Forcing the US Soccer Pyramid: League and Team Rules

What It Takes To Own A Professional Soccer Team

The U.S. Soccer pyramid has received significant scrutiny over the years, particularly with the failure of the NASL. As other professional leagues like NISA (National Independent Soccer Association) and NPSL-Pro look to get off the ground, many may not understand the pains it takes for a league and its teams to receive U.S. Soccer Federation sanctioning.

A soccer team is a business and a rich person’s business at that. This fact must be understood before any discussion of league formation can begin. In a country as large and diverse as the United States, there are also other challenges. Look no further than Sky Blue of the NWSL and their issues following league budgets while located in a high-cost area.

U.S. Soccer Federation Rules

When looking at men’s leagues, the USSF rules make it clear that the federation values team financial stability over most other factors. Teams must post bonds to ensure payment for at least a season’s worth of expenses and owners must be multi-millionaires with deep pockets to spend on operating teams.

As the table below shows, the primary team owner of a third-tier team must have a net worth (excluding the team’s value) of at least $10 million. Stadium sizes are also meaningfully different between tiers as one would expect. The USSF has clear preferences for where teams are located as well. A preponderance of teams for Division 1 leagues must be in larger cities, while Division 3 teams have no population requirement. Also, full-time staffing is required explicitly for first and second division teams, but such is not specified for third division teams. The table below is generated from the 2014 rules found here.

Existing League Rules Are More Strict Than USSF Guidelines

These USSF guidelines are minimums. Many leagues have rules that are stricter or have operating criteria that forces teams to be stricter. For example, MLS and USL required stadium sizes are meaningfully larger than the USSF requirement. And with the exception of League One, the net worth of owners is meaningfully more than US Soccer requires. Franchise fees are non-trivial as well. One challenge is how leagues will operate once expansion ends. For Major League Soccer, this is likely to be through league-wide sponsorship and broadcast rights, while for USL much of it may come from league participation fees. Reportedly, League One annual fees are $75,000 a year, presumably Championship teams pay several times that figure.While startup costs are significant, operating expenses are also non-trivial. A purported Pro-forma expense sheet for USL D3 (rebranded League One) suggests a team operating budget of between $1.3 and $1.9 million a year. including player salaries of about $300,000 per year. For teams to break-even based on these meager figures, attendance may have to average about 3,000 per home match with revenue per ticket sold of $46 (ticket price, concessions, and any advertising and partnership revenue).

Expansion of Existing and New Leagues

New start-up leagues may have stadiums and ownership groups closer to the USSF minimums than existing leagues. Some also are making an attempt to compete in some markets with existing MLS or USL franchises.

NISA appears to be willing to compete directly with MLS and USL in markets with established teams. MLS continues to poach teams with USL’s larger markets. Yet as Jake Edwards recently noted to The Athletic that expansion of USL Championship was likely going to slow, and while MLS may continue to expand, it’s growth will likely slow as well.

USL League One, however, appears set to continue its expansion into smaller markets. Currently, the east coast of the U.S. is well represented, meaning further expansion in the Midwest and West Coast might be a focus of the league office beyond any MLS 2 sides that may move down from USL Championship. The addition of Omaha for the 2020 season could be an example of markets the league is attempting to expand into.

Using the 2018 census estimates of metropolitan statistical areas (MSAs), we can find some potential expansion cities. Some, like Baton Rouge, have been targeted by NISA, while others such as Des Moines have USL League Two sides that with the right ownership could do a Tormenta-like jump into the professional ranks while maintaining their developmental side in League Two.

Conclusion: There’s Not One Way (Opinion, Stop Here If You Only Want Facts!)

Many question the structure of MLS and USL, which is a direct result of US Soccer’s league and team rules. Given the history of failed leagues and teams due largely to financial hardship, poor attendance, and lack of media deals, it is understandable that these two leagues operate much differently than their European counterparts.

MLS is run largely like other major sports leagues in this country. USL a bit different but is not as open like most European systems. Yet European systems are not full proof either. The lack of promotion and relegation is not the panacea some believe. The financial risk involved for would be team  owners could deter, rather than encourage, investment in local soccer clubs. Pro/rel should be a goal, but the US soccer landscape and finances are not robust enough as of yet to help support relegated teams – there are no parachute payments like those English Premier League teams get – nor is there established enough fan bases to support lower divisions teams – YET.

A case in point would be the Chicago Fire. I do not believe that the Fire would have survived if two years ago it had been relegated to the USL Championship. We can hope it would have, but there is no guarantee. And if survival probability is not relatively high, the owners would take a massive loss. Most soccer team owners are likely happy to break-even, or even lose a little money – but to risk the loss of all their investment with one season of poor on-field performance is likely to be more detrimental to the expansion of soccer everywhere in the country.

Owners of large European clubs continue to rumble about a “super league” that would be completely or mostly closed. This system would be similar to American sports leagues. At the very least those owners don’t think their system with pro/rel is perfect either. One might not like it, but the owners and the money is what help to grow the sport at this point – fan ownership is possible but has not truly been tested yet.

In my perfect world, we’d have a closed system with promotion and relegation between tiers of the league(s). And although not a mirror of the European structure, fans should not begrudge a uniquely American system if it provides a high level of entertaining play and does not risk financial ruin for owners.

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.