Big Moves Afoot in Major League Soccer?
In late November, Deloitte’s sports unit released a report analyzing the potential effects of instituting relegation in Major League Soccer. If relegation were implemented in the MLS, it would be an unprecedented event in American sports and challenge not only the status of team owners’ investments, but also the integrity of other professional American leagues. But in breaking with the prevailing order in American professional sports, it could also lend new vibrancy to the league.
For those not in the know, relegation means that each season the worst performing teams in the top league are sent down a notch, to Division II, and the best teams of that level are moved up to replace them. Alternatively, the worst Division I teams face the best Division II teams in a round robin to decide who gets the to be in the top division. This is the way soccer leagues, and many other sports leagues, work outside of the United States. The U.S. is unusual in that its professional sports are generally competed within closed systems such as the NBA, NFL, NHL and, yes, MLS. Minor league baseball teams never get moved up to the majors, and the 76ers don’t have to worry about being demoted out of the NBA, no matter how bad they are. In Major League Soccer, as things currently stand, there’s no risk that any team will be pushed out of the league and replaced by a team from the North American Soccer League (NASL).
But now some in the industry are asking if perhaps they should face that risk. The Deloitte report was sponsored by Silva International Investments. The fund is headed by Ricardo Silva, who owns Miami FC, an NASL team, and has spent his career buying and selling television rights for soccer teams around the world. The report argues that fans’ interest in the MLS and NASL and attendance at games would be boosted by the increased stakes of each game, broadcasters would be encouraged to invest more in televising the sport and owners would be pushed to pour more money into their teams.
Ultimately, the report says, adding relegation would result in “alignment with other major soccer nations” and “positions soccer in the U.S. as being a global player.” The increased competition, the report argues, would improve the overall level of play in the U.S. The report also directly ties relegation to improving America’s standings in the overall FIFA ranking, implying that it would help future World Cup performances. In a survey of 1,058 U.S. soccer fans, Deloitte found that around 90 percent supported implementing relegation in U.S. soccer.
But not everyone is so positive. “I think we have been very, very clear in our views on our structure, and the fact is that our structure has worked very well in helping to develop our league and the sport in the U.S. and in Canada,” MLS commissioner Don Garber told ESPN in response to the report. “We are playing the world’s game, but we are playing it here in North American, [which] has a very, very competitive structure that has proven to work very well for the other major leagues that are, in many ways, the model for professional sports throughout the world.”
“It doesn’t feel like the biggest global sport that happens to also have a league in America. It feels like an American sport that happens to be soccer.”
Conversely, Dan Jones, the report’s author and head of Deloitte’s sports business group, argues that the league is almost parochial in its current form. “This feels and looks—with its conference system and closed league and lots of playoffs—like an American sport,” says Jones. “It doesn’t feel like the biggest global sport that happens to also have a league in America. It feels like an American sport that happens to be soccer.”
The MLS obviously has a vested interest in protecting its owners, who have spent millions in franchise fees and developing venues and would likely not appreciate the risk of having their teams relegated. And, of course, NASL owners like Silva would see the opportunity to have their teams move up as an financial plus, leading MLS deputy commissioner Mark Abbott to argue that the Deloitte report raised “serious credibility questions.” Deloitte maintains that its findings are pure and that the league could benefit in the long term from introducing relegation. Jones even argues that relegation would be better for owners, as the increased fan engagement with the sport would boost the value of their teams.
“My experience is the sort of people who buy sports teams like being involved in sports for the competition aspect of it. They generally back themselves to win,” Jones says. “They’re not the sort of people who go into things thinking, My team could be one of the worst 10 or 15 percent of teams. They go in thinking, My team is going to be one of the best 10 or 15 percent of teams.” In other words, owners temperamentally may underestimate the likelihood of their teams being relegated.
All of this isn’t taking place in a vacuum. The MLS would not be the first league in recent years to deal with implementing or reforming a relegation system, if it in fact decided to go in that direction. The Swedish Hockey League added two teams and reformed its promotion and relegation system in 2014. Commissioner Jörgen Lindgren dealt with many of the same issues that the MLS would face if it instituted relegation. While the Swedish league has had relegation for many years, it frequently ran into a problem where the promoted teams would not actually be prepared to play competitively in the top division, and the demoted teams would be forced to cut costs and downsize their organizations. To solve this, the league instituted minimum financial and organization requirements and required that any promoted team either have a sufficient arena already or have a plan to expand their existing arena. If they fail to meet these criteria, they are not eligible to move up. This not only ensures that promoted teams are qualified to play in the top division, but also helps protect the large investments made in top division teams.
But teams that are relegated—the biggest fear for MLS owners, if the system were introduced—“of course won’t make as much money as they do in the MLS,” Lindgren says. “We can see the difference from our teams being relegated. We have commercial rights and media rights that are divided out in parts to the owners. It’s a huge difference in revenues between the first division and the second division.” To compensate for these lost revenues, the league gives relegated teams a cash injection to prevent them from downsizing their organizations. “Yes it’s difficult because you don’t earn as much as you would in the top division,” Lindgren says. “But on the other hand, if you’re playing so poorly, should you actually be able to stay?”