with a strict admittance policy. Just take a look at the crowd outside the door waving fistfuls of cash at the guy who holds the velvet rope.
Atlanta Falcons owner Arthur Blank, former soccer superstar David Beckham, Brazilian multi-millionaire Flavio Augusto da Silva and, perhaps most important, the combined consortium of Manchester City and the New York Yankees, who own the NYCFC: These are not people, nor organizations, that invest in losing ventures.
The league has plans to add at least four more teams (including a re-launch of a second team in Los Angeles). Bidding for those franchises is expected to attract more high-end investors. Perhaps MLS is losing money now, but with the line of fat cats looking to get in, one would assume the outlook for the league is good and green.
As Keller pointed out, you can’t measure financial success in pro sports by looking at year-to-year numbers.
“If you look at all pro sports models, you’re going to spend more than you make,” he said. “It’s the competitive spirit of pro sports that you’re going to push the envelope. Where you find value is in equity. Owners like Blanks, or the LA group, or the Emirates group, they understand that it’s not necessarily the case of (worrying over) the year-to-year bottom line.”
Teams are also required to invest money in developmental teams, such as the newly formed Sounders FC2 team that will play in the USL (a lower-tier American league). These teams are an added cost to owners. It’s difficult to imagine everyone agreeing to do it if the tide of red ink the league claims to be swimming in was continuing to rise.
Add up everything, and it was clearly time for sort of free agency and an overall player salary increase.
“It’s a progression,” Keller said. “This league was founded on the concept of no free agency. The whole idea was structured around the premise of the owners not being able to compete with each other. It’s going to be a long process for the players to get whole free agency — if they ever do. The players have done a good job of getting some steps in the right direction. And the owners have done a great job in softening their approach a little bit.”
Keller was directly involved in the last round of CBA talks in 2010, but observed this negotiation from the sidelines. As with most who pay attention to these things, he’s happy to see it come to a conclusion.
“The deal got done and I think both sides are walking away feeling they could have gotten a little more or given a little less,” he said. “f both sides come to an agreement, there’s nothing to complain about after that, because you signed the deal.”
Right. So now it’s time to play soccer.