Making a case for and against Promotion/Relegation in US soccer

By Srinivas Potluri and Greg Gordon

On 2018–05–11

If nothing else, the recently concluded USSF Presidential elections and the start to the MLS season are demonstrating the widespread appetite for change that exists within America’s domestic game. And it also underlines the gulf between those within US soccer that are committed to reform and those that seek to preserve their slice of what is a cash cow status quo.

And that means that the question of introducing promotion/relegation to MLS, and everything that comes with it, is sure to become one of the mostly hotly contested issues of Carlos Cordeiro’s tenure as the newly elected USSF President.

The football world at large says that there are strong football reasons to create the level of competition — and jeopardy — that is the norm within every other elite league in world soccer.

However, the act of creating a dynamic pipeline of promotion and relegation would also cut right to the heart of MLS’ commercial blueprint. And it is a blueprint that is based on stable, uniform franchises with a nominal equality of resources, facilities and personnel.
The role of Soccer United Marketing (SUM), MLS’ marketing arm is both central to the piece and central to the systemic problems that prevail within America’s cash first, soccer second domestic game.

U.S. Soccer, the game’s non-profit umbrella organization that oversees the factionalized reality of the round ball game within The United States, has a lucrative deal that runs until 2022 with Soccer United Marketing. Indeed, SUM is in itself a for-profit company owned by Major League Soccer’s owners.

The relationship between U.S. Soccer, SUM and MLS is clearly ‘cozy’ and it suggests multiple conflicts of interest. But there’s also no denying that SUM have legitimate claims to make for the effectiveness of their contribution. Having generated the $150 million surplus that currently resides within the coffers of the USSF, they can lay claim to a number that is hard to argue with as both a bottom line and a number that affords a level of comfort that is the envy of most, if not all, other international football associations.

However, perhaps this particular cash bonanza is a product of luck as much as judgement.

SUM have clearly benefited from being very much ‘right place, right time’. They acquired the TV rights to broadcast the World Cup 2002, bringing Disney on board and telecasting the games on ESPN. As the USMNT overachieved in the tournament in Japan and South Korea, SUM have surfed the wave of an unprecedented surge in interest for the 16 years thereafter.

A surge in interest for soccer in The USA after the 2002 World Cup made the MLS Cup Final attendance that year the highest ever recorded with a crowd of 61,316. LA Galaxy won the MLS Cup 2002 in the game played at Gillette Stadium, Foxborough, MA. © LA Galaxy

In pursuing an opportunity to both market US Soccer and drive MLS forward, SUM succeeded IMG as a commercial partner of the USSF. They also have a deal with the Mexican Football Federation to broadcast their national team’s games in The USA while also acquiring marketing rights to the CONCACAF and CONMEBOL competitions.

The deal that The USSF struck with SUM in 2006 confirms both a commitment to strengthen MLS as America’s prime league domestically and also to oversee the commercial growth of the game in the country generally.

MLS charges money for every new investor coming into MLS and their investment gets them the franchise for a club that plays in the league. Every investor is a partner within MLS rather than a competitor — as they would be in any other league where promotion and relegation exist. MLS owns these clubs and it earns all the money from the sponsorship deals, ticket sales, rights and merchandise. They then redistribute relevant cash sums to each member club.

It is to be observed that when these new investors are willing to take a stake in MLS they are, by extension, making a de facto investment in SUM because the fortunes of all parties are mutually intertwined.

According to Bloomberg in June 2017, Providence Equity Partners sold its share in SUM to MLS making three times what it had originally invested for a 25% stake in 2012. That 25% was $150 million in 2012. By considering these numbers, we can estimate that valuation of SUM was around $1.8 billion during this transaction. Providence sells share of soccer marketing business back to MLS

And here’s the rub. This structure of MLS and their marketing arm SUM makes promotion and relegation a major and practical deterrent for existing and future investors looking for an upward curve graph and predictable, guaranteed annual returns.

You’d have to consider that the league ownership model of clubs in MLS looks like an unsolvable puzzle when set against the ideal of implementing football-first solutions.

So, promotion and relegation, inflationary European style player recruitment and wages models and a form of meritocratic, as opposed to fee for service/pay to play youth development looks a lot like turkeys voting for Christmas. It would be a spoke in the wheels of soccer’s great gravy train.

But, and as soccer’s would be reformers would have it, the status quo is unsustainable. This is because, they say, soccer is broken as a competitive ‘football’ model relative to the norm everywhere else of significance.

As per US sports generally, America has a system where athletes are developed largely from schools. There are other pathways to playing professional soccer based around academies and large-scale trials (called combines) that are embedded within a lucrative, high wallet-share, pay to play system.

Pay to play/fee for service has already been discussed here: John Kowalski: US Soccer is lagging behind the marketing machine of MLS. But let’s, first tackle the college draft system.

Only clubs in MLS are eligible to pick players listed in the college draft system. Clubs that finish in last place get to pick the best players just out of college. These college players who get picked up by MLS clubs, must reach an agreement and then join their new club. The ones who don’t get picked are free to sign with anyone. For example, The USL (Division II) will add these undrafted players to bulk up their squads.

Now the problems start for drafted players who get picked by MLS clubs as soon as they get to their new training ground. There is very little chance in real terms that these already developmentally ‘backward’ drafted players will ever accrue enough minutes to ensure that their development catches up. There are a notable few, like Jack Harrison now at Middlesborough on loan from Manchester City, or Jordan Morris of Seattle Sounders, who make that seamless transition from college to the elite pro ranks. But for each rare success story there are significantly more young hopefuls that are cut to youth squads or are farmed out to USL clubs on loan. And most never see the bright lights of MLS again.

In 2016, 75 players were recruited by MLS clubs within the draft. Only 10 of those players have since seen any kind of minutes in MLS and 54 of them have been shipped off to The USL. This is currently how a clear majority of players are recruited into the lower leagues in The USA — on the back of a phoney war that needs to be resolved.

Why not instead, let USL rather than MLS clubs pick from the drafts and let the players develop, with game time at the clubs they’ve signed for?

Then, where appropriate, the MLS clubs could swoop in and buy those one or two star players of each intake deemed genuinely good enough for MLS.

This transfer cash redistribution plan would inject important funds into selling clubs. That’s cash which could be used to install or upgrade existing facilities and infrastructure or pay for subsidized youth development for talent players without the backing or financial wherewithal to fund their soccer dream.

Then, there is also a concept of Talent ID (or player discovery as it’s known in The USA).

In 2016, Philadelphia Union ‘discovered’ their Swede by the name of Zlatan Ibrahimovic. What this means is that if another American club goes on to sign Zlatan in the immediate future, they must pay a fee to Philadelphia as a thank you. Just to be clear, that’s a fee for discovering a very well-known world class athlete with nearly 20 years pre-existing experience in the game at the likes of Ajax, Barcelona, Inter and AC Milan, PSG and Man United.

Zlatan Ibrahimovic; a recent marquees signing for MLS and LA Galaxy. © LA Galaxy

When Philadelphia were busy ‘discovering’ Zlatan, the German club Borussia Dortmund, came and ‘discovered’ USMNT star Christian Pulisic. The potential for compensation and the negatives associated with a player development model based on ability to pay rather than ability as a player, makes the domestic talent pool overly shallow for American clubs. Effective player recruitment is still a huge problem for MLS as it is for every soccer league in The USA.

Anyone looking at football rather than commercial outcomes would have to consider that the business of soccer is killing the true business of soccer — entertaining and developing the game competitively.

And so, anyone with the game’s best interests at heart, who’d want to see MLS really be one the best of top 10 soccer leagues in the world, would almost certainly hope to see a pyramid structure with promotion and relegation implemented.

But for the desires of commerce and competition to be reconciled, something has to give and a more realistic, sustainable roadmap must be found.

What happens next must be enacted with the utmost care, because, looking ahead, it is clear that the future of the game of soccer depends upon sensitively managed reform.