Is the problem…lack of spending?

Earthquakes Owner John Fisher discusses the new Intermedia partnership in January 2020. Photo credit: ISI Photos

Let’s face it: the San Jose Earthquakes are awful. They looked dreadful prior to the pandemic shutdown, went on a shockingly strong run at MLS is Back, then reverted to form after the restart, including truly humiliating results at Seattle and against Portland at home.

Why they’re so bad is a legitimate question. There are three major decision-makers in the organization: Coach Matías Almeyda, General Manager Jesse Fioranelli, and Owner John Fisher. This will be the first in a three part series evaluating each of those power-centers for where the blame resides.

We’ll start with ownership, because fundamentally, that’s where it all starts. In addition, it’s popular for fans to blame ownership for poor results in the 12 years of this iteration of the Quakes due to generally spending very little despite being in a rich market, and it provides a convenient excuse for fans who want to protect their favored person (particularly Matías Almeyda) from shouldering any blame.

For me, the facts simply don’t back that up. The level of investment, while certainly lower than it could be, is neither an adequate explanation for, nor a guaranteed solution to, the dreadful results on the field. The level of investment is more than adequate for a playoff team, and certainly more than adequate for a team that doesn’t get regularly embarrassed.

I’ll break down major areas of ownership’s influence, whether the spending is adequate for the task or genuinely deficient, then discuss whether ownership itself or its habits are likely to change any time soon.

Salaries and Transfers

This is the area where spending is most obvious on the field, and where we have the best data.

In 2019, the last year with complete, reliable data from the MLSPA, the Quakes spent about 9% less than the median team in MLS, ranking 17th out of 24 teams in guaranteed compensation.

In 2020, we don’t have salary data (MLSPA didn’t release it presumably due to the pandemic and paycuts they arranged), but we know that San Jose spent on a club-record transfer (Cristian Espinoza), a TAM-level transfer (Judson), and a TAM-level loan (Oswaldo Alanís). Espinoza will also move from a subsidized loan to a full salary, which presumably will be quite a bit higher. I would be stunned if the total spending associated with 2020 was less than 2019, and it is likely to be higher.

We have a team that is likely somewhere between the middle and the bottom quarter of spenders on salary. But the distribution of spending in MLS is more balanced than any other league on earth, so just a 10% bump would put them into the top half. This is not the story of relegation fodder versus super-clubs as we see in Europe. It’s why I focus more on the deviation from the median than on the ordinal ranking.

As such, the current level of spending is no reason to be utterly uncompetitive: Two of the teams who spent less in 2019 finished 1st and 3rd in the Eastern conference that year, and a top-three spender (Chicago) missed out on the playoffs altogether. NYRB and FCD managed for years to dominate despite being at the bottom of the salary lists. Philadelphia, in particular, has turned itself into a powerhouse on a budget.

A worrying sign that spending is not (primarily) to blame for results is the deep deterioration between 2019 and 2020. In 2019, Almeyda led his team to roughly the middle of the pack, and a creditable +0.18 expected goal differential per game. In 2020, his side sit at the very bottom of the Western Conference, and the expected goal differential per game has collapsed to a -0.40 figure that is worse than even Mikael Stahre’s tenure in San Jose. However, spending, if anything, increased between those years.

Would the Quakes benefit from spending more on players, particularly in this pandemic crisis that has created perhaps the all-time buyers market? Yes. But the dramatic dive in results proves that roster spending is insufficient as an explanation for anything more than a portion of what we’re seeing.

Infrastructure

Building the $100 million stadium is a big deal, and it’s a huge improvement on the Buck Shaw facility, not just from the standpoint of the physical asset, but also the fact that it’s wholly owned by the team rather than leased. Keep in mind, also, that it was entirely privately financed, not parasitically funded by the public as so many stadiums are. That’s something to be proud of for ownership, and a serious investment in the club.

But beyond that? That long-promised $35 million training facility feels like a distant memory. That’s a huge problem for several reasons. First, the existing facilities attached to the stadium are already inadequate for the club, with not enough office space to fit the front office staff, just a single practice pitch, and a gym that can’t serve the entire 30-man first team. That’s not to mention fancier bells and whistles, such as more elaborate on-site medical facilities, a dining hall, film room and others that are common elsewhere.

Second, this has a major implication for the academy: there is no wholly owned space for them to play, train, or develop, as there hasn’t been since its inception. Major pro clubs around the world have the academy in the same facility as the first team, partially to give them a sense of a path to the professional level, but mostly so that they can benefit from pro-level resources. The new training facility would need more pitches, locker rooms, office space for coaches, and gym space/equipment. For all those exact same reasons, a co-located second/reserve team or women’s team is also not currently possible in San Jose, despite the potential benefits either might bring.

Third, and least tangibly: prospective players evaluate such things. Dave Kaval told me years ago that he more than once had the experience of bringing a prospective transfer to Buck Shaw and watching them visibly lose interest. The new stadium is obviously an improvement on that, but facilities matter too. There’s a reason that Tottenham spent so extravagantly on their training complex about a decade ago: top facilities attract top players.

Given that we’ve heard little to nothing about it, I can only assume that nothing is imminent. However, make no mistake: plenty of MLS teams don’t have a devoted training complex of the sort I’m describing. Heck, some MLS teams (DC United and Minnesota) still have pay-to-play academies, which San Jose luckily doesn’t. As such, this is an area where improvements are possible, but it’s not the difference between a bottom-dweller and a champion, and typically the returns don’t manifest for many years.

Staffing

Ownership has two important influences on staffing: deciding who fills the top positions on the football side (the General Manager) and business side position (e.g. Team President), and setting a budget for each to build out a team.

In terms of decision-making, the historical track record is mixed. Team President Dave Kaval was instrumental in getting the stadium developed, and was genuinely interested in developing a relationship with the fans. Tom Fox, brought in from various Premier League stints, was barely visible, and quietly left while implying he’d lost interest after just a few years. Jared Shawlee, the current COO, is much more keyed-in and connected to the fans, but we’ve yet to see how his tenure will pan out.

On the GM side, John Doyle was allowed to retain his job far too long, likely for sentimental reasons given how much he’s meant to the club as a player and leading advocate for the return of the club in 2008. I’ll evaluate Jesse Fioranelli in part two of this series, but he’s been unambiguously better, although with an imperfect record of his own.

In terms of budget, they still lag behind their MLS peers. The scouting department is still just Bruno Costa. They are one of the minority of MLS teams that is without a single dedicated data analyst, a position that is considered to be table stakes in the modern game.

One place they did not skimp in the budget? Matías Almeyda. While the Argentine has recently made noise about not being paid any more than he was at Banfield, I would be very surprised, based on what inside information I do have, if he (and his staff collectively) wasn’t making distinctly more than his predecessors in San Jose.

For me, the story here is of relatively low accountability, matched with a shoestring budget. While fans complain about the lack of spending on the on-field product, the deficit there is actually not as large as it is in the back office. Of course, the back office is a less direct contributor to performance, but for me is a classic example of a place where you can be “penny wise and pound foolish”: excellent data analysts and scouts save you money by identifying undervalued talent. High-quality medical staffs keep your players on the field. Etc.

But even if the technical staff doubled in size, you wouldn’t see the club turn into a championship contender. This is simply too peripheral of a factor.

Prognosis for Change

John Fisher is unlikely to go anywhere, period.

Club values in the MLS are escalating rapidly due to a combination of being the only major league on Earth with effective cost controls, the only major league on earth without the possibility of relegation, and the only major league on Earth with a domestic market that has major potential for growth. Not only does that mean it would be difficult for anyone to afford the club, much less during a pandemic, but it also means that the asset increases in value whether or not the team is succeeding on the field, reducing the incentive to invest. What’s more, a new set of TV deals are imminent, which will dramatically increase the franchise value. It doesn’t make sense to sell before such an event.

That’s all to say: don’t expect existing ownership to dramatically change its approach, and don’t expect them to be interested in selling a growing asset. The latter, in particular, is difficult to imagine in the next several years.

However, with greater revenues, and therefore more of the value of the franchise derived from its profitability rather than speculative future growth, it’s possible that the gap between teams that spend in a growth mindset (like tech companies) and teams that spend in a profitability mindset (like mature industries) will narrow. But either way, Quakes fans should not set their hopes on matching Toronto, Atlanta, LAFC et al any time soon.

Conclusion

There is no doubt that there are places that spending in San Jose is lagging behind its rivals, and a few smart investments could make them more competitive in the short and long term.

However, those deficiencies do not explain multiple beatdowns. They certainly don’t explain how the team went from middling but exciting last year to dismal this year, given that underlying financial conditions didn’t change. Clubs do more with less within this league alone, and the disparities between the smaller and larger clubs in MLS are the smallest in the world.

And lack of spending certainly doesn’t let players, coaches, or staff off the hook for their failures.