Let me throw out an idea as an alternative to the 'pro/rel creates incentives to succeed and single entities create no incentives' argument. MLS secures a naming rights sponsor much like the Barclays Premier League. So lets say the American equivalent would be the Chase MLS. They get a new fancy euro looking logo with Chase on it and MLS agrees to put a Chase logo on the back of all 19 team jerseys. Remember teams use to have sponsors on their backs before it was abandoned for front shirt sponsors. So Chase gets their naming rights and all those shirt sponsors, and in return they pay 25M a year. Which is a pretty good deal when you figure they are getting 19+ shirt deals and a league naming rights and lots of commercials on TV. But instead of throwing it into the SUM pot and dividing it up evenly among the teams, you reward all 25M only to the club who wins the MLS Cup. This can be divided up anyway the club wants. That means if Bob Kraft wants to line his pockets with 25M then he can. If AEG wants to go on a spending spree and bring in some stars they can use it all as allocation. If DC wants they can use it as a down payment for a nice little SSS. Basically its a ton of cash, given to one club every year. And if you win and use the money the right way, it could be an incredible game changer for your organization. What does this do? It creates a much higher competition level between the clubs and because the money is coming from a new sponsor, it doesn't cost the league anything. Now if there is much more money to be made, that might be the difference between a team signing DPs or not. Maybe they invest a bit more on scouting, maybe they pay a bit more on transfers, maybe they are quicker to fire coaches who aren't winning. The stakes gets turned up because there is now so much more to gain. Basically everything would matter more once teams can make much more money. So while we wouldn't actually have pro/rel, you would have the same kind of huge financial benefits to finish at the top. If we create that giant carrot at the top of the table through alternative methods, we might be able to create much of the benefits of pro/rel but without the doom of relegation.
Re: Friday, April 13, 2012 Eurosnobs in the US don't wake up to watch bottom feeding EPL teams. The vast majority glory-chase the top teams. How many Sunderland or Swansea City jerseys do you see at the average American soccer bar?
Awarding hosting rights to the MLS Cup isn't enough incentive to finish top-of-table? And winning MLS Cup is supposed to be its own reward. If you need incentives to win the league championship, you really need to find another line of work. ------RM
What? You are joking right? You really think American sports owners invest hundreds of millions into their team and stadium just for what...honor of winning MLS? You think owners world wide invest millions to move up to the 1st division or to move into Champions league because of the honor of the reward itself? This is incredibly naive on your part. The reason why you have increased investment everywhere in the world is because there is more reward (financial rewards). You invest millions to make it to the Champions League to make more in the long run, if there was absolutely zero financial gain to moving up divisions or into the Champions League, do you think you'd have owners willing to invest so much? There is very little rewards for MLS owners to win. There are some rewards for signing stars (sponsors, TV deals) but that is not the same as a reward for winning. Galaxy was making just as much with Becks when they sucked as when they were good. This is the heart of the pro/rel argument, reward success and you will get more investment. If you were to create a reward system within the single entity, where more money will go to the winner, then you will see more investment. It is an incredibly simple concept. And I even suggested a way to pay for this prize (league sponsorship) so it wouldn't have to come out of any current owner's pockets. In a perfect world, this reward system would happen naturally. Champions League would be an incredibly lucrative tournament with tons of sponsorship and TV cash. Teams would fight like hell to get into CL so they can make all that money. But in Concacaf, CL just isn't a money maker. It is certainly still worth playing in, but it isn't going to get a Bob Kraft to care about investing any more cash into his club just for the chance of entering a tournament that they'll probably loose money on the travel. If going to CL make clubs tens of millions of dollars, then it would raise some eyebrows, even for guys like Kraft. You would see teams much more willing to invest if they could make that kind of cash, which is exactly why you see so much investment in Europe. But in America, we just don't have that. MLS itself needs to create the reward system because international competition isn't profitable yet.
So let me see if I've got this straight, because this is one of those posts that's so far out of left field, it's all I can do not to stare speechless at the screen. So... In your world, billionaire owners pay tens of millions of dollars in expansion fees to join MLS. They invest a similar amount of their own money to build a stadium. And then... what? They just yawn, half-ass it, and lose interest because winning doesn't have a freaking monster payout? If this is happening, I'm missing it. (And don't point to New England as if Kraft is somehow emblematic of the league as a whole.) Also, there are plenty of existing incentives to win. Winning means higher attendance, which means more money. Winning means more playoff games, which means more money. And you might be surprised to learn this, but owners have egos. They like to win because it's their team. Only the most devout Ayn Rand followers believe that wealth is the only incentive to do anything. In short, what you're suggesting is a solution for a problem that I just don't see. If you do, I'd appreciate concrete examples, other than New England. ------RM
What Champions League teams are making more "in the long run"? Maybe Arsenal in the EPL and Bayern Munich and a couple other in the Bundesliga (but that's mostly due to their league restrictions) but other than that who? It seems that the best teams Man U, Chelsea, Barca, Real Madrid etc are losing tens of millions all while their revenue is increasing. MLS owners have the same rewards and incentive to win as NHL, NBA and NFL owners.
US Open Cup and Superliga all have/had cash prizes for winning. So cash incentives are nothing new for MLS teams, I simply suggested a large cash prize for MLS Cup and I showed how to pay for it.
You are probably right on the American part, but mainly wrong worldwide. Owners aren't in it for the money as most don't make money on the deal. "Invest" is typically another word for "throw money at". They don't tend to get that money back. Even if being in the CL brings a lot of money in, you have to keep spending that money to stay there.
Yeah, and the SuperLiga is defunct ... and we're still trying to figure out how to get people and teams to give a crap about the Open Cup. Also, you didn't really show how to pay for your idea. Simply saying "get a league naming rights deal" is the same thing as WhiteStar saying "have a millionaire start a team in Timbuktoozikstanishirewestelvaniahampton with pro/rel and it'll be the greatest ever" .... I'm not aware of anyone actually wanting to pay for the league naming rights, let alone 25m for them. Outside of that, giving every single red penny of that to one club isn't really a good idea.
Yeah. From a financial standpoint, does pro/rel result in a better product than a "closed" league system? Considering the unproductive high fixed cost investment that pro/rel requires (especially, requiring an oversized stadium for a second division team), I do not think it is clear that pro/rel would lead to improved quality of play. I'm rereading Schlumpeter right now who emphasizes that monopolies are not less efficient than theoretically unlimited competition.
I'm not trying to suggest that European investments have been sound, what I was saying is that in all cases when there is more to gain you will see more investment. Now inflation (wages and transfers) have created a system that isn't sustainable, but if there was no incentives, if all media and sponsorship revenue was divided up evenly regardless of performance, than you would have seen less investment. This is the reality in all markets. Prizes are proven to be incredible motivators. Take for instance the X-Prize (I know a bit off topic), the prize given for various scientific endeavors. It is believed that the 25M prize has spurned on hundreds of millions of dollars of overall investment in the field of space aviation. That is just one example, but it is clear that when there is something to gain, there is more motivation and investment than when there is nothing (or very little) to gain. If you agree that MLS is a unique American sport, because unlike the big 4, MLS is not the strongest league in the world and it does loose market share to international clubs. So how do you spur on the needed investment to catch up to the rest of the world? In my opinion, the owners of MLS need more to gain from improving, which right now they don't have. There is motivation to build stadiums because it makes financial sense, that is why we see stadiums. There is motivation to sign big superstars because they bring in press and sponsorships. But there is not as clear cut reason for most clubs to invest heavily into their club. Why should Dallas spend 5M more on their club if winning MLS cup presents no clear economic gain. If there was a large prize, then there would now be a clear economic gain. We have created financial incentives before for our competitions (USOC and Superliga) and while those competitions haven't been supported by fans, they still show that our owners and USSF agree that prizes can help. What I was suggesting is a prize big enough that it could increase investment levels in order to obtain that prize. Now the argument that MLS couldn't find a sponsor willing to pay big money is legit. I work in marketing and I understand that in this market it is hard to find sponsors. But there are ways to value what an MLS sponsor could be priced at. For instance we know that MLS shirt deals are between 500k-5M (2.5M being the average) for the front of the shirt, so it would be reasonable to price rear sponsorships at less than 1M. Of course some will point out that some clubs do not have shirt deals yet, but that may be because those markets are pricing themselves too high and would rather wait for a 3M a year deal then to take a 1M deal that might be on the table. But if we price the rear sponsorship at about 750k-1M, then you are looking 15M just from the shirts and more when teams are added. Also you can begin to offer the sponsor pre-roll commercials on all MLS videos, banner ads on the website, video display ads in MLS SSS, commercials on ESPN/NBC during the broadcast, naming rights to other SUM events like the World Football Classic... It would be impossible for me to get a realistic price without seeing all the data and the impressions that MLS could offer a sponsor, but I think that a rough guess would be around 20-25M a year. If Herbalife alone is willing to pay 5M just for the Galaxy front sponsorship, I think finding a sponsor for the whole league between 20-25M is not unreasonable.
Re: Friday, April 13, 2012 But surely all of the problems the A-League has is BECAUSE it doesn't have promotion and relegation. Don't forget, pro/rel is a panacea.
Re: Friday, April 13, 2012 Not yet, I would Imagine Korea would implement it first, A-league is decades away IMO.
Again, in the USA, most probably, but abroad, much less so. Most "investors" aren't in it for the financial returns. They try to make the team better so they do well and hopefully win stuff, not because winning will make them or the club more money.
Re: Friday, April 13, 2012 I would not say that. The AFC is clear that they want to be 100% like Europe and have every league with pro/rel (why... I dont know, its stupid in my opinion) and soon A-League will have to rush to get them done.
OK, not to get off track about US owners versus European owners because of course the thread is about American owners. But are you staying that increased investment in football over the past decade has nothing to do with the increased revenue opportunities due to TV and sponsorships? So if starting next year if promoted teams into EPL receive ZERO additional revenue from promotion and Champions League also results in ZERO additional revenue, do you think we will continue to see the same increase in investments over the next decade? You can argue that US owners are more interested in a profitable business venture, but it is impossible to say that European owners are simply not interested in financial motivations. I think if CL or EPL offered zero revenue opportunities then you'd see decreased investment across the board. There is always a bottom line. Now I don't think we should try to emulate the hyper inflation we've seen in Europe over here, but if indeed Americans want MLS owners to increase investment into their clubs then it seems reasonable that we offer higher financial rewards for those owners who invest into winning clubs.
The investment was there before the payouts with the Champion's League. What, they were rolling out the dough in 1956 ? Not so much. While the intrinsic "value" of winning and being considered the best football club in the world has been put on the shelf in recent times, it was far and away was the main reason the competition took off initially. The competition was born out of exactly that, competition. The clubs then just wanted to show each other up on the pitch. And yes, that drive still does exist today. It isn't the driving factor because of over inflation and the need to "jones up" just to stay solvent. That doesn't mean though, that Real doesn't want to keep it's perch atop the ladder .... or that the likes of a Tottenham doesn't want to finally be taken seriously outside of the EPL. That's a catch 22 right now due to our structure just now starting to grow. The ability to invest is still too low to substantiate the type of cash reward you're aiming at. Nobody is going to pay 25m for league naming rights when it takes the salary cap of half the league to equal that. The league essentially tossed 1m away each year for SuperLiga (or whomever the payout breakdown was attributed too) because nobody gave a crap (well most people). Given the state of the salary cap/revenues at the time for most of the teams, that was plenty monetary incentive to "invest" ... but the "investment" only could go so far and didn't warrant itself. So where exactly does this monetary reward go ? Where is this "incentive" going to be applied ? There's only a couple of teams that "need" a stadium. The CBA has ensured the smartest thing the league has done. Slow, steady, and sustainable spending growth is what is allowing the league to thrive. So yeah, you give New England 5, 10, 15 million for winning the league. Then what ? Where's it going ? What exactly is it doing ... ... and most importantly where is it coming from ? I don't see Chase or anyone else stepping up to provide that amount over multiple years, let alone every year. What you want simply isn't substantiated by the league yet.
Yes. Owners, on the whole, are putting money in, not taking it out (unless the are corrupt, which is a different kettle of fish entirely) The extreme examples are Abramovich at Chelsea, and the middle east "investments" at Man City. They are not doing it to make a profit. In fact the higher they drive their clubs, the more they lose. Clubs aren't making profits. Yes. An owner bankrolling his club each year would just carry on doing so by the amount he feels necessary/worthwhile. A reduction in income would probably also result in a lessening of expenses, meaning proportionally he might not have to chip in so much though. How the financial fair play rules will hit the game is something that could be interesting to see.
1. Chelsea is worth more than 4 times what Abramovich purchased him for. So you have to factor in at $500+ million in stock price increases into the evaluation. So while they might be bleeding money at the end of the year, overall they are still motivated by the bottom line. Superclubs are play toys for these guys for sure, but they are still dumping money into a brand that they can still sell in the future. This is no different than teams in the US. I know that there is only 4-5 teams in the NBA that make profits at the end of the year, but team evaluations keep going up. There are other ways to make money on sports teams other than day to day, but money is always a issue for everyone and Abramovich or Man City are no different. The biggest clubs in the world are worth about 1.2B, if City or Chelsea can dominate in England and Europe then the world will view them as the best and they will find the kind of global fan base that would allow them to be worth over a billion dollar. These clubs are bleeding money to get to the top, but there is still financial motivation. They might not be motivated in making money each year, and they could happily loose money for a decade as they build, but that is not an uncommon strategy in many businesses. Often times companies will be in the red for years as they build their brand. Netflix for example made a business plan that clearly had them loosing money for long enough that they would destroy Blockbuster and eventually own the market and then start making money. Making cash at the end of the year isn't everyone's motivation, but that doesn't mean that money isn't a factor. 2. As far as the sponsorship goes, I outlined above why I think you could get 25M a year but I agree that its difficult to know for sure. BBVA would seem like a strong possible partner because they are already investing in MLS (Dynamo stadium) and have naming rights in Spain. The closest US equvalent is the Nascar Sprint Cup Series. That sponsorship is worth 750M over 10 years. Nascar has much stronger ratings than we do, so they deserve a much higher sponsorship, but I think MLS/SUM could offer things other than just TV impressions that could help find a sponsor.
UGH really Stan? Is there anyway for you to take my name off of this thread...It was a snarky remark about another silly pro rel article. I think I have made it abundantly clear on my position on this and I hate having my name on this thread.
Chelsea regarded losing £80 million as a good season not so long ago. The club has been losing somewhere in the region of £100 million every year for the past 9 years. The rise in the club value, in itself an incredibly inexact measure due to the ongoing debt levels, does not cover those losses. These guys buy clubs as an investment in the same way that they buy yachts because they are a convenient means of transportation. that's the difference between normal business, and football business. Investment in a real business, which may well result in the club being in the red for a few years, is often spent in genuine investment. That's not the same as spending money on wages. The increase in income doesn't cover the "investment" required to bring it in. In other words, it'll cost you £50 million a year to make an extra £30 million in income. That's not a good investment. Now, if Chelsea could build a superstadium holding 80,000 with loads of other facilities to increase revenue, they'd be in a much stronger position, and then could make money. This isn't the USA though, and Chelsea can't get the tax-payer to build a stadium for them.
Sorry, man. I made a thread about it because it was generating enough responses to eat up a daily news thread, and because I had only just closed the last one due to post count. I don't think I have a way to delete a name out of it.