Major League Soccer has a unique ownership structure, even for America.
Although leagues in other American sports are similar, in that the teams playing in them are franchises of the league, those teams are still independently owned and operated by the person or people at the top. They are their own businesses.
MLS is not quite the same.
It operates using a single-entity structure, enabling those running the league to keep tighter control of what happens within it, from player contracts to sponsorship deals and more.
Some people have criticized this way of working, but it’s also a key reason why MLS succeeded where other American soccer leagues failed.
It’s quite a complex structure, especially compared to many European leagues where the teams are all independently owned but governed by a body such as the FA, in England. You will have a much better grasp of how it all works after reading this short article, though.
How the Single-Entity Structure Works
With a single-entity structure, the league and all the teams in it are owned by the league itself.
This means that they are in control of:
- Player contracts
- The clubs
- Intellectual property rights
- Sponsorship deals (most of them, anyway)
- Broadcasting rights
It stops any one club getting so powerful as to dominate the league on the pitch or off it.
Essentially, the league owns all the assets and has procedures in place to distribute those assets across al the teams in the league. So even the players are contracted to the league rather than a specific club.
Revenue is also shared out between all clubs in a structured way, which aims to constantly rebalance the league to keep it competitive and allow teams that are falling behind to catch up and challenge again.
It helps to keep all clubs financially viable.
However, the people who own and run the league are also the same people who own the rights to operate the clubs.
Confused? Not for long. Read on.
How the League Ownership Works
When a club joins MLS, the ‘owners’ of that club are actually buying operational rights, not the club itself.
So MLS might decide they want an expansion club based out of Birmingham, Alabama. They then invite anyone who is interested in the opportunity to apply for the right to do so. That person or business has to buy their way in so they become an investor-operator of the league, and then they can run their club as they like (up to a point).
MLS has a Board of Governors who come together to make decisions on how the league is run and any big changes that are up for discussion such as expansions, rule changes, and policies. That Board of Governors is made up of representatives from each of the teams. In this way, every investor-operator has a seat at the table. As investors, when the league does well, so do they, so it makes sense for them all to work together for the good of the league.
The Board also appoint a CEO or Commissioner of the league. For more than 25 years, that person has been Don Garber.
The CEO doesn’t own MLS, they aren’t an investor in the same way the club operators are. They are paid a salary to do their job, responsible for the day to day running of the league as well as long term planning. They don’t have any involvement in the running of any individual club, but the league as a whole. They have authority for most decision making, such as negotiating broadcast deals or managing disciplinary actions, but for really big changes the Board will get involved.
The CEO has a team of around 30 executives working under them, all responsible for things like Talent and Culture, Communications, Player Strategy and Relations, etc. So they all have their own areas to focus on. Just like the CEO, these people are employed by the league rather than being part owners of it.
What do the Clubs Own or Control?
Although the clubs are still owned by the leagues, the stadiums they play in are usually owned by the operator rather than the league. If not, the club are responsible for arranging their own venue to play at. This means ticketing and merchandise etc. are all under the club’s remit too, and since clubs tend to keep the majority of their locally earned revenue, this is a very important factor for the finances of each club.
Along similar lines, they can also strike their own local marketing and sponsorship deals such as front of shirt sponsors, hoardings, stadium naming rights, etc. It may sometimes need approval from the league, but generally this is under each club’s control. This is another way certain teams can make so much more money than others.
Despite the players being contracted to MLS, each club also has control over who they try to buy or sell and the contract negotiations. It’s just that any transfer has to be signed off by MLS who then technically own the contract, but will assign the player to the club in question. It’s just a device to allow the league to retain control, but in reality, the clubs do all the work. The terms of the contract have to adhere to the rules of course, such as the salary cap and designated players rules, but within that the clubs are free to buy and sell as they please.
Lastly, it goes without saying that the league doesn’t interfere with the on field activities of a club. The hiring of managers, coaching and backrooms staff, and all other club employees are under the complete control of each club. Anything pertaining to the day to day running of the club is their own business.