How competitive should sports be for young children?

My 7 year old (second grader) plays soccer. He has practice once a week, and a game once a week. The teams are made up of kids the same age, no tryouts. Everyone who signs up plays an equal amount of time in the games. They don’t even have goalies yet. My son has fun playing with his friends and running around, but doesn’t care much about the game itself.

This is his second year of soccer, and all of a sudden it seems much more competitive. The coaches take it very seriously (our coaches and the coaches I’ve seen on other teams). It’s almost painful to watch the practices and games because of the huge difference in skill and interest among the kids. Some are very competitive and clearly practice a lot. Some have no clue what they’re doing and become easily distracted, which clearly frustrates the coaches.

I’m not talking about middle school or high school sports. Just littler kids, like early grade school. Is it too early for the kids to be focused on winning and figuring out who is “best,” or should it still be all about having fun and learning?