If you compare salary data with the annual Forbes estimates of revenue generated by teams, the Sounders don’t come off looking great. For the past several seasons, they have spent roughly 20 percent of their estimated revenue intake on payroll.
Inside sports business
The release last week of Major League Soccer salaries by the players’ union appears to justify recent concern expressed by Sounders fans.
The “guaranteed compensation” paid to players by the Sounders jumped from $10.37 million at the start of last season to $11.38 million this year, but they fell from No. 7 to No. 8 in spending among the league’s 23 teams. MLS is on a spending spree after recent rule changes, with 11 teams above $10 million in payroll compared with four a year ago.
Coming on the heels of Sounders general manager Garth Lagerwey stating in a national soccer website interview — which he later apologized for and backtracked from — that the Sounders likely won’t remain a top spender, the new totals are somewhat ominous.
2018 MLS guaranteed salary compensation by team
1. Toronto FC, $26,167,498.69
2. Los Angeles Galaxy, $17,502,008.29
3. New York City FC, $14,147,632.75
4. Chicago, $13,824,204.43
5. Los Angeles FC, $13,432,052.68
6. Portland, $12,516,334.71
7. Montreal, $11,888,540.60
8. Seattle, $11,376,125.36
9. Atlanta United FC, $11,306,330.49
10. Colorado, $11,001,331.46
11. FC Dallas, $9,333,819.28
12. Sporting Kansas City, $9,176, 166,46
13. Orlando City, $8,981,657.53
14. Real Salt Lake, $8,975,665.57
15. Philadelphia, $8,915,987.84
16. Vancouver, $8,233,011.70
17. Minnesota United, $8,152,682.50
18. San Jose, $7,787,252.57
19. New York Red Bulls, $7,689,313.93
20. Columbus, $6,971,083.47
21. New England, $6,818,556.10
22. D.C. United, $6,744.419.62
23. Houston, $5,673,471.62
MLS players union
The top five spenders — Toronto, New York City FC, the two Los Angeles squads and Chicago — hail from the league’s biggest cities. Toronto is spending more than $26 million, the L.A. Galaxy $17.5 million and the other three more than $13 million each.
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Lagerwey did say the Sounders’ huge attendance every year allows them to “punch above their weight” with big spenders. But it’s fair to question how far above that weight the punches have landed.
If you compare salary data with the annual Forbes estimates of revenue generated by teams, the Sounders don’t come off looking great. Those Forbes numbers and salary figures show the Sounders for the past several seasons have spent roughly 20 percent of their estimated revenue intake on payroll.
Forbes won’t publish estimates of last season’s revenue until this summer. But based on recent trends, the Sounders again appear poised to come in around 20 percent.
And that would rank near the bottom of MLS.
Now, some caveats: It’s risky to take either the Forbes or union numbers as gospel, even though they’re the best we’ve got because teams won’t show their financials to us.
Lagerwey wouldn’t comment Friday on the team’s spending versus revenue, other than saying nobody outside the team has access to the true numbers. He repeated his assertion the team will add a new Designated Player and boost payroll once the July transfer window opens.
We know the Sounders typically spend more on support infrastructure — such as their sports-science department — than most teams. And the Sounders also are in the upper echelon of spending on youth development — likely between $3 million and $5 million annually.
They also pay rent at CenturyLink Field and lack full in-stadium revenues of teams owning their own venues. The flip side, though, is they aren’t paying off stadium-construction debt.
2017 MLS revenue percentage spent on salary
1. New York City FC, 53%
2. Chicago, 52%
3. Toronto FC, 49%
4. Vancouver, 43%
5. Colorado, 42%
6. Orlando City, 40%
7. Real Salt Lake, 37%
8. Philadelphia, 36%
9. Columbus, 26%
10. Portland, 25%
11. New York Red Bulls, 22%
12. FC Dallas, 22%
13. San Jose, 21%
14. New England, 21%
15. D.C. United, 21%
16. Seattle, 20%
17. Houston, 19%
18. Los Angeles Galaxy, 19%
19. Sporting Kansas City, 19%
Note: Includes April 2017 total player compensation data from MLS Players’ Union and 2016 end-of-year revenue estimates from Forbes. Atlanta United and Minnesota United left off list because did not exist in 2016 to generate revenue.
Finally, the union’s salary list doesn’t include transfer fees paid for international stars. Atlanta United FC paid an MLS-record $15 million fee to sign Argentine teenager Ezequiel Barco. If counted, it would more than double the team’s current No. 9 payroll of $11.49 million.
Lagerwey has said he’ll spend “eight figures” on his July DP addition. That includes a seven-figure transfer fee not counted in payroll rankings, plus a salary that could boost the team by two or three ranking notches. He also has hinted he’ll sign another Targeted Allocation Money (TAM) player to go with the four added since last summer.
Sounders percentage of revenue spent on salary
Note: 2018 is projected based off 2018 salary data and past revenue performance, as 2017 year-end revenue estimates by Forbes not yet available
The Sounders have paid big transfer fees before: $6 million for Nicolas Lodeiro in 2016 and $9 million for Clint Dempsey in 2013. So, while the Sounders in 2016 spent 21 percent of their estimated $52 million in the previous year’s revenue on payroll, that would have jumped to 32 percent had Lodeiro’s transfer fee been counted.
That’s better, but still not upper echelon.
For instance, last year, New York City FC spent 53 percent of its Forbes-estimated revenue from the previous season on salaries. Chicago spent 52 percent, Toronto 49 percent, Vancouver 43 percent, and Orlando City 40 percent. At 32 percent, the Sounders would have placed eighth.
In fact, the Sounders — who haven’t paid any transfer fees since Lodeiro’s — were near the bottom on last year’s list at 20 percent, beating out the 19 percent by Houston, the Galaxy and Sporting Kansas City.
The Galaxy paid a $5 million transfer fee last summer for Jonathan dos Santos. It has since boosted payroll from $12.11 million to this year’s $17.5 million.
So it’s hard to blame fans for wanting the Sounders to spend more.
It doesn’t help that Forbes consistently shows the Sounders as a top-two MLS revenue generator. That revenue hasn’t fluctuated much, with Forbes listing it at $53 million in 2016, $52 million in 2015 and $50 million in 2014.
If that trend continues, projecting a $54 million revenue once Forbes releases final 2017 calculations seems reasonable. And that would mean the “total compensation” the team is paying players would amount to 19 percent of last season’s revenue.
Does it ultimately matter?
It hasn’t until this year’s slow start, with the Sounders reaching the past two MLS Cup finals. Entering the weekend, only two of the top-five MLS spenders were among the five best teams in the standings.
Payroll traditionally hasn’t impacted on-field performance in MLS like other leagues, largely because of salary caps on all but top players.
But those caps have been loosened, creating concerns that parity eventually will vanish. For now, the Sounders appear in need of a seven-figure talent infusion to keep pace.
All things considered, they probably aren’t the worst at spending. But there is mounting data suggesting they aren’t the best.
So Lagerwey would do the franchise a favor by getting ink on some player contracts the minute that July transfer window opens.
And until any newcomers arrive, it seems fair for ticket-buying fans to keep prodding the team to dig deeper into an ample purse.