Editorial: If CAS Ruled For Pro/Rel, Here’s a Possible Path

Counterfactual Fantasy World: Creating a Pro/Rel structure had the Court of Arbitration for Sport ruled differently

The Court of Arbitration for Sport (CAS) put to bed any hope for a quickly implemented promotion and relegation (pro/rel) system within U.S. Soccer (see ruling here). I’ve long argued that pro/rel is a worthy goal, but given the history of soccer in the United States, it’s also not necessarily the panacea those fervently in favor suggest. This is particularly true given how other U.S. sports leagues are run and the familiarity those would-be owners have with it. But for fun, I propose a counter-factual.

What if the CAS Ruled in Favor of Pro/Rel

Not long ago in an editorial for BGN, I suggested a limited form of promotion/relegation. The idea was for pro/rel only for MLS “2” teams in USL League One and USL Championship. The goal of the piece was not to “solve” the pro/rel issue. Instead, it was to ensure League One remained half independent teams (i.e. it didn’t become an MLS Reserve League), while also creating an incentive for MLS2 teams to build competitive rosters to remain in the Championship. It was answering only one small and very specific issue in a realistic way.

The best negative response to this proposal was that all the “bad” MLS 2 teams would end up in USL League One. To which I answer, that could happen anyway, along with the good ones. Meaning the Real Monarchs, Red Bulls II, and several others could potentially dominate the league.

But, let’s imagine for a moment the CAS ruled against FIFA and USSF had to come up with a pro/rel system say by 2022. How might this occur without prolonged lawsuits by MLS owners in US court (which likely the owners would win, but let’s assume they decided not to sue because this plan protects them in some ways)?

As you’ll note, before one discusses exactly HOW pro/rel would work, many other factors of ownership and structure need to be considered. For example, certain league rules need to be harmonized. Creating a pro/rel structure is not straight forward as existing league infrastructure would need amending.

For the purpose of this counterfactual discussion, I’ve assumed I have full control propose this vision. Then, pray team and league ownership would agree or negotiate in good faith where I’ve missed something.

Step One: Designate League Tiers

The first step in this matter would be to determine what leagues would be in various tiers for pro/rel. Given there are currently two leagues designated as third tier, I would keep both of those at that level. Then, I’d create a new fourth tier, which would be the entry point for all new teams.

Under my scheme, US Soccer would eliminate the ownership net worth rules and remove minimum market population sizes from its criteria. USL and MLS would amend their minimum stadium sizes to the US Soccer minimums noted below. See current rules from USSF, MLS and USL here.

Division 1 – Major League Soccer: No more than 30 teams split into two or three geographic conferences, stadiums of at least 10,000 (reduced from 15,000 currently), with press boxes and other amenities.

Division 2 – USL Championship: No more than 30 teams split into two or three conferences mirroring MLS. Teams must have soccer-specific stadiums of at least 5,000 seat capacity with press boxes and other amenities.

Division 3 – USL League One & NISA: No more than 30 teams each split into geographic conferences to limit travel costs. Teams must have soccer-specific stadiums with a seating capacity of at least 1,000.

Division 4 (new. Perhaps UPSL & NPSL): Semi-professional leagues, with stadiums (but not necessarily soccer-specific) of at least 1,000 seats and playing seasons largely similar higher leagues. Unlimited number of teams and leagues. The United Premier Soccer League and National Premier Soccer League have enough potential full-year teams to create eligible leagues. Some state and regional leagues with teams that have ambitions to become professionals may also join.

Step Two: Dealing with MLS Ownership of Soccer United Marketing (SUM)

A large portion of profits of MLS, and the reason billionaires are willing to buy franchises is to get a stake in Soccer United Marketing – the organization that promotes soccer throughout the U.S. for all USSF sanctioned soccer. They also work with CONCACAF and CONMEBOL. In fact, Don Garber, the Commissioner of MLS is also the CEO of SUM.

This is where things get sticky and where lawsuits would arise. If CAS had ruled differently, one potential (and realistic) way to remove the SUM problem would be to spin it off from MLS with the current owners remaining owners, and MLS becoming an independent league. Mr. Garber would need to choose which organization he would run (I suspect SUM).

By splitting SUM and MLS, this would mean the current MLS franchise owners remain involved with the profitable marketing arm and reason they got into the soccer business. The teams/franchises would then be spun off into their own enterprises independent of all the others. This would allow owners to sell their teams without divesting from SUM. This is very much like a regulatory break up that is sometimes forced by the Federal Trade Commission: classic Teddy Roosevelt type “trust-busting.”

This is where the financially poor teams would be discovered and the value of teams themselves would likely decline, but the value of SUM would continue to insulate the owners from severe losses.

Another advantage and the reason why owners might agree without too much argument is relegated teams receive payments from their continued ownership in SUM, even if their MLS clubs don’t perform as well dropping into the USL Championship.

On the downside, it means that those initial MLS owners’ cash flows would be higher than those in USL Championship, but the better attended and marketed championship teams may be able to compete with the lower portion of MLS teams. The next section attempts to rectify some of the potential spending disparity.

Step Three: Create Roster Rules and Salary Caps

Up to now many pro/rel fans may see these are realistic means to conduct pro/rel. Now is where I’m sure to trigger those people who aren’t wealthy with my suggested roster and salary cap rules. The goal here would be to attempt to maintain financially sustainable teams in local communities that could benefit from proper management, fan engagement, and player acquisition.

I understand many people hate the complex rules of MLS salary budgets and the concept presented greatly simplifies the matter. Remember it’s the owner’s money we’re playing with. Many owners may like the idea of creating both incentive and parity – at least within the first-team roster. And I’m not saying this is the only way these rules can be structured (and the players’ unions would also have some say), but it’s a way that makes sense to me.

Part of the goal of these roster rules is to develop a player transfer market within these leagues, plus not limit teams as much in terms of the top of their roster spend (i.e. no DPs). But, it would still not allow one or two very wealthy owners to spend profusely and dominate the league. See current USL League One Roster rules here for a comparison.

For All Divisions

  • Transfer fees paid to any domestic league team (including the Canadian Premier League) for a player who was rostered for at least one year do not count toward the salary budget.
  • Transfer fees for players from other nations are amortized toward the salary budget for the length of the contract (like the current MLS rule).
  • Up to 30 players per roster, plus up to 5 academy players.
  • Players who spent at least 20 months rostered/carded with a team’s youth affiliate or academy and subsequently sign a professional contract are not counted toward the salary budget up to $200,000 per year until the season after the player reaches the age of 21 years. After that season, the player’s full salary will count toward the salary budget. Teams may have up to 10 homegrown players rostered.
  • Clubs may have up to five academy players on their senior roster who are unpaid and remain eligible to play college (like current USL Academy contracts). Teams may have more than five academy contract players, however at no time may a team have more than 35 total players on their roster. Not more than five academy players may be on the game-day roster for any team in Division 3 or above.
  • Transfer windows will be from January 2nd to March 30th and July 1st to August 15th.
  • Rosters will be frozen 28 days prior to the first scheduled playoff match, or 56 days prior to the end of a single table season. Teams that own or control lower division teams may not loan players up or down after the first of the roster freeze dates.
  • Each player may be loaned not more than twice per season from their primary team. Loan lengths may be of any length. Recalls are considered the end of a loan.
  • Divisions with player associations will have all promoted teams comply with the collective bargaining agreement mandates.
  • Transfer fees and prize money (see below) received will not be included in team revenue.
  • International roster spots can only be traded with teams within a clubs league, and only for the length of a season. No team may have more than 10 international roster spots at any given time.

Division 1

  • Salary budget maximum of $20 million per season, no minimum spending requirement. This includes all players and amortized international transfer fees.
  • No more than seven international players (green card holders are considered domestic players).

Division 2

  • Salary budget maximum of $10 million per season, no minimum spending requirement. This includes all players and amortized international transfer fees.
  • Teams with gross revenue of more than $20 million may spend 20% of revenue over $15 million on salary budget. For example, teams with $25 million in revenue would have a salary budget of $12 million. At no time shall a salary budget be greater than $20 million.
  • At least two players on a game-day roster must be homegrown or academy players.
  • No more than seven international players (green card holders are considered domestic players).

Divisions 3 and 4

  • Salary budget maximum of $5 million per season, no minimum spending requirement. This includes all players and amortized international transfer fees.
  • Teams with gross revenue of more than $10 million may spend 20% of revenue over $5 million on salary budget. For example, teams with $15 million in revenue would have a salary budget of $7 million. At no time shall Division 3 teams have a salary budget of more than $15 million and Division 4 teams no more than $8 million.
  • At least two players on a game-day roster must be homegrown or academy players.
  • No more than seven international players (green card holders are considered domestic players).

The salary budget rules are designed to promote some parity among teams in various leagues but also allows for teams with vibrant fan bases and advertising support to benefit from such support. The goal would also encourage teams to spend ownership funds on marketing and sales to generate revenue rather than just purchase a team and a roster good enough to be promoted. This should also help teams compete with the bottom portion of the higher division in terms of roster spend.

For example, a Division 2 team had $50 million in revenue could have a salary budget of $17 million, likely enough to compete with a Division 1 club. Also relegated clubs with meaningful revenue could also continue to have relatively high spending on their roster. Say an MLS team with $65 million of revenue was relegated, they could still have a $20 million salary budget, the same as all MLS teams.

Direction of League Finances

Leagues could charge clubs operating fees and other reasonable expenses. The league would attempt to generate revenue to be shared with teams who participate in their league for the season when the revenue is generated. This would include media rights, corporate sponsorships, and other revenue. The league would utilize this revenue to offset its operating costs.

Any profit above league operating expenses would be split as follows, otherwise, clubs are responsible for paying a pro-rata share of non-covered league expenses.

10% to be given for grants to at-need youth clubs for the purpose of growing the game, perhaps run by the US Soccer Foundation and the United Soccer Coaches Foundation.

50% divided equally among the teams in the league.

40% into a prize pool to be given pro-rata to teams based on performance. For Divisions 1 and 2 if there are 30 teams in two conferences, at least four-fifths of the prize pool would be given to teams based on regular-season standings. Leagues could choose to allocate up to one-fifth of the prize pool for post-season tournament performance, which would be allocated above the season merit prize. Leagues could determine how the prize money would be allocated, with not less than 2% of the total prize pool going to each club, and a single club not receiving more than 6% of the prize pool.

Let’s say a 30-team league had a profit of $100 million. $10 million goes to charity and each team then gets $1.67 million in earnings money. The prize earnings would mean teams would receive another $800,000 to $2.4 million depending upon their performance.

Promotion and Relegation Between Divisions

Finally, after all these details are ironed out we can come to the actual act of Pro/Rel. It’s not easy to get to this point – and this isn’t everything legally what would need to occur. There’s a lot of details behind the scenes that I’ve not addressed here such as how the owners of some leagues like USL would be bought out. So, here goes.

For All Teams

  • All new teams wishing to enter the professional ranks would initially play in their local Division 4 league. This includes pre-professional and start-up teams.
  • Teams with stadiums that do not meet the minimum requirements may not be promoted.
  • Teams not able or willing to comply with a division or league collective bargaining agreement (should there be one) will not be promoted into the higher division.
  • Teams with rosters controlled by a team in the Division they would be promoted into, that team is not eligible for promotion. If a senior team is relegated into a league containing a team with a roster controlled by the relegated team, the controlled team will be relegated one division as if that team placed last in the conference or league.

For Division 1 Relegation

  • The team finishing with the least points in each conference would be relegated.
  • The club with the second least points would play in promotion playoff with the Division 2 team in their conference with the second most points. This means between 2 and 6 teams could potentially switch between Division 1 and Division 2 depending on the conference structure and playoff results.
  • Matchups and the hosting venue will be chosen by lot.

For Division 2 Relegation

  • The team with the least points in each Division 2 conference would be relegated.
  • The club with the second least points would play in a promotion playoff with a Division 3 team. This means between 2 and 6 teams could potentially switch between Division 2 and Division 3 depending on the conference structure and playoff results.

For Division 3 Promotion

  • There would be teams from both leagues who will compete for the right to play in the promotion playoff with the Division 2 team at risk of relegation within closest proximity.
  • Each league will determine how teams will be promoted depending on their league conference structure.
  • Their seasons should allow time for teams to play up to four additional matches to determine promotion.
  • Each Division 3 league will provide four teams who will play the geographically closest team from the other league in an eight-team playoff in two brackets.
  • If Division 2 has two conferences, the winner of each geographic tournament would play the second to last team in the relevant Division 2 conference.
  • If there are three conferences, the losers of the semi-finals would have the right to play in the promotion playoff.
  • Each league will determine playoff participation.
  • Matchups and the hosting venue will be chosen by lot.

For Division 3 Relegation

  • Each Division 3 league will determine which two teams will be eligible for relegation to Division 4 based on their conference structure. Determining which team will fall will be on sporting merit.
  • Division 4 leagues will have a competition determined by USSF to determine which four teams may compete for promotion.
  • Each of the Division 4 teams determined eligible for promotion shall play in a promotion tournament.
  • Matchups and the hosting venue will be chosen by lot.

Division 4 teams cannot be relegated.

What Divisions Team Begin Play

The 2022 season would begin with league alignments based on the then-current leagues.

MLS: 30 teams in two 15 club conferences (currently announced teams only, no new teams without promotion)

USL Championship: 30 teams in two 15 club conferences. Five teams would be relegated to USL League One at the end of the 2021 season to compete in that league in 2022.

USL League One: While it is currently unknown how many teams there will be in 2021, let us assume there will a further three expansion teams. The league would then also have the five teams relegated as noted above. Leaving 20 total teams in the league. The league would then be split into an eastern and western conference to align as much as possible with the Championship. The league would accept promotion from lower leagues until it reached 30 teams, at which point promotion and relegation would begin.

NISA: We can assume NISA expands to perhaps 14 teams in 2022. We’ll keep them in a single table for now, but the league may wish for promotion playoff purposes to keep two conferences. This would be at the league’s discretion. The league would accept promotion from lower leagues until it reached 30 teams, at which point promotion and relegation would begin.

Lower leagues may be structured however they desire. Teams relegated out of the Division 3 leagues could choose the Division 4 league they enter.

Conclusion

There you have it. Pro/rel in a nutshell dealing with owners, leagues, and alignments. I came up with this in about three days. While I believe such a plan could have been realistic, it would still be difficult and would have many legal aspects to be considered – and a two year implementation period would likely be unrealistic. In reality, if USSF attempted to implement something like the above unilaterally (which it wouldn’t, I mean Don Garber is on the USSF board), MLS franchise owners and potentially the owners of USL might enter lawsuits which could last years and create an ugly environment.

However, as I’ve noted it is possible to help MLS owners and create a system of pro/rel that reflects the realities of today’s soccer landscape. We can’t just start over. The world doesn’t work that way, but the concepts here show it is possible to shift and bring US soccer toward the world standard.

Finally, I’d need to note that all the discussions around a European Super League suggest it would be a closed, or nearly closed, system. Many global owners seem to want to move closer to an MLS, NFL, MLB system and away from pro/rel.

Given there is not a single way to realistically create a pro/rel system, I understand this is only one possible path. But I’m happy to entertain well-considered and thought-out feedback, plus other COMPLETE ideas. One cannot just snap their figures and make pro/rel happen. One cannot focus just on the structure of pro/rel, but all the other components that need to occur as well. There are many steps first… many more even than I’ve laid out here.

Author

Ira Jersey

twitter: @irajersey Soccer fanatic and nerd with many hobbies, Ira is a New York Red Bull supporter who loves lower division soccer. He is a youth coach with several USSF and United Soccer Coaches licenses; and also a competitive youth referee. He writes and podcasts on USL League One for BGN. Ira has worked in finance for more than two decades focusing on bond markets and is currently the Chief U.S. Interest Rate Strategist at Bloomberg Intelligence, Bloomberg LP's research arm.