A salary cap is a fixture in most of the major sports leagues in the United States. Every league except for Major League Baseball has a system in place to prevent teams from spending unlimited funds on its players with the idea of leveling the playing field financially. The NFL and NHL have a “hard” salary cap, meaning teams are forbidden from going over the stated salary cap number with zero exceptions. Teams must be at or under that number at all times. The NBA has a “soft” salary cap which punishes teams who spend over the salary cap number with a “luxury tax” – a tax on the amount a team spends over the salary cap. The NBA also states a maximum amount an NBA team is allowed to pay one player which is referred to as a “max contract”.
The MLS has a hard salary cap – with exceptions. For 2014, the stated salary cap set by the MLS is $3.1m; however, a team is able to designate up to 3 players that do not count towards that number – a.k.a. “The Beckham Rule”. Therefore, a team is able to spend an unlimited amount on its top 3 players while still being required to stay under $3.1m with the rest of the squad. Back in 2007, this gave the LA Galaxy the ability to sign Beckham for over $6m per season, despite the salary cap being at less than half that amount.
Beckham’s signing back in 2007 was revolutionary for the MLS and certainly paved the way for the current trend of European stars finishing their careers in the States (a la Thierry Henry and Jermaine Defoe). Even though these players are at the downside of their careers, they are still a level above the rest of the MLS which not only raises the level of competition across the league, but also adds star power that the MLS is so desperately in search of. The NBA has LeBron, Durant, Melo…etc. The NFL has Peyton Manning, Adrian Peterson, Calvin Johnson…etc. The MLB has Miguel Cabrera, Clayton Kershaw, Derek Jeter…etc. The MLS, solely because of “The Beckham Rule”, now has Dempsey, Henry, and Defoe. Stars attract fans, it’s as simple as that. No way would Dempsey, Henry, or Defoe be playing in the MLS if teams were required to stay under $3.1m without any exceptions. It’s also no coincidence that after the Beckham signing, the MLS popularity has been climbing ever since.
ESPNFC.com just posted an article regarding how seven of the top MLS individual earners earn more in wages than some entire MLS teams earn in revenue. Take a look at the table:
As you can see, Dempsey, Bradley and Defoe make more than 3/4 of the teams in the league. It just so happens the teams that out-earn them, are the teams that employ those players. A team isn’t willing to pay Dempsey $6.7m if they can’t earn more than that back in revenue…simple economics (not to be confused with the billionaire owners in Europe). This is why Beckham is pushing for the removal of the salary cap in general which will open up the signing of players to more of a free market system, similar to the Barclay’s Premier League. The only way top-level talent can be coerced to play in the MLS is by offering them more money. And the only way to grow the league is to bring in those big names.
Beckham recognizes this fact when he says, “The salary cap removal is what we’ll work for. Obviously, that’s one of the things that stops a lot of players coming over here, where I think the league and certain cities in this country will attract big-name players.”
In other words, the salary cap is holding back the growth of the MLS. One of the main reasons a salary cap exists is to keep parity in the league so that every team has every chance financially to provide a winning product. Last season, two teams who earn less than 6 individual players played for the league championship (Real Salt Lake and Sporting Kansas City) so parity does exist. I think the main focus for the MLS now should be to align with Beckham’s ideas and either greatly increase or completely remove the salary cap.
Now that Beckham will be making executive decisions with his own team in Miami, he would like to have the ability to sign the best players available without the current financial restrictions.
“I’m not going to mention any players because it’s disrespectful to the players and the teams,” says Beckham. “But we want to bring big players. We have to.”
If that doesn’t get soccer fans excited at the potential of the MLS, I don’t know what will.