Friday, February 26, 2010

Fake Sigi: Paranoider Than I Thought

Fake Sigi has a new post detailing his own theories about why Canadians want MLS' single-entity to be loosened.  For a guy (or gal) who writes fairly frequently about paranoid conspiracy theories, Sig's post sounded...a little paranoid.

First of all, Fake Sigi points out the USA has a bigger talent pool (in part from a markedly better development scheme, but also in part because of a 10-1 difference in population):
The reality is that the USA has developed a deep enough talent pool to be able to stock a rapidly expanding MLS even when a number of high quality players are plying their trade overseas. Canada has the players, but its resident teams must expend much more capital to bring them back into the fold. Their domestic development model has resulted in too few players of varying quality mostly being dispatched to Europe, while being somewhat incompatible with the larger, stable development model and top level soccer structure of the United States. Like we've seen with Toronto FC, the Canadian MLS teams will get stocked with Americans and other internationals, and without sound management, will struggle to be successful on the field.
This paragraph doesn't make much sense.  Currently, TFC enjoys an exception to the international rule to make up for a lack of top flight-ready Canadian talent. Sigi quotes the exception and says it's a form of subsidization.  But "international" really means "American."  We are allotted 13 international slots as opposed to the rest of MLS which gets 8.  Yet five of those have to be American, so we're stuck with the same 8 "internationals" as well.

"But you get five Americans!  You don't have to rely on Canadian players!  It's not fair!"  Welcome to the world of Canadian professional sports. Just like we don't force the Americans to fill their NHL teams with domestic players, the MLB doesn't force the Blue Jays to buy Canadians.  It's been that way for some time. 

It comes down to money.  TFC pays the same amount for players as any other MLS club, we live under the same cap, we get the same allocations and DPs.  We used a DP for Rosario and De Guzman, but that was up to Mo Johnston.  There were less expensive options to fill the five Canadian slots, but he got a two-time MLS MVP and a former Deportivo La Coruna player instead.    

In any case, FS' conspiratorial view—that Canadian bloggers want the single-entity rules changed and the cap loosened is so we can buy back expensive Canadian footballers in Europe to fill the domestic rosters—is one I've never heard before. If the other clubs get the domestic roster exception, the total number of Canadian players required to fill three Canadian MLS rosters is twenty-one.  Is the only way for Canadian MLS teams to compete with their twenty-one Canadians in MLS and not "struggle for success on the field" is if we buy one of these guys?  Is that really why Duane wants single-entity to change?  I somehow doubt it.

TFC might have sucked, but RSL finished one point ahead of TFC in the league standings this year and won the MLS Cup, so I'm not really sure where this "struggling to be successful" comes in.  In any case, MLS can only be good for Canadian soccer in that it will encourage us to develop better players to fill the domestic rosters.  But league parity in MLS is such that it's not the case that we have to break the bank on Canadians playing in Europe to compete.  And the sort of changes Duane is advocating would take some of that competitive parity away.

Honestly, Sig, Dan, Bill, whoever: the reason I suspect many prominent Canadian soccer fans want changes to the MLS single-entity is because they think the quality of play could be better if the league spent more.  Why are they so obsessed with getting better players in MLS?  Probably because while MLS was born, became the status quo, and slowly and carefully grew, Canadians were watching international club soccer on basic cable for the last fifteen years and kind of got used to the standard.  Perhaps they suspect lots more people would watch soccer if it were a whole lot better.

Maybe they're naive.  Maybe Kenn Tomasch is right, and the sort of money we'd need to spend to see a qualitative difference in play would bankrupt the league.  I don't know.  But I know it's not because we want our European soccer-playing Canadians back.  If anything we want them to stay there so our national team might beat Honduras one of these days.   

Update:  Upon completing this, I read this comment from a familiar twitter pal on FS's post.  It bears re-posting here:

Brad
I want soccer to be a success in North America for a number of reasons, not the least of which is to become successful in the business of the game as a coach (civic pride, love of the forgotten game, pent up anger that I was never identified as a soccer head in my youth, are others), however, I see a big problem looming. The greatness of the biggest leagues in the world, which, to me, is always going to be the biggest source of domestic (North American) fandom is in the order of things. A multiple layered system of leagues which rewards consistency and demotes indifference will eventually cause MLS to crack on some level. The very insistence of commentators to stay on top of the USL, NASL saga is the boldest example of this desire. The people mentioned in this article are far more informed than I about these subjects and so I apologize for "sheep"ishly coming here to comment, but, I can say this MLS is not the answer, nor are seperate US and Canadian leagues, nor is just selling out the franchise owners who've brought soccer this far since 94.

Maybe instead of goonishly bitching back and forth at one another (Hi Duane!, Hi Soucie!) it would be of benefit to admit that it is far more important to continue to attract new soccer heads to the plight of the game in North America and hope that someone out there, with the gumption, can rise above all of the bullshit to truly lead us forward despite all of the roadblocks, pitfalls of our systems, geographical near-impossibilites, and cultural rants we insist on allowing to defer progress at this most basic level. Blind Love of the Game.


  

Thursday, February 25, 2010

Stupid Questions Part 7: On Free Agency

Not going to add to the pile, except to (very earnestly) ask this: when people talk about players wanting "free agency" in the new CBA, do they mean the straight Wikipedia version: "a player whose contract with a team has expired and who is thus eligible to sign with another club or franchise"?  Or "something else", whatever that might be?  And does anyone have an idea if MLS offered them something similar, but not quite "free agency"? 

Some Brief Words on the Hockey and the Football

I've written before that football seems to be the one sport in which match analysts, newspaper reporters, bloggers and fans all begin to sound like film critics.  "There wasn't much quality in the first half," "Not a classic by any means," "There was a great tempo to the match" and so on and so on.  It's not enough for a team to win, it has to be formally and aesthetically pleasing.

That seems unique to the sport.  You don't, for example, hear it often said in my neck of the woods that, "that was a really, bland, cynical display of conservative baseball out there today."  And while there is certainly a qualitative difference in the quality of play witnessed in Canada v. Russia and Finland v. the Czech Republic last night, aesthetic concerns about the quality of play are not usually on the minds of most hockey fans.

The reasons why become obvious the more you watch the sport.  A four goal lead in the last ten minutes of the third period often doesn't mean a damn thing.  Two consecutive power plays can change the course of a game in a matter of minutes, sometimes seconds.  There is little to say about the formal symmetry of attacking formations in a sport that involves back-checking, fore-checking, tying up the slot and, as players like to say, "putting the puck on the net and hoping for a good bounce."  Hockey might not always be pretty, yes, but it's usually relentless.  It is constant pace, turnovers, skating skating skating, shots from the point, rebounds and two on ones, three on twos.  Watching it, heart pounding, face hot and mouth dry, you sometimes begin to feel like Dave Bowman disappearing into the monolith.  I often refer to hockey as a cleanse from the slow, exacting nature of football.

Last night Canada beat Russia 7-3 in the mens hockey quarterfinals in the Olympics.  To say Canada has a special relationship with Russia in hockey is a gross understatement.  While Americans have their "Miracle on Ice," beating the Russians Soviet Union in the 1980 winter games, hockey was not and never will be the American national sport.  That victory was meaningful for the Americans in the same way it would be meaningful if the US beat England this summer.  A "miracle" in international sport for the US usually involves beating other countries at a sport Americans don't even really like.

In Canada, ten year-olds could expound on the importance of the Canada-Soviet 1972 Summit Series and Paul Henderson's final, series-clinching goal.  Common folklore has it that the Americans had the ICBMs and Senator McCarthy in the Cold War; we had Phil Esposito.  But even though our battles raged on hard ice, by grappling in a sport mutually adored by two winter nations, Canada and Russia bonded in a way the US can't understand.  We hated the Russians because they loved our national sport, and that's why we loved them.  You can still find Canadians rocking the CCCP with more than a little sense of nostalgia.

And that's why this morning, watching Russian hockey fans with heads bowed into their beers and Ovechkin shirts pulled over their heads, hearing from the Russian press that a gold in hockey would have make up for their disappointing tally in the 2010 games, makes you more proud to be Canadian than any shots of jumping, Maple Leaf-clad Vancouverites. Not because of the schadenfreude, but because of the lingering power of a fifty year, nation-defining struggle with a worthy and familiar foe.  Everyone spoke about how last night was going to be about Ovechkin and Crosby, but in the end it was about Canada v. Russia.  As it has always been.

This Sunday sees two finals, the Olympic Gold medal game in mens hockey, and Aston Villa v. Manchester United in the Carling Cup.  Two finals, two different sports.  While Canada still needs to beat Slovakia on Friday, chances are good they will be there on Sunday.  I can't recall the last time two teams I care about have faced off in a medal round on the same day.  While football is still my wife in the sporting realm, hockey will always be my mistress.  Here's to not having a heart attack.

Tuesday, February 23, 2010

The Internet is a Psycho Hose Beast: MLS Edition

Since everyone seems to be jumping on the Free Agency Timeline bandwagon, I thought I'd hop on too I and look at how the MLS bloggers have sneezed blood over the weekend, all from some coordinated player remarks on free agency made on Friday, and MLS president Mark Abbott's subsequent response.

Friday, February 19th, 2010 (Player Tweets, Facebook, Ives, Snowden, Carlisle)
  • Ives: "Key among the issues being fought over are player free agency and team autonomy in player transactions."
  • Snowden: "But say what you will about Wal-Mart - their employees at least have much more freedom than MLS players do when it comes to movement."
Saturday, February 20th, 2010 (Player Propaganda, Question for Mark Abbott, Old Soviet Union)
  •  Davis:  "As for Snowden and his latest salvo at Soccer365, it loses some of its thunder in light of his past efforts."
  • Goff: "But what is the harm in a player declaring his intent to remain in MLS but wanting to play for a different club?"  
  • Tomasch: "If you don’t want a player, why shouldn’t he be free to seek employment elsewhere (like any other worker in any other field in America)?"
  • Goff on Twitter: "Source close to players, about #mls cba talks: "It's like the old Soviet Union--everyone knows the system stinks and is holding things back."
Sunday, February 21st, 2010 (Will Players Strike Over Free Agency?)
  • Rollins: "However, what is clear is that this could get messy this week."
  • Archer: "So what the players have done, after the smoke clears, is given every writer, blogger, journalist and Ontario-based fantasist a question that they can now ask every single player, every chance they get: 'Will you strike?'"
  • Clive: "Fans taking a stand on free agency doesn’t make much sense given that most people don’t understand the underlying economics of the league’s long term strategy."
  • Tomasch: "If you want the player, pay the player. If you don’t want the player, don’t hold the player hostage."
Monday, February 22nd, 2010 (The Internet Goes Crazy)
  • Goff: "Dear Mr. Anschutz Thank you for your time, sir. Can I call you Phil? No? Okay, no worries."
  • Loney: "Dear Mr. Goff, Thank you for your letter, Steve. Can I call you Steve? Let me answer that for you."
  • Ives: "How exactly would free agency within MLS hurt the league as long as the league has a salary cap? It really can’t, not from the standpoint where skyrocketing salaries would be a concern."
  • Sirk: "And that's what happens with internal free agency in MLS. It dilutes the purchasing power of any salary budget, regardless of dollar amount, and simultaneously places inflationary pressure on that salary budget. Lather. Rinse. Repeat.
  • Clive: "Allowing free agency would be a nail in the single entity coffin, which explains the league’s reluctance to entertain the idea."
  • Fake Sigi:  "My original thought on the single entity thing was that the more teams acted like they were competing with each other, the less a court would be able to consider MLS a single entity."
  • Davis: "What you have seen from Mark Abbott is "free agency wouldn't be good for the league" and similar quotes. That's it, no official league explanation. Now, plenty of people have made up explanations."
  • Rollins: "Nothing is getting sourced right now. If you want to share information you receive about the actual negotiation, you have to go anonymous because it ain't getting out otherwise."
 


 

What is a "Holligan?"

A waste of my time, or apparently a bunch of people who decided for whatever reason to go shithouse mental on the comments section of a seemingly innocuous Rumour Mill written by Paul Doyle.  The readers of the Guardian continue to frighten me.  I'm only doing this to keep it alive on Wikipedia because someone asked nicely.

Friday, February 19, 2010

Stupid Questions Part 6a: A Quick Follow-Up to Kenn Tomasch's Answers

Yesterday I quickly brainstormed a few open questions I have about single-entity; granted, they came to me on the spot and weren't the product of a long and arduous research project.  In any case, I want to thank Kenn Tomasch for taking the time yesterday to answer my questions in the comment section.

I think Kenn paints a fairly accurate view of the sport's potential in North America.  Dreams of soccer becoming the most popular sport with the best league are likely just that for now: dreams.  I'm not convinced this will always likely be the case; it's folly to assume sporting culture will remain static, even in a place like America.  But soccer is at the bottom of a very large mountain, wearing shorts and a fanny pack.

While there is a lot to discuss among Kenn's answers, I want to focus for now on his answer to my penultimate question:
>>>And is single-entity a good platform to build wider support for soccer in North America?

That's a big one. I'm not sure it matters. Among some rabid fans/conspiracy theorists, single entity is blamed for everything but H1N1 - partially because it's trendy or easy to do so (B follows A, therefore, A caused B).

I have no doubt it's been a great platform to keep a professional Division I league alive this long. As I mentioned above, "single entity" doesn't mean as much as some would like to think it does. Cost containment has absolutely been key. The (perhaps) unintended consequence has been (arguably) too much parity. Some argue that you need a Superclub to spice things up, and MLS rules and regulations stifle that. Others say we don't want an EPL-type situation where the top four are obvious to everyone from Day 1. The answer, as with most things, lies somewhere in the middle. There's probably a way to loosen some things up so that you can create some teams that are more memorable than what some would call the "mediocrity" of what we currently have - but you're almost inevitably going to have some shockingly bad teams, and that's not good, either.

The notion that any team can potentially win is seen as a good thing by many. Others disagree. I'm not sure there's a good answer.
I want to emphatically echo Kenn's answer here.  Let me come clean: I think that the single-entity league structure is probably the best option for MLS in an unstable and soccer-unfriendly market. I very much agree with Kenn when he writes that "cost containment has absolutely been key."  But I think that critics of some of the "unintended consequences" of the league's emphasis on absolute, centralized spending parity have been unfairly blamed for wanting to overturn single-entity altogether and introduce a European-style ownership system where club investors run the whole show.

As much as Kenn is correct about the "rabid fans/conspiracy theorists" blaming single-entity for everything, there also exists the mirror image of MLS' defenders being completely deaf to any discussion about improving on the present model.  I think there are ways of rewarding clubs whose operator/investors have managed to turn a decent profit pay into the MLS pot without upending the whole thing and having the league crumble like the NASL. 

Even though some NASL backers were spending ridiculous amounts of money, like $4 million for Pele's signature (which arguably led to a sold out Giants stadium), the league died in large part because it expanded too quickly (in part because team owners wanted a piece of the centrally-distributed expansion fee).  I don't see how introducing something as simple a turnover-based team salary cap, or enacting some sort of revenue-based allocation, will end up swallowing MLS whole.  I agree with Kenn that there is a happy middle ground, and I don't think MLS is there yet. 

So why the Duane hatred from MLS single-entity proponents?  I could be wrong but as far as I know, he's not a free-spending, debt-enamoured radical; I just think he wants some openness to the idea of opening up the league to rewarding investor/owners for operating at a profit for spending a bit more on players.  Ditto many other MLS bloggers.  Single-entity, as a notion, is probably good for professional soccer in America right now, but I'm not sure there are simple final answers to every question about improving the present model. 

Thursday, February 18, 2010

Stupid Questions Part 6: A Billion Stupid Questions about Em El Es.

So now we turn, inevitably, to Major League Soccer.  Remember when I paraphrased Chuang Tzu and wrote that the number of financial articles you can find on a league is directly proportional to its financial stability?  Well basically anyone who follows MLS regularly will know something about allocation money, or the Designated Player rule, or the up-to-the-minute minutiae of collective bargaining talks.  You can't talk about MLS without talking finance.  That's not to say that MLS is financially unstable—rather, the question of whether single-entity is either fucking brilliant or fucking brutal has yet to be satisfactorily settled for all involved. 

It's for that reason I don't want to write five long posts on the mechanics of MLS single-entity ownership.  Major League Soccer bloggers have all written yards on it; hell, even I've written extensively on it in the past.  If you don't know how it works, and very few of us can say with confidence we entirely do, as a starter you might go here for a very simple overview, and then here for Fake Sigi's excellent two-parter on the MLS single-entity structure.

For the nutshell, over to Fake Sigi:
MLS LLC is a limited liability company with single taxation and partners that own it who are a mixture of corporations, partnerships and individuals. MLS owns all of the teams that play in the league (a total of 12 prior to the start of 2002), as well as all intellectual property rights, tickets, supplied equipment, and broadcast rights. At the same time, MLS contracts with owners to operate the teams it owns. These contractors retain a portion of ticket sales and other revenue, and must pay a portion of operation expenses. Contractors have a right to operate the teams they contract for and can sell a percentage of that right to other investors who may not be investors in MLS LLC.
In response to which Kenn Tomasch over at the aptly-named kenn.com, countering the commonly-held assumption that MLS owns 51% of its clubs (perhaps pilfered from the Bundesliga?), clarifies :
MLS controls its franchises. MLS ultimately decides what happens to its franchises. The “owners” (investor/operators) of MLS clubs own stakes in MLS, LLC, which, in its single-entity model, controls player contracts and league-wide marketing and media deals.
So basically replace the word "own" with "control" in FS's paragraph and you've got it.  I think.  MLS runs the show and gives local owners a piece of the action.

So why single-entity?  Well, it's careful.  MLS employs a salary cap so that the sort of transfer fee and player wage inflation that has bankrupted many a European club doesn't wreck a league promoting an immensely popular global sport in a fickle-but-wildly-wealthy North American market.  The league offers a bit of a way round with the designated player rule, essentially allowing franchise investor/operators to use their own money to make a marquee signing.  But the emphasis is on a centrally-controlled approach to prevent any runaway spending that might threaten the league as a whole.

I'm not going to get into the pro/con debate, except to say that it's raging and it forms a clear ideological fault-line among fans of MLS.  Critics believe that the centrally-enforced salary cap (currently $2.3 million per team) and single DP allowance are preventing the league from getting better players and improving the quality of play, getting asses in the seats, and allowing the league to negotiate better TV deals.  Competitively, they point out league parity is balanced to the point of absurdity.  They also point out that single-entity is propping up successful-yet-money-losing and poorly-attended clubs like the Columbus Crew.

Defenders point out the sort of money required to improve the quality of play in MLS to the extend more people watched/attended would bankrupt the league.  They also believe allowing profitable teams the right to spend whatever they make on players would lead to the sort of problems that led to the demise of the NASL.  My own view is 100% non-committal either way.     


But that's because I have about a million unanswered questions about MLS single-entity system.  And I'm not alone; it seems everyone has endless reams of "stupid questions" on that front, from players to fans to pundits to whomever. I'm not always convinced people writing/commenting about single-entity are really entertaining or acknowledging these questions in good faith, but project their own view and sort of leave it at that.

My stupid questions are fairly simple but infuriatingly broad: does single-entity make it harder for less profitable teams to move to a more profitable market or disappear altogether?  In a league where championship clubs don't sell out at home, what sort of leverage do fans have in participating in the operation of their club?  Is there a way to improve the quality of play in MLS without spending more on player transfers and wages?  Would an improved on-field product even be enough to convince a European soccer-loving American to purchase an MLS season ticket?  Would profit margins dramatically improve if they all decided to buy MLS season tickets tomorrow? Under what circumstances would an American who doesn't watch soccer start going to MLS games?  Would they even watch MLS if it became the best league in the world?  Or is there something about MLS sporting culture that's preventing the league from selling more tickets and getting better TV deals?  Is there any research or precedent to support the argument that the league just "needs to be around longer" to get more fans?  And is single-entity a good platform to build wider support for soccer in North America?  Does wider support for MLS or soccer in general in North America even matter?

I have many, many more questions besides.  I'm not sure I'm willing to dedicate a several part series on them, but I will try to answer these questions in relation to the problems currently experienced in the wildly popular/profitable Premier League, to see whether single-entity should either be a bridge to something else, or the status quo for North American soccer. 

Monday, February 15, 2010

Stupid Questions Part 5: What it Will Take to Reform English Football

In a Pitch Invasion Sweeper from last week, Tom quoted Supporters Direct on various solutions to the debt problem in English football: 
"...they may be salary caps, luxury taxes, loss caps, a more comprehensive, single Fit and Proper Test, built in supporter-representation at clubs to ensure protection against grounds like Crystal Palace’s Selhurst Park being split from the club, or the countless number of small London clubs seeing their homes sold to pay for wreckless spending (in some cases, something a little more sinister at play by property developers).”
As I wrote in the Sweeper on Sunday morning, it seems some or all of these measures may be coming down the legislative pipe.  These two stupid questions come immediately to mind: can any of these a) be feasibly implemented in the free market culture English football now takes for granted? and b) will they be actually effective in protecting clubs from running up irresponsible debts and threatening their club's existence a la Pompey?

Market freedom has been both extremely generous and extremely dangerous for English clubs since the advent of the neoliberal ethos of the post-1992 Premier League era.  In good times, the freedom of the top flight to separately negotiate its own TV deal and distribute said rights fees to its member clubs has been an enormous boon, leading to clubs with a lot of money to spend to buy the best players to get even better, win trophies and get Champions League money, promotion money, more TV money, and eventually, European dominance.  Few fans complained because hey, everything's lovely when you're winning.

In bad times (and importantly these are the first real bad times since '92), this freedom has led to a negative feedback loop of debt.  Clubs that went into debt to spend on players now have to go into even bigger debt buying players to maintain their place in a league or cup competition to guarantee future revenue to keep making debt payments (see my previous posts).  So what?  In dire economic times, companies die under similar circumstances all the time.   The difference is, if a company becomes insolvent and goes out of business, it's tragic because people lose their jobs.  But when a long-established football club dies, thousands, if not millions of supporters are aggrieved a beloved sporting institution that has been around in some cases longer than a century.  It gets people really upset, hence the sort of legislative campaigns we're now just starting to see form in England.   

The model everyone is now touting as a model for the Premier League future is the Bundesliga. Patrick Barclay at the Times has been running with the idea of introducing wholesale the Bundesliga's 50+1 rule to English football, whereby private investors can never own more than 49% of a club, meaning club members control the board of directors and the day-to-day operations of the club.  He also advocates selling off the most egregiously paid players in an effort to drop ticket prices across the board, and implementing a salary cap based on revenue turnover, providing ticket price subsidies from a portion of TV revenue.

I don't want to go into the various merits/drawbacks of these ideas.  We know them: English clubs might not do as well in the Champions League because they would no longer be able to run up massive debts on star players.  England would no longer have pick of the international litter.  And the upside, which I think are significant: less irresponsible spending, more fan say in the operation of their club, cheaper ticket prices.

I'm just not convinced that these sorts of changes are yet politically or culturally feasible in England.  Clubs have enjoyed some measure of private autonomy from fans since the inception of the league in the 1880s.  There has been a culture of ruthless capitalism in English football for decades, stretching through the White Horse final to Portsmouth captain to Jimmy Guthrie's struggle against the Football Association for better wages to the inception of the Premier League.  It may not seem that way because for most of football's history, strict control of player salaries and exploitative contracts, and run-down, often unsafe grounds, and a dismissive attitude to fans, kept owners and chairman rich and football relatively stable.  In some sense, the bitter irony is that the Taylor report, a recommendation to modernize the game so that fans were no longer treated as cattle to be exploited, when combined with the splitting off of the Premier League and the Bosman ruling, led to an unsustainable period of enormous wealth for clubs, as well as enormous risk.  So even when intentions are good, in the relationship between money and heritage in English football money has tended to win out. 

I use this example because I think that the relationship between private money and football in England is so entrenched, legislating reform has to be more than cosmetic, more than installing a place or two for fans at the club directors table.  While the Bundesliga provides a great sustainable model for football (although it had its opponents in Germany among those who wanted glitzy PL style glory), it was born in 1963 out of a league system that had only gone semi-professional beginning in 1949.  Even then, the Bundesliga was formed out of concerns that the lack of a single professional league in Germany was adversely affecting the national team.  My point is, the sporting culture in Germany largely supported a more equitable, more member involved and less capitalistic or financially reckless model.  The Bundesliga was a means to improve the national sport, not to make owners rich.

To my mind, changes to the English system should be based on a clearly articulated belief that clubs can no longer be considered to be private, for-profit companies alone, but public cultural institutions in need of governmental protection and regulation.  My concern is that the current anti-debt movement in England is both populist and reactionary.  Public sentiment is largely directed as individual owners, often portrayed as "foreign investors."  A few fan-placating provisions might prove popular before a General Election, but I'm not convinced they will flip the script and protect beloved clubs from mismanagement and ruin.  As I've tried to demonstrate, debt in football is not just a problem of bad management; it's built in to the league structure itself.  Simply telling clubs they can't spend more money than they have won't be enough.

Any structural changes are complex, and require the expenditure of a lot of political capital.  This means the Supporters' Trusts need to go beyond Green and Gold campaigns: they need to articulate a new vision for clubs that puts fan interests ahead of owner profit.  This would comprise a massive ideological shift in England, a sharp break from the past, and therefore it deserves more than indignant, populist reaction.  It deserves a clearly articulated vision and plan for implementation from the Supporters' Trusts, not a laundry list of possible "solutions."  There will a lot of resistance; already the Premier League have made a token gesture to increased competitive parity with a playoff option for the final Champions League spot, which essentially follows the Premier League script: get the TV money, buy the good players, compete for top spot.  But it's a fight worth undertaking.       

Thursday, February 11, 2010

Stupid Questions Part 4: A Response to David Conn and Lord Mawhinney

A few things to mention on the last post before I go on: while I compared the NFL to the Premier League, many of the structural peculiarities of the latter are not obviously limited to the top flight.  I think it's important this issue broaden out to English football as a whole. 

I should also stress that club debt is not bad per se; obviously, few businesses could operate without some level of manageable credit.  What is bad is the sort of debt that leads to insolvency, or failure to pay taxes (or indeed St. John's Ambulance).  I think that much is clear.

Pitch Invasion has been collating some stories the past couple of days that tie in to this discussion, so I'm going to reference some these pieces to work in some questions about commonly held solutions to the problem of insolvency in English football over the next few posts

Yesterday's Sweeper quoted David Conn's article on the failure of several clubs to pay taxes owed, the sort of final death throe before insolvency.  There are two key paragraphs I want to pick apart a bit:

Yet the very appearance of two of football's bigger clubs – and Southend United – who continue to receive millions of pounds in TV and other income, in a court where scores of small, hard-hit businesses will be wound up today, has concentrated minds again on the game's inability to balance the books, even in this boom time.

Since 1992, the year the Football League's First Division clubs broke away to form the Premier League, and therefore not share their TV rights bonanza with the other three divisions, Football League clubs have fallen into insolvency a staggering 53 times.
   
Conn is clearly insinuating that the Premier League's split from the Football League and their exclusive access to the television rights money bonanza have led to smaller clubs going out of business.  That being the case, as he implies in the first paragraph, the bigger clubs—Cardiff and Portsmouth—should have better balanced their books considering the income they received in television rights that their lower league counterparts could not enjoy.

I'm happy to accept both these claims, except Conn mentions something later in the piece that hints at a problem which is often dealt as a separate issue when discussing money problems in football: the "football-creditors rule."  I'll let him explain:
Compounding this embarrassment is football's insistence that when a club is bought out of administration while "ordinary" creditors have to accept a fraction, often a 10th, of what they are owed, other clubs, and players, must be paid in full.
 Both the Premier and Football leagues justify this, the "football-creditors rule", by arguing that it preserves competition by preventing a club signing players from other clubs then not paying for them. The priority given to football debts explains why the Premier League withheld Ports­mouth's £7m January TV payment and some of the £5m fee from selling Younes Kaboul to Tottenham, then used the money to pay other clubs, while Pompey's £7.5m tax and VAT bill was left unpaid.
As Conn goes on to write, Her Majesty's Revenue and Customs (the tax man) hates this rule because it means the football league will force a club to pay the full price for a player before it pays the government the massive tax deducted from fat wage packets, which in turn leads to things like winding-up orders which is not very nice for the club or the fans.

Again, Conn knows his stuff.  But he frames this discussion in terms of "overspending on players." He quotes without an indignant Lord Mawhinney, the Football League chairman: 
 "People try to find excuses about why clubs have had to go into administration," Mawhinney said yesterday. "One of the sadnesses is that there is never enough recognition of the small businesses, the taxpayer, and worthy groups like St John Ambulance who are left owed money after doing business in good faith."
Mawhinney has publicly backed a salary cap for many years, but the clubs have rejected it because they want the freedom to push for promotion. He added: "A number of clubs over the years have effectively used HMRC as another banking facility. I'm pleased that our new arrangement with HMRC makes that much less likely in the future."
Note that Mawhinney frames the issue as greedy guts clubs wanting to go after promotion, but doesn't acknowledge that some clubs might not want a salary cap to prevent them from spending on players to stay up.  And that failure to stay up in a particular league could lead to financial peril as well, especially at the higher tiers in the Football League chain, issues I mentioned in my post on Tuesday. 

Transfer fee and wage inflation may have been in part spurned by the Premier League money bonanza (in confluence with a number of other factors, notably the Bosman ruling), but that does not automatically mean clubs with access to that money can afford to pay the going rate for good players and stay in the Premier League at the same time.  Wage inflation is an enormous issue in football and shouldn't be dismissed simply by saying "we proposed a salary cap but the greedy-guts clubs said no."  The very fact that "a number of clubs" are pocketing wage packet tax deductions to pay their creditors goes to show that "a number of clubs" are spending an unhealthy percentage of revenue on player wages.  It's not limited to "badly-managed" clubs; buying players often helps guarantee that revenue will be there in future years i.e. to help the club stay in the Premier League and keep getting that TV money.

This is not a defense of Portsmouth, who were undoubtedly poorly managed (and you can blame Harry Redknapp if it makes you feel better, but it hardly matters now).  But in some ways focusing on Portsmouth's recent troubles, and using them as an example of bad management and club avarice, is a distraction from the wider problem of clubs often having little choice but to spend a lot of money on player wages or face the prospect of either no future progress or a slow decline. 

Mawhinney would be justified in his stance if football were a mere circus act, but football is by its nature a competitive sport.  A club that languishes in the centre of the strictly anti-insolvency provisioned Conference, carefully managing its finance and seeking to develop local talent rather than buying big players, will no doubt be in good financial standing.  But what is that club for?  It's best players poached by bigger clubs at below market prices, attendances static or dropping for the lack of progress, because at the end of the day the game has to be about winning.  Or at the other end of things, you could have a Hull that gets promoted to the Premier League to enjoy some of that sweet TV money, doesn't spend on players to avoid irresponsible debt, and goes straight back down to the Championship and doesn't get the TV money until it pops back up again.  Again, this strikes at the heart of the matter: that sporting competition and finance are intrinsically linked.

Conn notes at the end of the article that the FA has been silent "...on the wider financial problems convulsing the game, from the combined £1bn debts ladled on to Manchester United and Liverpool by their US owners, to Portsmouth's meltdown, Crystal Palace going into administration, Peter Ridsdale's struggles at Cardiff and the other clubs consulting the A‑Z for directions to the winding-up court..."  But he ends essentially by blaming the exclusive money pile that is the Premier League TV deal.  So my stupid question is, would things be any different if the £1.78 billion was distributed throughout the Football League?  Would players be more affordable, or would transfer fees and wages rise accordingly? 

Tuesday, February 9, 2010

Stupid Questions Part 3: An NFL v. Premier League Case Study

Some housecleaning: this series has killed my numbers this week, so to remedy the situation, I've stopped looking at my numbers.  Also, the following subject matter has been covered elsewhere already countless times, but I needed to do this for myself, so if you comment on or link to it, please don't write "this is nothing new."  Thank you.

I watched the Super Bowl on Sunday evening and for all the ads, the ads, the constant graphics, the ads, the Close Encounters of the Third Kind-inspired half-time show featuring some band from olden times, it was a pretty good game.  Yet it probably only just "a good game" for me and my soccer-following cronies who immediately switched to GolTV after the final whistle.  For everyone else, particularly the NFL channel which apparently felt it necessary to broadcast an eleven-hour pregame show, this was the sporting spectacle of the year (and for some sports journalists and one emotional quarterback, redemption for Hurricane Katrina).  And any time there is a sporting spectacle in America, there is a hell of a lot of money not too far away.

Even on Canadian TV, there are constant reminders the NFL is a league drenched in revenue—this is the one game where the ads are often more popular than the main event.  It's no secret the NFL makes oodles and oodles of money.  In fact, it's four spots ahead of the Premier League in overall profitability.

It's certainly arguable the Premier League has a greater global reach, but the NFL dominates a cash-heavy North American viewing base.  That's part of the story, but there's a lot more to it.  In fact, the NFL provides a good point of comparison to parse out some of the problems with the Premier League model.

It's interesting to note the two separate wikipedia entries for the Premier League and the NFL.  The Premier League article features two sub-headings, one labeled "Finance" and the other "Corporate Structure."  By comparison, he only substantial space dedicated to money issues on the NFL entry is under "Player contracts and compensation," and you get the sense it's only there because the NFL are just so damn proud of the 59.5% of total projected league revenue wage hard salary cap.     

Which oddly brings to mind Chuang Tzu's dictum:

So, when the shoe fits
The foot is forgotten,
When the belt fits
The belly is forgotten,
When the heart is right
“For” and “against” are forgotten.

And when you have a functional financial model, money issues are "forgotten" too.  Hence you don't have a gang of American David Conns raving about irresponsible ownership and the threat of enormous debt in the National Football League, or lots of space on the NFL wikipedia page—or the internet for that matter—dedicated to discussing NFL finance.  

So why is the highly-profitable NFL doing so well while the highly-profitable Premier League (and often not-so-profitable English football in general) remains financially unstable?  Simon Kuper once wrote that it's amazing English football teams persist as long as they do considering how many businesses have failed since the late 19th century, but that argument misses the point.  These are English football clubs, not grocery stores.  They are administered by the publicly governed Football Association, which often intervenes (for better or for worse) whenever clubs are threatened by financial mismanagement.  European football clubs often operate as quasi-private businesses that double as important 'public' institutions, and for this reason it's a lot harder for football clubs to fail.  Consider how many Simon Jordans in England would willingly lose ten years and £30 million preserving a long-running but money-losing cracker factory.

Anyway, the reason why the NFL is in such good health despite a hard economic downturn is simple: stability.  This stability isn't necessarily engineered; in the NFL's case it often comes down to culture and geography.  

First of all, NFL teams are franchises. The franchise system doesn't carry the stigma in North America that it does in Europe simply because many sports clubs here haven't been around since kingdom-come.  For example, there are only two original 1922 charter teams still in the NFL, and both have since moved to different cities.  A franchise system offers economic flexibility; if your team can't generate enough money in one geographical area, it can simply be moved somewhere else.  When this was most recently tried in England, with FC Wimbledon getting moved to Milton Keynes, it caused a public furor as Wimbledon was perceived to be "more than a private business," it was a club with supporters and a rich history.  But the flexibility of the franchise system isn't just a perk in North America—it is integral for owners interested in building a viable business.

That brings us to relegation/promotion.  Sports teams the world round tend to make their money the same way—stadium tickets, television broadcast rights fees, sponsorships and merchandise.   It's much easier to earn money in all of these areas, even if you're the worst team year-in, year-out in the league, if you don't have to worry about relegation to say, the CFL.  Consider that the St. Louis Rams with their persistent loser-status were last valued by Forbes magazine at $929 million dollars.   

Hull on the other hand have no choice but to spend as much on players as they can get away with—which means dallying in long-term debt for short-term survival—before worrying about maximizing gates via stadium upgrades, because just staying in the Premier League is so financially important.  And the sheer number of teams going up and coming back down in England is such that those sorts of upgrades are already an extremely risky venture regardless if your team stays up.  There are 92 league teams in England.  There aren't enough fans from every last geographical quarter of England to fill every ground anticipating a long stay in the Premier League, and therefore gate receipts, sponsorship and merchandise are a much more difficult prospect than in the NFL with its limited, and static, number of teams.    

None of that would be as big an issue though if player wages and transfer fees weren't so inflated.  Which brings us to the third point, the business of the 59.5% of projected league revenue hard salary cap.  Now before MLS salary cap advocates get all uppity, it should be noted that the talent pool for the NFL is almost entirely (North "Go Doug Flutie!") American.  The NFL has no real global competition to worry about either.  It's not like Peyton Manning can go to some Mongolian league to earn three times as much money.  

The Premier League on the other hand is competing with four or five European leagues.  If it independently decides to enact a salary cap, even one based on turnover, the league's smaller clubs won't be able to compete while the Big Four crushes competitors at home while suffering in the Champions League, losing millions of dollars of revenue.  All the best players will simply go to the continent.  It might work if UEFA mandated a cap across Europe, but we've yet to see any concrete action on that front.

You get the idea.  A sport where the business side and sporting side are so integrally linked, where "merit," that is, league standing, is bought and sold at prices far exceeding any long-term investment an owner might choose to make for the benefit of the club; where teams are unable to project revenues beyond their standing in the league table (or whether they'll be in the league at all), where they are unable to move to a more profitable market, and are forced to pay market rate for players with no centrally-enforced salary cap, will put owners in debt.  Lots of debt.  The Glazers, for all their bad behaviour—borrowing against the club, selling players to shore up their own debt—wouldn't be nearly as hated if qualifying for the Champions League meant the difference between a bright future or "doing a Leeds."  Nor would Liverpool be in such dire straights if keeping Fernando Torres on the squad wasn't integral for the club keeping their "Big Four" status.  To me, this is a structural problem, and a deeply complicated one that won't be solved by fiat or by fan. 

The Premier League (perhaps arguably all of English football), based on the history, geography, and culture of its place of origin, has made financial wizards of every fan of the league, because performance in the league has such direct consequences for a club's financial health.  And as we saw the other day, the league in some part wants it this way.  The way out will involve hard choices, from everyone, fans, owners, football administrators and politicians alike.  We can all keep reacting to the news as if money-makers are bad, or we can decide what a football club is exactly, whether it is worthy of public protection or not.  I will continue to look for answers...   


 

Friday, February 5, 2010

Stupid Questions Part 2: The Merit Payments Fund

I suppose in some ways it was weird to begin an in-depth look at Premier League finances with the Fit-and-Proper test, but in discussing this sort of thing, there really is no good jumping in point.  Anyway, after awhile you start to see a clear pattern, clearer still if you've been slavishly following the league tables year after year like most football people.  None of this should be a surprise, but as Orwell said, "To see what is in front of one's nose requires a constant struggle."  And I think I can speak for David Conn when I say, boy has this been a struggle.

So, revenues.  The Premier League publishes all its rules on its website, including those related to finance, so if you really want the Articles of Association handy, go nuts.  Needless to say, I've downloaded them. But perhaps it would be better for now to refer to the handy Premier League FAQ:
How are television revenues distributed to Premier League clubs?
50 per cent of total money goes on an equal share basis to the 20 Premier League clubs, while relegated clubs also receive some of this money in the form of a parachute payment. 25 per cent of the money is paid as facility fees, which are determined by the number of appearances on television. 25 per cent is paid in merit payments, determined by the position that a club finished in the league.
The caveat to that first 25% is that it's pretty much expected each Premier League team will get on telly at least once.  It should also be said that this is UK TV revenue; overseas broadcast revenues go to operating costs first, and the rest is divided equally among Premier League clubs with less going to relegated clubs.  PL sponsorship money is also distributed equally, with less going to relegated clubs  Boring?  Perhaps.

But note the built-in bias in that little twenty-five percent toward clubs that finish farther up the table; the Premier League calls it the Merit Payments Fund.  Sounds nice; everyone likes a meritocracy.

But this is top-tier football here.  "Merit"—that is, league table finish—is largely determined by the quality of players on a particular team (despite the currently in-vogue romanticization of "The Manager" in England).  Yes; contrary to the radical socialists in our midst, "merit" cannot necessarily always be bought or sold—but as Fredorrarci masterfully pointed out the other day, money does buy you a good measure of probable success.  In any case, this notion of merit is important and I'll be returning to it in future posts.

Now this 25% chunk might not seem like that much in the scheme of things, especially when you compare it to other sources of club revenue like season tickets and club sponsorship and all the rest. But when you compound the Merit Payments Fund with the TV rights money lavished on Champions League qualifiers, and the quite-a-bit-smaller TV money given to Europa Cup qualifiers, the amount of revenue a club can expect from finishing a bit higher increases exponentially.  The idea is a club can use this money to buy the sort of players in order to climb even higher, or at least stay where you are.  Hence, in large part, the Big Four (although their dominance involves more parsing out, which I'll tackle in the next post on club revenues).

The MPF is really just a symptom of how the PL works: a club's financial health is intricately tied to its on-pitch success.  Twas ever thus you might say, but the Premier League's peculiar link between the football and the money is one of the main reasons we're seeing so much financial damage today, why Premier League clubs are so reliant on capital from wealthy foreign owners, why Pompey have had four such owners in the last six months, why Liverpool are on a massive precipice simply because they might not finish fourth.  It is also one of the main reasons why the Premier League is doesn't generate as much revenue as the NBA, NFL, or MLB, which will become clearer when we discuss how individual clubs earn money, and player wage/transfer fee inflation.

I didn't ask any questions I know, but there are lots coming down the pipe.  Okay, is any of this wrong so far?

 

Thursday, February 4, 2010

Stupid Questions Part 1: The Premier League's Fit and Proper Persons Test

There are several problems when blogs/media operations get involved with in-depth discussions of sports league financial models; it's complicated, and journalists love a good, simple story i.e. Big Bad Corporation = Bad, Fan = Good.  I graduated with a Bachelor of Arts in philosophy, so while I could go on and on about a possible Adornian aesthetic of football, I'm not really equipped to delve into the finer points of winding up orders or the unique qualities of a single-entity league structure.

But I think it's important to try to learn about these things in light of a) the increasing financial problems faced by both big and small Premier League teams alike and b) the endless back-and-forth in MLS circles about whether Don Garber has created the perfect model for the sustainable financial growth of smaller market sports in America, or whether he's settled for his small potato operation and doesn't have the gonads to take the cap off and liven his shit up.  The more we know about both football league models, the more we might be able to rationally compare the successes and failures of either, and whether they indeed have anything to learn from one another.

Now, the only way though I can ever figure any of this out is by asking potentially very stupid questions.  And I don't expect any of you to provide answers; rather, I'm just going to put these questions out there, to see what might stick and what might need revising.  If I can't find a relevant answer, I'll send them to the appropriate authority, in this case, info@premierleague.com. 

So I want to begin today with some very preliminary questions about the corporate structure of the Premier League and its relationship between club owners/directors, and specifically, how this relates to the (in)famous Fit and Proper Persons test.  So, to wikipedia.  Let's consider how the Premier League came into being in 1992; the top flight clubs breaking away from the Football Association's Football League in order to independently negotiate their own television rights and sponsorship rights in order to make more money and better compete in Europe (this is all neatly elaborated in this 1999 court decision btw).  In other words, the clubs wanted more independence in negotiating lucrative broadcast and sponsorship deals in order to get more money.  I think we can say, "mission accomplished," but with some fairly large caveats, among them, the built-in bias toward Champions League qualifiers (that's for another post on revenue). 

As wikipedia blandly puts it (or completely unreliably puts it, depending on your views on wikipedia) : "the Premier League is a corporation in which the 20 member clubs act as shareholders."  Those clubs are independently owned and operated, and they elect the chairperson, a chief executive, and a board of directors.  The FA maintains a special board veto vote over the appointment of the chief executive and chairman, and in the imposition of rule changes, but does not oversee "day-to-day operations".

So, in other words, the Premier League shareholders are the majority club owners, and the FA has no say in the Premier League's operation.  Fine.  Now to the Fit and Proper persons test, initially instituted in 2004 to try to regulate majority club stakeholders.  Initially, it was enacted primarily to prevent known criminals from buying Premier League clubs.  But this past summer, the Premier League responded to government pressure by strengthening provisions regarding public disclosure of owners, as well as providing measures for the league to respond if they consider any of their clubs to be a "going concern."  David Conn also wrote last summer that the provisions "check where the money is coming from to fund a club and must pass it as legitimate," although I'm not sure how exactly.

So far so good?  No seriously; is this okay?

Now, read that Guardian article.  The Department for Culture, Media and Sport Andy Burnham was pissed off that the question of "leveraged buyouts" that is debt-loaded club acquisitions, hadn't been addressed in the new Fit and Proper test.  To which Richard Scudamore saucily replied:
"Acquisition debt is only available to those whose assets are worth lending against in the first place.  Clubs have been managing debt for 20 years. They are also able to adjust their cost base...The word 'debt' is like an onion.  The minute you start to strip off the ­layers, your eyes start to water because it gets harder and harder to grip, because it's complex. The people best qualified are directors of companies, accountants, banks."
So, in other words, let the club accountants and the banks take responsibility of the potential harm of leveraged club buyouts like those at Manchester United.   So my stupid question is this: why would the Premier League shareholders, that is, the club owners, ever vote on a provision that would effectively discriminate against acquisition debt, the same approach that got them involved in the Premier League in the first place?  What would be the point, from their perspective?  And how could someone force owners to address these concerns after the fact, outside of a real risk of insolvency? These aren't rhetorical, I mean it.  I don't know.

Also, the Portsmouth crisis continues, and is such a fucking mess that it makes my head hurt.  More questions...

Wednesday, February 3, 2010

What "Not Senior Enough" Means in the Premier League

More infuriating news via the Guardian's David Conn.  Apparently in the Premier League, "not senior enough" means having the authority to sell a top-rated (and Canada-shirking) keeper at pathetic price under the nose of one of Portsmouth's executive directors.  And because he's "not senior enough" corrupt Israeli lawyer Daniel Azougy does not have to face any meaningful scrutiny from the league.

If Pompey gets snuffed out, it's not on Ali al-Faraj's head; it's on Richard Scudamore's.  To allow this farce to take place means the Premier League is not doing its job on behalf of supporters, and I hope the Portsmouth Supporters Trust and SOS group remind him of that today. 

Enough is enough.  All the Premier League supporters' trusts should take consider taking collective action against Scudamore following the unregulated mess his tenure has wrought in these past months.

Tuesday, February 2, 2010

Choose Your Own Pricing, and a Question to the More Knowledgeable

Reading the reader just now, and quite bemused reading in the Sweeper covering Mansfield Town's "choose your own price" promotion to thank the fans for being so yada yada yada.

What would I voluntarily pay to watch Toronto FC?  With Carver in charge, ten bucks.  Cummins, meh, fifteen.  Preki I'd pay full price as a starter, more for curiosity.  That and the new pitch.  Which reminds me: Toronto FC supporters should press future mayoral candidates on their views on BMO Field and the Argos and future support for soccer in Toronto, if they have the chance.

This year I'm going to go to as many CSL games as possible, and I paid ten bucks the last time, which was about right because it was a Serbian White Eagles/Toronto Croatia "derby" match and worth every penny to see Toronto's weird, pseudo-hard underbelly.  Based on quality of play though, I'd kick in a buck a game.

Anyway, I have a question for any reader who would like 1) my respect or 2) blogger who would like a semi-competent guest post: please explain to me in the most explicit terms possible how Soccer United Marketing is "affiliated" with AEG.  Just curious.

Monday, February 1, 2010

US Fans Can't Afford World Cup Tickets - Headline News ESPN?

I picked this one up on Twitter via @omerida, and the story really is essentially that some US fans ca't afford to go to the World Cup because they don't have enough money.

First of all, I know quite a number of "US fans" and most have them have been following the USMNT for some time.  They've picked up a few useful tidbits of knowledge along the way, like, for instance, that going to World Cups is usually quite expensive.  This isn't something they would normally find out by reading a bunch of sad-sack tales on Soccernet mere months before kick-off.

But our buddy Leander busts out the world's tiniest violin:

Yet many of those who thought they had stumbled on a nice piece of luck are discovering that the tickets they shelled out anywhere from $80 to $900 apiece for will be hard to actually use. Travel to South Africa, as exotic as it may sound, has turned out to be prohibitively expensive. Flights from New York to Johannesburg -- where most games, including the final, will be played -- would normally cost about $1,000, but they will set you back at least $2,500 if travelling during the World Cup.

Last I read, way back in the wild and crazy boom times of 2006, traveling to a first world European country in the middle of summer to watch the World Cup wasn't something you could sort of pick up in the bottom of a discount bin at the airport (god were there such things!).  I mean the economy was doing okay but it's not as if Joe Home Depot Center was chucking twenties on the field whenever goals were scored at MLS games.  In Germany, prices were gouged, things got expensive.  Something about it being the world's most popular international sporting tournament.

And if that could be said for 2006, 2002 in Japan/Korea should be a no-brainer.  Chances are if you were at that tournament with a US flag in hand, you were in Asia teaching English back when it still paid quite a lot.

So I'm guessing these US "fans" Leander provides a whiney platform for may not have really been "fans" at all.  They may have watched the Cobert Report the day after the US spanked Spain in the Confed Cup and made a mental note to buy tickets to that thing that the US might win in Africa, a place everyone knows would probably take bits of dirt as currency.  Meanwhile, other actual US fans either did the smart thing and saved up, or did the smart thing and booked off the appropriate days at work.  What editor approved this story angle?