How Does The Salary Cap Impact The MLS?

Since its inception in 1996, Major League Soccer (MLS) has sought to establish itself as one of the top soccer leagues in the world. While few would claim it has achieved that goal, the MLS has certainly grown to a particular level of prominence in the sport.



One of the key reasons for this is also one of the most defining features of the MLS; its salary cap. Unlike other major competitions like the Premier League, the MLS centralizes players’ salaries, meaning that the league pays them, rather than the club they play for.


In order for this system to work, the MLS has always implemented a salary cap on its clubs, meaning each franchise cannot spend over a certain amount on players’ salaries. As the league has developed, that figure has grown to $4.9 million per club in 2020.


That budget needs to be spent on 20 players within the roster, though does not need to be distributed evenly between them; naturally, some players will command more money than others.


The idea behind this, in the early stages of the MLS, was to keep things fairly even between teams and to avoid one or a few franchises dominating the league simply because they could afford better players. It also ensured most teams were able to stay in business as they were not spending too much on salaries.


However, things changed in 2007 with the introduction of the Designated Players rule. A new caveat was introduced for the salary cap, allowing teams to bring in star players who commanded more than the cap allowed for, provided the club could pay the excess amount.


For example, the maximum amount a single player can be paid annually in the MLS is $530,000, however Zlatan Ibrahimovic receives roughly $7.2 million per year, with his club LA Galaxy making up the difference.


One of the driving forces behind the implementation of the rule was LA Galaxy’s acquisition of David Beckham, who joined the club as a result of the new parameters. Since then a swathe of international soccer stars have joined MLS franchises, such as Thierry Henry, David Silva and Steven Gerrard.


This, naturally, can give certain clubs an edge over their competitors, and this is usually reflected in the betting odds, with wealthier clubs like LA Galaxy routinely tipped for glory. This does not take place in college football odds, since salary is no in play.


That being said, parity is still very high in the MLS, especially when compared with other soccer leagues across the world, and that’s mainly thanks to the salary cap.


Aside from the Designated Players rule, franchises need to work within strict parameters and so cannot overspend. While this has helped keep the MLS and its franchises afloat, it could be argued it has also limited the growth of the league.


Part of the appeal of watching soccer is seeing global stars ply their trade; major leagues like the Premier League, Serie A and the Bundesliga are packed with some of the world’s biggest soccer names and fans flock to see them.


Even with the Designated Players rule, the MLS’ salary cap means there are nowhere near as many marquee names involved in the league, and so not as many people will be as interested in watching.


However, the salary cap rules also ensure a level of stability within the MLS. As mentioned above, if there were no cap then franchises would be free to spend as much as they like on their players.


This would lead to some clubs committing too much money to salaries and potentially going bankrupt. The landscape of soccer can change dramatically in a short space of time and if a club has already allocated a significant portion of its funds to salaries, there’s little room to adapt and react to other issues that might arise.


Removing the salary cap would also likely shift the overall dynamic of the league and we would see a few clubs emerge as dominant forces, simply because they’re able to afford more expensive – and therefore better – players.


Some would argue this isn’t necessarily a bad thing as it would increase the popularity of the MLS and bring more revenue for it overall. However, it would also likely mean the MLS would have to decentralize salary funds and instead have clubs pay their players directly.


Undoubtedly, the introduction of the Designated Players rule helped the MLS grow internationally and domestically, though perhaps at a rate that is slower than some would have hoped.


A full removal of the salary cap would be an enormous shift to the fundamentals of the MLS and so is unlikely to happen anytime soon, but there could well be developments similar to the Designated Players rule in the near future.


What those changes could be and how they would affect the competition remains to be seen, but for now the MLS remains stable with its salary cap. For those clubs who can afford it, there are opportunities to bring in more prominent players but, on the whole, the league remains competitive.


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