By Christopher R. Deubert, Senior Writer
In February 2020, MLS and the MLS Players Association (MLSPA) agreed to an unprecedented provision in their new collective bargaining agreement (CBA) – the salary budget (cap) would increase if MLS’ broadcast revenues increased “above the amount generated by the league in 2022 plus $100 million.” This past summer, the NWSL and NWSL Players Association (NWSLPA) also agreed to share media revenues in their new CBA. The Women’s National Basketball Players Association (WNBPA) recently opted out of its CBA with the league, effective after the 2025 season. Early reports indicate that the players may be looking for an explicit share of media revenues like their soccer colleagues. They should be careful.
The MLS Exemplar
MLS’ broadcast arrangements had traditionally looked like those of MLB, the NBA, and NHL. The league sold a package of games to be broadcast nationally, and teams contracted with local networks for the bulk of their games. This model had limited success. In 2022, MLS’ national television deals were worth a reported $105 million, of which $25 million went to U.S. Soccer. Moreover, teams made little money selling their local rights, with some teams even paying just to get their games on television (Disclosure: I was General Counsel of D.C. United of MLS from November 2018 to March 2021).
MLS thought instead that it could maximize revenues by adopting the NFL model – selling all league games as a collective package. MLS Commissioner Don Garber was confident in the expected largesse from such an arrangement, predicting annual rights fees of $300 to $400 million.
The players heard Garber loud and clear. When their CBA approached expiration in January 2020, the players faced the prospect of executing a multi-year agreement on player pay, only to have that agreement undermined by a large jump in league revenues during the term of the CBA.
To avoid that fate, the players and league agreed that the salary cap would be adjusted upward if league media rights grew substantially (as Garber apparently expected). Specifically, the parties agreed that the salary cap and player expenditures would increase by a share of league media revenues in an amount over effectively $205 million annually. The players’ share of the incremental media revenue was slated to be 12.5% in 2023 and 25% in subsequent years.
The NFL, NBA, and NHL have shared percentages of their revenue with their players for decades. However, the MLS deal was the first time that players got a specific portion of broadcast revenues. Moreover, it was the first time a league had agreed to adjust the salary during the life of a CBA based on a forthcoming broadcast agreement (the NBA has a salary cap smoothing system to prevent the cap from jumping too much in any one season, as may happen from its recent media rights agreements).
Unfortunately for the players, MLS did not get the media revenues it expected. In June 2022, MLS signed a broadcast agreement with Apple TV worth $2.5 billion over ten years The deal was below the annual values predicted by MLS, tied MLS into a long-term deal without any ability to re-enter a dynamic market for sports broadcast rights (such as after the 2026 World Cup), and put the vast majority of its games behind a paywall. MLS has the ability to earn more money from the deal if it hits certain subscription metrics. Yet, to date it has not done so, casting further doubt on the value of the deal.
The NWSL Comparison
In November 2023, the NWSL announced impressive new media rights deals. Having previously only received $1.5 million annually from CBS, the league secured new agreements with CBS, ESPN, Amazon Prime and Scripps Sports worth $240 million over four years, or $60 million annually.
The NWSL deals compare favorably against that of MLS. First, the NWSL deal provides its 14 clubs with $4.3 million each, half of the approximate $8.6 million each of the 29 MLS clubs receives from the Apple deal. Second, the term of the NWSL deals are only four years and thus permit the league to go back into the market right after the 2027 Women’s World Cup, when interest is at its highest. Third, while some NWSL games will be behind paywalls, many will still be broadcast on the largest and best networks. Fourth, the NWSL retained the rights to about a third of its games which it airs domestically on NWSL+, a direct-to-consumer service.
At the time of the NWSL’s new broadcast agreements, the NWSL and NWSLPA had a CBA that extended through 2026. However, this past summer the league and players quietly and surprisingly agreed to a groundbreaking new CBA. The CBA did away with the player draft and provided all players with unrestricted free agency upon the expiration of their contracts, among other changes. The league also agreed for the first time to share a percentage of revenues with the players through a salary cap, a portion of which is explicitly drawn from the league’s broadcast agreements.
The league and players have thus embarked on a partnership that will see both sides make more money based on the success of the league’s media rights deals. On the whole, the agreement aids the NWSL’s domestic and international competitiveness amid growing popularity, revenue, and team valuations.
The WNBPA’s Shot
Like the NWSL, the WNBPA has been experiencing a boom in interest. Nevertheless, monetizing that interest is complicated. Most importantly, the WNBA and its clubs are substantially owned and controlled by the NBA and its member clubs. Thus, when the NBA signed new broadcast agreements this past summer, the WNBA’s rights were folded into the deals. The WNBA is set to receive about $200 million annually, a large increase over the $60 million it was receiving, but only about 3% of the $75 billion, 11-year deals agreed to by the NBA. At the time, the WNBPA expressed concern that the WNBA’s media rights had been undervalued, resulting in depressed player salaries.
At the same time, WNBA teams have jumped in value to an average of $96 million on average annual revenues of $13.2 million. The league is in growth mood with teams in Golden State, Toronto and Portland joining soon with more expected to follow.
The players do not want to miss out on that growth by waiting until 2027 to negotiate a new CBA. They want better pay and benefits now, described as an “equity-based” model.
The term equity can mean multiple things. It is not realistic to think that the league will provide players with equity ownership in clubs, which would make salary cap calculations a nightmare. Equity also means fairness, and for sure the players are striving for what they believe will be a fairer financial model.
Providing the players with a share of league revenue, including a percentage of broadcast rights, would certainly let the players share in the upside of the league’s growth. However, if the revenues do not grow as expected (as in the case of MLS), the players will not see the pay increases they want.
Deubert is Senior Counsel at Constangy, Brooks, Smith & Prophete LLP
