The “MLS is growing” Ponzi scheme

I laughed last week when the news of the European Super League first broke, Taylor Twellman tweeted Alexi Lalas, “Do you think the growth of the MLS influenced this?”

I laughed, because, so far ‘growth of the MLS’ is a Ponzi scheme and I’m pretty sure that Twellman and Lalas know this.

Thought, it’s not the first time I’ve seen someone on Twitter hype the ‘growth of the MLS.’

But, only two facts to support their view, neither of which indicate organic growth.

Fact #1: The number of MLS teams keeps growing.

This is true. There are no shortage of rich folks wanting to buy into the MLS, but that doesn’t indicate organic growth (like fan support), especially when you see quite a few of the franchises, prior to covid, having trouble filling seats.

Fact #2: The ‘value’ of MLS teams are growing because new owners are paying $200 – $300 million in franchise fees to the MLS, which is quite a bit more than just a few years ago.

This is where the Ponzi scheme comes in. First, without these new owners, many MLS teams would be in deeper financial trouble. It’s these franchise fees, rather than revenue from fans watching (tickets, TV ads) and merch, that is currently keeping the league solvent.

Just because there are some folks willing to take a risk that an MLS franchise will be organically valuable some day, doesn’t mean it is today.

It’s also good to know that the $200-$300 million buys them a share of a marketing company that stands to have a good chunk financial payout when the U.S. hosts the World Cup in 2026.

The question a good reporter would ask of new MLS owners is how much of their franchise fee is based on the value of the team and how much is based on that World Cup payout?

Someday, MLS might turn the corner and become profitable on fan support, but that day has not arrived, yet.

How’s your touch? Post game speech

I recently watched a typical game of soccer for high school age kids. The winning team was cheerful, the losing team was not.

But I thought both teams were losers and just don’t know it. Neither team had a good touch and they don’t know that, either.

The was a turnover fest on bad first touches, bad dribbles and bad passes and one team just had a lucky goal or two more than the other.

It made me think back to when I coached. In the post game I might’ve tried to grab onto 2-3 things we did well, didn’t do so well and the difference makers.

I now know those mattered little compared to touch.

With beginning and intermediate soccer teams, turnover ratios are high because of bad touch. It’s common to see turnover ratios of 90% or more.

Unless the turnover ratio is less than 20-30%, it should be the number one focus and the only topic that needs to be covered in the post game until that improves.

I wish I would have been a broken record on touch, to the point that the players could’ve recited it for me.

It would have been simple.

How well did we keep the ball on first touch, dribbling and passing?

I should have tied the good plays and mistakes back to touch. “We had that great passing sequence that led to a good goal, but with a better, more consistent touch, that sequence can happen 10x more every game, which should mean even more goals.”

“That defensive mistake was unfortunate. But, we lost the ball on first touch so much, and we had so many quick transitions to defense. That wears us out and it’s just a matter time before a defensive mistake happens. Just improving first touch can significantly reduce those chances for the other team.”

Why Metcalfe’s Law applies to soccer

In this post back in 2019, I wrote about how Metcalfe’s Law of computer networks can be applied to predict time of possession in youth matches.

There, I make the case that the offense of an 11v11 team is a network, with each player being a node of the network for which the ball to pass through.

To be an effective node, players need to be able to keep the ball with the team. To do that, they need to be able to trap, pass and dribble with consistency. It also helps know how to get open and communicate with your teammates and throw in some deception to keep the defense off balance.

The offensive effectiveness of a team is exponentially, rather than linearly, related to how many players are effective offensive nodes (i.e. low turnover).

That’s because for each player that are not it eliminates their passing options and weakens the quality of the remaining options on the field, because the other team can predict where the ball is going easier and can better cover those options.

Unhealthy team competition

If I had to do things over when I started coaching soccer, I would have spent more time on developing a sense of team and striking a balance between healthy and unhealthy competition within the team.

What’s unhealthy competition within the team?

When players are more concerned about where they rank on their own team than in beating the opponent.

I see this hurt the team in a few ways. It prevents working together as a team, supporting each other and learning from each other.

Some examples…

Prevent working together as a team: Players might avoid making a pass to another player that is especially big-headed or they feel is beneath them.

Not supporting each other: Players are reluctant to give teammates praise for making good plays. They explain away the good things as ‘luck’ and only tend to remember those players mistakes.

I’ve even seen those receiving praise reject praise from players they feel are beneath them. “I don’t need your praise!”

Learning from each other: Players simply don’t give each other credit for making progress or trying different because their own ego can’t acknowledge that someone did something they haven’t figure out yet.

What would I have done differently?

I would have reinforced a few things a lot more:

The primary competition is on the other side of the field and to beat them, we need to be together as a team.

You should want all the players on your team to be as good as possible. So, be open to seeing their strengths and weaknesses and helping each other get better. For example, giving praise when they do something good. Good pass. Good talk. Nice run. Good recovery. Good effort. Good thought. And so on.

Take the praise from anyone. Thank them and look for way to return it when they do something good. If you think you are too good to receive praise from someone, then go to another team.

If we are all praising each other for doing the right things, we will get more of the right things, and as a team, that’s what we want and need in order to beat the other side.

What is an MLS team worth?

Many folks have mistaken growth in number of teams and the amount of franchise fees paid for MLS teams as signs the MLS is doing well.

But, the jury is still out.

I think people are paying the high franchise fee lining up to pay for two reasons (or really, the first reason).

  1. Bundled with their MLS team comes a share of TV revenue from the 2026 World Cup. I’d say this is probably the bulk of why folks paid $200 – $300 million for a team. And, I think the MLS is selling those future World Cup cash flows because they need the cash to keep the lights on, like someone taking a second mortgage out on the home to invest in their band.
  2. A hope and prayer that somehow, someway MLS catches on and someday their team might be worth multiples of what they paid. I hope that works out for them.

So, the real value of an MLS team is close to zero.

From this Forbes article on when the the MLS Chicago Fire was bought in 2019:

“It is unclear why Mansueto paid such a premium in the latest transaction, and specific details of the transaction are unknown…”

Perhaps he paid that much expecting he’d get most of that back in 2026.

European Super League: Some Random Thoughts

I am surprised at how well existing European leagues, governments, commentators are articulating the benefits of the open pyramid system and maintaining sporting merit. I assumed that maybe they didn’t understand the benefits of an open competition, but it was an institutional artifact. I was wrong about that. There is real passion about open competition.

I would have loved to see that similar type of passion as folks in the U.S. appealed to FIFA to have an open pyramid in the U.S., but it was crickets from the rest of the world. I’ve always thought that FIFA, and other clubs in the world, were allowing the closed league approach as a experiment to see if parity (i.e. rigged) soccer would work.

It hasn’t come close to proving out yet, but the Super Clubs are anxious and are willing to the call the results from the NFL/MLB/NBA/NHL good enough to give it a shot.

Now those passionate supporters of open competition may pay for their silence. If FIFA tries to to stop the Super League, it’s possible that the Super League could point to FIFA’s hands-off approach with the USSF and MLS and the findings of CAS case decided about a year ago, brought by two lower tier soccer clubs in the U.S. against US Soccer to adhere to FIFA’s open pyramid rules, as precedents. That case found that FIFA has the power to allow exceptions to their own rules, if they so desire. So, now FIFA may find themselves in a pickle trying to explain their inconsistent approach with how they have allowed U.S. Soccer an exception to the open pyramid but wish to enforce it here. Here’s more on that case.

I wrote about that case in February of 2020. I wrote that soccer players around the world should be concerned about that decision, because that might open the door to such closes leagues, a key benefit of which is player salary constraints, to help make the sport more profitable on a cash flow basis to owners, not just on asset value.

I think FIFA’s inconsistent approach is easily explainable, but probably not something they want to say out loud: money.

They thought granting the exception in the U.S. wouldn’t cost much, since the pro soccer in the U.S. is still small dollars. So, I think even they were interested in giving the NFL-guys a shot to see if there was more money to be made in the NFL approach.

Whereas, allowing the exception with the European Super League could drain good amounts income from FIFA’s cash cow in Europe.

I wonder how the new Super League will get commercials in? They could be inserted into natural game breaks during injuries, VAR review, substitutions and post goals. I wonder if they will invent new ways. Perhaps a 30 second time our for a substitution? Planned water breaks?

I can see a scenario where the European Super League grows in popularity in the U.S., hurting the MLS in the process, while significantly diminishing the sport in the rest of the world that wants to watch the best soccer, not parity (or they might call it parody) soccer.

How would it hurt the MLS? American fans might naturally gravitate to the “NFL of soccer” and they may come to find their 2nd & 3rd tier talents too boring for their busy schedules.

Has anybody written the jingle for “Football Night in the World” yet? Do you think they will go for Sunday or Monday night?

Some folks will point to the desire for the Supper League as proof the MLS works, but that logic doesn’t hold, as it hasn’t yet been proven in the MLS nor has it been proven in the Super League, whereas the value of the open pyramid has been proven to produce some of the top league valuations in the world in countries with relatively small populations.

Which brings me to my last thought, can the Super League work? You never know until you try. But, given the closed league status, I think there will be a tendency for inertia to develop in the willingness to pay for talent and, as long as open leagues exist, other investors will come in and invest in that talent outside the Super League and eyeballs will naturally gravitate to watch watching the best.

If that happens, the “Super Clubs” can only bank on their name brand and history for so long. Already, even some of the clubs rumored to want to become part of the Super League, are in the position of not being the best.

IMHO, what sells in the soccer world is the best team for the buck, not parity.

Why do we stop at red lights? Part 2

This post from 10 years ago, Why do you stop at red lights?, continues to be one of this site’s most popular. I’m guessing, that’s just by accident, because I doubt many folks pontificate stopping at red lights, philosophically. They may, for example, be looking for study materials for a driving test.

On his blog, Arnold Kling wrote a similar post that I enjoyed reading, Messing with the web of social conventions.

Here’s a good slice:

“The late economist Hyman Minsky had an aphorism:

It’s easy to create money. The trick is getting it accepted

This aphorism can be adapted to other realms.

It’s easy to create a software standard (like the Internet protocols, or an operating system, or a programming language). The trick is getting it accepted.

It’s easy to create the software architecture for a social network. The trick is getting it accepted.

It’s easy to create a law. The trick is getting it accepted.

It’s easy to create a social norm. The trick is getting it accepted.

It’s easy to create a religion. The trick is getting it accepted.

It’s easy to create a credentialing system. The trick is getting it accepted.”

I can add, it was easy to create red & green lights. The trick is getting it accepted.

I recommend reading his whole post. I think it spans much of life.

I see businesses struggle with this. Creating a new product is easy. The trick is getting it accepted. That’s the hard part, that most business managers severely underestimate.

Fashion, music, food, exercise, language are some examples of this type of behavior. I still don’t know how athletes for eons got by without heavy ropes to flail and tractor tires to flip!

The sharks, on the TV show, Shark Tank, are basically trying to pick the products they think have a chance of getting accepted. They understand that it’s easy to create a product, but the hard part is getting it accepted.

As they try to decide what to invest in, they are looking for signs that it has a chance to get accepted. What are sales? Would I use this product? Why or why not? Maybe the product is almost there, but needs a tweak, will the owners be willing to pivot?

The Real Reasons Why Promotion/Relegation is Better in Soccer

Promotion/relegation advocates often point to these benefits:

  • Teams play/work harder to avoid relegation.
  • The threat of relegation makes more matches more interesting, which can improve viewership and the stakes of games of the bottom ranked teams.
  • Pro/rel attracts more investment, as investors buy 2nd or 3rd tier clubs hoping to win their way into the top division.

While I think all that can help, if I were to say soccer could be 100% better with pro/rel, I think these reasons would make up 10% of that improvement and what makes up 90% gets no attention, even from pro/rel advocates.

I also want to establish upfront that I am under no delusion that in an open pyramid, the deepest pockets would not result in super teams. I would expect that. But, I also think there’s nothing wrong with that.

American sports leagues have been successful at using legal collusion among owners to strip players of earnings power so owners can (wink, wink) protect themselves from outbidding each other for the best players to build the best teams and go along with rigging (er…evening the playing field) the competition for the sake of the ‘greater good’.

After all, nobody wants the Yankees to win every World Series, do they? Well, that’s what the owners want you and the players to believe, anyway.

They pass this argument off without much push back, even while there are plenty of counter examples of lucrative soccer leagues with perennial, deep pocket powerhouses.

I think that itself deserves some close study. You will find that many soccer fans around the world have their super club favorite that they watch on TV and their local favorite that they watch live. You will also find that a plethora of competitions have emerged to keep fans interested, even with these powerhouses, and many of these competitions have linked stakes. So, not only do you have the league standings and the relegation zone, but you also have the ability to earn your way into the Champions League or the Europa League based on your league placing. Plus each country tends to have other competitions that run concurrent, like the FA Cup in England. All the while, the players regularly go back and play for their home countries in international competitions. So, as a fan there’s a lot to look forward to.

So, I think moving to pro/rel would better enable these types of competitions to gain traction. For example, it might be more interesting to watch Seattle Sounders team, not tethered to MLS roster and salary rules, go up against clubs from Liga MX and see how they fare, rather than watch the watered down “evened playing field’ MLS pretend they are true soccer clubs and barely stand a chance (though the MLS is trying to go the other way and take over Liga MX, so they can water down that competition, too).

Anyway, I digress. This still only makes soccer in the U.S. 10% better.

So, what’s the other 90% of the benefit?

Grassroots

The pro/rel discussion rarely touches on what an open pyramid could do for grassroots soccer, but I believe that’s where 90% of the benefit would come from.

First, it would connect up parts of soccer culture that are disconnected and work against each other today.

This, in turn, would provide young players and their parents with a clearer view on long-term development, which would get multiple times more players on that path much earlier than the disconnected system we have today.

An open pyramid also better propagates best practices AND new practices that work. Our current system has too many bubbles where unproductive practices can persist for too long, including the highest-level, because they get just enough results to fool people into thinking they are onto something. Example: many Americans still hold onto kick-and-run soccer because it works well enough against kick-and-run teams to get results.

Also, I think an open pyramid makes the jobs of our national coaches about 10x easier and gives them 5x better chance of success.

Finally, I think these changes at the grass roots level could substantially increase interest in the game, which ultimately is going to be the real driver to viewership of the top league.

Connect the soccer culture

In grassroots soccer we have several disconnected groups, but I will focus on two disconnected groups as an example: club and school soccer.

These are disconnected and unfriendly to each other. During high school soccer seasons, for example, high school players are forbidden by their high school athletic associations from even going to their soccer club to practice or assist coaching a younger team.

To me, it’s madness to have two organizations fighting over the same group of kids and splitting time with them, rather than looking for ways to work together to help these kids become the best they can be.

In countries with an open pyramid, soccer players have a seamless experience from the time they start with the club at around age 8 and have a clear line of sight to what it takes to make the club’s first team in a few years.

Young American soccer players don’t get this because of the disconnect between club and school, which is a key reason American soccer players are years behind.

Our youth players are content to be the best on their team at something. Their youth players have close contact with first teamers and they are striving to become like them.

What is good soccer?

For too many people in the U.S. good soccer is winning soccer. It can be the Bad News Bears against the Bad News Bears (at the beginning of the movie) and people think it’s good soccer because it was a close game and neither side is aware they are Bad News Bears level.

Listen carefully and you can hear the miscues of good soccer, when parents dote on their little ones. “They’ve been playing for years.” “He scored 4 goals.” “She’s playing UP an age group.” “They won their division.” “Their coach played college ball.” “They won their division/tournament.” “She’s fast/aggressive/physical.”

The following questions will be met either with blank stares or justifications on why that’s not important.

What skill level are they playing? How’s their touch? Can they keep possession? Can they work with their teammates to set up scoring chances or defend their goal?

It’s not their fault. It’s the system’s fault. They are stuck in their bubbles and have not been exposed to good soccer, so the miscues are all they know.

An open pyramid helps because it pops these bubbles. In an open pyramid, you know where your club’s first team at each age level sits within the national or regional pyramid and that feedback gets clubs, coaches and parents more attentive on things that drives toward success.

In our current system, it’s very difficult to figure that out.

Change the top

I feel sorry for the folks who run the national teams, because how they’ve structured soccer in the U.S. makes them work harder, not smarter, in an game they can’t win.

In countries with open pyramids, the open pyramids do the work of sorting out the best coaches and players, through competition. Their federations just need to keep track of who’s winning these competitions to find the best players, coaches and styles of play.

In the U.S., it’s like we have music companies that restrict their talent search to Julliard. That sounds logical because Julliard has some very talented folks. But, it misses huge swaths of budding artists that are slogging it out on their own in small venues across the country, while learn to produce things that people want, rather than just the things that the teachers at Julliard think are good.

Increase interest?

A connected pyramid increases interest in lots of ways.

In place of high school varsity teams, you get your local club first team that competes with other nearby clubs, because clubs can make money by getting players under contract and selling those contracts to teams further up the pyramid.

Rivalries build. Interest comes from the youth that have been involved in the club from a young age to adults that grew up in the club and now maybe play Sunday league there and volunteer coach a group of young ones.

As a “supporter” you are a real supporter of the club. You actually pay a club fee and get more than a season ticket to first team matches. You get access to play in the club’s leagues and attend their events. You might have kids playing in the club and you might play there yourself in an adult league. “Supporter” isn’t just a marketing term for season tickets. You are actually IN the club. You might even rent out the club’s facilities for wedding receptions and parties.

Over time, you see kids move from your club to teams further up the pyramid and you watch their careers with interest.

You might develop an affinity for one of the bigger clubs in your area because you happen to know quite a few players on that club and watched them develop at your club.

You also develop an affinity for one of the super clubs in your region, well, because you just appreciate the high quality players they bring in and their desire to kick ass, or do the best they can with their budget.

Anti-Competitive Soccer in the U.S.

I saw a debate comparing soccer in the US and Europe to socialism and capitalism. It went something like this:

“Soccer in the U.S. is socialist, in Europe it’s more capitalist and works better!”

“No! Soccer in the U.S. is, by textbook definition, not socialist. It’s capitalist and is like all of capitalism — the wealthy control it.”

I find analogies to economic systems hurt a debate because it devolves into what people think of those systems, rather than the problems with US Soccer.

U.S. Soccer, in my opinion, has one overarching problem: it is deliberately anti-competitive to protect MLS owners.

As Terry Moe pointed out on an EconTalk podcast last year, “Vested interests are universal…those vested interests have a stake in protecting their institutions from change…and have absolutely nothing to do with whether the institutions are performing well.”

I believe the anti-competitive measures in the U.S. started with good intentions. US Soccer wanted to bring some stability to a soccer landscape pockmarked with league failures. They thought it would be good to have a top league that wouldn’t go bankrupt and disappear overnight. That would give US players a stable league to play in to develop and help grow interest in the game.

So, back in the 90s, they turned to other sports leagues in the U.S., and their owners, to help them develop such a model, which unsurprisingly, they based on the other successful anti-competitive pro sports leagues in the U.S.

But, since then, the good intentions have morphed into ill-intentions that actively protects MLS owners and US Soccer power brokers from competition that could be great for the game in the U.S., and that helps drive the game in other countries.

One of the anti-competitive measures is the Professional League Standards that sets a high barrier to entry to leagues that might compete with MLS and essentially gives MLS leadership the power to veto them. Imagine giving McDonald’s official veto power over anybody that wants to start a restaurant in your town. That’s essentially what we have in U.S. Soccer.

To imagine how high this barrier to entry is, consider, that I don’t believe the MLS met those standards for the first 10-15 years of its existence.

Not surprisingly, the US Soccer/MLS powers-that-be uses that power to keep out upstarts it doesn’t like (i.e. those with smaller pockets or those not aligned to the philosophy of protecting owners from high player salaries or watering down the competition to ‘keep it interesting fro the casual fan’) and uses it to direct big pocket investors to kiss their rings to be granted entry to the club.

Another recent development locks out non-MLS competition from the international market of transfer fees, training compensation and solidarity payments for players.

MLS leaders didn’t even understand these revenue streams just 3 years ago. I believe MLS owners with stakes in foreign clubs educated MLS leadership on these revenue streams. As soon as they understood it, they immediately started acting to monopolize these.

One way they did this in 2020 was limiting the top youth league participation to primarily the youth clubs of MLS teams, and a few other politically connected clubs. The effect is that top youth talent will need to get on one of these teams should they want to participate in the top league, which then locks that talent up for the MLS owners, either for their own teams or for the revenue streams that might come from a foreign transfer.