Will USL’s transfer to pro-rel exchange U.S. football, threaten MLS?

In the previous 30 years, the most important debate in U.S. football circles has been whether or not leagues on this nation must undertake promotion and relegation, or “pro-rel.” While leagues internationally have this kind of construction — wherein prime performers of decrease divisions transfer as much as the tier above them, with the strugglers getting demoted to the league beneath — MLS hasn’t ever severely entertained the speculation. The similar was once true of the alphabet soup {of professional} leagues that experience dotted the U.S. prior to now half-century.

That might be about to switch.

Back in March, the United Soccer League (USL) with its 3 tiers, and plans so as to add a fourth on the most sensible of that pyramid, introduced plans to institute pro-rel in both 2027 or 2028. If the football stars align, it will quantity to a sea exchange for the game on this nation. Games on the backside of the league standings could be simply as compelling than the ones close to the highest — if now not extra so — and would introduce without equal type of responsibility for groups, gamers and managers.

Implementing the machine additionally carries with it the chance of devaluing an funding if a workforce will get relegated. Yet the inherent meritocracy additionally has really extensive attraction. That’s why the USL’s announcement was once lauded by means of fanatics and homeowners alike.

“It’s going to bring in better players, better staff and just a better show for our fans. So that’s going to allow us to have even more of a positive impact to our community,” stated former MLB All-Star Jose Bautista, who’s now the landlord of the Las Vegas Lights within the USL Championship. “So how can we say no to that?”

The USL is made up of 3 leagues: the second-tier USL Championship, third-division USL League One and the beginner USL League Two. The USL Championship is the second-highest stage {of professional} football within the U.S., beneath MLS. The introduction of a brand new Division I league could be a transparent selection to MLS for fanatics and gamers alike.

“As we are in our 30th season with 30 clubs, world-class stadiums, a global fanbase, and significant investments in player development and top talent, we welcome the continued growth of soccer in North America,” MLS stated to ESPN in a remark referring to USL’s intent to create a rival Division I league.

Pro-rel could be a differentiator. As it’s, the champions at any stage within the USL get no praise past the pleasure of successful their league.

“No one felt as though we were gaining enough relevance,” stated USL CEO Paul McDonough. “The monies weren’t there from sponsorship, tickets and things like that.

“It’s beautiful difficult to get the fanatics excited when the sport does not topic.”

‘I do believe it’s a game changer’

In late 2021, the league went out and enlisted sports consultants Twenty First Group to examine what the impact would be of implementing changes to its business model. These included moving from a spring-fall calendar to a fall-spring calendar in line with European leagues, adding a Division I tier above the USL Championship, and implementing pro-rel. The latter two proposals carried the day.

According to a USL spokesperson, among the report’s findings was that implementing pro-rel could potentially increase matchday and commercial revenues by 15% to 30%, although the spokesperson noted that “the particular affect will range relying on a membership’s place within the pyramid and its operational readiness to capitalize on new alternatives.” This rise in revenue would be primarily achieved through increased ticket sales and sponsorship.

The league’s owners met in May 2023 to discuss pro-rel, but decided they weren’t ready. One source said the USL’s pro-rel presentation fell flat, only for Rhode Island FC owner Brett Johnson to step up and deliver a compelling presentation of the system’s merits. Subsequent conversations led to another meeting in March of this year, at which point the USL decided to take the plunge.

“I do imagine it is a sport changer for USL, and I’m only a huge, huge fan of the assemble of promotional-relegation and video games of result,” stated Johnson, who could also be a part of the consortium that owns English facet Ipswich Town, which was once relegated from the Premier League in April. “And I believe it is one thing that is sorely missing in North America writ massive, now not simply clearly MLS, but in addition in USL. This is an excessively transparent selection league and construction and layout, one that appears much more in keeping with international soccer.”

According to McDonough, the announcement has resulted in an uptick in interest on the business side. He recalled how one ownership group said that a potential investor was now willing to quadruple their investment because of the allure of climbing the USL pyramid, and the possible increase in revenue and fan interest that would come with it. He also says that sponsors who weren’t interested before have now returned to the bargaining table.

It helps that the price point for a USL team is far below that of an MLS counterpart. San Diego FC paid MLS a $500 million expansion fee ahead of the 2025 season and invested tens of millions more in infrastructure. The cost of acquiring a franchise in the USL Championship is around $20 million, with League One costing around $5 million, according to the league’s 2024 Franchise Disclosure Documents (FDD).

The pro-rel approach dovetails neatly with the creation of a Division I league that would have teams in bigger cities and stadiums.

“The bull case round the entire USL houses is obvious and compelling,” said Bobby Warshaw, vice president at Bloom Sports Partners, an advisory firm that helps sports organizations on strategy and executive placements. “Build gorgeous new 15,000-person stadiums in up-and-coming towns; introduce pro-rel to the American target audience; assemble world-class rosters with out the burdens of MLS and NWSL laws, and you’ll be able to do all of it at available worth issues relative to different American leagues.”

McDonough also said about the increased interest, “I believe while you see that and there is more cash pouring into the machine to lend a hand the groups, then we are hoping that is a motive force to make it.”

But “hope” is still doing a lot of heavy lifting. There has been scant detail on how exactly USL will implement pro-rel, even beyond the mechanics of deciding how many teams there will be in each tier and how many will be promoted or relegated each season. The USL’s push into pro-rel is also making a lot of assumptions, the biggest being that enough fans will care about the league to a demonstrably greater degree than they have up to this point.

“There’s now a kind of promotion-relegation-curious set of customers available in the market, and I believe that is [USL] responding to that,” said Dr. Stefan Szymanski, a professor of sport management at the University of Michigan. “How it’s going to in truth paintings in follow will rely very a lot on how customers react once they in truth see it within the flesh, because it had been. They would possibly get very enthused and it’ll do good things, it can be a large fats not anything and no one cares. And anything else in between is conceivable.”

‘There are a lot of hurdles to go’

On the business side, there are myriad questions to sort out. To what degree will implementing pro-rel drive ticket sales and sponsorships? How will it affect media rights? How much more money will teams have to spend on players as they move up the pyramid? Will there be parachute payments for relegated teams? What will the USL Players Association (USLPA) think in terms of a new Collective Bargaining Agreement (CBA)? The U.S. Soccer Federation has minimum standards for market size, stadium capacity and the financial heft of owners of Division I teams; will the USSF hold the USL’s feet to the fire, or will it allow for some flexibility?

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Of the more than a dozen people ESPN interviewed for this story, many of the responses to such queries sounded something like, “We nonetheless must determine that out.”

“The PR releases were genius as a result of other people at the moment are calling and asking,” Warshaw said. “Every early-stage corporate must will issues into life, so I do not blame the league in any respect, however there are numerous hurdles nonetheless to move.”

Warshaw added that when he talks to potential investors, he breaks it down to a handful of “bets,” such as building a 15,000-seat stadium, and asks whether the investor thinks those bets will come to fruition.

“Once you get granular, you understand how a lot has to occur and the way lengthy the percentages are,” he said in reference to those bets. “It does not imply an investor should not do it; it is simply necessary to have a transparent figuring out of the location, chances and returns.”

The Twenty First Group report points to an approach where driving local revenues is, at least initially, the main aim of implementing pro-rel. Is that enough? Sources told ESPN that only a handful of teams across the USL Championship and League One are profitable.

Andrew Vassiliadis is the former owner of USL Championship side San Diego Loyal, which shut its doors following the 2023 season when, with San Diego FC starting up in MLS, the Loyal couldn’t find a stadium solution. He estimates that he lost $40 million over the course of four seasons, although some of this was due to the onset of the COVID-19 pandemic. He admits the spending was done with an eye on moving to MLS, but he still feels merely relying on local sponsorships and ticket sales is limiting.

“I can have offered out each and every unmarried sport at [our home venue], and I used to be nonetheless dropping cash as a result of price ticket gross sales is actually the one road to luck within the USL Championship,” he stated.

Vassiliadis thinks there are some groups that may make the present setting, blended with pro-rel, paintings, however too many house owners are working their golf equipment “like a minor league baseball team.” One good thing about pro-rel could be sooner or later removing one of the extra poorly run groups, however that handiest works longer term if sufficient workforce homeowners wish to compete at the next stage. And there’s a sense amongst some homeowners that the USL must do extra to power nationwide sponsorships.

“We have a responsibility as teams to enhance our league. The league has a responsibility to the teams to be a better league, to be a good league,” stated Ray Beshoff, proprietor of USL Championship facet Monterey Bay FC. “The way they’re a good league is if they drive sponsorship.”

Then there are media rights. The USL has offers with ESPN (finishing in 2026) and CBS (finishing in 2027), however no matter revenues they generate, little or no of it trickles right down to the golf equipment. Part of it is because the USL league place of business could also be dropping cash, in line with more than one resources. The rights charges additionally don’t seem to be sufficiently big to generate a tangible stage of income for the golf equipment.

The loss of income sharing could also be since the USL makes use of a franchise type. In addition to franchise charges, the groups pay annual charges to the league, the quantities of which pass up as you climb the divisions. One supply showed knowledge within the league’s FDDs that the once a year price within the USL Championship is between $250,000 and $287,500, despite the fact that just like the franchise charges, each and every workforce negotiates that quantity. Implementing pro-rel is not going to switch that association.

More severely, the league is owned by means of two people: USL chairman Bob Hoskins and USL CEO Alec Papadakis. Because of this association, the groups do not need a stake within the league, and the majority of nationwide revenues — be it media rights or sponsorships — stick with the league. McDonough says any extra broadcast income is poured again into making improvements to the TV product, and he does not see the association converting, a minimum of within the brief time period.

Yet the workforce homeowners that ESPN spoke to for this tale really feel that finally media rights bucks will make their manner right down to the groups, as will nationwide sponsorships.

“I do think that if there is a significant increase in the national-level revenue growth from a league perspective … I’m sure the league will be open to sharing that in a fair manner with the local teams,” stated Bautista.

The thought of sharing extra of the league’s nationwide revenues with the groups — turning into stakeholders and now not franchisees — has been introduced up with the USL’s possession earlier than, even though, and as one former workforce proprietor put it, “That was quickly stomped out.”

That dynamic appears to be putting in war down the street between the league and its workforce homeowners. As one business supply stated, “Incentives need to be aligned. Otherwise, what are you doing?”

There is near-universal settlement that hiking divisions would require better funding by means of groups, each in gamers and infrastructure. Scouting and formative years building bills are virtually sure to extend, particularly within the proposed Division I.

Those larger prices are why McDonough, when requested if there could be parachute bills for groups that get relegated — a regular follow all over the world to melt the monetary blow of losing down a department — stated that the other would happen. One worry a few pro-rel machine is if a workforce will get relegated, it could shut up store because of plummeting revenues. But McDonough feels that as a result of the loss of tv source of revenue, relegated groups may not essentially see an enormous drop in income, however fairly promoted groups will want an infusion of money to be able to higher compete in upper divisions.

“We don’t want a team to get promoted and then get busted [financially],” he stated. “That’s our biggest concern.”

McDonough added that the larger league charges might be waived, and prize cash for successful a decrease department may just lend a hand offset larger prices. Where that prize cash would come from continues to be one of the unknowns.

The most likely build up in participant salaries brings up any other impediment in instituting pro-rel: negotiating a brand new CBA with the USLPA. The USL Championship and League One have separate CBAs, with other expiration dates; the Championship model in 2025, and League One CBA in 2027. Overseas, gamers on relegated groups are regularly at risk of having their salaries diminished when their workforce is relegated. What will occur to participant salaries for a relegated workforce within the USL? That will wish to be jointly bargained.

Both McDonough and the USLPA showed that negotiations on a brand new CBA are underway, however one supply mentioned that the affects of pro-rel have not been a part of the discussions but.

Then there may be the problem of filling out a Division I league with markets sufficiently big to fulfill that designation. Atletico Dallas just lately signed on to sign up for the USL Championship in 2027. But for McDonough, it is not simply markets which might be necessary, however the homeowners that wish to signal on. In the previous, the league’s vetting procedure hasn’t at all times stored out problematic homeowners. Last 12 months, the league terminated its franchise settlement with League One facet Northern Colorado Hailstorm, this after reportedly loaning the membership $1 million to lend a hand meet payroll.

“Just having an owner with money doesn’t fix problems,” stated McDonough. “They’ve got to be in the market. They’ve got to be in the community. They’ve got to sell tickets. They’ve got to be appealing to watch. They got to be successful in the field. So those are all the things we’re going to look at as we get into this.”

The excellent information for the USL is that there’s two to a few years earlier than it implements pro-rel. The 2026 FIFA World Cup may have come and long gone, permitting the league to leverage one of the momentum from that event. How the USL navigates the a lot of stumbling blocks between at times will undergo observing.