MLS Soccernomics Part 2: Static in the Cap

Yesterday’s discussion of soccernomics was on the overpriced community known as the American footballer. Today’s post is about the salary cap and the growth model for MLS.

Kuper and Szymanski (authors of Soccernomics) prove that, at least in the European leagues, the higher a team’s payroll the more successful the team. I would argue this doesn’t apply in MLS. Our league is a very different animal. MLS, like most American sports, has a salary cap.

There are two types of salary cap, the hard cap and the soft cap. The NFL has a hard cap. The amount of money spent per team is firm, and all teams are kept on an equal financial level. Teams must rely on solid coaching and smart GM’ing, not money, to find an edge and win. Major League Baseball and the NBA have soft caps via luxury taxes. In short, if a team overspends the cap, they must pay a tax, a percentage of the amount overspent, to the league. Yes this incentivizes staying under the cap, but money still makes a difference. It’s why the Lakers and Yankees, as long as they are always willing to overspend, stay relevant and successful, while the A’s and Royals have to hustle hard.

The MLS salary cap for the 2014 season is $3.1 million. MLS has an incredibly low cap. Imagine having only $3.1 million to split between an entire baseball or football team. However it gets more complicated, as MLS has neither a soft nor hard cap. Major League Soccer is a very different animal, not only from other soccer leagues, but also from other American sports. The $3.1 million is a hard ceiling, like the NFL, but certain types of players do not count against it. Players signed to a Designated Player, Home Grown Player or Generation Adidas contract do not count against the cap. Further rules limit how many players can have such contracts. I’ve already explained HGPs and GAs in a previous post and I assume most of you know about the three DP limit (if not, a DP is a player who’s salary can be anything the team is willing to pay, i.e. Clint Dempsey makes $5 million a year, and each team is allowed only three (unless they are LA (or Toronto))).

To make a long story short, MLS is complicated. But money spent still doesn’t equal results. Yes, the Galaxy won two years straight with top talent and a hefty payroll, but look at SKC’s payroll. Below is the total team payroll from 2013 (so TFC hasn’t jumped up into the top tier yet).

Screen Shot 2014-03-19 at 11.46.44 PM

NYRB, SSFC and LAG did well last year. But so did SKC, Houston, RSL, Portland and Colorado. I am not an economist and cannot begin to analyze why this is exactly. For example, the Sounders had underpaid assets last year in Ozzie, EJ and Neagle, but that didn’t combine with salaried stars like Oba and Dempsey into a smashing success.

All the aforementioned tweaks to the cap have resulted in unexpected consequences that is putting static in the system. The team that best figures how to take advantage of these tweaks and static, inefficiencies, wins.

A winning team must be built on inefficiencies. You have to break new wood. The Moneyball Oakland A’s are the most famous example of exploiting baseball’s market inefficiencies. In the NFL, teams like Green Bay and Pittsburgh traditionally eschew free agency, and roster build through the draft. This has paid dividends for them. The early 2000s Eagles were built to win every year (just not championships) with progressive and inventive deals signed by tricky Joe Banner. John Schneider is either very good or very lucky. The Seahawks won the Super Bowl with underpaid stars in Russell Wilson and Richard Sherman. We’ll see if the Hawks can sustain success in light of their recent salary purge; Red Bryant, Golden Tate, and Brandon Browner all sought paydays elsewhere.

One day I imagine MLS will greatly relax the salary cap. They’ll need to if Don Garber really wants to be an elite league. They’ll never abandon it completely. Enough data supports caps help teams and leagues in the long run (think NASL, Italy).

The best model for MLS growth is Major League Baseball. Both have tiered system of the majors and minors (not guaranteeing we’ll have promotion or relegation), a long summer season, and an international pool of players.

Currently MLB is the EPL. Japanese and Venezuelan star ballplayers want to get time in the Bigs, but will settle for the Nippon Professional Baseball or other such leagues. If MLS can get a soft cap like MLB, our league will be in business. Does this doom the Columbus Crew to the fate of the Kansas City Royals? Maybe. But not necessarily, consider at two recent MLS Cup winners.

Does SKC or RSL have some secret algorithm they use to roster build on the cheap? With the realities of the cap, an incentive exists in MLS to find a unique model for success. For example, the Sounders are doing a good job of finding good, young Western Hemisphere players. I think this is a great inefficiency to exploit. Players from Europe and select South American countries, Brazil and Argentina, are just brand names. You pay luxury prices for them.

How many Brazilians, Argentines, Germans or Spaniards are on the Sounders? Or in MLS? Not many (other than the Timbers who looove Argentines). Why are there so few manufacturing jobs in the States? Americans demand better pay and working conditions. Why are there so few Brazilian and Spanish footballers in MLS? These countries expect to play in European or South American leagues with the accompanying salaries and international cachet. Players from Chile, Martinique and Costa Rica, for example, don’t demand the same cachet. An MLS team can sign a rising star from those countries for far cheaper than a Brazilian would seek. It’s better to dig through the bargain bin, than blow your cap on overpriced commodities.

We know the league is ambitious. Don Garber wants MLS to be elite, and it’s possible with America’s wealth and influence.

We need an MLS Manifest Destiny or Monroe Doctrine. That is we need to set “our house” in order before we try to conquer across the pond. MLS needs to become the premier league in the Western Hemisphere.We have to surpass Liga MX and Brazil’s CBF. And yeah… that hasn’t happened yet. Xolos made The Galaxy look minor league, SKC was pooped on by Cruz Azul. At least San Jose kept it close (I am not, ever, pull for San Jose, but man they deserved to beta Toluca). I realize I am arguing for imperialism, and I am trying to be comfortable with that.

We want all the talented players from Patagonia to Barrow to want to play in MLS.

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