One of the most common criticisms in regards to soccer in America is the lack of a promotion and relegation system that is quite common across much of Europe, South America, and most other parts of the world. Despite the outcry from those who advocate embracing such a change here as well, this is something that will never occur for painfully obvious reasons.
While I can confidently state that promotion and relegation will never occur in the United States, I am referring to a true system where teams are transferred between multiple divisions including the highest division. This means Major League Soccer, the top-flight league in the U.S. and Canada, must be included. While there may be lower level leagues that implement promotion and relegation independently in their own closed system, that’s an arbitrary point as they can never be promoted to the highest tier.
MLS Owners Have No Upside in Risking Their Investment
MLS team valuations have skyrocketed over the years. According to Forbes, MLS clubs rose in value 30% from 2018 to 2019 with an average valuation of $313 million. Joe Mansueto, billionaire founder of the Morningstar investment firm, bought 49% of the Chicago Fire in July 2018 at a valuation of $240 million. Just 14 months later, when he purchased the remaining 51% stake, the valuation had jumped up to $400 million.
LAFC was recently valued at more than $700 million, the highest for a Major League Soccer team. This is a team that recently joined MLS in 2018 as part of the league’s rapid expansion. The average 2019 valuation for MLS teams would make them higher than all but the biggest clubs in Europe.
Expansion fees, the cost to add a new team, have greatly increased as well. In December 2019, hedge fund billionaire and owner of the NFL’s Carolina Panthers David Tepper agreed to pay a record $325 million expansion fee for the rights to bring a new team to Charlotte. Fifteen years ago, Toronto FC came into the league for a fee of just $10 million.
MLS owners currently have hundreds of millions dollars at stake in their respective teams. In addition, owners view their clubs as potential high-growth investments. Whereas most North American professional leagues are at the top of their sport, MLS is still growing and expanding as a relatively new league. Coupled with the fact that it could become a top league in the future, the potential upside is huge.
Additionally, this is all without the benefit of a large TV contract. MLS has historically struggled with low TV ratings. Yet, considering that media rights for live sports are booming all over the world, MLS owners are hoping they will eventually land a massive TV deal. In theory, MLS teams could eventually hit billion-dollar valuations.
With promotion and relegation in place, all of that could come tumbling down. Any MLS team upon being relegated to a lower division would immediately face a precipitous drop in their overall valuation. There is not a single team owner who would willingly take such a hazard risk to their investment.
You could argue that upon being promoted again, the team valuation would rise accordingly. There’s obviously no guarantee that would happen, and even if it did, the team’s value would still be negatively affected in comparison to if they had never been relegated. Regardless, the volatility of their investment based on yearly performance would never be agreeable to team owners.
All For One and One For All
It is a key factor that Major League Soccer operates as a single entity instead of as independently owned clubs. Owners technically buy a stake in the league and are then given rights to individually operate a particular club. Therefore, team owners are actually partners in the league together rather than competitors.
Since the clubs are owned by MLS, the revenue belongs to the league and not the individual clubs. Teams do get a percentage of their generated revenue but the lion’s share goes into the combined league account. From there, the money is distributed out to the clubs to cover their expenses including paying for most of the player salaries (minus the amount of Designated Player Salaries above the salary cap). League profits are redistributed to the owners who have the option of reinvesting into their respective clubs.
MLS is the only league in the United States that functions, along with the afforded legal protection, as a single-entity structure. MLS owners are currently protected as a closed league with fixed membership and one of the few leagues in the world that does not use promotion and relegation.
Therefore, MLS owners are essentially partners who own stock in a private company. As such, they win together and lose together when it comes to the bottom line. Since MLS clubs share revenue, they are incentivized to control costs and to protect their investments as part of a single-entity ownership system.
Keeping this in mind, why would they do anything to disrupt their current protected state? Do you remember those Choose Your Own Adventure books you read as a kid? The reader would assume the role of the protagonist in the story and make the choices that would determine the plot’s outcome. In the case of MLS owners, they have total and full control of choosing their own destiny. Who in their right mind would decide to implement promotion and relegation in their league over the current system with a built-in protection for their lucrative investments?
Professional Sports in the U.S. are Closed Systems
There is no context for promotion and relegation in other major North American sports. As mentioned earlier, most of these leagues are considered the top level in their respective sports. And yet, none of them have promotion and relegation. The NBA, NFL, MLB, and NHL are all at the pinnacle of their sport and are all closed leagues with fixed memberships.
Beyond sharing the same closed system pedigree as the other leagues, MLS has the added benefit and protection of being a single-entity structure. For them to embrace promotion and relegation, they would be going against the grain of the proven formula that has allowed their more mature and successful counterparts to flourish. The adage of, “If it ain’t broke, don’t fix it” seems to be the widely accepted ideology amongst the billionaire team owners that make up the North American landscape.
This isn’t to say that there isn’t merit for promotion and relegation around the world in most other soccer leagues and in other sports. In fact, for other countries, I would say that an open system has worked out industriously, if not spectacularly, for their purpose. But from an overall perspective, I stand by the argument that while it may be good in theory, the drawbacks outweigh the positives in actual practice.
The United States is a country with a population of over 330 million people across a vast mass of land. It has unique requirements and circumstances that are not comparable with the smaller countries such as those in Europe and South America. Those who make the argument for promotion and relegation in the U.S. are obtusely making comparisons without looking at the full picture. Even if for some miraculous reason promotion and relegation could somehow work in the United States, those owners currently residing at the highest level of the sport would never allow their investment to be compromised by such a risky venture.
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Simple Reason Why Promotion and Relegation Will Never Happen in the US.
Owners currently residing at the highest level of the sport would never allow their investment to be compromised by such a risky venture.
2 sentence article.
I can’t say I disagree with you but still have to add some context to that overarching point. Appreciate the feedback.
Thanks for this, Lee. I have a similar mentality when it comes to judging American sports and how it’s played and organized abroad. I’ll talk about pro-reg a bit differently, if you don’t mind.
I have been following the the MLS for quite some time, maybe 15 years, and slowly observed the discussion of pro-reg. I can’t say I’m absolutely for it or can against it. Honestly, I don’t care either way if it does or doesn’t happen. I won’t damn the league if it doesn’t and I won’t let out a an exasperated sigh of relief if it does. The US has four other amazing sports leagues where MLS is just one of many. (MLR – Major League Rugby – has joined the professional sporting landscape and I dearly hope it succeeds.)
When proponents for pro-reg bring in the developmental aspect of players I quickly turn to the academies belonging to each individual club. I then turn to European clubs who are seen as powerhouses: Barcelona, Real Madrid. I then turn to clubs who have a history of churning out national team players for England: Southampton. ManU. West Ham. So far, MLS academies have been improving; the very best of those at US academies go abroad to finish their training.
When proponents say that a closed system creates lazy, unmotivated players, I say there’s no proof of that as I quietly say to myself that they’re slightly dumb. (Lazy compared to who?) To get to the MLS you need to be good, though you may not be the best of the best, hence why you’re there but nonetheless you’re good enough to play in the league. Players who can’t make it abroad want in on MLS. Players who play in DII in the form of USL want to be in MLS one day.
I also point to the fact that to have a great league no matter the sport pro-reg isn’t a necessary feature. As you stated, the NBA, MLB and NHL are closed systems and are considered the best leagues in their respective sport. In foreign hockey leagues, some are pro-reg but that doesn’t mean that they produce the best players or that the league itself is better than the NHL. Basically, pro-reg has little to no bearing on whether or not the players in the system will be good or that the league will be of quality and attractive to potential owners.
If the MLS wants to field a competitive USMNT every four years then it needs to work on its academies. Plain and simple. Sure, pay-to-play needs to be revamped/reformed, but, honestly, you don’t need an excessively large population to find talented soccer players — you need scouting and development (see: Germany’s efforts in rebooting their developmental academies after their 2000 Euro performance).
Let’s look at the NBA. If we leave out one-and-dones, the NCAA DI and AAU basketball are the primary methods to develop the best basketball players. This works for men’s and women’s basketball where Team USA dominates. Whatever Europe is dong it’s not working to the degree they want. Now, interesting enough, the NCAA route for women’s soccer produces a strong USWMNT and strong players, but the NCAA pathway for men has proven to be a poor pathway to produce a strong USMNT and players in general. So, of course, a different outlook and pathway must be used: developmental academies via professional clubs.
Pro-reg is a feature I don’t really care much for once it’s all said and done. If it happens then it happens. If anything, it just adds drama, which is all well and good, but that’s the extent of its value to me. It’s not something that I believe will greatly help the quality of MLS or the national team; I say this because when we look abroad in countries whose pastime is mainly soccer/football, it’s their academies that drive their national team and not pro-reg.
One great reason for me to continue paying American Footy no mind at all.
So you don’t watch any other American sports then? NBA, NFL, MLB or NHL..?
I don’t. Admittedly I’m a European that moved to US many years ago. But not having promotion/relegation is painful to me. My greatest criticisms would be that there are too few teams and they are not local enough, which makes it hard to form any alliance to them. This goes for all the sports. To me sports fandom is local, but it has never been about that in US pro sports.
Many American soccer fans don’t watch MLS either. I think that has little to do with Pro-Reg, but rather a desire to see the best in the world play. That would be EPL. US soccer (MLS) may never find itself in a position amongst world leagues that it aspires to. My $.02 would be that it has little to do with Pro-Reg and more to do with the general lack of domestic support (compared to other US pro sports) it receives here. Trust me, most Americans who don’t really pay a lot of attention to soccer have little knowledge of Pro-Reg and couldn’t care less about it. Americans who do watch soccer and focus on EPL and other leagues may hem and haw about Pro-Reg but if US soccer took on Pro-Reg you’d see few of them start to pay more attention. It’s a simple way for naysayers to look even further down their noses at MLS (not necessarily saying that’s you).
You make a good point that a distinction should be made between American soccer fans and Americans in general. I tend to agree that a major reason even many American fans of soccer don’t support MLS is due to the overall quality rather than a lack of promotion and relegation. I think the financial/salary system that helped MLS become stable has been outgrown and is now clearly outdated – specifically the Designated Player Rule and the salary cap structure.
I wrote an article recently on that topic here: https://urbanpitch.com/lafcs-carlos-vela-is-a-prime-example-of-why-the-designated-player-rule-is-broken/
Cheers.
The reason I am for promotion/relegation system is that it doesn’t allow a club/team to tank their season and set themselves better up for the next season. Promotion relegation also minimizes the amount of games “don’t matter at the end of season” because team in the current set up is out of the playoff contention. Promotion/relegation brings a second source of fight who are out of the running for the season silverware, the threat of relegation would increase investment into US Soccer. Pro/rel will also allow smaller more local clubs gain quality and get the chance to move up the soccer pyramid in the US.
The problem with a closed league is not at the top of the tables – there are reasonable rewards if you win – it’s at the bottom of the table. Tanking is just one issue.
What’s to stop an MLS team owner from not investing? Just as they have no incentive to risk their investment by backing promotion-relegation, they also have no reason to invest at all if they’d rather pocket the league profit kickback and just wait to see the value of their franchise rise simply because they have one. This is more harmful to US Soccer and to MLS and to a region than tanking. In fact I’d argue that tanking isn’t even a thing for owners like these. They don’t really care about their draft picks.
Wouldn’t we rather see a motivated USL team take the place of an unmotivated and poorly managed MLS team for a given region? We should find a way to make displacement a real threat to underperforming franchises. Having motivated teams and deep regional rivalries be better for both MLS and US Soccer.
The regional angle may be the way out of this. Why not make US soccer like Eurovision? Fans would love it, like they love the World Cup. Abolish the MLS financial structure (not interesting sport to follow for all the points raised in the comments, and when it doesn’t get a TV contract,it will be irrelevant and not a good investment) and replace it with a regional system. It plays to the strength and diversity of the US.
It’s been 20 years since MLS started, it opted for benchmarking other sports leagues inside the US: NBA, NHL, NFL, MLB, which are closed leagues. I think it was a failure, because soccer is a very different sport, MLS should had benchmarked soccer from the best leagues of the world. The best leagues in Europe and América have relegation and promotion: 3. Brasil even have 5. Because of that MLS progress has been slow and never will be in the top leagues of the world.
Unfortunately, lack of pro/rel is hurting soccer development in this country. Closed system says it all. Too expensive to play. Too expensive to drive to big city for team most have little connection to. Also, where´s the incentive to win? You could stink it up in MLS and still make loads of money as your valuation continues to rise with the league’s. I would totally support my local team if there were a chance they could move up. No room for romantics in MLS, just rich people making rich people richer and excluding everyone else. As you say, why would investors want to ruin that model? This is where US soccer needs to come in and take the development of soccer in this country seriously from the grassroots up, not by throwing token camps and projects to low income areas and calling it connecting with the community. Unfortunately, this is short term model. Soccer in the US could explode organically if US loosened the reigns and opened it up. Closed system. Exclusive. Boring, whatever. I’d rather watch the pro/rel drama in the 3. Bundesliga, even without the Messi and Beckham type stars.
Do you support any other US sports?
The lack of promotion and relegation leads to stagnation and is a major factor in the major US sports failing to make serious expansion into international markets. It also means that there is no scope for smaller regional teams to punch above their weight and make a national impact. In all honesty, the American attitude to professional sports is so unAmerican it’s actually funny
The way I see it is that as soccer grows throughout the US over the next 20 years in both MLS and USL, there will be some kind of merger and the all of the USL teams that have sprung up around the country will all become part of the MLS structure. That structure will be a 5 tier pyramid with 20 teams in the top tier and either 20 or up to 24 teams in the other tiers much like the English system. All teams would be part of the single entity of MLS and all revenue would be shared between all levels. The only way teams could be part of these structures is by the smaller teams from USL is if they have a stadium that seats a minimum of 5000 people with the ability to expand up to 15000 people like the stadiums for Sac Republic or San Antonio FC. The top tier would be called the MLS Premier League. Below these leagues would be MLS Championship and then below that would be USL League One, League Two, and League Three. It is possible that if their are more teams that would be competing at the lowest tier that there could be 2, 3, or 4 divisions of 20 teams from these League Three. This would provide the single entity of MLS the ability to expand its reach to all parts of the USA and Canada and provide all professional teams the local support that other leagues have for their local clubs as well as keep the valuation of each team that is part of the structure from taking a catastrophic loss of valuation. It would also give the smaller clubs and their academies the opportunity to really develop players from a much more focused way.
Imagine a team like Union Omaha from Nebraska not just having the US Open cup as the place to fight it out against the top clubs in the US like it did a couple years ago. I would see the need for each of the merging teams having to pay franchise fees to join the lower division and then pay a comparable fee to move up if they win promotion. That fee would go to the relegated team as it would offset some of the loss of revenue that would happen at the point of being relegated. If a club couldn’t afford to pay the fee to be promoted, they would give up their right to move up and receive a fee from the team that was supposed to be relegated because they would retain their place. Eventually all clubs and their ownership would fight to stay up to keep revenue and also their players. Ultimately I see this being potentially possible in 20 plus years from now when TV and Streaming deals make it all viable for a merger of leagues.
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