Review: Sport and business in US soccer

Discussion in 'Soccer in the USA' started by Metropolitan, Dec 23, 2017.

  1. Metropolitan

    Metropolitan Member+

    Paris Saint Germain
    France
    Sep 5, 2005
    Paris
    Club:
    Paris Saint Germain FC
    Nat'l Team:
    France
    #1 Metropolitan, Dec 23, 2017
    Last edited: Dec 23, 2017
    First thing I would like to say, as a huge fan of international football, I've always favored development of soccer in the US. My point of view can be discarded as the one of an outsider, so be it. The thing is I do have a growing issue with the whole US soccer business model, and this as much for the clubs as for the national team in itself.

    I've never bothered the fact the MLS was a closed league and that's not the core point of this thread. After all, all major sports in the US are organized in closed leagues, and people on this board convinced me this was the only way to make it profitable. So be it. However, the growth of USL started to put that statement into question. If USL can sustain a national-wide open league (or at least more open than MLS), then why wouldn't MLS?

    And that's where the ugly face of the whole thing appeared to me. Business is like cholesterol, there is good business and bad business. And the reasons why MLS sticks to the closed league system despite the growth of the sport isn't to make it more competitive, but to keep the money for them. And that is bad business. A proven rule in sport is that the more open is a competition and the more competitive it will become. Restricting this, because of business reasons, is actually putting money interests above sporting interests, which in the long term can only be bad for the business itself.

    But the problem is that this business approach doesn't show up only in MLS, the more it goes and the more it seems to be the general US approach of the sport. It all started in 1991, when the CONCACAF Championship was replaced by the Gold Cup, a tournament permanently located in a single country: the US. Not even Saudi Arabia or Qatar would dare proposing this for the AFC Asian Cup, but in the US, it doesn't bother anyone. North American teams don't need to qualify, that would be "bad" for business. We need guaranteed money to ensure profitable broadcasting rights. The funny thing is that the US has actually anti-trust laws in order to prevent that kind of ill behaviours in real business, but it does not apply in sport. And this actually becomes a real problem when Mexico doesn't even bother to send its first team to the local confederation tournament anymore. Even in World Wrestling we know a good entertainment show needs the rival to appear in full strength. If it doesn't, the audience will notice the victory is plastic. That is bad business.

    And then happened the unthinkable: the US, which financially supports that joke confederation of CONCACAF since the beginning for the only reason that it offers a guaranteed spot to itself at each World Cup, failed to beat Trinidad and Tobago. They're not qualified. And what is the American footballing reaction to this? Let's organize our own "alternative" World Cup, that's the way to save the business. Does it make sense for the future of the US soccer team to meet Cameroon or China in may 2018 rather than playing against teams which did qualify for the real thing? Of course it doesn't. But once again, money is primary, sport is secondary.

    This trend only seems to grow stronger over the years. We could add to this the "pay to play" system preventing the growth of local talents and many other things you know better than I do. This reaches such a scale that I actually start to wonder whether it would really be a good thing to organize the 2026 World Cup in North America. The real question is, what do Americans want to make of the sport? It is well-established and works perfect elsewhere. The rest of the world doesn't need that kind of shenanigans, not any of them.

    My humble advice to make the sport grows in the US would be: just play it fair. Don't try to bypass the rules of competition, simply accept them, and you will only grow stronger. Let's open the MLS, let's merge CONCACAF with CONMEBOL, let's go with an All-American Copa America and who cares if you wouldn't win every editions, just remember that famous Mandela's quote: "I never lose, either I win or I learn".
     
  2. An Unpaved Road

    An Unpaved Road Member+

    Mar 22, 2006
    Club:
    --other--
    - Gold Cup always in the U.S. would have to be taken up with CONCACAF. I assume they're not keen for the tournament to bleed money by being held elsewhere, with dismal attendances beyond the host country.

    - No one has called for an "alternative" World Cup. What some (mostly fans) have noted is that a tournament featuring World Cup regulars who didn't make it might be fun to watch, mostly because more soccer is fun to watch. If this very idea is totally anathema to the international spirit, I would kindly ask Barcelona, Real Madrid, and other European clubs to stop cashing in on friendlies played in the U.S.

    - The sport works "perfect elsewhere" because elsewhere is not here. Soccer is still a niche in terms of mainstream attention. Do what we do has little relevance when so many people don't want to do the sport at all.
     
  3. Metropolitan

    Metropolitan Member+

    Paris Saint Germain
    France
    Sep 5, 2005
    Paris
    Club:
    Paris Saint Germain FC
    Nat'l Team:
    France
    Is it really that sure the tournament would be a catastrophic failure if organized by Mexico, Canada, even Costa Rica, Panama or Cuba? But anyway, if you do believe so that just validates the idea of a merger between CONCACAF and CONMEBOL, as mentioned in my opening post.

    Your post seems defensive and frankly my intent wasn't to attack anyone, I know many people in the US do agree with the points I raised here.

    I've mentioned the "alternative world cup" thing not necessarily for its seriousness (I hope it isn't) but because it was motivated by business reasons rather than sporting reasons, which is exactly the problem I'm trying to point out. Sport requires sometimes to accept the loss, and that's what seems to be refused here. Your post actually supports that claim.

    No matter if it goes about a club getting relegated or not qualifying to a tournament, it seems there is a business difficulty to accept the risk. That risk is actually what makes achievement meaningful, and that's what generate the competitiveness which in the end is what generates the business interests as well.
     
  4. Baysider

    Baysider Member+

    Jul 16, 2004
    Santa Monica
    Club:
    Los Angeles Galaxy

    How is the USL open? The league is privately owned (although not single entity). You need to pay an expansion fee to join. United Soccer Leagues can approve or not approve your application.

    The primary difference between the leagues is that the USL targets smaller cities with attendances in the 5k-10k range and correspondingly lower budgets.
     
  5. An Unpaved Road

    An Unpaved Road Member+

    Mar 22, 2006
    Club:
    --other--
    Again, take up the Gold Cup with CONCACAF. You're talking like the U.S. is using the region in an unfair way, when it's CONCACAF taking advantage of U.S. demographics and infrastructure which guarantee a successful tournament.

    Yes, there's a business mentality that is wary of the risks of relegation. Hardly surprising in a country where soccer is not innately loved on a widespread, mainstream level, and where lower division soccer is not exactly a shining example of stability.
     
  6. Metropolitan

    Metropolitan Member+

    Paris Saint Germain
    France
    Sep 5, 2005
    Paris
    Club:
    Paris Saint Germain FC
    Nat'l Team:
    France
    From what I've heard, USL will soon launch USL Division 3 and is considering pro/rel between their two leagues. Furthermore the entrance fee are much lower in USL, and as such is a lot more prone to accept newcomers.

    If the growth of the USL lead me to rethink the financial sustainibility arguments given by the MLS, it is simply because the USL does prove clubs playing a minor soccer league can be sustained financially in the US. And it's obvious that if promotion to the top division would be allowed, that appeal would only be stronger.
     
  7. Metropolitan

    Metropolitan Member+

    Paris Saint Germain
    France
    Sep 5, 2005
    Paris
    Club:
    Paris Saint Germain FC
    Nat'l Team:
    France
    I don't believe it's really about interest in the sport. It's more about the way to organize sports in general.

    There are tons of minor sports in Europe with no significant audience which are still organized in pro/rel systems, even at the amateur level. I'm talking about Europe, but this is true everywhere actually. I guess it has more to do with sporting culture than anything else, and that's actually the reason why I never bothered about the US having a closed league untill recently.

    However, as told in my initial post, I do believe this business model actually prevents the sport to develop, and this for the very reason that it's not its primary objective. Not only MLS, but even USSF, are trying first to grow a profitable business and only second to develop the sport accross the country.
     
  8. Baysider

    Baysider Member+

    Jul 16, 2004
    Santa Monica
    Club:
    Los Angeles Galaxy
    Half of that's right. There will be a USL3, likely in 2019. There isn't pro/rel between the two leagues. Basically we have a three tier structure. MLS with high spending teams and a very high entry fee, USL2 with small spending teams and a moderate entry fee and USL3 with very small spending teams a a low entry fee.

    Each owner/city figures out which level they want to be. You could replace USL with MLS in the last paragraph and it wouldn't make much difference. But MLS isn't really interested in running a minor league.

    Could USL have pro/rel some day? Never say never, but it's not the plan as it stands now.
     
  9. Metropolitan

    Metropolitan Member+

    Paris Saint Germain
    France
    Sep 5, 2005
    Paris
    Club:
    Paris Saint Germain FC
    Nat'l Team:
    France
    So there's already 60 professional teams in the US, and there will probably be 10 more with the USL3, and you're saying they'll all be playing in 4 different leagues (counting NASL) with no articulation whatsoever between one another?

    Oh come on! What a scam!

    Those guys are not fearing "teams bankrupcy" and even less the "total dissolution of American professional soccer". If there is room for 70 professional teams in the US then nothing is threatened at all. They are just protecting their fixed incomes!

    And you see, that's precisely what I wanted to denounce in opening this thread. The US actually has all the needed structure to build a competitive pyramid, from amateur level with UPSL, APSL, NPSL, ASL, whateverSL to the top with the MLS, and no competitive-driven structure emerges from it because everyone wants to keep its little revenues. That is just petty.

    Mexican clubs can have no fear, they'll continue to play CONCACAF Champions League finals against one another for a long time.
     
  10. Yoshou

    Yoshou Fan of the CCL Champ

    May 12, 2009
    Seattle
    Club:
    Seattle Sounders
    Nat'l Team:
    United States
    I don’t think it was anyone from USL saying they could implement pro/rel. Rather, it was people outside the league going “Hey, USL will have leagues in separate divisions, that means they could put in pro/rel to connect them!”

    However, I’m not sure that fits into USL’s plans. When USL decided to go for D2 sanctioning, they realized that they were locking out a number of markets that couldn’t meet D2’s requirements, or would hurt the league’s ability to meet the league requirements. Rather than completely abandon that market, they decided to start a new league.

    If USL has “pro/rel”, I suspect it will be more like when USL had two divisions and teams would move between the divisions based on finances and ambition..

    I’m not sure you understand the financial differences between running a D1 team and a lower division team.. From what I’ve seen, USL teams generally have a total operating cost between $3M and $5M and still lost money. MLS teams have operating costs of $20m-$40m with some teams, allegedly, losing money. I’m not sure how possible it is to scale that far up/down on a single offseason and remain viable..
     
  11. Metropolitan

    Metropolitan Member+

    Paris Saint Germain
    France
    Sep 5, 2005
    Paris
    Club:
    Paris Saint Germain FC
    Nat'l Team:
    France
    Clubs not only in Europe but in Asia, South America or Africa are constantly evolving. They even change their status from amateur, to semi-pro, to professional. Clubs only need to financially prepare themselves to such changes and things happen well.

    The problem I believe is that you think too much in a closed-league system, with huge entrance fee to be paid as a starter and a big debt to pay back afterwards. In an open system, promoted teams are actually rewarded with TV revenues when they come in. They have no debt whatsoever in the first place. Then, there's the transfer market on which players can be sold if initial investments were proven too costly. There is absolutely no reason to assume relegation automatically means bankrupcy.

    But I agree it's a fully different financial structure. And considering the proliferation currently happening in the US, I would say it's certainly a more sustainable system than a collection of unstable closed leagues trying to grab "markets" against one another.
     
  12. Baysider

    Baysider Member+

    Jul 16, 2004
    Santa Monica
    Club:
    Los Angeles Galaxy
    That's what I'm saying.

    Actually, some clubs have substantial amount of debt and those that fall can suffer greatly. What keeps the pro/rel system in Europe from collapsing is that everyone knows their place. The rich teams win and don't face relegation. The teams with moderate revenue don't win but don't get relegated. The poor teams face relegation where they swap places with the poor (although rich for their division) teams from the league below. Everyone knows their place. MLS is built around parity where the top teams are constrained and the bottom teams are supported. Therefore, in any given year, any team could be relegated, and to drop down to the much, much poorer USL would be very damaging. So damaging, that the teams and cities wouldn't be willing to make the necessary investments at the start.
     
  13. Kacper

    Kacper New Member

    Manchester United
    Poland
    Mar 27, 2018
    I think there is lot of truth in what You are saying that it is money that became prevalent not football and it is not even a case of US I think. The nearest example I can think of is the Juventus operations who decide to abandon the crest that stands for many years of success and drive brand's growth and revenue through rebranding. Of course it does kill the game a bit and it might feel like the business side is what matters nowadays in football.
    On the other hand, sports is just one form of entertainment that needs to compete against so many alternatives that such operations as USA trying to organise something instead of the World Cup which is purely about the sport might be just a way to protect the very bit of the game that we love!
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  14. Paul Berry

    Paul Berry Member+

    Notts County and NYCFC
    United States
    Apr 18, 2015
    Nr Kingston NY
    Nat'l Team:
    United States
    Many promoted teams in England have a ton of debt. Any additional revenue is offset by higher salaries. Otherwise Sunderland wouldn't have been $200 million in debt when they were relegated from the Prem.

    Most EFL clubs require benefactors just to survive. My club was £18 million in debt and at the bottom of League Two when our latest owner came along. We're now almost debt free and favorites for promotion.

    It's no coincidence that the top four teams in the Championship last season were all owned by billionaires.

    2016/17 figures

    Blackburn Rovers
    Net debt: Not stated, loans of £87.3m (£87.1m) to parent and £14.2m (£12.9m) bank overdraft

    Bolton Wanderers
    Net debt: £193m (at the date of the balance sheet)

    Brighton and Hove Albion
    Net debt: £193m (at the date of the balance sheet)

    Bristol City
    Net debt: £63.9m

    Brentford
    Net debt: Not stated; shareholder loans of £37.1m

    Cardiff City
    Net debt: Not stated; non-current loans from overseas shareholders and associated undertakings £100.8m (£101.6m)

    Fulham
    Net debt: Not stated; loans of £28m were provided during the year, taking the amount due to the club's immediate parent to £45.3m.

    Huddersfield Town
    Net debt: Not stated; £42m is owed to owner

    Ipswich Town
    Net debt: £86.5m

    Middlesbrough
    Net debt: Not stated; amounts owed to "group undertakings" total £93.6m in addition to a £5m bank loan

    MK Don's
    Net debt: Not stated; amounts owed to "group undertakings" total £8.2m

    Nottingham Forest
    Net debt: Not stated; loans to directors and other related parties totalled £55.6m (note that when Nigel Doughty owned the club he put in about £80 million of his own money and the last owner converted significant debt to equity)

    Preston North End
    Net debt: Not stated; Owner advanced £4.6m during the year taking total loans to £28.1m

    Queens Park Rangers
    Net debt: Not stated; loans of £180.7m were converted to equity during the year. Total Soccer Growth loaned £34m repayable on 30 June 2017

    Reading
    Net debt: Not stated; loans totalled about £59m during the year but £8m was converted into equity in October 2016, after the year end

    Rotherham
    Net debt: Not stated; £1.3m loan provided by ASD Lighting during the year

    Net debt: Not stated; £17.7m shareholder loan provided during the year (another club that transferred £10 millions of debt into equity)

    Wolverhampton Wanderers
    Net debt: Not stated; £17.7m shareholder loan provided during the year

    Congratulations to Burnley on getting promoted to the Premier League almost debt free but it was painful.

    Most of this debt had been accrued attempting to get promoted or avoiding relegation.

    If you include the financial shenanigans including converting debt to equity to take it off the books, plus the $ billions pumped in by owners as part of their vanity protects, you'd be safe to say that $150 million to get into the Premier League would be a bargain.

    https://www.insidermedia.com/insider/national/football-finance-championship-club-by-club-2015-16

    And relegation doesn't only threaten the team

    "On Saturday, the Potters’ home defeat to Crystal Palace confirmed the club’s relegation to the Championship – although many supporters had already resigned themselves to the drop.
    So what will this mean for Stoke-on-Trent? A major business suddenly becoming less profitable will obviously have an immediate economic impact, but there could also be wider knock-on consequences, depending on whether City can make a quick return to the top flight.

    Last year, accounting firm Ernst & Young carried out an economic and social impact assessment for Stoke City, which found the Premier League club was worth £132 million to the local economy and supported around 2,200 jobs in the area."

    https://www.stokesentinel.co.uk/news/what-stoke-citys-relegation-mean-1541728
     
  15. Paul Berry

    Paul Berry Member+

    Notts County and NYCFC
    United States
    Apr 18, 2015
    Nr Kingston NY
    Nat'l Team:
    United States
    Sorry, accidentally copied and posted the wrong thing into Brighton.

    It should be:

    "Net debt: Not stated; £170.5m (£147.5m) owed to Tony Bloom.

    Many Americans look at Europe and day pro/rel world over there so why not here?

    The only reason it works over there is that there are a lot of fools willing to risk $100s millions of their own money, or someone else's money to live the Premiership dream, and if they fail there are more folks waiting in the wings.

    Notts' owner says his dream is to get the team into the Championship but says he would have to find a buyer because he couldn't afford the cost of running a team at that level.
     

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