Wednesday, May 11, 2011

2011 MLS Salaries: Down from 2010, Up 60% Since 2006, and in Total Equal to the Torres Transfer Fee

So I am only a few days in to my vacation from the blog, and I already feel compelled to break my vow and make a post.  Who can resist analyzing the 2011 MLS player's salaries when such a treasure trove of information is so neatly presented by the MLS player's union?  The topic has been pretty well covered already, but I've covered this topic in the past, am integrating the data into a wider MLS database, and haven't seen too many neat graphs yet.  So why not make a quick post on the topic?

Rather than just focus on the change versus 2010 salaries, I've chosen to focus on all the publicly available data I have that goes back to 2006.  The trends and associated conclusions are interesting, and shed light on how MLS is attempting to manage its financial position within the US sport's landscape.

Player Salaries

MLS's player salaries are very non-normal, so using an average value to make comparisons is not appropriate.  Rather than use the average, the median is used from each season to make comparisons.  The graph below (click on it to enlarge) shows the median player salary by season, the per cent change versus the previous season, and the overall inflation per season versus 2011.

The annual rate of change from one year to the next peaked in 2009 at 33%, just prior to the latest CBA. The terms of the CBA and expansion since it was signed seem to have reversed the growth trend to the point the median salary has dropped by 13% in 2011 versus 2010.  While salaries are down 13% from last year, the median pay is up 60% since 2006.

Salaries aren't the only thing has changed since 2006 - the number of games in a season has also changed.  The 2006 season saw 32 games, 2007 through 2010 had 30 matches, and the 2011 season will have 34 matches.  While not a perfect predictor of the effort required in a season, the number of matches can serve as a proxy for how hard a player is working for their pay.  The graph below (click on it to enlarge) re-plots the data from the graph above, but normalizes it to a per match basis by season.

Given that the 2007 season saw a reduction of 2 matches versus 2006, the pay per match actually went up 7% while gross pay remained flat according to the first graph.  The next three seasons see pay changes identical to the gross numbers shown in the first graph as the number of matches does not change.  The final season (2011) saw a drop in per match pay even bigger than the gross data - 24% reduction versus 13%.

Jeremiah Oshan at SB Nation details some of the reasons why the median player salary has moved down, so I won't recount them here.  Whatever the reason, the median player is earning less than 2010 and working harder to earn it.

Team Payroll

So what is each team spending on payroll over the years?  The graph below (click to enlarge) shows team payroll from 2006 to 2011.  The numbers have been unadjusted for MLS median player salary (more on that later).

The graph shows a steady increase in the team payrolls from just under $2M in 2006 to over $3M in 2011.  Four teams exceeded $4M in 2011 payroll - Chicago, New York, Los Angeles, and Toronto, although the move of Juan Pablo Angel from NY to LA and Dwayne De Rosario from Toronto to NY have lowered the peaks those four teams experienced in 2010.  Clearly, the addition of roster spots in 2011 has boosted the bottom line cost of fielding a squad in 2011 even if the median income of a player has gone down.

So what happens if we baseline everything in 2011 MLS dollars?  Similar to Pay As You Play, a player pay inflation factor (in this case based on wages and not transfer fees) is required.  The change in median player salary is used for such an inflation factor.  The inflation factor for each season shown in the first graph was applied to each player's salary in that season to provide what their equivalent 2011 salary would be.  Those salaries in 2011 MLS dollars were then totaled by team, and are presented in the graph below (click on graph to enlarge).

The inflated 2011 wages from 2006 onwards show two clear conclusions:
  • MLS per team payroll has not increased significantly since 2006 (although the number of teams making such a payroll has).
  • MLS per team payroll was declining from 2008 until this season.
What's also interesting is that the real time payroll differential of LA versus the rest of the league shrinks over time with each year of David Beckham's contract.  Adding Landon Donovan's $2.3M DP contract helped stem the rate of decline in 2010, but it still didn't stop NY from passing LA as the most expensive team in the league.  Of personal note to Sounders fans is the virtual erasure of any payroll cost differential they had the last two years.  They've gone from leading the pack of teams outside the Big Four spenders to falling in line with the rest of that pack.  Parity not only rules on the field, but it rules on the payroll as well.

League Wide Expenditures

So where does this leave the league overall?  The graphs below present two summaries of the same date for the league (click on either to enlarge).  The first looks at the sum of guaranteed contracts over time (unadjusted) and the total count of players with contracts, while the second looks at the rate of change of the total expenditure and number of contracts from one season to the next.

Since the last year of the last CBA (2009), overall league expenditures on pay have risen greatly - an increase of 58% to be exact.  Over the same time, the number of players in the league has increased 34%.  From 2010 to 2011, league pay expenditure increases could not keep pace with the addition of two teams and roster spots on every team meaning that overall pay increased by only 12.5% while the number of players increased by 26%.  This was the first time in the six years of recorded salary data that increases in total team payroll were outpaced by the growth in the total number of contracts.  This is likely a one-time event that we won't see again until another two-team expansion like we witnessed with Portland and Vancouver this year.


The above data confirms that MLS's single entity model provides for a very interesting balancing act - almost like a social democratic economic model.  On the one hand, they need to have some provisions to attract older, top talent from around the world as well as keep up-and-coming talent in the league.  This is their method for fueling league growth and exposure.  At the same time, they're clearly trying to grow the professional sport in the United States in a controlled manner to avoid an NASL-style meltdown.  In the last few years, they also seem to be taking the approach of improving the bottom end of the salary range by a modest amount, and are willing to keep wage growth in the median contracts to a minimum.  It's almost as if the league has taken a "reasonable income for the greatest number approach", as there is not doubt an increasing number of players are able to make a modest income in MLS by playing the game they love.

At the same time, the league wide payroll numbers indicate just how far the league has to go to be competitive on the world stage.  The 2011 league-wide payroll of $80.2M equates to the transfer fee Chelsea paid for Fernando Torres.  That's right - the rights to negotiate on a contract with one player in the EPL cost more than the entire wages of MLS for a season!  MLS has more than doubled what they can spend on wages since 2006 - a sign that both average pay and the size of the league have grown.  But they still have a long ways to go if they wish to compete for top talent on the world stage, and attract enough worldwide attention to be able to pay for such talent.