Major League Soccer (MLS) is one of a kind, in the world of soccer. MLS is unusual to most soccer leagues in the rest of the world, particularly in Europe, in that it has no promotion and relegation system.
The closed-shop structure of the league — its teams are assured a place regardless of how well or poorly they play on the field – is a cornerstone of North American sports.
Why does MLS, the top tier of club soccer in the United States and Canada, avoid a system that is so inherently part of the fabric of global soccer?
To do so, we will first need to explore the history, structure, and culture of MLS, not to mention the greater panorama of North American sport.
MLS Foundation and Evolution
Major League Soccer was formed in 1996 as a component of the United States’ successful bid to host the 1994 FIFA World Cup.
The league’s formation marked a turning point in the growth of soccer in the United States, a country where the sport had traditionally found little traction against established behemoths such as American football, basketball, and baseball.
Yet MLS’s early years were beset by problems. The league lost billions, and in 2002 it folded two of its original teams.
MLS has also come a long way since those early days, despite stumbles along the way. The development of soccer-specific stadiums, the introduction of the Designated Player Rule (which allowed teams to sign big-name players, such as David Beckham), and the rich national TV contracts.
These changes contributed to making MLS a profitable business entity, alongside an average game attendance of more than 20,000, ranking it as the fourth most-attended professional sports league in the U.S. and Canada, behind only the NFL, MLB, and the Canadian Football League (CFL).
In 2013, MLS was the sixth-best-attended professional soccer league in the world.
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The Structure of MLS
The MLS schedule runs from late February or early March until mid-October, with each team playing 34 matches.
The Supporters’ Shield is given to the team that has the best regular-season record. Postseason: MLS Cup Playoffs, comprised of 18 teams and capped by the league’s championship game, the MLS Cup.
This system will be familiar to followers of North American sports, in which playoffs are standard for crowning champions.
But it is a marked departure from the promotion and relegation systems in most of the world’s major soccer leagues, in which teams are rewarded or punished for their performance by being promoted or demoted, respectively, to higher or lower divisions.
Why There’s No Promotion and Relegation in MLS?
MLS does not have promotion and relegation for a number of reasons, primarily related to the unique nature of the league’s organization, the financial structure of North American sports, and the cultural context of MLS behavior and fandom.
The Single-Entity Structure
The single-entity structure of MLS is one of its most distinctive features. Unlike traditional soccer leagues in which owned and operated clubs compete, MLS is a single entity.
The league owns each team but leases them to the league’s investors for operation. This structure affords a level of financial stability and control that is uncommon in world soccer.
Under this system, team owners buy a stake in the league, in theory, and are granted the right to operate a specific club. That is owners are partners in the league, not competitors.
This finds its way into a pool of revenues earned by all the teams, which is shared out to pay other expenses — including player wages excluding Designated Player salaries that go beyond salary cap limits. Profits made by the league itself are distributed to its owners, who at their behest may reinvest back into their clubs.
This one-entity format promotes cost control and protects investments because the success of the league is the success of each individual team. It also offers financial certainty and stability; it allows clubs to plan and develop without the almost permanent threat of relegation.
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Investing and Financial Stability
One of the main appeals of MLS to investors like these is the lack of relegation. Owning an MLS team is expensive, with expansion fees soaring into the hundreds of millions of dollars.
For instance, Toronto FC paid 10 million to join the league in 2007, NYCFC paid 10 million to join the league in 2007, NYCFC paid 100 million in 2015, and Charlotte FC spent $350 million in 2022.
These numbers show the rapidly growing worth of MLS as an investment.
But these investments are at risk, of relegation. A side relegated to local conservation and to a lower division would almost certainly face a collapse in its valuation, its sponsors drove away and revenue streams withered.
The financial effects could be catastrophic, especially for teams that were already fighting for their viability. It creates a safer investment environment for owners by removing the pressure of relegation.
Sports culture in North America
However, the lack of promotion and relegation in the U.S. leads to a broader analysis of the North American sports culture. And, by the way, other major North American sports leagues — the NFL, NBA, MLB, and NHL — do the same.
Instead, these leagues use a playoff system to crown champions and a draft system to allocate new talent between clubs.
It provides a degree of stability and predictability that appeals to both owners and fans. Also, every time a team has a disappointing season, they can restock through the draft and come back.
This system is deeply ingrained in the North American sports psyche, so MLS embraced it in the interest of meeting the cultural expectations of its audience.
The Lack of Robust Lower Divisions
Soccer in lower divisions has been slow to develop in North America, another reason MLS lacks promotion and relegation.
As you move down into leagues like the USL Championship and the newly formed MLS Next Pro, the professional leagues below MLS do not have the same kind of monetary strength, infrastructure, or fan interest as MLS.
Part of the following system is a hierarchy, so you can go up or down in the division, where some teams are very healthy and fan bases are healthy, at least as far as Europe is concerned.
Relegation from MLS to a lower tier system in North America producing a major pay cut and also attendance, is a non-starter. Without a comprehensive lower-division setup, promotion and relegation do not presently make sense for soccer in the U.S.
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Lessons from the NASL
The history of the North American Soccer League (NASL), which ran from 1968 to 1984, holds up a cautionary tale for MLS.
It embraced rapid expansion, and drew global stars such as Pelé and Franz Beckenbauer to its ranks — but ultimately collapsed, unable to make sound investments in itself, and going bankrupt after years of overspending on player salaries.
MLS has tried to prevent the same fate by introducing a salary cap, and keeping the league closed. Prevention of promotion and relegation is believed to be a central reason behind the sustainability and growth of the league over the years.
MLS is attempting to create a sustainable model for professional soccer in North America by utilizing financial security and incentivized growth.
The Growth of Soccer in North America
Soccer is becoming one of the most popular sports in the United States and Canada, with ever-growing interest in domestic and international competitions.
This growth has coincided with the increased success of MLS, a league that has changed the mindset of homegrown players while also drawing in the players who would help those homegrown talents succeed.
Not having promotion and relegation allows MLS to concentrate on developing a solid platform for the sport that won’t be disturbed by what a promotion and relegation system might do.
With MLS growing and changing, the league must gain traction among competing major sports in the area. As the closed league structure is believed to be a necessary backdrop to maintain the current velocity and ensure the long-term viability of soccer in North America.
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