Paper Outline

 

On this site we will be comparing the Chinese Super League (CSL) and the Major League Soccer (MLS). Our research will be guided by the overarching question of what role economic structure plays in determining the success of a league, as measured by: revenue generated, the quality of players attracted and the progress of the league in achieving its founding objective. We chose to investigate the CSL and the MLS because they share several fundamental properties. These include: a positive growth rate, access to largely untapped markets and similar founding dates – all of which will make our evaluation of the impact of economic structure on a league’s success more plausible. 

To further develop our understanding of the distinct economic structures employed by the CSL and MLS, we will investigate their respective approaches to revenue generation, the transfer markets and ownership structure. 

To gather this data, we will evaluate a variety of articles, podcasts, statistical databases as well as the information provided by the MLS and CSL on their websites. One limitation for our project is that the MLS and CSL are both privately owned companies, so the metrics we can collect are restricted by what information is publicly available. Once we have addressed the relative strengths and weaknesses of both leagues’ economic structures, we will provide an assessment of the more efficacious approach by determining the extent to which it has fulfilled the league’s mission statement. We will also provide a prediction for the future development of both leagues, based on the sustainability of their economic structures. 

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Histories of the MLS and CSL

In 1994, the Chinese Jia-A League was founded, representing the first formal soccer competition in China after the conclusion of the Chinese Soccer Champions (direct translation), which served as an informal competition between the top teams in the country. In 2004, the Chinese Football Administration (CFA), operating under the auspices of the Communist Party of China (i.e. the government), rebranded the Jia-A League to form the Chinese Super League. The government directed the Chinese Football Administration to use the newly established super league as a means of promoting the status and standard of soccer across the country to ultimately achieve its goal of hosting and winning a World Cup (Watanabe & Soebbing, 2017). Primeminister Xi Jinping is a soccer enthusiast and has made his intention of investing in the sport, to propel China to the pinnacle of global soccer, very clear (Watanabe & Soebbing, 2017).

Since its inception, the CSL has received attention for its exponential rise in transfer spending, a product of the league’s comparatively relaxed fiscal policies. Tighter measures have recently (January, 2020) been introduced in order to establish a more sustainable economic model. These include a club salary cap of $95 million per season and a salary cap of $3.3 million for foreign players (Price, 2020). The league is urging investors and owners to channel investment into soccer infrastructure and youth development in addition to their own clubs, in order to drive the sport’s growth across the country. By the end of 2020, the CFA expects to have built 20,000 new soccer academies and 70,000 new pitches and is well on its way to reaching these targets (Wenderworth, 2018). 

The MLS was formed in 1955 with play commencing in 1996. It’s establishment marked a shift in attitude towards the development of soccer in the US by replacing the NASL (North American Soccer League) – its largely unsuccessful predecessor, with a more financially robust and structured competition. The concept of the league was developed many years before its official launch in an attempt by the US Soccer Federation to have the 1994 World Cup staged in the US (Pyne, 2006). Since its formation, the league has expanded from 10 to 26 teams with plans to incorporate another 4 clubs by 2022. It operates within the same Spring to Winter schedule used by the CSL and also has had similar average match attendances, sponsorship values and estimated annual revenues – further indicating why these two leagues provide an interesting comparison (Bloomberg, 2017). 

The role of the US Soccer Federation in the formation of the MLS revealed the league’s initial objective of promoting the sport’s growth in the country and the ability of the national team. Recent statements from the league’s commissioner Don Garber, however, suggest that the founding objective has shifted to focus more on the development of the league itself, so that it can establish a competitive balance with international leagues. The influx of big-name players in the past decade has raised awareness of the MLS and helped promote its status as an increasingly competitive competition. 

The rapid growth manifested by both the CSL and MLS in the past decade has demonstrated their respective intentions to provide a domestic competition of similar quality and prestige to those of Europe’s most acclaimed leagues. Much of these two leagues’ potential rests on the stability of their economic structures as well as their ability to make adjustments to these structures in light of past mistakes.

Comparison of Statistics

Note: Given the private nature of the financial data concerning both leagues, compiling accurate data is extremely difficult as it is usually provided by third parties. The following statistics have been compiled from various reliable sources and demonstrate some of the structural and financial distinctions between the two organisations that are available online. We have chosen only to include a few points of comparison because of the issue of reliability and the lack of other data points available. The sources for each of the following statistics can be found under the “Stats” heading on the Citations page.

CSL  MLS 
Number of Teams  16 26
League Revenue  €945 million (2016) €851 million (2017) 
Highest Paid Player (2019)  $25.8 million (Oscar) $7.2 million (Ibrahimovic)
Average Match Attendance 24,276  24,488
% Foreign Players  15.6% 56.4%
2020 Fifa Country Ranking (China / USA) 76  22 

 

Analysis of Economic Approaches

The economic approaches of the two leagues in question are starkly different. This distinction primarily stems from their respective ownership models, whereby the MLS operates as a single-entity structure and the CSL operates as a privately owned corporation with participating clubs acting as shareholders. Both approaches are accompanied by positive and negative impacts on the respective leagues and provide interesting models to investigate. This section will provide an overview of both leagues’ economic models and an assessment of their relative strengths and weaknesses, prior to arriving at a conclusion detailing the more efficacious approach between the two. 

CSL Approach

The CSL has adopted many features of the top European soccer leagues such as the promotion / relegation system and the Winter / Summer transfer formats (Humphreys 2015). The ownership structure of the league, however, is a model unique to the CSL and has resulted in a consistently strong performance on the international transfer stage in addition to impressive financial growth. Teams in the CSL are owned by both private investors and conglomerates directed by the government, which continues to control segments of a host of industries across the country (Humphreys 2015). On the one hand, this financial approach has resulted in the attraction of world class players in their prime playing years, such as Oscar and Paulinho, which is something the MLS has largely failed to achieve. On the other, an increasingly large gap in performance between many state and privately owned teams has begun to appear – indicating a failure by the league to establish a more balanced competition.

While there is no set benchmark for a ‘successful’ economic approach, one strong indication is the progression of the value of league sponsorship deals. From the 2018 to the 2019 season, Nike doubled its existing shirt sponsorship contract for the CSL to $50 million per season – indicating the exponential increase in perceived value of the league (SoccerX, 2019). Similarly, the CSL was the “world’s highest-spending league” (Doyle, 2017) in 2017 and began to be seen as a competitor by top-flight European leagues, as it was beginning to attract top talent from around the globe (Liu et al.,2017). That the league managed to obtain this status within 14 years of its inception demonstrates the vast amount of progress the CSL has made as a result of having relaxed spending policies associated with its financial model. 

When assessing the impact of the CSL’s economic approach on the quality of play, a global study from June 2018, provided by the Research in Sports Medicine Journal, demonstrates the CSL had higher performance statistics from the 2017 season than the MLS. These performance statistics include, but are not limited to: average distance run per player, team passing accuracy, average sprint speed and shot accuracy. This study would indicate that the quality of play in the CSL has benefitted from the vast amount invested in the league to date, which despite being impossible to quantify an exact amount, is expected to be approximately 30% larger than the net investment in the MLS from 2004 onwards (Smith, 2018).  

Given that the CSL was founded in 2004, the success it has had to date of attracting world class players, sustaining positive growth in annual audiences and across its balance sheets, indicates that its economic approach has been largely successful. The nature of financial spending demonstrated by the CSL demonstrates an adherence to the O-ring economic concept.This concept states that the value of a sporting franchise is directly proportional to the quality of the players it possesses. The CSL appears to have prioritised strong investment in its early years in order to garner credibility as a serious competition. The degree of success it has had thus far in obtaining this credibility has been reflected by the threat it now poses to international leagues in the transfer market. 

 

MLS Approach 

While the CSL adopted many economic features from European leagues, the MLS carved its own path by forming an LLC and sought operational inspiration from other North American sports leagues, such as the National Football League and the Major League Baseball (Pyne,2017). Because the MLS operates as an LLC (Limited Liability Company), the league owns the participating teams, however, individual investors operate these teams and are all financially bound to and responsible for the ‘company’ (Krasny, 2017). This means that profits are distributed on a pro-rata basis (provided there are profits, which has not always been the case) or, in the event of negative share performance, investors must all provide liquidity to cover the losses.

The relative successes of this economic structure depend on what one perceives to be the ultimate goal of the MLS. Unlike the CSL, which President Xi clearly stated was intended to develop the sport in China to the point where the country could win the World Cup and become a global soccer powerhouse, the MLS was not established with an objective as specific as this in mind (Gibson, 2018). That 56.4% of the total number of players in the MLS are foreign, whereas the CSL only has 15.6%, would substantiate President Xi’s aims while demonstrating a lower degree of importance ascribed by the MLS to the development of American born players. In light of the lack of one clear objective of the MLS, this assessment assumes the overarching aim of the MLS is to develop a domestic league that can eventually rival the popularity of the top European leagues.

One primary benefit of the MLS’s single-entity structure arises in the form of a collaborative business model, which mitigates competitive risk as anyone investing in a team is also investing in the prosperity of the league. Given the centralised nature of the MLS, transfers and wages – a team’s two largest expenditures – can be kept under control and are not as correlated with inflated external markets as the CSL or European leagues. Thus, the prices paid by MLS teams for players are significantly more economical, which consequently saves the league money in addition to increasing its profits and ability to re-invest these profits as retained earnings. Furthermore, there is a requirement for collaboration among teams and investors meaning that during a transfer window, no team can spend more than its competitors unless every team agrees on increasing the spending amount for the window in question. This means that the league can promote unanimous growth for teams, which is something the CSL is failing to  achieve. This collaborative business model does, however, make it difficult for MLS teams to compete for world-class players in the international transfer market because of the financial restrictions brought about by the single entity structure of the league. 

Aside from sponsorship deals, broadcasting rights and ticket sales, the MLS derives a significant portion of its operating income from expansion fees, collected from newly annexed franchises. This aspect of the its economic structure provides some cause for concern given the unsustainable nature of relying on one off payments required by new franchises in order to join the competition. Due to the fact that the MLS is a private company that does not choose to disclose its financials, it is difficult to predict the economic growth the league will experience in the future, particularly once it stops expanding (Krasny, 2017). What we can assume, however, is that the MLS will have to find additional revenue streams to cover the inevitable loss of the one received from expansion, upon which it has been largely reliant to date. This demonstrates the potential of future instability within the MLS’s economic model and the need to establish additional sources of revenue – demonstrating the existence of a cloud of uncertainty surrounding its economic structure.

One interesting and unique approach taken by the MLS to diversifying revenue streams was its creation of Soccer United Marketing (SUM) in 2002. SUM is a company partly owned by the MLS that organises and promotes matches for visiting soccer teams to play in the United States. In 2011, the MLS sold a 25% stake of the company for a reported $200 million, which subsequently demonstrates the vast financial reward realised by this particular venture (Bloomberg, 2017). The existence and success of SUM exemplifies two noteworthy factors in the assessment of the MLS’s economic approach: Firstly, its financial model has successfully facilitated the monopolisation of the soccer market in North America, as evidenced by its ability to create companies like SUM. Secondly, it demonstrates the need to find additional sources of income, external to those directly derived from the league, which in turn suggests that the league cannot sustain itself through its own revenues. 

The financial approach of the MLS reveals a host of benefits, many of which arise from shrewd spending strategies that are the product of its collaborative business model. The approach also sheds light on a plethora of weaknesses, namely that of an unsustainable (in its current form) revenue stream, which indicates the need for some form of change if the MLS is to attract bigger names, larger audiences and establish a competitive (performance) balance with other global leagues. 

In light of this investigation into the economic approaches of both leagues, the majority of the evidence gathered indicates that the CSL has developed a more sustainable and effective (to date) financial model than the MLS. This assessment is based upon the CSL’s superior sustained annual revenue growth, a stronger presence on the international transfer market and marginally higher average player / club performance statistics. The evidence does, however, demonstrate that the MLS’s economic model facilitates the possibility of financial innovation, which reveals its ability to promote growth through unrealised gains. Therefore, while this conclusion provides an assessment of the success of the two leagues’ economic approaches to date, it does not take into account the potential of future windfall for the MLS (created by its monopolisation of the market), which the CSL will not be able to access through its current economic structure. 

Success of Leagues

In our ‘Analysis of Economic Approaches‘ section, we addressed the difficulty of determining the extent to which a league has been ‘successful’. The metrics and meaning of success are, to a large degree, subjective. Thus, we have decided to define success in this instance by determining how effectively the two leagues have fulfilled their founding objectives. These objectives are as follows: 

MLS – “Our vision is to be one of the top leagues in the world.” (Don Garber, League Commissioner)

CSL – “The ultimate aim is to win a bid to host the world cup, help the national team compete at the highest level and eventually win the world cup by 2050” (Bland and Cover, 2016 – paraphrasal of the Chinese Communist Party’s Domestic Sport Plan as outlined by President Xi). 

These objectives reveal dissimilar priorities between the MLS and CSL. The MLS statement places much less emphasis on the promotion of the national team by choosing to focus on achieving a competitive balance with other leagues. The CSL appears to be a means through which Chinese soccer can be developed so that the country can compete internationally at a much higher level than it currently does. 

The term ‘retirement league’ has frequently been associated with both the MLS and CSL. A destination where Europe based players can earn lucrative contracts for their final few playing years in a less demanding environment. This existence of this term, which has had some truth to it in both cases, contrasts with the objectives of both leagues. In recent years, however, the CSL has distanced itself from this term by signing the likes of Ramires at the age of 28, Jackson Martinez at 29, Alex Teixeira at 27 and Alex Witsel at 28 – to name only a few examples (Transfermarkt, 2018). Conversely, the MLS has failed to disprove this term in recent years. Despite the consistent influx of household names, the ages of these players almost always begin with a three. The dearth of in-form (typically 24-29 age range) transfers from top flight European clubs would suggest that the MLS has a long way to go in order to attract the players it needs to fulfil Garber’s vision. The transfers conducted by the MLS to date have increased both domestic and global awareness of the league, which represents a step in the right direction towards reaching its objective, but the nature of these transfers reveals how many more steps are required. 

The quality of play in the CSL has increased exponentially due to the arrival of foreign talent. This is evidenced by Mao and Peng’s performance analysis of each participating club in the league across 6 seasons, in which they assembled thousands of data points illustrating both technical and tactical improvements across the board (Mao, Peng et al., 2017). The league’s limit of 5 foreign players per team ensures that each club is primarily composed of Chinese players who have, as the study demonstrates, improved dramatically as a result of the influx of foreign players and coaches (Campbell, 2016). The results of the aforementioned study indicate that the league’s unparalleled spending (from 2017 onwards) on importing world class coaches and players has enhanced the performance of Chinese players within the league, in addition to raising the popularity and accessibility of soccer across the country (Campbell, 2016). 

The CSL’s continuous improvement in performance statistics in addition to the growth in popularity of soccer in China provide compelling evidence that points towards a successful start to achieving its objective. The most relevant benchmark of success, however, indicates the sheer size of the task ahead and represents how much progress is still required. The country’s FIFA ranking has fallen from 54 to 76 between 2004 and 2020 (Fifa, 2020). Its most recent result was a 2-1 loss to Syria in November 2019. This indicates that the CSL has failed to convert domestic progress into international performance, demonstrating that it is not much farther ahead than the MLS, if at all, in achieving ‘success’ through the fulfilment of its aforementioned objective – although it would appear that the foundations for national improvement have been successfully laid as a result of the success of the CSL. 

Impact of COVID-19 (Emir Ozsuer)

As almost every country in the world goes into lockdown to mitigate the COVID-19 pandemic, the sporting world is arguably one of the most affected industries from the global epidemic. This section explores the measures implemented by Chinese Super League (CSL) and Major League Soccer (MLS) in response to the impact of the virus. Both leagues have a choice of cancelling their respective seasons due to the virus and face the uncertainties posed by the ban on mass gatherings, which have made it impossible for games to be played.

In March, MLS commissioner Don Garber shared that MLS clubs arrived at a consensus to temporarily suspend the league based on the recommendation and guidance from the Centre for Disease Control and Prevention and other public health authorities (Lutz). The CSL was also temporarily halted due to COVID-19. The Chinese Football Association announced that if the league cannot schedule a 30-day CSL season before December, then the season will be cancelled (White). The Chinese Football Association is not thinking of extending the season to 2021, so the decision is to either have a 30-day season or to have a total cancellation.

Both leagues are severely affected by the pandemic. From a business point of view, cancelling the season will result in a tremendous economic loss for both leagues as there will be no inflow of cash. Organisers are already projecting millions in net loss. Physical distancing is almost impossible in sporting events, especially in the jam-packed arena filled with passionate fans. In addition to these, one of the most ambiguous problem both leagues are facing is the unpredictability of the situation. Epidemiologists warn that unless a vaccine for COVID-19 is discovered, it will likely continue its reign upon us for a long period of time. This means that if sporting events want to continue, they have to contend in playing inside empty stadiums. Likewise, they have to impose stricter health protocols to the players, coaches, game officials, and other concerned individuals. These additional measures and recommendations will constitute expenses on the side of the business owners. It is not easy to operate a sporting event without selling tickets as ticket sales are, if not the most prominent, one of the most significant direct sources of revenue for the industry. Ticket sales also help maintain venues, pay utilities, pay wages of employees – from the players to the general staff – simply put, generate a cash flow. Therefore, the challenge has now become finding a way to profit from empty stadiums.

There also is an issue of climatic differences. This is particularly true in the case of the CSL.  White notes in his informative article relating to the CSL that “the climate difference between the north and south means that summer in the south will not be ideal for games.” Warm temperatures, high humidity and other climate factors have a negative impact on football. This mainly gave birth to the idea of having a big summer break between seasons, particularly in China where temperature differences between the north and south of the country are extreme. If the leagues are pushed back, which doesn’t seem likely to happen, the game might become unplayable and even dangerous as there have been cases of players having heart attacks in game due to high temperatures.

The clubs of CSL and MSL also have their own issues from within, especially since most clubs have foreign players and coaches. When the outbreak first started in China, a number of players and coaches decided to leave the country and return to their homes. As their contracts are still active, they will eventually have to return to China if they want to get paid but; all individuals are required to stay in quarantine for some time upon entering China. So, it is a question of whether these individuals will be able to play or coach if the league commences at any point in the foreseeable future.

Overall, it is clear that COVID-19 is a significant and unprecedented threat to the sporting industry. It will be interesting to note the differences, particularly within stadiums and across fans in the future as a result of the pandemic. Pretty much all sporting events are cancelled until further notice. At the same time, all teams have to prepare for the new normal that will require them to drastically change their business models, that is if clubs manage to stay on their feet and avoid bankruptcy in these times. In this respect, it will also be interesting to note which league recovers more swiftly from the economic impact of COVID-19. It is our prediction that the CSL will be more likely to recover at a faster speed given the higher cash reserves its clubs are likely to have as a result of recent wage and transfer restrictions that have restricted their cash outflows this year. 

Video Analysis of Matches (Emir Ozsuer)

Football fans around the world may share similar ways by which they support their teams but, does this mean all celebrations are the same? Fans usually tend to show support to their teams through chants, banner shows and by wearing uniformed apparels. There are, however, differences in the manner that Chinese Super League fans cheer and support their favorite teams compared to that off Major league Soccer fans. Their differences lie within the manner in which they support their teams. In CSL’s case, how they can support their team is influenced by the country’s political climate as dictated by the kind of government they have. As such, Chinese fans can’t use tifos and flares when compared to their Major League Soccer counterparts as they do not want to challenge the authorities. Chinese Super League fans, however, have bands solely dedicated to their local team, which is not present in Major League Soccer Teams. Chinese Super League fans are also more “uniformed” in their support to their local teams compared to Major League Soccer fans. On the other hand, MLS fans have more freedom when it comes to supporting their teams as there are no strict political boundaries like that off the CSL (TorontoFCUltras, 2017). MLS fans also show a great imagination when it comes to adapting pop songs to create new chants for their teams (Raw, 2017).

In China, tifos and flares are seen as potential tools for challenging the authorities. (COPA90 Stories, 2019). Tifos are a large choreographed display of fan’s support, which could also contain political messages. Due to this political aspect, they are not used in the Chinese Super League. Flares are not only banned in the Chinese Super League but are also banned throughout the whole country by the government.  As shown in the video, there are no tifos and flares used by the Chinese fans. In contrast to CSL, European football fans are known for lighting many flares and having extreme tifo’s. One of the greatest examples for this is Borussia Dortmund where fans show spectacular choreography on a yellow wall (Bundesliga, 2020). So, in this regard, MLS comes closer to the standards which both the MLS and the CSL are trying to catch up to. Flares are not allowed into the games in any country but are also not seen as means of protesting the government. Instead, they are seen mostly as tools that act as a supplement to the choreography show made by the fans.

Instead of tifos and flares, Chinese Super League fans have dedicated bands to support their teams.  Mi San Dao and Beijing Guoan’s Royal Army created “ultra” fans who know the lyrics of their songs by heart (Copa90 Stories, 2019). These songs serve as “anthems” and contain nationalist lyrics which express the hope they have of one day winning the World Cup. In the video, the band can be heard but the lyrics are inaudible (COPA90 Stories, 2019).

Both leagues’ fans show “uniformity”. This can be observed for the CSL from the video as everyone wears the same blue apparel that belongs to their team. This results in the uniformity of fans. (FootballAsiaNow, 2017). In the MLS, we can observe the same trend where a majority of the fans wear branded jerseys of their teams. What is interesting is that some fans can be seen wearing either random outfits or random American Football jerseys (Raww, 2017).

We can see that patriotism is a strong factor which unites crowds in the MLS, in a way that is not as apparent as in other leagues across the globe. On the contrary to the European Leagues and especially the CSL, we can see a great deal of national flags, in this case American flags, being waved in the stadium (Joshua Curley, 2019, 1:29 – 1:40). Furthermore, the fans of the MLS appear to be significantly more diversified than in other leagues as evidenced by the strong presence of LGBTQ flags among other minority group symbols. On this front, the MLS has done an incredible job of accommodating and promoting diversity within its fan-base.

In conclusion, Chinese Super League and the MLS don’t only differ from each other but they also differ from European clubs from which they are influenced by. Both leagues also have numerous similarities. How fans in both leagues execute their chants and how they support their teams are affected by politics and are also derived by cultural norms. What is so great about football is that, no matter how much you try to do the same thing as another League or another team, the end product is never the same and never will be.

Conclusion

When comparing the relative successes of these two leagues, it is important to recognise and account for the environmental differences surrounding them. The MLS is ultimately a company, controlled by its shareholders with no affiliation to the US government. Conversely, despite the majority of CSL teams being owned by private investors (although some are still owned by government controlled conglomerates), the Chinese government exerts a large amount of influence on the league and its development. Although both are technically operating as Limited Liability Companies, the CSL is state-backed and being driven by a President whose regime has prioritised the development of soccer (Bland and Cover, 2016). Although this comparison focuses on the two leagues themselves, and not the environmental conditions surrounding them, it is important to understand the additional  advantage given to the CSL as a  result of its government backing, which is not experienced by the MLS. 

The evidence gathered in this comparison demonstrates that the CSL has developed a more efficacious economic structure, which has consequently facilitated a higher standard of play and attracted international stars in their prime years to its clubs. In comparison to the MLS, it has experienced growth at a faster rate, given that it was founded 9 years later and achieved a higher perceived valuation as a result of this superior growth rate. It has also acted on restricting unsustainable spending amounts in an effective manner without completely restricting the ability of its clubs to land big-name signings, while ensuring the majority of each team is composed of Chinese players that have come through recently established academies (Wenderoth, 2018). The MLS has had a huge amount of success, particularly given the increased competition it faces within the North American sports market from other sports such as Basketball, Baseball and American football. It appears to have been restricted, however, by its single entity structure which does not allow for the unrestricted spending manifested by the CSL (before 2020) that enabled it to achieve such exponential growth rates and draw younger superstars into its clubs. 

Looking forward, the future of both leagues is immensely bright. Despite the additional rivalry present within the North American sports market, the MLS is drawing investors from across the globe, as manifested by its latest addition of Inter Miami FC – backed by David Beckham, and attracting larger audiences each year (Statista, 2017). Similarly, the CSL is making an impressive amount of progress in achieving its objective of promoting soccer across China – although it still has a long way to go with regard to its international team. The status of the national team, however, will almost certainly rise in the near future, particularly when one considers the potential offered by the country’s 1.38 billion residents or the inevitable talent that will be discovered within the 27 million children now playing soccer regularly across the nation (Wenderoth, 2018). 

We hope you found this comparison interesting and appreciate you visiting our site. 

Will von Guionneau, Emir Ozsuer and Tony Davis