The Effect of Foreign Players on Pay and Performance in Major League Soccer

By Medcalfe, Simon; Smith, Rebecca | International Journal of Sport Finance, November 2018 | Go to article overview

The Effect of Foreign Players on Pay and Performance in Major League Soccer


Medcalfe, Simon, Smith, Rebecca, International Journal of Sport Finance


(ProQuest: ... denotes formulae omitted.)

Introduction

Major Leag ue Soccer (MLS) is the top division of professional soccer in the United States and Canada a nd has seen an increase in demand for its product over the last 15 years. Total attendance at reg ular season ga mes increased from a league low of 2,215,019 in 2002 to 8, 270,187 in 2017. During this time the league increased t he nu mber of teams from 10 to 22, resulting in average attendance increasing from 15,822 in 2002 to 22,113 in 2017. MLS is ranked as t he sevent h biggest soccer leag ue in the world, based on tota l and average attendance. With league expansion and a growing presence w ithin the internationa l market, MLS clubs are attracting international players w it h the potentia l to further boost attendance and revenue. As Lee and Harris (2012) stated, MLS reached "a crossroads wit h an increasing focus on the recruitment of high-profile and high earning overseas players" (p. 106). Brow n (2005) argued that "MLS must become a destination for t he best players in t he world " (p. 58).

In order to at tract top international talent, increase attendance at soccer matches, and improve TV ratings (Apostolov, 2012) MLS implemented the Designated Player Rule (DPR) which allowed clubs to sign a ma x imum of three players w ith compensation and acquisition costs above the club 's salary cap. David Beck ham, the first player signed under the rule, earned an annual g uaranteed salar y of $6.5 million in 2007 wit h the Los Angeles Galaxy. For Beck ham and ot her designated players, the MLS club had a financial responsibilit y for all the compensation above t he designated player's budget that varied with the player's age. Not all designated players are foreign players, and not all foreign players are designated players. Since the implementation of the DPR, only 20 players have been from the United States or Canada. In addition to the DPR, beginning in 2008, each MLS team had eight internationa l roster spots, however, these spots are tradeable, so some teams may have more than eight international players a nd some tea ms may have fewer. The introduction of international roster spots and a salary cap was in part a response to the demise of the Nor t h American Soccer League in 1984, which has been attributed to esca lating sa laries paid to international stars (Duru, 2010).

MLS is not alone in strategically pursuing international players with t he National Football League (NFL), Nationa l Basketball Association (NBA), and Major League Baseball (MLB) also attempting to become more attractive by signing foreign players and schedu ling more games outside of the United States (see Tainsky and Winfree (2010) for MLB and Eschk ler, Perez, and Siegler (2004), Hill a nd Groothuis (2017), and Ya ng and Lin (2012) for NBA studies). However, MLS is unique in the major league spor ts landscape of the United States as t he only league to limit international players on tea m rosters (Duru 2010).

In addition, MLS is unique relative to other international soccer leagues in several ways. First, it does not have promotion a nd relegation. Second, the leag ue is organized as a single entity structure with players signing contracts with the league rat her t han individual clubs. Designated players may choose the MLS team they will play for, but a ll other players are a llocated to teams by MLS (Decurtins, 2017). This monopsony power has resulted in salaries representing as little as 25 percent of revenues in 2007 compared to 50 to 60 percent in other US professiona l leagues, and up to 70 percent in European soccer leag ues (Twomey and Monks, 2011), making it difficult for MLS to attract mid-range foreign players w it hout "top star status" (Decur tins, 2017). Third, MLS has a team sa lar y cap and other sa lar y restrictions t hat are non-ex istent elsewhere in international soccer. In 2014 the collective bargaining agreement (CBA) between the Major Leag ue Soccer Players Association and MLS set a sa lar y budget or cap of $3. …

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