The Cost of Success in Major League Soccer

In almost any business, labor is one of the greatest expenses on the books.  Materials, production costs, and transportation are becoming more efficient around the globe, but employee salaries and benefits, especially in the sports world, are almost never cost-efficient and rarely static.

Big player signings make national and international headlines, and signing a star player tends to bring notoriety and prestige to an organization which can afford to pay such high costs to compete.  This does not mean that sports organizations are not diligently working to reduce the costs of incoming players, however.

READ: The Most Valuable Players in the World…For the Clubs Who Owned Them

Some Major League Soccer (MLS) clubs have written the book on spending efficiently and competing for championships.  The league has an intricate (and sometimes mysterious) rule book on how teams are allowed to build their rosters.  Aside from two or three Designated Players (DPs), each team has a spending limit when signing players.  A combination of foreign talent, domestic veterans, and rookie signings is a common recipe for remaining under the salary budget.

READ: The Spending Habits of MLS Clubs in 2014

Which teams are the most efficient at spending their salary budget?  Using the regular season standings from 2013 and 2014 along with the salary data released by the MLS Player’s Union, it is possible to see which teams have the lowest cost per point.  Below is a figure that illustrates just that for the 2013 season.

2013 MLS Salaries and Cost Per Point

 

All teams that spent over $5 million made the MLS playoffs, with the exception of Montreal who missed the playoffs by two points.  The 2013 season was ripe with parity, the difference between the 10th place team and the 16th place team being a mere ten points.  The average cost per point in the league that year was $113,835.  Teams with larger budgets will naturally have a higher cost per point than teams that did not spend as much money.  However, it seems that spending paid off in 2013, for clubs like NYRB, RSL and LA, though Sporting Kansas City and Portland  finished in the top 3 in the league while efficiently spending under $70,000 per point, showing that it’s possible to build a strong, competitive team on a more modest budget.

Below is the same table for the 2014 season.

2014 MLS Salaries and Cost Per Point

This season had a slightly bigger gap in the winners and losers by season’s end.  This time, D.C. United and Real Salt Lake found ways to win while spending economically.  Both clubs finished 3rd and 4th respectively in the regular season while spending under $70,000 per point.  The average cost per point in 2014 was $140,570, a slight increase from 2013.

Top performers Seattle Sounders and Los Angeles Galaxy showed this season that spending paid off.  Both had a high cost per point but both performed well, but the LA Galaxy would go on to win the MLS Cup.  What is true in both years is that teams towards the bottom half of the table seem to group around the low $100,000 mark in cost per point.  These teams are not spending much but they are also not seeing excellent results on the field. The team that finished last in 2013 and 2014 also have a high cost per point, which mathematically comes when you don’t have many points in the denominator.

To understand how these teams compared from year to year, below is a graph that represents the cost per point for Eastern Conference teams in 2013 and 2014.

Here is the same graph for Western Conference teams.

Notice Toronto FC’s jump in spending with the signing of Michael Bradley and Jermaine Defoe.  Yet the team finished with 41 points, eight shy from the club’s first playoff berth.  San Jose also saw an increase in cost per pont from 2013, considering they finished second to last in 2014.

Seattle, Los Angeles, Real Salt Lake, Columbus, New England, Kansas City, and New York all made the playoffs in 2013 and 2014.  That means seven of the ten teams from the 2013 regular season finished in the top half of the table the following season.  If making the playoffs is the benchmark for success, these teams can be grouped into two very distinct categories: teams that spend a lot of money to win and teams that efficiently do so to achieve the same results.  Seattle, Los Angeles, and New York, the big market teams, spent money and will finish the regular season achieving their goals but with a high cost per point.  Columbus, Real Salt Lake, and Kansas City compete efficiently and have a low cost per point.

There is no right way to spend in MLS.  Success has been achieved in many ways and the formula to win seems to be rewritten year to year.  This is partially what makes MLS exciting to watch.  There is no arms race for the world’s best players like there is among Manchester City, Real Madrid, and the like.  With several new big name signings joining the league, as well as two new clubs, it will be interesting to see how things shake out and what recipe is the winning one for 2015.

 

What do you think about the cost per point trends in MLS? Let us know in the comments section below, or via Facebook or Twitter.

Reporting on the business side of the world's game.