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EXCLUSIVE: Stefan Szymanski of Soccernomics, Part 2

We called in one of the big guns to help us sort through the MLS collective bargaining mess and the future of soccer in America. Here's part two of our exclusive interview.

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The analytics movement may be a Revenge of the Nerds for the sporting world, but the jocks aren't going quietly.

We reached out to Dr. Szymanski -- economist, academic, and co-author of the best-selling Soccernomics -- in hopes of getting a better grip on Major League Soccer's collective bargaining issues and its uncertain future. On Monday evening, we posted the first part of our chat. By Tuesday, a U.S. Men's National Team legend and FOX Sports pundit had engaged Szymanski in a lively back-and-forth on Twitter as a result of our interview. We can re-live that online exchange here:

https://twitter.com/AlexiLalas/status/570279683918409728

I'm glad I don't have to make some kind of Sophie's Choice between two titans of their respective fields. I couldn't! We love Alexi. We love Stefan. We love the narrative, and this conversation is one that Major League Soccer needs to have someday.

So, why not right now?

We'll get right into the second part of our chat with Dr. Szymanski, BUT FIRST, noted mathematician Tom Lehrer will get us in the right frame of mind for some piping-hot analytics:

Thaaat's Soooccernoooomiiiiics!

Here we go, edited only for length:

HRB: You noted that, in the soccer world, the best teams and leagues didn't get that way by being "sensible." Can you expand on that?

SS: We're not talking about a structure characterized by rational actors who coherently develop a business strategy and implement it and watch the fruits of their efforts. It's chaos out there! It's mayhem.

There's a kind of dissonance here in the United States. This is meant to be home of the brave and land of the free. This is where free markets go to their limit. The customer is king. We're just at the service of the customer.

On the other hand, Americans seem to want a nice, regulated market with predictable cash flows. One knows what's going to happen, and everything is set out in advance. In European soccer, the customer is king, everything is done to make a better product for the customer, and nobody makes any money. There are no profits. They lose money.

HRB: And if there are profits, they don't go back into the game, like what the Glazer family has done with Manchester United.

SS: That's kind of the exception. Even the money taken out by the Glazers is dwarfed by what [City Football Group's] Sheikh Mansour and [Chelsea FC's Roman] Abramovich have put in over the last decade. The Glazers took out $1 billion; those two [invested] about $3 billion between them over roughly the same period of time. Look at Paris Saint-Germain. Monaco. Look at what a lot of the Russians are doing. Italy's never made any money.

This idea that there's some kind of orderly business plan which MLS could follow that would ultimately produce success? Good luck with that. Maybe I'm wrong, but everything I see in the history of soccer and what makes successful soccer leagues, it has nothing to do with ordinary planning and high profits.

HRB: This is what the market has ended up dictating.

SS: Yes, and the genius of the major leagues in the United States is always to control and restrict this. The major leagues in the U.S. are the antithesis of free markets. These are tightly regulated and controlled markets. The only reason they work is because there's no competition.

If there were a hundred leagues out there in the rest of the world competing with the NFL, the NFL would be nowhere.  It would be competed out of existence, which is exactly what's happening to MLS. I've seen figures which suggest that 90% of the income in MLS comes from gate money. From tickets!

HRB: That's staggeringly high, and speaks to the utter lack of TV money trickling down in MLS. I would wager that not a single first division in Europe would have a figure even close to that. The money is coming from anywhere else.

SS: For big leagues in Europe, it's now somewhere between 20-30% coming from the gate, and after the new Premier League broadcast deal, I would think they're going below 20%.

HRB: At a place like Manchester City, I would imagine it's even lower. Their ticket prices are actually quite cheaper than even some clubs in England's second division. They don't care about the money they're making on tickets.

SS: And where would the NFL be if they were taking 90% of their money at the gate? That's not where the money is. Modern professional sports are television products, and MLS is not a TV product. It's not a modern professional market, and it won't be until it can compete on TV. To do that, you've got to have really high-quality talent.

It seems to me that the argument people are having over the CBA is like people saying, "I've got to walk from New York to San Francisco," and arguing over whether they should take Broadway or 5th Avenue. "Which is going to get me there fastest?"

HRB: And you've got to go four thousand miles!

SS: It's irrelevant. That's not really your major issue if you've got that far to travel.

The [CBA] negotiations are really about how to divide a very small cake between the two sides. It makes sense; they both have a stake, even though it may be very, very small. It's still a cake, so it's worth arguing about who gets which share.

But I think the question that you're interested in is not about who gets the share of the cake, but how we make the cake bigger. My point is that nothing about this [CBA] argument is going to make the cake bigger in a serious way. The European cake is thirty times bigger than this. How do you grow it thirty-fold? Well, that's a whole lot of baking you've got to do! You need a much bigger oven, new technology. And with this tiny little cake, nothing about its division is going to change those requirements.

HRB: So, MLS cannot behave like the other major U.S. sports because NFL, NBA, MLB, etc. don't have any outside competition, but MLS also can't be a major player in the worldwide soccer market based on everything you've laid out-- lack of buying power, a tiny TV contract, not much of a national audience. They still have to decide what they want to be, but the league and the owners are either unwilling to make hard decisions or simply in denial about where they stand.

SS: One of the things I've always felt is that generals always fight "the last war:" they're focused on what went wrong before rather than being focused on the future. MLS has always been about the old North American Soccer League. It's always been about saying, "we won't make the mistakes that they made." I actually think that's a misreading of history.

The NASL was not such a big failure. In many ways, it was actually quite unlucky. NASL was doing fine, but broadcast contract negotiations failed in 1983. If they were living in the multi-channel environment we're in now, they would have got a broadcast contract, and they would have continued. They had built up the presence of soccer in the U.S. quite substantially as a professional game, but MLS has spent twenty years rubbishing NASL and claiming that they're different. They're in a situation now where it looks to me like they're going backwards at the moment, and the future doesn't look good until they dramatically change their views on things.

Part of it is that their analysis of the problem is wrong, and actually, I would think that if you took them aside and went through my arguments – which I think most of them are familiar with – the honest truth is they'd probably turn around and say, "yeah, that's actually more or less correct. The problem is we can't say so publicly."

We have to soldier on regardless, but strange things can happen, right? What if a Chinese billionaire walked through the door and said, "I'm gonna put in a billion dollars into sustaining this." Something unexpected could happen which would suddenly change the face of the game.

HRB: But it really would take a deus ex machina situation?

SS: That's exactly the way to think of it, and sometimes God does come out of the machine! It's actually happened.

HRB: I would welcome it! In that same vein, speaking as a guy who spends most of his time covering NYCFC, how long will it be before Chelsea snatches up a team in America using a similar model?

SS: That's a good question, and to be honest with you, I'm almost surprised that more clubs have not done it already. One of the things that's been very noticeable is clubs opening up offices in New York. There was a story recently that Bayern Munich was opening an office in New York. That's very interesting. Why would you do that? I know they have fans in the U.S., and it might help. But some of these offices in New York might be exploratory ventures which might lead to owning a franchise.

HRB: That's just about all we've got for you today, professor. Can you tease us on any of your upcoming projects?

SS: I've got another book coming out in June. This is my more-or-less complete take on how I think soccer works as a business. The major themes are about dominance and distress-- the idea of why we have teams that are perpetually dominant in soccer, and why there are teams that go bust.

The point of the book is to explain how the markets work to bring this out. It's a competitive market, but one that produces this equilibrium in which you have extremes of wealth and poverty. It's called Money and Soccer – really original title! – A Soccernomics Guide. It's actually got a preface by Simon [Kuper, co-author of Soccernomics], and it's going to lay down in tedious detail, you might say, how the economics of this really works.

*     *     *

We have to wrap things up for now, but fear not-- the discussion over MLS's struggle for the future is ongoing.

So, is the professor right about MLS? Is he dead wrong? We want to hear your takes! Leave a comment or blow us up @hudsonriverblue.

And whether or not the players strike over the CBA and Michael Bradley ends up singing on top of the barricades like it was Les Misérables, don't you EVER forget your daily dose of HRB.