MLS Threatens to Lock Players Out; Season Start in Jeopardy

This probably feels all too familiar. Before the 2015 season, Major League Soccer (MLS) and the MLS Players Association (MLSPA) were negotiating a new Collective Bargaining Agreement (CBA) and barely made it onto the field for the first game of the year (reaching a deal two days before the season started). That deal expired following the 2019 season and the 2020 negotiations went much smoother, with a deal being announced well before the season started.

At the time of that announcement (February 6, 2020) the global pandemic was just getting started in other parts of the world, and while it had arrived in the United States, it wasn’t clear to everyone (apparently including MLS owners) how big of an issue it was going to be. That said, it was already impacting other parts of the world and anyone with some foresight who listened to the experts, could have seen what was coming.

COVID-19 then hit the US hard and the CBA was never fully ratified. So the negotiations started back up and a new deal was reached in June 2020 to negotiate what would be known as MLS is Back and the subsequent return to play of the regular season. As a part of that deal MLS was able to insert language into the contract (more on the force majeure clause in a second) and they extended the previously agreed to CBA by one season and players took a five percent pay cut.

So while the original CBA ran through 2024, as of this moment, it runs through 2025 with all the years of escalations in salaries, salary budgets, etc., pushed back by one year. So the 2020 numbers are now the 2021 numbers, 2022 is now 2021 and so on. However, this is where things start to get complicated.

What is a Force Majeure Clause?

In the simplest terms, it was a clause MLS inserted into the renegotiated CBA that would allow the league to opt out of the current CBA if some disaster — like the pandemic — would significantly impact team’s ability to make money and operate the league. Last summer, it wasn’t clear if the pandemic would be ongoing by the start of the 2021 MLS season. Obviously it still is and most health experts expect it to stretch through much, if not all, of 2021.

By owners opting out, they triggered a 30-day window (in MLS’ eyes, not the MLSPA’s eyes) to renegotiate a new CBA otherwise owners could lock out the players or the players could strike. In other words, some sort of work stoppage was looming.

That day was January 28th. However, MLS has given a one week extension. The season isn’t set to start until April 3rd, so all the deadlines are somewhat arbitrary.

What Did MLS Offer the Players Originally?

After invoking force majeure, the owners made a new offer to the players. In exchange for there being no pay cuts, they requested the CBA be extended two more years. So the minimum salaries (and maximum salaries) as well as the salary budget from 2020 would be in effect for 2020, 2021, 2022 and 2023. The CBA would go from the original five years to eight years (remember, they added a year last summer).

When it was first announced, I thought to myself, ‘this seems fair.’ There were no pay cuts during a global pandemic for the players. The MLS owners are taking most of the financial risks (obviously zero of the health risks though). Owners claimed they lost $1 billion in revenue. MLS relies heavily on game day revenue (tickets, concessions, etc.) and that was greatly impacted. Also, they previously offered limited charter flights but all flights in 2020 during the pandemic were charter flights and will be going forward into 2021. Additionally, their TV rights deal is worth far less than other major sports.

However, as I’ve looked deeper, my perspective has changed. While it’s true wages remain flat under the salary budget, contracts aren’t usually negotiated that way. Wages go up every year in most deals. So if a player is due a $50,000 raise (pretty typical for guys on Sporting Kansas City like Johnny Russell or Roger Espinoza over these past few years), the salary budget hasn’t gone up with their pre-negotiated wages. That money has to come off of someone else’s deal. So someone else gets their option declined or gets cut or the team chooses to sign less players or cheaper players. It has an impact.

The MLSA PA Makes a Counter Offer

There were actually multiple counter offers, but this is the most recent known counter from the MLSPA, according to Sam Stejskal and Paul Tenorio of The Athletic (emphasis mine).

“This newest offer brings the first major movement in the negotiation, with the union willing to add another year on to the CBA agreed last year, extending the agreement through the 2026 season. A source said that the MLSPA’s offer includes additional concessions in the form of decreased annual salary budgets and the acceptance of an MLS proposal — which hadn’t previously been made public — to decrease the share of media rights revenue that could go to players starting in 2024. The source said the MLSPA claims those concessions amount to $50 million throughout the life of the deal. According to the source, the union also proposed easing free agency qualifications in 2025 and 2026 to include players 23 and over with at least four years of MLS experience (currently, players must be 24 or over with five years of MLS experience to qualify).”

So to summarize:

• The MLSPA would agree to another year, making 2020 salary minimum/maximums, salary budget, etc. the numbers for 2021 and 2022
• MLSPA would agree to further reduced salary budgets (numbers not outlined)
• The MLSPA reduced media rights revenue that was set to start in 2024
• MLSPA gains slightly in when a player can become a free agent

It seems clear the players have made further concessions with only the slightest of gains around free agency. One key is the 2026 World Cup which will be held jointly in the United States, Mexico and Canada. If the MLSPA deal is accepted, they would be negotiating on the heels of that big “bump” as opposed to before the World Cup as it stands now. If the MLS deal goes into effect, it’ll be more than a year removed from the World Cup and it’s likely not as good of a time to negotiate as it would be after the 2027 season.

How did the MLS Respond?

By threatening to lockout the players. “If we are unable to finalize a new CBA by 11:59 pm ET on February 4, the MLS Labor Committee has voted unanimously to authorize the league to terminate the CBA and institute a lockout.” They also describe the deal as “far apart.” In fairness, though a lockout would stop paychecks, MLS has agreed to keep providing healthcare to the players and families. The Athletic has a good explainer on all the possibilities how how a work stoppage could play out.

Never in the history of Major League Soccer has their been a work stoppage. The league put out (a biased) Q&A on this entire saga.

Why Would MLS Go Forward with the Lockout?

This is entirely conjecture on my part, but it seems to be an attempt to grab power back from the players and strip away some of the gains players made before the 2020 season. They won’t open their books and don’t have to in order to prove they lost $1 billion in 2020. Also, the MLSPA is claiming that $1 billion in losses was accounted for in the renegotiation in June 2020. Obviously, more losses are coming in 2021, so that could be part of the issue.

It’s clear teams lost money. It seems to me that teams don’t often make money in MLS. Even during successful seasons, owners reportedly lose money. In a 2019 story from Forbes, only six of the then 24 teams turned a profit. However, it’s misleading because MLS owners are buying into SUM (Soccer United Marketing) and their teams are investments with values climbing substantially year-over-year. Individual revenues on a year-to-year basis may not actually be what most owners are “buying” when they join MLS.

So how much is MLS going to save with their version of the deal? Estimates from the league put it at just $100 to $110 million. Over the 27 teams in 2021 that’s just over $4 million per team on average. Not much in the grand scheme of things, it’s obviously about something else.

To drive home the point, Sam Stejskal did a little research (around the 12 minute mark) on the billionaires that own MLS teams. There are 10 MLS owners (or their families) on the Forbes list of billionaires that they track their net worth live. In the last year, eight of the 10 saw their net worth rise during the pandemic. And rise dramatically. The average across the 10 (including the two who lost value) was an increase of $1.4 billion in net worth. As is usually the case, the rich tend to get richer.

So what about the other 17 MLS owners? It’s possible they are hurting. Real Salt Lake is currently under league ownership (though for entirely unrelated reasons) and it’s rumored that other teams are for sale. If they want out, there are plenty of billionaires that will buy teams and no matter what they paid in salaries, expansion fees and other expenses, the team values are up so much, they stand to gain substantially.

For further breakdown and understanding of the subject, I highly recommend, Allocation Disorder, a podcast by Stejskal and Tenorio. The January 18th episode was particularly good, as was the one from yesterday. Form your own opinions but it seems it would a horrible mistake and hurt the relationship between owners and players if the owners choose to shut this process down, lockout the players and potentially to delay the season. Hopefully, cooler heads will prevail.