Does MLS need promotion-relegation? Part three: Why we may never see it

Before the 2015 Major League Soccer season begins, SoccerGods is taking a one-time look at the promotion-relegation trope – the interminable debate about whether the United States and Canada should fall in line with much of the soccer world and move to a multi-tiered league system.

What does that mean? Why does it matter? Should we give in and love it forever, or blow it up and walk away, like the Joker? Steve Davis may not be able to answer all of those questions, but here, in the final part of our series, he explains why none of those questions are likely to matter. Promotion-relegation’s not coming to our shores anytime soon.

As much fun as another noisy spin of the promotion-relegation debate wheel might be, there is a hard truth at work here: Yes, the system is a traditional staple in other lands, but it is highly unlikely to ever happen in North America.

Remember the movie where the geeky high school boys tried to create a woman out of sciency stuff and wishful thinking? Fabricating a system of promotion-relegation within the U.S. professional soccer structure is not quite as far-fetched, but it’s close.

It really boils down to one thing: There is precious little incentive for ownership in Major League Soccer (which is North America’s top soccer association and the essential element of any notable “pro-rel” system in our land) to adopt such a radical change to its structure. Seen another way: For a league making undeniable, steady progress, a system of promotion-relegation is a solution looking for a problem.

MORE: What is it? We explain pro-rel to you, like you’re a six-year-old.

We can talk all day about ideology and how a promotion-relegation system might spur player development. U.S. coach Jurgen Klinsmann even recently lamented the lack of such a framework within the country’s professional soccer conglomerate. But the real world simply does not spin on ideology or best intentions. Once we get past charitable endeavors or matters of public good, we live in a world where things that don’t make financial sense generally don’t happen.

AT&T MLS All Star Game - Chelsea v MLS All Stars

Jeff L’Hote, a management consultant whose firm, LFC International, specializes in business side of global soccer, believes Major League Soccer’s focus necessarily lies elsewhere.

“MLS is in an incredible position coming into its 20th year,” he said. “From that standpoint, the things they are working on wouldn’t deal with promotion-relegation. Most teams are working on maximizing ticket revenue and local sponsorship revenue, and from a centralized standpoint, the league is looking at maximizing TV ratings.”

L’Hote said he understands the argument that promotion-relegation might help marginally in some of those efforts, but believes slow, steady progress under the current framework is working fine for a league on the rise.

MLS is now at 20 teams, with a target of 24 by the year 2020. It definitely isn’t having trouble generating interest from investors. And those investors are paying big bucks to be part of MLS, not to be part of a second or (egad!) third tier.

MORE, Part one: Why the debate about pro-rel?

Look out west to the newly created Los Angeles FC. The collection of owners spent in excess of $100 million for expansion fees and has promised to spend another $150 million on a new stadium. You can bet a Steven Gerrard bobblehead that the stadium price will creep closer to some $250 million by the time they turn on the lights and start kicking properly inflated balls inside a new ground. They’re likely in for $300 million and change.

The league owners – let’s take successful Vietnamese-American entrepreneur Henry Nguyen of LAFC, just to put a face on it – didn’t accumulate vast wealth by sinking into the quicksand of imprudent investments. It just doesn’t make a lot of sense to spend that kind of scratch for schedules and deals attached to matches against the Wilmington Hammerheads or the Dayton Dutch Lions. No offense to either city or club; they just exist in smaller markets.

Colorado Rapids v Seattle Sounders

In financial terms, the gap between MLS clubs and clubs in the North American Soccer League (an officially designated U.S. Soccer Tier 2 association) and USL Pro (an officially designated Tier 3 association) is generally vast. Some lower tier clubs are owned and operated by some seriously rich people. But some are owned by individuals who, while certainly wealthy by normal standards, aren’t threatening to infiltrate Forbes’ Richest Americans list anytime soon.

If you believe MLS commissioner Don Garber (not suggesting there is a reason not to, but the league collective bargaining agreement is currently the subject of contentious negotiations) combined losses for the league clubs is around $100 million annually. So it’s fair to wonder how many USL Pro clubs or NASL clubs could handle the hefty annual cash calls, not to mention the operating expenses at Tier 1 standard.

MORE: Pro-rel clowns look to fly for MLS Cup

So why would, say, the fabulously well-funded Seattle Sounders prefer a system where clubs of much lesser means are suddenly partners in revenue sharing? Yes, we see smaller clubs abroad – with stadiums that hold a fraction of their larger brethren, with sponsorship deals that pay a fraction of what larger clubs will reap, etc. – existing alongside the league behemoths. But those associations were created long ago, in a time when sports were more about community and competition, and less a slave to the mighty dollar. It’s fair to wonder if those leagues in lands afar were created today, would the structure look significantly different?

Red Bull, the powerful Austrian-based energy drink manufacturer, seeking ways to enhance brand awareness, signed up for an MLS where owners’ net worth is in the hundreds of millions, minimum. They don’t want to be backed into a corner, forced to underwrite a group of well-intentioned investors who simply lack commensurate financial heft.

Not to mention the possible consternation from MLS sponsors or local broadcast partners who might not be happy to see value fall with a significant league restructure. Remember when the LA Galaxy negotiated that breakthrough local TV deal, a 10-year agreement with Time Warner Cable valued at $55 million? They might just want a do-over if the Galaxy took an (admittedly unlikely) tumble into a lower tier.

MORE, Part two: How to shoehorn pro-rel into MLS’s structure

If this were up to the fans, perhaps a framework of promotion-relegation would be off and flying already. Supporters can certainly influence choices, but they don’t actually make policy. That’s up to MLS owners, who’ll ask the tough questions:

What’s their benefit of buying into promotion-relegation? Even in the framework we laid out in Part II of this series, what’s the benefit of that one? How would it grow revenue – and trust me, “grow revenue” is at the top of every club’s to-do list – to shrink the top flight? In that scenario, clubs would be going backward in those critical efforts to increase TV revenue and grow the value of sponsorships, stadium naming rights, etc. What’s the point of that?

The answer from MLS higher-ups on whether this will ever happen has always been a resounding “No!” In fact, the league’s second-highest ranking executive, deputy commissioner Mark Abbott, said “never” when asked about it at last summer’s MLS All-Star game. Later, commissioner Garber softened that stance just a smidge. It wouldn’t even be fair to say the commish cracked the door open; more like he just slid the deadbolt to a halfway unlocked position.

The significant road blocks aren’t going anywhere. The smart money says that if it ever happens, we’re talking “decades away” more than just “years away.”

Tuesday, part one: Does MLS need promotion-relegation?
Wednesday, part two: One way it might work