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View from the End Line: MLS and the Current Financial Structure

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The financials of football are perplexing and it’s difficult to know which rules help and which ones harm.

Manchester City v Watford - FA Cup Final Photo by Richard Heathcote/Getty Images

As much of the world’s football season starts to wind down, and MLS is in the midst of the second third of its season, I found myself watching and wondering how this all happens. England crowned its champion on Championship Sunday a week ago, Germany crowned its own yesterday. Italy and Spain are about to conclude their seasons, but the trophies’ destination is well known already for both leagues.

Remembering that these leagues end after the final whistle of the final match, and the trophy is presented to crown the season champ, I cannot help but wonder how moving towards a more international system would help or hinder MLS in the United States.

In an effort to maintain the financial viability of clubs, many football governing bodies have instituted financial regulations. One of the more well known is the UEFA Financial Fair Play (FFP) rule. The easiest way to explain FFP in layman’s terms is this: it was designed to help prevent clubs from getting into long term financial issues in the short term quest of immediate success. Basically, it was put in place to stop teams from spending more than they make, over multiple seasons, by investing in players to gain immediate success on the pitch who could put the long term financials of the club at risk. It sounds simple, but in fact it is more complicated than you think.

Rules of this nature were intended to simply help safeguard the long term health of teams and leagues. There has been some stark criticism of the “unintended consequences” of the fair play rule and the monsters it has created. Could the current definition of FFP be helping clubs like Barcelona, Real Madrid, Juventus, Paris St-Germain, Manchester United, Manchester City, Celtic, Rangers, Bayern Munich and Borussia Dortmund as almost untouchable? These are some of the highest revenue and profit generating clubs in Europe and, as such, will naturally have more money to spend on players than virtually any other team in their respective leagues.

Think about this: Bayern Munich just secured its seventh straight Bundesliga title, and this season was the first in a long time that went to the final match day to decide the champion. Outside of a magical season, similar to the 2015-2016 season in English Premier League that saw Leicester City pull off what some thought was impossible, most top flight clubs are going to have an extremely difficult time competing with the league behemoths, not only on the pitch, but also in recruiting players to join their clubs.

MLS, and its ever evolving efforts to continue to Americanize the game of football (or soccer if you prefer), has adopted a similar method to help maintain the financial viability of the teams, although to be honest, the structure of MLS means that it is maintaining the financial long term health of itself as an organisation. Remember, MLS is designed as a single-entity structure, not a collection of individual organizations. For MLS to be sound financially, and to protect its investors, the structure must spread the financial impacts and risks as broadly and evenly as possible across the entire league, theoretically.

Like many other sports based in the United States, MLS tries to protect its investors through various means — specifically in the league’s case that means salary caps, allocation orders and money systems, and the Designated Player rule structure. Again, this is all in theory.

Looking across MLS, especially with its current growth, it is obvious that some teams come out of the starting gate better, and faster, than others. This could be scouting, player recruitment, better negotiating skills, better climate — who knows?

One thing that cannot be overlooked is the ownership aspect. MLS clubs, as well as those big international clubs, with financial “sugar daddies” have avenues to work through big losses for multiple seasons, if the club benefactor can afford the write-offs in the hopes of a return on investment at some point much further down the road.

This will certainly make it much more difficult for some clubs to compete, driving some clubs to constantly be lower table teams versus teams that have much deeper pockets and create a self-fulfilling maelstrom of players wanting to join the club.

Would the sport as whole benefit from a removal of some of these restrictions, or rewriting them? Outside of simply shifting to a market free for all, are there any options globally, or within MLS to allow for more competition? Does the single entity structure of MLS hinder a team’s ability to grow and compete in the name of financial stability? Is MLS so focused on maintaining and growing its investments rapidly, and not smartly, that it is making decisions that are detrimental to the sport itself (a constantly changing playoff structure, giving home field advantage throughout the playoffs, and a lack of importance of the Supporters’ Shield)?

If you could change something about the current structure of the league, what would you change? Would MLS survive in the U.S. if it turned into a league dominated by one or two clubs backed by multi-billionaires?

Investment can bring you trophies, but at what cost? How many fans could handle that level of roller coaster? How many people truly understand the “ride or die” mentality of sports? There are, of course, many examples of fans within the U.S. who can do this, but it is not in soccer; however, the tide might be shifting slowly. I can say I am City through and through. I have watched and been with clubs through relegation and promotion, and I do not wish that on anyone. I would hope that a league is not only financially stable, but also competitive from opening kickoff to final whistle. MLS might be there soon, or...