An nyiforlife.com EDITORIAL: How Professional Sports Leagues Can Learn from MLS

It's funny to me to read about how other leagues are interested in the MLS model now that the recession has hit. It wasn't that long ago that the media was mocking them for how they do business (here I am thinking of PTI) and now MLS is the only league growing when others are hurting.

The main thrust (if you can call just shouting a thrust) of the argument on PTI was that all of the teams under one umbrella of management negates the competitive nature of team vs. team in the marketplace for players and results. Noted soccer expert Tony Kornheiser even called the league a joke to operate in this manner; and he is on the record so very, very many times as being a soccer detractor. And we all know that he does not think before he speaks.

Michael Wilbon is not without blame here, even though he sort of endorsed DC United signing Freddy Adu to a contract even though Adu wasn't yet able to drive himself to the games or practice.

Now comes word that the Arena Football League has ratified a new business model with it's players' union and that the league expects to be fully functional for the 2010 season.

And guess what? The new business model is described as a whole heck of a lot like the MLS model.

For those who aren't familiar, the MLS model is essentially that the leaders meet and decide what it is going to cost to run a team before each season. A salary cap is decided and given to the MLSPA to ratify. Each of the teams pay into a pool and the league manages that money. Traditional ownership does not exist in the league; instead the teams own shares in the league to run and team and are called operators. Each operator runs a business with a specific team in a specific market like a traditional owner would. If one of the operators wishes to divest from the league, the opportunity to be the operator of that team would be sold to another bidder by the league and the outgoing operator would be compensated with the proceeds of the sale equal to their "stock" in the league.

Okay, so I have over-simplified, but that is pretty much how it goes. The salary cap works in a similar manner to the NBA salary cap in that there are roster exceptions and exemptions for certain players.

Say a player is signed to a MLS contract worth 300K but the salary limit per player is 100K. Well, that means that the 200K that is over the cap becomes the responsibility of the team operator who wants to add this player to his squad. Each team gets a limited amount of these Exceptional Player exceptions so that one crazy renegade operator doesn't tilt the apple cart too much.

(David Beckham is the big exception here. The league reportedly paid a major part of his salary from a general fund and he had all sorts of licensing deals through the league that inflated his salary to much higher than the "average" MLS superstar.)

The AFL was humming along similarly for a long while until the new money infiltrated the league in the early part of the decade. Once the players formed a union, all salaries had to be made public and therefore, all salaries went up as players and agents could compare one player to another statistically and salary-wise. Free agency and the promise of big-time NBC money that never materialized also drove up salaries.

(That's why it was a lazy argument back in the day when the media liked saying that the AFL on NBC was out-drawing the NHL TV-wise because anyone with half a brain could look at the numbers for both leagues and figure out that the AFL was the new kid in town and that the ratings would slide whereas the NHL was an established entity with over 90 years of credibility behind it. You're noticing the new car smell is off NASCAR now, aren't you?)

Of course, there were other issues that lead to the rapid decent of the AFL. First off, they seemed to go out of their way to upset the hardcores by allowing unlimited substitutions on both sides of the ball. One of the most intriguing aspects of the traditional Arena game was that many of the players on the field were Ironmen who had to play both offense and defense. Linebackers became running backs and receivers became defenders, etc. John Elway, part owner of the Colorado franchise, pushed for this change and once it passed, it took away a lot of what made Arena Football "special" and different in the eyes of their most ardent fans.

Crazy expansion would be another issue; as the league went to different cities where the style of play was not understood by the average person who would attend the game. Many of the newbies expected outdoor football in a pinball machine and the nuances of playing winning arena football is much different indoors than the strategy is outdoors.

As an outsider, it seems to me that you should be able to make money with an AFL team. You market it as an alternative (and go back to the summer schedule when rinks are empty) and not as a little version of what you see outdoors in the fall and winter. Of course, everything seems easy when it isn't your money.

Marketing MLS is a bit of a different road because you have to get credibility with the ex-pats in America who follow their leagues from back home. You need to build up your game as real sport and not just a grown up version of the game every little kid plays in the suburbs...which is the unfortunate way many in this country see the world's game.

So, this MLS business model...could it work for the NHL? Probably not.

If the league were in true peril, then perhaps it could. But what we have seen is that the NHL and the NBA are funded by some very serious dudes with some very serious coin. In the AFL, and to a lesser extent, MLS, you're dealing with owners who don't have the capital that the ownership in other leagues has. And what makes that dangerous is that when you get eager and competitive owners with a little bit of money who want to roll the dice with the big boys, you'll find a much slimmer margin of error. In a business where losses simply have to be expected and absorbed, those losses are compounded by the fact that the teams often are paying rent on the arena.

MLS was smart from the beginning and have been smart under the leadership of commissioner Don Garber to stick to the model and develop ancillary income around the game and the league. They've resisted the urge to grow too fast like the AFL did with the false promise of NBC money and they've had to reorganize into (or, back into) a more prudent model.

Anyway, just an editorial on a slow week for the Islanders. We'll be running a series of these over the summer involving all sorts of topics so if you have an idea or would like to write for the site, contact me at the address above.