MLS Single entity (and all other league structure talk) Part II

Major rep on all the thought you put into these posts. Definitely agree that a major priority should be shaping up Chicago, DC, NE in the major markets. Hard to do in these crowded markets, we'll see how much of a dent NYCFC can make in New York.

I would be curious to see how the earnings look in other American sports leagues or other professional soccer leagues. Owning a professional sports team isn't really known to be a moneymaker. A good owner is making money through other pathways (concerts, real estate etc.). Also, the growth in a team's valuation can offset the yearly losses if an owner eventually decides to sell.

Ultimately, we can complain about not having risk-averse owners, but these are the only people willing to invest in American Soccer. I would like to see a greater wage bill but not at the expense of losing markets (well perhaps I wouldn't be too disappointed if Chivas USA were culled ).

What I think is hard for the idealist soccer fan to grasp is seeing many of these ownership groups spend significantly more on the other teams they own (Kroenke & Kraft) yet do less than their share of the paddling in the boat that is MLS. They expect all the owners to share their optimistic view of the potential for soccer with just more investment in marketing or quality of play. They see SKC as an example of where a committed ownership (some may call lucky with $300 Million in public funding) can completely flip the fortunes of an organization.

We need people pushing for the next step in the league and asking more of some of the ownership groups. Some of these idealists may not be realistic, and I certainly wouldn't want them in Garber's position. But IMO it's healthy to have a percentage of fans asking for more. Ultimately the owners will do whatever the hell they want anyways.

 

What is hard for the "idealists" to come to terms with is a basket full of issues, including, but not limited to the following:

1. There are not millions of fans avoiding MLS or Team X in MLS because MLS Owners refuse to engage in the hyper-inflated transfer market and bring "world class" players to MLS in the prime (National Team) of their careers.
   
   
2. There are not multiple networks willing to engage in a bidding war to give the league several hundred million to billions of dollars for the rights to broadcast it's games so that it can allow said teams to chase "world class" players.
   
   
3. There is not a list of billionaires who are currently shut out of MLS who would run underperforming franchises so much better, or are currently prevented from buying into MLS and would spend millions to build "superclubs".
   
   
4. There is not a list of world class players that are willing to either forego a large portion of their career earnings to come play in relative anonymity in MLS, or risk, for really any silly amount of DP money to risk being not selected by their NT managers because of the perception that MLS is not maximum optimal competition like the Big 4 leagues are seen.
   
   
5. Assembling a parcel of land and getting a stadium designed and approved to be built is not a 60-90 day process. Owners cannot just pick a place in town and say "We're building here, rezone it for us and bring infrastructure to our site". Not to mention, adjacent landowners have significant rights under US land use case law for impacts of adjacent development.

 

What would the league revenue jump to if we switched to a Fall/Spring schedule?

 

I don't think anyone has an issue with pushing owners to do more. The issues are with folks who....


.....can't even understand or acknowledge what they are doing right now to improve the game....


......who act like many structural/monetary issues can be solved in a year or so....


......and who ignore rudimentary basic facts in their Tolkienesque like fantasy worlds they have created. My twelve year old son already has more business sense than several of the people posting. I'm not joking either.

 

It would double immediately....


...because I said so.


Take that logic!

 

Interesting question.

Obviously, all the Europosers who currently ignore MLS in the months of August, September, October, November, March, April and May would flock to the league if they substituted December and, say, February for June and July. So there's that effect.

Would the entities reportedly interested in ponying up $70M a year for TV rights do that if they had no mid-May to mid-August programming and instead had to find places to put it from late November to February?

Would the playoffs be more interesting or viewer-attractive if they happened in April and May instead of November and December? Would they get higher ratings? Don't know.

 

Don't question.

 

I'll be honest, I'm not sure if there is anything MLS can do but wait for the passage of time.

I've recommended Craig Cohen's study of the early NFL many times here, and while it's on the dry side and reads like a doctoral thesis, it's must reading for how a league evolves IMO.

Armed with a lot of data, Cohen details how the NFL understood from the 1920s through the 1960s that big markets -- the largest cities in the country that in virtually every case supported major league baseball teams -- and small markets were fundamentally different. In big markets, having a pro football team meant next to nothing. These teams got little coverage in the press, drew respectably well when they were winning, but watched attendance fall sharply when they were losing, and resorted to gimmicks just to get fans to buy tickets.

By contrast, in smaller markets, teams were much more likely to be viewed as community assets. From everyday fans to the chamber of commerce types, just having a team was viewed as a positive reflection on the community, and, as a result, new teams were embraced more quickly in these markets. Support was in large part civic boosterism.

It's a very different world, but I'm not sure all that much has changed.

For anyone who doubts the importance of boosterism in smaller markets, I encourage them to read again the interview with Dell Loy Hansen on why he bought RSL when it was in trouble. He flat out says his motivation wasn't to make money on RSL, but he did fear Utah would get a black eye in RSL failed.

http://www.sltrib.com/sltrib/news/56012549-78/hansen-rsl-checketts-lake.html.csp

Although they don't explicitly note the boosterism benefit, from time to time BS posters will suggest that MLS should forget about the bigger markets and just concentrate in smaller markets where it might find acceptance easier. The NFL, which grew from small industrial towns in Ohio and the upper Midwest, actually talked about this quite a bit, but those in charge of the league knew eventually they would have to succeed in big markets to drive revenues the sport would need to thrive.

And so they just ground it out in the big cities, slowly, slowly, slowly winning converts. But it was a 50 year journey from upstart league to the modern goliath the NFL has become.

I'm not trying to excuse MLS management in some of these bigger markets. DC United needs a stadium, and Chicago and RBNY do seem more tone deaf then most organizations in dealing with fans. But even so at this point all of this is at the at the margin. Even if all of these things were fixed, it will be years before those teams mean as much to those markets as Portland, Seattle and Kansas City do right now to theirs IMO.

And I'm not sure there is any microwave setting to cook them faster.

 

I don't know about you, but watching their cold. frozen bodies being removed from MLS stadiums still wrapped in their Manchester United scarves sounds like must see TV to me.

 

How did you handle the fact that Red Bull is basically and advertising cost for their main product - meaning they forego shirt sponsorships and a bunch of other ancillary revenue because their operating loss is simply an advertising cost for their main brand? Chivas was actually much the same - an operation that was meant to supplement their other brand. I'm sure most would agree in the hands of someone trying to make money on its own they would have losses anywhere near what they are incurring.

That still leaves a few teams doing in the red, but overall its not too bad. The other thing to consider is that the business is still in the high growth phase. In this phase, many businesses expect to be in the red. So the the fact that so many in are in the black seems suggests to me the finances are more along the lines of your original thinking. BTW, I too am curious as to why Chicago seems to be such a struggle.

 

I let the Forbes numbers speak for themselves because there is no way to know how they may have factored ancillary benefit. Lot's of teams do benefit owners in other ways. AEG gets venues to promote. The Krafts get another tenant for their stadium. There are media and development tie-ins in Colorado.

Valuing these ancillary benefits is tricky though, especially when we're talking about branding. Vergara was just quoted saying that Chivas USA was so bad it degraded the value of CD Guadalajara's brand in Los Angeles. So do we attempt to add that loss in brand value to Chivas USA's $5.5m operational lose? Is it really, well, pick a number, a $30m loss?

http://www.lagconfidential.com/2014/2/17/5419324/on-the-possibility-of-chivas-usa-rebranding-as-lasc

Before we start down that path, I think you look at the basics first. If MLS teams are to be sustainable, they should break-even operationally IMO. Red Bull doesn't. Chivas USA doesn't. If Forbes is right, operationally both have posted significant losses.

From a sustainability standpoint, the fact that Red Bull may tolerate a $6.3m operating loss because they are getting something else of value is only meaningful if that something else is of comparable value to someone else. Take Red Bull out of the picture. Would a third party pay that team $6.3 million annually for the shirt sponsorship rights to close the operating deficit to zero? I suppose it's possible, but that would be one of, if not the biggest shirt deal numbers in MLS. Likewise, for the stadium naming rights, would any company be willing to essentially pay the cost of building Red Bull Arena just to put their name on it for 20 years? Doubtful, but if they would, send them down to Washington or up to Boston.

So while Red Bull certainly is getting something else here, I'm not sure any other buyer would pay nearly as much for those naming/shirt rights. If I had to guess, absent Red Bull, the team would still have an operating loss of a couple million a year after they signed a conventional shirt deal and they'd be playing in a stadium more like Toyota Park or at a higher annual cost to the team. Without cutting payroll, I don't think they'd be operating in the black.

 

Good post. The solution has always been IMO, run things smartly, conservatively and competently for the most part, and just grind it out as time passes. Time passing.....huge, and nothing can change that huge variable.

I also do want to say that NYRB is starting to get it. That fan supporters group is monstrously under rated, and there clearly is an air of change with regards to that team IMO.

 

$0.00...eventually

 

You could do a dissertation on this issue, and you could start your research with the FIRE BS boards, and elsewhere.

But start with the fact that this has been a craptacular team for the better part of a decade, having won exactly jack & shyte since the 2006 USOC. When Blanco arrived a year later, that was a team that was fading out of contention before he came to rescue it. This past season, it took a league gift of the MVP to make the team even remotely worth watching. And now, it's been 1 post season [play-in game] in the past four seasons.

Add into it a cavalcade of stupid decisions and self-inflicted wounds, starting some nine years ago when AEG stupidly fired Peter Wilt; a parade of imbeciles have since inhabited the majority of the FO's and manager's roles.


In sum, Chicago is a major market that can tell the difference between a quality product and a sh!tty one. This so happens to have been a shyte sandwich of a product on the pitch for years, and the purveyors have forced their best customers to take a giant bite over and over again. Fix all of this, and MLS can have a good-to-great market again. [Paging Garth Lagerwey...]

 

Again, if there is a concern, while the NFL was far from a finished product, by the late 1940s it had demonstrated it could do well in big markets. Dan Topping, who owned of the New York Yankees and also owned the NFL Brooklyn Dodgers (in a bit of irony) claimed the league was so determined to have strong franchises in these markets that it favored certain teams. Topping bitterly complained that the NFL consisted of the "Big Four" -- the New York Giants, Chicago Bears, Washington Redskins and the Green Bay Packers -- and the "stooges".

When the NFL league blocked Topping from moving his team from Brooklyn to Yankee Stadium, which he owned, to protect the Giants, it was the last straw and he jumped to the rival AAFC. He told the press, "I was one of the six stooges to the Big Four until I got some brains and pulled out." The NFL didn't forget. When the two leagues merged in 1949, Topping's New York team was left out of the merger and disbanded. The AAFC LA Dons were merged into the NFL's LA Rams, and the new team exploded at the gate.

Point being, 30 years in following the merger, the NFL was rock solid in the nation's largest market (Giants), it's second largest market (Bears), it's fourth largest market (Rams) and it's ninth largest market (Redskins) and, in all but LA, it had been for some time.

LA excepted, MLS simply isn't there yet.

 

I agree valuing ancillary benefits is tricky which is why I limited myself to Red Bull and Chivas since they were clearly deals to build their respective Brands. Since the primary goal was not maximize revenue, I don't think it is accurate to portray the relative health of the league by treating these teams operational results the same as an enterprise who's goal is maximizing revenue.

Herbalife paid the Galaxy $4.4 Million per ($44MM over 10 years). They get an image of their shirt in pictures, maybe a couple in stadium announcements and a few other goodies. In contrast Red Bull gets the same benefit as Herbalife does from the Galaxy, except in a bigger market. But if you compare the benefit of the Galaxy brand to the Herbalife from broadcasts, articles etc is pretty obvious that the Herbalife Brand benefit is a fraction of the Galaxy. So of Red Bull is paying a $1.9 Million premium for this benefit as well as the fact their shirt deal is in a bigger market it is a pretty darned good deal. At the very least it would be fair to say that since Red Bull is accruing the benefit of a Jersey deal, their true economic loss is far less than $6.3 Million.

Chivas had a similar goal as Red Bull. The problem is that their execution was terrible and rather than building the brand, it hurt the brand. But I think most people would agree the problem is not the location or the opportunity but instead a horribly failed plan. I also think most people would agree that investors would pay a significant premium over other potentially available teams to operate gain control of a Chivas franchise in the LA market. So to me that fact that Chivas is losing $5.5 Million is a reflection of the the operator in the market and not the health of the league itself.

 

I couldn't find anything on the Craig Cohen study on google - could you give me a title or link?

 

Well, it would have helped had I spelled his name right in that post. Duh.

If you search "From Sandlots to the Super Bowl" by Craig R. Coenen you'll find it on Amazon and other places.

Sorry about that.

We tend to assume the NFL started with the Super Bowl, but there are several parallels between the early NFL and MLS -- it's almost eerie really.

And for those who do find it interesting, I'd recommend after you read Coenen's book you continue with one of the good studies of the first American Soccer League during the 1920s. The ASL and the NFL had similar visions -- move their sports from the sandlots to professionalism in major market venues. One worked (barely), the other didn't.

 

How did you handle the fact that they invested 300m$ just to buy into the league and build the stadium ?

The millions in training facilities ?

 

I'm an outsider, but to me, this explains everything. The franchise was very successful with Wilt, on and off the field. Since Wilt was fired they were pretty good while Blanco was there, and complete shit since Blanco left. To me, that means that unless they can resurrect Blanco as a 32 year old, the owner needs to crawl over 5 miles of broken glass to beg Wilt to come back. (On the other hand, no other MLS club has hired Wilt, so maybe there's something wrong with him. I have no idea what that could be given his success with the Fire, but it'd have to be pretty awful.)

IIRC, the reason Wilt was fired had to do with the stadium and nothing else.

Khan, is that about right?

 

That was answered previously. Those costs are not part of FFP.
It's a decent question but triplet is correct in that there is no good answer.

 

I can't speak to why Wilt isn't working in MLS, but Indy 11 have more season ticket holders than the FIRE do. [Think about that for a minute.] If memory serves, it was because of Wilt not being as good with landing sponsorships as he was with building an organization, and building club culture, though I no longer recall it fully.

That said, they have had absolute morons running this thing into the ground over the past 9 years. The net effect: Simultaneously making the product a crappy one, and making their clients feel badly about buying their product.

The owner's response to firing almost all of the morons this offseason was to bring in the head coach FIRST, and then not bother with a team president or GM or TD to be the "adult in the room." The same mouthbreathing morons in the "Academy" that have produced ZERO minutes played by HGPs kept their jobs. As far as I recall, the same morons that have "run" the scouting operation kept their jobs.

Oh yeah, Ayatollah Yallop "hired" Brian Bliss to be a [snicker] "TD," but Bliss' only job is to say, "Yes, Frank" more than Mrs. Yallop. Bliss is a nobody with no power in the FO. He's a nutless monkey. He has no say over anything.

So, if Yallop can be a genius and make an organization functional all by himself, Championship Manager-style, it'll work out. Color me dubious.

Chicago is a major cosmopolitan metropolis. The current ownership thinks smaller than this, and runs the FIRE as anything other than "Major League." [FFS, the local minor league teams in baseball and hockey think bigger than he does.]

The way to fix this is to move heaven and earth, and push a MASSIVE pile of money in front of Lagerwey, and just tell him to come home to Chicago, and "fix this shyte-pile of a team." Or, to find another front office manager that can un-fvkc this organization. Make the product worth watching, and Chicagoans will buy it. [See: Blackhawks, Chicago, 1990s vs. 2010 - present]

 

I knew it was criticism for how he performed one (out of many) facets of the GM's job. To me, the way to handle a guy who is a star performer in 80% of his job but poor in 20% (I'm taking the Fire's word for it that Wilt was legitimately poor at that one thing) is to tell the guy, Peter, we love most of what you do, but you're not very good at this one thing, so we want you to hire someone to do that for you.

They really threw out the baby with the bathwater on this one.

Two things.

1. Is this really true???? In the Chicago market, that's an incredible indictment of their academy. You'd almost have to put EFFORT in failing to pull that off.
2. The fact that I'm an MLS geek and I had no idea about this is a big black mark against the Fire. They're in the US' 3rd biggest market, at one time they were among the strongest franchises in the league, and now they're pretty irrelevant. A failing that big isn't something that is known by non-Fire fans. As a DC fan, what hurts about the club over the last 6-8 years isn't so much the sucking, it's the descent into irrelevance.

The Blackhawks are an example of one of the great turnarounds in American pro sports. It also shows just how quickly fans in Chicago will respond if you improve your organization.

 

The guy who was really good at it went to RSL to be their GM.

(And he was up for the job in Chicago a couple of people ago and they declined to hire him. Might have made a difference.)

I think Peter will tell you there was no one clear reason. It is unfortunate that he has not made it back to MLS since. But Indy is looking like a success, so there is that.