Is the salary cap hurting American soccer? Is the so-called beautiful game, destined to become our next national pastime?
Here are some key questions CNBC emailed back and forth with Vanderbilt University sports economist John Vrooman. The topic: The economics underlying the future of professional American soccer. Below is an edited excerpt of the conversation.
Q: How does a league decide how many teams it should have? Is the MLS being smart with a jump from 19 teams now, to a planned 24 by 2020?
A: After a critical mass is formed usually in multiples of 8, a sports league will expand as long as the marginal (extra) benefits of expansion are greater than the extra costs of expansion. The costs of expansion are usually the extra demand placed on increasingly diluted talent supply. When the National Hockey League added 9 teams in 9 years, player salaries went from 50 percent of revenues to over 70 percent just before the lockout of 2004-05 because they had expanded too rapidly.
In a revenue sharing league like the MLS the costs of expansion also involve the reduction in the national TV packages, which are usually divided equally among clubs. The MLS TV revenues have just tripled in value from about $30 million to $90 million annually in an 8-year deal with ESPN/Univision and Fox.