The Szymanski Rebuttal

Discussion in 'MLS: Commissioner - You be The Don' started by triplet1, May 4, 2015.

  1. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    #1 triplet1, May 4, 2015
    Last edited: May 4, 2015
    To keep a final promise (before I cut back here), I am posting my detailed rebuttal to by Stefan Szymanski’s recent post about MLS. It’s a lot of material – I have to break it into several posts – but I have gone into some detail because I wanted to preserve a lot about MLS that YBTD posters have pieced together through good detective work over the years.

    If you missed Szymanski’s post, here it is:

    http://www.soccernomics-agency.com/?p=692

    Having projected MLS to be losing significant amounts of money, Szymanski concludes:

    “But now MLS starts to sound like a pyramid scheme. You can fund a loss-making enterprise from the entrance fees of new buyers for a while, but without making money, the only reason for doing this would be glory, not profits. Americans constantly tell me that owners of sport franchises in the US will insist on making money. If that really is the case, then I predict that MLS will collapse, and probably sooner rather than later.”

    It’s a bold claim, and to his credit, Szymanski does at least attempt to check his work by comparing his estimate to the estimated MLS team revenues published by Forbes in 2013, which are far higher.

    For those that missed it, Forbes estimated that in 2012 ten MLS made money, one broke even and eight teams lost money. According to Forbes, total revenues for all 19 teams averaged $26 million, with a median of $24.2 million.

    http://www.forbes.com/sites/chrissmith/2013/11/20/major-league-soccers-most-valuable-teams/

    Unable to reconcile his own low revenue estimate with Forbes’ much higher numbers, Szymanski instead dismisses the Forbes estimates. He writes:

    “So that gives us [really him] an estimate for total [MLS] revenue in 2014 of $233 million. In 2013 Forbes published estimates suggesting that league revenues were in fact $494 million - I find it hard to see how they got that and they didn’t respond to an inquiry from me. However, they also said that operating profits amounted to $34 million, when MLS themselves say that losses exceed $100 million.”

    http://www.soccernomics-agency.com/?p=692

    Now, to be fair MLS has claimed a $100 million loss in the run up to the CBA negotiations, and some MLS officials have challenged the specifics of some of the Forbes team estimates over the years, but even so, could the average MLS team have revenues of $26 million as Forbes estimates, or is the total closer to Szymanski’s $12.26 million ($233 divided by 19 teams) that he says makes the collapse of MLS imminent?

    Let’s look at another source.

    On November 5, 2014 Convention Sports and Leisure (CSL) delivered its report to the Council Chair for the District of Columbia. That report has a detailed pro forma projecting DC United’s revenues and expenses in a new soccer specific stadium starting in 2017.

    You can download the report from the District’s website:

    http://dccouncil.us/DC_Soccer_Cost-Benefit_Analysis_FINAL.pdf

    On page 45 of the report, CSL estimates that DC United will generate $27.475 million in revenue in 2017 – very close to the Forbes $26 million estimate. This isn’t a simple blog entry, CSL prepared this report for the District and had access to certain team and financial data that isn’t generally public. Having personally worked with CSL on a study like this years ago – I was part of a public private partnership that retained them to look at the feasibility of an arena – I’m inclined to think they did this work with similar care.

    The CSL study for DC United seems to suggest the Forbes numbers are a lot closer to reality than Szymanski’s own revenue estimates that, to him, signal the end of MLS.
     
  2. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    #2 triplet1, May 4, 2015
    Last edited: May 7, 2015
    So where did Szymanski get it wrong?

    Mistake One: He Misses the Stadium Revenue

    CSL projects that DC United will make $17,959 million from team operations. That figure includes (i) traditional “match day” revenue in the form of ticket sales and related income from concessions, parking, merchandise and ticket rebates (from Ticket Master), (ii) $5.6 million in shirt and other sponsorships, and (iii) about $775,000 from youth development. It also includes a $150k loss from local TV, meaning the team buys time to broadcast games. Added together, and that’s still considerably more than Szymanski’s average of about $12.26 million, but at least it’s in the ballpark.

    But MLS teams aren’t just in the soccer business, they are also in the stadium business.

    By controlling a stadium, an MLS team can generate significant additional revenue beyond the team’s operations, and Szymanski doesn’t appear to take that revenue into account. CSL projects that the stadium alone will generate an additional $9.5 million for DC United in the form of naming rights, suite and club seat sales and rent from other events held in the stadium (along with concessions, parking and merchandise sales form those rental events). That’s a third of the team’s projected revenue.

    Add the stadium revenue to the match day income, and CSL’s DC United projection of $27.45 million is very close to both the Forbes average and median revenue estimates.

    Mistake Two: He Assumes Too Many Comp Tickets

    Szymanski does attempt to calculate the gate receipts that are the largest component of MLS match day income, but he discounts his estimate by 30%. He justifies this by recycling the common criticism that MLS is simply puffing attendance numbers well beyond the number of tickets it actually sells, which, in turn, throws off gate receipts estimates. He compensates by trying to subtract out these complimentary tickets.

    Szymanski says:

    “MLS claim that attendance was 6.5 million in 2014, including playoffs and the All-Star game. They also say the average price in 2014 was $26. However, a large fraction of tickets to MLS games are given away via promotional schemes. My source says around 30% of tickets generate no revenue. Taking all this together gives us ticket revenues in total of $120 million.”

    We’ve known since the San Diego Union Tribune ran its 2006 story that MLS announced attendance was higher than paid attendance. With materials leaked by a league source, Mark Ziegler reported that in 2005 MLS announced attendance was indeed 29% higher than paid attendance.

    http://www.utsandiego.com/sports/soccer/20060927-9999-lz1s27goal.html

    But times change.

    CSL also looked at the number of tickets really sold by the league in compiling its estimates for DC United. According to CSL (on page 25), “average MLS paid attendance was 16,159 in 2013 . . . the median MLS ticket price was $25.60 in 2013.”

    Now, to be fair, using its rather flattering “tickets distributed” count, MLS did announce an average attendance of 18,606 during the regular season in 2013, which was 2,447 more tickets per game than CSL said the league actually sold, but even so that means comps only accounted for about 13% of announced attendance, not 30% as Szymanski’s source claims. That means, at least in 2013, even excluding the playoffs, the All Star Game and using a slightly lower ticket price than Szymanski used, MLS revenue in 2013 was closer to $133 million than the $120 million he estimates.

    Quite simply, it appears that MLS sells more tickets than Szymanski assumes.

    Mistake Three: He Doesn’t Value Small Revenue Streams that Add Up.

    It doesn’t seem like much, but concessions, parking, and merchandise sales during game days can produce a significant amount of revenue. Those revenue streams and the academy are projected to generate $3.67 million for DC United. Szymanski doesn’t appear to include these revenues in his projections.
     
  3. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    #3 triplet1, May 4, 2015
    Last edited: May 7, 2015
    Mistake Four: He mishandles SUM

    In 2002, the owners of MLS formed Soccer United Marketing, LLC. SUM is “the preeminent soccer company in North America, exclusively offering access to integrated marketing partnerships with properties such as Major League Soccer, United States Soccer Federation, the Mexican National Team, and more.”

    http://www.mlssoccer.com/advertise/

    SUM is also an affiliated company, meaning it has a lot of common shareholders with MLS, LLC, but it’s not a wholly- owned corporate subsidiary of the league. In addition to shareholders who are also own stock in MLS, LLC, SUM also has some shareholders like Providence Equity Partners that don’t operate an MLS team or own a share in MLS, LLC.

    SUM not only negotiates the national TV and sponsorship deals for MLS, it also represents other soccer “properties”, including USSF. Prior to the new TV MLS deals, SUM’s revenues have reportedly been about $100 million a year.

    http://xfinity.comcast.net/slideshow/sports-powerfulwomeninsports/3/

    MLS has never been all that transparent about how SUM works. USSF, however, does give us clues about how SUM operates in USSF’s audited financial statements, which are online. Note 3 to the USSF 2014 audited financial statements says: “The Federation recognizes revenue under this agreement net based on amounts received from SUM. Most sponsorship, television, licensing, and royalty revenues (excluding Nike) are paid to SUM. Revenues under the agreement totaled $15,433,754 and $11,110,170 for the years ended March 31, 2014 and 2013, respectively.”

    http://www.ussoccer.com/About/Federation-Services/Resource-Center/Financial-Information.aspx

    Let’s pause here because it’s a subtle, but important point on how this works – SUM itself collects the TV and sponsorship money, subtracts its fee and it pays the balance of the TV and sponsorship money over to USSF. MLS has never confirmed this, but I’m betting SUM does exactly the same thing for MLS. In other words, SUM’s $100 million in revenue likely includes the MLS national TV and sponsorship money. That revenue is booked at SUM.

    Szymanski is correct that both the old and new MLS TV deals are bundled – meaning MLS and USSF will divide the proceeds.

    “The eight-year deals with ESPN, Fox and Univision are priced five times higher than the average annual value of the league’s current media deals. ESPN and Fox will share the English-language rights to MLS and U.S. Soccer matches over the next eight years. The two networks are paying a combined $75 million per year on average for those rights. MLS also signed a Spanish-language deal with Univision for an average of $15 million per year. The combined average rights fee of $90 million per year represents a stark increase from the $18 million annual average the league receives . . .”

    http://www.sportsbusinessdaily.com/Journal/Issues/2014/05/12/Media/MLS-TV.aspx

    Because the deals are bundled, USSF and MLS divide the proceeds generated by the national TV deals – that much is clear from the media reports. The exact split is harder to calculate. Citing an unnamed source, Szymanski believes USSF is getting over just over 43% of the revenue from both the old and new TV deals:

    “Until last year MLS and the USMNT had deals with ESPN, Fox and Univision worth about $23 million in total. However, my source claimed that the MLS share amounted to only about $13 million, which makes sense since USMNT games draw much larger audiences . . . MLS just signed an 8-year broadcast deal, which is much better than the old contract, but after taking out the USMNT’s share, leaves only about $50 million for the league.”

    http://www.soccernomics-agency.com/?p=692

    While it sounds on the low side to me, Szymanski may actually be right that only about $50 million of the $90 million generated annually under the new TV deals actually finds its way to MLS, LLC., however, that doesn’t mean USSF has upped its share of these bundled TV deals from $10 million to $40 million as his source suggests.

    The ESPN and Univision portions of the old TV deals ran for an eight year term from 2007 through 2014, while the Fox deal was extended through 2011 before MLS moved to MSNBC for 2012 - 2014. If you look at USSF financials, the cash USSF has received from SUM has steadily increased over that time, from $3,625,000 in 2007 to $15,433,754 in 2014. But much of the growth in this payment occurred in the run up to the World Cup. As recently as 2012, when SUM paid USSF just over $8.5 million, SUM’s total payment to USSF have fallen far short of the $10 million annually Szymanski says USSF was getting out of the old bundled TV deals. Remember too that the SUM payments to USSF include both proceeds from the bundled TV deals with MLS and sponsorships negotiated by SUM that are specific to USSF. In other words, that $15.4 million SUM paid USSF in 2014 isn’t just from the bundled TV deals.

    Again, you can find the USSF Financials here:

    http://www.ussoccer.com/About/Federation-Services/Resource-Center/Financial-Information.aspx

    We’ll know for sure when USSF releases its 2015 financial statements next year, but it looks like Szymanski clearly overestimates USSF’s take under the old TV deals, and, I suspect, the new ones as well. But the question remains: if a lot of the additional cash generated by the new TV deals isn’t being paid over by SUM to either MLS or USSF, where is it going?

    My guess is that the extra cash is being paid out as a dividend to the SUM shareholders.

    In the 2009 Portland stadium feasibility study, HVS Convention Sports & Entertainment noted that the annual SUM dividend to the Timbers owners was projected at $1.6 million annually through 2015. (See page 9).

    You can download the report here:

    http://post.portlandmercury.com/ima...93587-microsoft_powerpoint_-_mls_pp_final.pdf

    If HVS is correct, assuming each operator of MLS owns the same number of shares in SUM, SUM was distributing nearly $30 million of its $100 million in annual revenues to its shareholders. Not a bad rate of return. And given the size of the new TV deals, there’s no reason to suspect SUM has lowered its dividend having sold a quarter of the company to Providence Equity Partners for a reported $125 - $150 million back in 2011.

    http://www.sportsbusinessdaily.com/Daily/Issues/2011/09/12/Leagues-and-Governing-Bodies/MLS.aspx

    Why does this matter?

    If you want to see how MLS owners make a profit, you need to follow the money. Even if only $50 million of the new TV deal is finding its way to MLS as Szymanski asserts, if SUM is taking a good piece of the remaining TV and sponsorship cash and distributing it to its shareholders – shareholders largely comprised of MLS team operators who only own shares in SUM only because of their MLS investment – the owners’ return on their MLS investment is much better than Szymanski assumes.
     
  4. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    #4 triplet1, May 4, 2015
    Last edited: May 7, 2015
    Mistake Five: His Conclusion is Wrong (IMHO)

    So are the owners making money, or is MLS, as Szymanski claims, something like a pyramid scheme where expansion fees cover the previous losses?

    Szymanski attempts to provide us with a consolidated picture or MLS’ finances, grouping the team, the leagues and SUM together. The problem with this approach is that while the league purports to be a single entity, the teams themselves are very much independent profit centers.

    Like in any other corporation, the shareholders of MLS, LLC share in the company’s profits and losses. As the operator of a team, however, the owners keep most of what their team makes (or loses) for themselves, and they alone bear those losses. As the Fraser court noted , “while the investors qua investors share equally in the league's profits and losses, the individual team operators qua operators fare differently depending at least in part on the financial performance of their respective teams.”

    http://caselaw.findlaw.com/us-1st-circuit/1441684.html

    In other words, in MLS the owners of Seattle can make a lot of money, just as the owners of Chivas USA are losing a lot of money. The Forbes estimates indicate that’s just what happened in 2012.

    So to really try and answer the question of whether MLS owners are making money, we need to look at the elements of the league separately.

    We have the pieces to make a good guess.

    As we’ve been discussing, the Forbes estimates may not be exact, but, again, read with other studies I think they fairly present how some MLS teams are doing well under the present system. Likewise, SUM appears to be making a dividend and the sale of part of the company to Providence Equity Partners suggests to me it is doing just fine as well.

    Which leaves MLS, LLC – the league itself.

    I have set forth what I think are very conservative estimates to project league revenue for 2015 – remember, we are using a very specific definition of league here, “MLS, LLC” -- and I believe it to be north of $175 million.

    Here’s the summary, the math is below in a subsequent post:

    Gate Receipts: $49m
    Estimated TV Revenue (Gross, before any SUM Fees, net of USSF share): $75m
    Estimated Sponsorship Revenue (Gross, before any SUM Fees and excluding Generation Adidas): $51m
    Subtotal of League Dedicated Funds: $175m
    Generation Adidas (includes cash and equipment, assumes not booked at SUM): $25m
    Shirt Deals: Team Operators pay League a Flat Fee of $200,000 per Contract
    League Share of Transfer Fees: Unknown

    Again, I know this is familiar territory for you and YBTD fans, but with that revenue MLS, LLC pays for two things -- the league office and player payrolls. Last year, payrolls opened at about $115 million and ended the season about $120 million. This includes money paid to the designated players by individual owners.

    http://www.sbnation.com/soccer/2014/4/11/5605210/mls-2014-salaries

    Now, we can attempt to back out the DP money paid directly by the owners from that $115 - $120 million, but that’s tricky given the league also allows teams to apply league funded allocation money to those costs, or we can simply note that at a minimum, the 13 DPs making $46 million between them last season were likely costing the owners of those teams at least $40 million, so the total cost to the league was closer to $80 - $90 million.

    This year, the cap adjustment should add another $7.4 million of payroll expense (if fully funded for 19 teams), with one more roster to fund at roughly $4.2 million (counting the salary budget for the top 20 players, the extra cost of players 21 – 28). That’s $11.6 million, give or take. Even assuming a lot of “hidden” payroll costs, it’s hard to see league funded payrolls exceeding $120 million this year, again plus the cost of DPs paid for by individual owners.
    Unless the cost of the front office is exorbitant, MLS appears to have enough cash to meet its obligations without asking the owners for more money in the form of a capital call.

    Szymanki’s own expense numbers likewise suggest the league is fine.

    Let's assume he's right that the cost of the league office is $20 million and the payroll cost is a whopping $150 million – far above the Union payroll numbers. To pay that $170 million, assume MLS is getting $50 million from the TV deals as he says, $45 million from national sponsorship deals, as he says, and $40 million of gate receipts (representing one third of his $120 million estimate.) That's $135 million in league revenue, leaving MLS $35 million short. Which just happens to be what CSL projects as the capital call -- $1.75 million per team -- an amount CSL shows DC United owner operators can pay and still turn a profit.

    Even if we take Szymanski’s numbers, it works.

    Which is why I find this all rather sad. You see, I actually agree with Szymanski that MLS should spend more money. The fact that the league appears to have it to spend makes it even more difficult to accept the current standard of play.
     
  5. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    #5 triplet1, May 4, 2015
    Last edited: May 4, 2015
    The Appendix

    Projected MLS, LLC Revenues 2015
    Gate Receipts: $49m
    TV Revenue (Gross, before any SUM Fees): $75m
    Sponsorship Revenue (Gross, before any SUM Fees and excluding Generation Adidas): $51m
    Subtotal of League Dedicated Funds: $175m

    Also:
    Generation Adidas (includes cash and equipment, assumes not booked at SUM): $25m
    Shirt Deals: Team Operators pay League a Flat Fee of $200,000 per Contract
    League Share of Transfer Fees: Unknown

    Sources:

    Gate Receipts

    CSL DC United Study, Page 25: “average MLS paid attendance was 16,159 in 2013 . . . the median MLS ticket price was $25.60 in 2013, or approximately $28.80 in estimated 2017 dollars (three percent annual inflation)”

    The math:
    I assume the league is taking on third of the gate receipts from regular season games. (I haven't included playoff games in these figures): There were 323 regular season games in 2013. Multiply 323 x average paid attendance of 16,159 and that gives us 2013 total paid attendance for the league of 5,219,357. Multiply total paid attendance of 5,219,357 x the median ticket price of $25.60 to calculate estimated 2013 ticket revenue of $133,615,539. (Yes, this is based off the median ticket price, not the average ticket price which we don’t know, but I assume the two figures are close). To estimate 2015 ticket revenue, adjust the 2013 figure of $133,615,539 by 3% per year for 2014 and 2015, which gives us $141,752,725 -- $7,460,732 per team -- in 2015. But that's based on a 19 team league. For a 20 team league, multiply $7,460,732 x 20 and estimated ticket revenue league wide would be approximately $149.2 million. A third of this, $49.2m, belongs to the league.

    TV Revenue

    The new national TV deals that begin in 2015 have widely been reported to generate $90m annually. “The eight-year deals with ESPN, Fox and Univision are priced five times higher than the average annual value of the league’s current media deals. ESPN and Fox will share the English-language rights to MLS and U.S. Soccer matches over the next eight years. The two networks are paying a combined $75 million per year on average for those rights. MLS also signed a Spanish-language deal with Univision for an average of $15 million per year. The combined average rights fee of $90 million per year represents a stark increase from the $18 million annual average the league receives . . .”

    http://www.sportsbusinessdaily.com/Journal/Issues/2014/05/12/Media/MLS-TV.aspx

    The math:
    These deals were negotiated by SUM. Because the ESPN and FOX deals are bundled with USSF, we must attempt to pull USSF’s share out of the $90m rights fees (or, more specifically, out of the $75m from FOX and ESPN for both MLS and USSF games) in order to calculate how much of this money is MLS’. We can get an idea of how much USSF now earns from its SUM contract from its financial statements. Note 3 to the USSF 2014 audited financial statements says: “The Federation recognizes revenue under this agreement net based on amounts received from SUM. Most sponsorship, television, licensing, and royalty revenues (excluding Nike) are paid to SUM. Revenues under the agreement totaled $15,433,754 and $11,110,170 for the years ended March 31, 2014 and 2013, respectively.”

    http://www.ussoccer.com/About/Federation-Services/Resource-Center/Financial-Information.aspx

    There is no way to be certain because TV, sponsorships and licensing are lumped together in USSF’s financials, but if TV comprises $5m of USSF’s SUM payment now – and that would be about double what I think it was in 2010 (see below) -- I’ve estimated it to increase to $15m under the new FOX and ESPN deals, leaving $60m for MLS. Add in the Univision deal, and MLS’ estimated take is $75m. That may be a little low.

    Sponsorships

    Soccer United Marketing negotiates most national TV and sponsorship deals for MLS. I think it’s a fair assumption that SUM’s deals with USSF and MLS operate similarly. Recall again what the USSF financial statements indicate: “Most sponsorship, television, licensing, and royalty revenues (excluding Nike) are paid to SUM.” So just how much of MLS’ TV and sponsorship money does SUM book?

    The Fake Sigi Schmid Blog at 6:02 PM - Jan 21, 2011 provided us with this:

    “I came across this photo touting Soccer United Marketing President Kathy Carter as one of the most powerful women in sports. Helpfully buried in the caption was the following: Carter is the Executive Vice President of Soccer United Marketing, helping accumulate $100 million in annual revenue.” The link to the story itself is dead, but Fake Sigi explained how Carter confirmed to him that about $65m of the $100m in SUM revenue was generated by MLS deals.

    http://soccerblogs.net/blog/archives/775-the-fake-sigi-schmid-blog/2011/1

    The math:
    From what Carter told Fake Sigi, the value of that revenue was $65m in 2010. To calculate the sponsorship and licensing money at SUM, we need to first subtract the TV revenue from that $65m. Those numbers have been reported. In 2010, Univision paid MLS $9m, ESPN $8.5m and FOX $6.25m, a total of $23m.

    http://www.sbnation.com/2011/8/10/2...n-per-year-major-league-soccer-mls/in/2119493

    But once again, that $8.5m in ESPN money is shared between USSF and MLS. Again, from footnote 3 to the USSF 2010 Financial Statements, we know USSF received $5.628m from SUM that year, including the ESPN TV payment. I’m guessing that TV was roughly half of that payment to USSF -- $2.6m -- meaning about $6m of the ESPN deal was retained by MLS. Add that all up, and I estimate MLS received about $21m in TV revenue via SUM in 2010. Subtract the TV revenue from the $65m, and SUM booked about $44m in MLS sponsorships and licensing fees. Add a 3% annual growth escalator, and MLS would have about $51m in sponsorship money in 2015.

    Adidas

    Note that while SUM books the TV and sponsorship money for both USSF and MLS, the USSF deal specifically excludes its Nike deal from the SUM contract. It stands to reason that the Adidas deal with MLS might likewise not flow through SUM, in which case it isn’t captured in the sponsorship calculation above.

    MLS’ current deal with Adidas is reportedly 8 years paying $200m over the contract term -- $25m per year. Part of that value is equipment, however, it isn’t all cash. Since we can't know how much is cash, I haven't included it in the revenue estimate above, although it surely must pay some money to MLS.

    http://espn.go.com/sports/soccer/news/_/id/5511821/adidas-mls-sign-8-year-sponsorship-contract

    Shirt Deals

    “Teams don't have complete freedom to sign jersey sponsors. MLS is establishing a "floor" of $500,000 a year for uniform sponsors, with the league collecting a flat fee of about $200,000 from all deals.”

    http://www.post-gazette.com/busines...sell-ad-space-on-jerseys/stories/200609280513


    Transfer Fees

    Home Grown Player: Club receives 3/4 of transfer fee revenue and the League receives 1/4
    Generation adidas players and Non-Home Grown Players acquired in the SuperDraft:
    -- 1 Year of service: 1/3 to Club and 2/3 to League
    -- 2 Years: 1/2 to Club and 1/2 to League
    -- 3+ Years: 2/3 to Club and 1/3 to League
    All other players: Club receives 2/3 of the transfer fee revenue and the League receives 1/3
    http://www.thevipersnest.com/2010/04/mls-roster-changes-and-transfer-fees.html
     
  6. KCbus

    KCbus Moderator
    Staff Member

    United States
    Nov 26, 2000
    Reynoldsburg, OH
    Club:
    Columbus Crew
    Nat'l Team:
    United States
    What's the boiling point of brain?
     
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  7. bunge

    bunge BigSoccer Supporter

    Oct 24, 2000
    Jeppson's Malort.

    Great topic.
     
  8. Kappa74

    Kappa74 Member+

    Feb 2, 2010
    Seattle
    Club:
    Seattle Sounders
    I'm going to miss triplet's posts. My fandom generally is confined to the play on the field, but I have often enjoyed triplet's system analysis of the league. The hazy and convoluted nature of the subject really calls for some Holmesian deduction, which can easily go askew. But our man triplet somehow always hits the mark.
     
  9. superdave

    superdave Member+

    Jul 14, 1999
    Raleigh
    Club:
    DC United
    Nat'l Team:
    United States
    This should be stickied...everywhere.
     
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  10. Zoidberg

    Zoidberg Member+

    Jun 23, 2006
    Just to add.

    I do believe most MLS owners would spend more money on players, but I think we underestimate the union dynamic.

    We need more quality domestically.

    Why spend more money on run of the mill players here if you are an owner, and why would the union agree to a higher cap if it meant more of their domestic players would be out of a job? Let's face it, if I own a team I want a proven 500K guy from Europe or SA. I don't want to spend it on fodder here.

    I really believe that at this point in MLS we will see more spending, willingly by the majority of owners, when our local taelnt makes it worthwhile.

    The owners will happily do it, amd the union will happily take the money.

    For me, that seems to be the crux of the issue moving forward.
     
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  11. Blong

    Blong Member+

    Oct 29, 2002
    Midwest, the real one.
    Where do the recently reported sponsorship deals enter the equation? I know that official numbers were not released, but I think the deals for Heineken and Coca-Cola alone were rumored to be around 25m and 50m respectively, which would blow right by the 49m.

    The other item not considered is international TV rights. I think Canada has some decent money coming in, and I assume all these new overseas deals involve some amount of payment.
     
  12. ceezmad

    ceezmad Member+

    Mar 4, 2010
    Chicago
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    [​IMG]



    jk, good shit triple.
     
  13. Stan Collins

    Stan Collins Member+

    Feb 26, 1999
    Silver Spring, MD
    Indeed. This comes back to the 'big problem' with his analysis, which is that if MLS valuations are a bubble, he has failed to adequately explain why it happened. I connect that with the above because that article used data from before the run-up in value occurred in the first place, and should have been discounted on those grounds.

    I posted the following this in the post-CBA thread:

    [​IMG]

    If capital started flooding in somewhere in the mid 2000s, but was unsupported by revenue growth indicating near term profit, then you have to ask yourself why that didn't happen sooner. Now, maybe you can come up with a reason for that, but if you can, it's not going to hinge on data gathered from before it started in the first place.
     
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  14. 4four4

    4four4 Member+

    Nov 13, 2013
    Land of 10,000 Lakes
    Absolutely 100% correct.
     
  15. areathrasher

    areathrasher Member

    Mar 26, 2014
    Toronto
    Club:
    Toronto FC
    Nat'l Team:
    Ireland Republic
    Excellent work.
     
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  16. 4four4

    4four4 Member+

    Nov 13, 2013
    Land of 10,000 Lakes
    Strike while the iron is hot. It's going to be interesting to see how much Sacramento pay for their franchise. $120ish?
     
  17. HailtotheKing

    HailtotheKing Member+

    San Antonio FC
    Dec 1, 2008
    TEXAS
    Club:
    San Antonio Scorpions FC
    Nat'l Team:
    United States
    Not sure it's close to that ... but markets are different. With our "bidding" taking place for the Scorpions, the total cost of stadium upgrade etc left the monies that could only be attributed to the Fee itself was around 70-80m.
     
  18. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    Exactly right.

    Now, there was one area where I got it wrong and I think many others did too. Everyone assumed the entire revenue generated by MLS was about equal to the $500 million reported in those Forbes estimates. I'm now convinced that is just the revenue generated by the teams.* The league itself generates its own revenue which is in addition to that $500 million.

    In other words, assuming the average team again averages about $26 million in revenue this year -- with two new teams and Chivas gone you'd think they'll easily at least hold the line -- and the league does indeed generate $175 million or so, if you consolidate everything (even if you are conservative) it looks to me that MLS is generating about $700 million this year.

    MLS is far, far more financial substantial than people give it credit for IMO.

    Anyway, enjoy!


    ______________________
    * The only real room for error is double counting gate receipts. Every pro forma has netted out the league's share of the gate receipts when calculating team revenue, and I assume Forbes did too since their numbers are so close, but Forbes itself has never said one way or the other.
     
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  19. 4four4

    4four4 Member+

    Nov 13, 2013
    Land of 10,000 Lakes
    Minnesota United gave MLS a check for $100 million dollars. If MLS waits two to four years wouldn't the price go up to?
     
  20. HailtotheKing

    HailtotheKing Member+

    San Antonio FC
    Dec 1, 2008
    TEXAS
    Club:
    San Antonio Scorpions FC
    Nat'l Team:
    United States
    That's why I said markets are different ... CitiGroup but a valuation of the Scorpions in the "mid to high 8 figures" ... and the valuation was based with expansion to MLS as part of the model.

    38-45m is the expected cost of the stadium expansion.

    50-75m (mid to high 8 figures)

    88-120m range with those two added

    Hartman himself has stated several times that he's looking at only selling to groups with MLS expansion as the goal and there's been "total" prices of 160-200m bandied about. Subtract the stadium expansion+cost of team from that total and you're looking at roughly 70-80m for the EF ....

    I don't know if there was pricing, in part, with conversations and handshakes from the MLS in the valuation process ... if those numbers came from Hartman's conversations .... just not sure. I've heard them more than once though, and the words weren't coming from the guy at the end of the bar.


    Of course, this was before Minnesota's 100M ....

    Maybe the price reflects and gives credit for work/infrastructure already done ? I dunno.
     
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  21. Cavan9

    Cavan9 Member

    Nov 16, 2011
    Silver Spring, MD
    Club:
    DC United
    Nat'l Team:
    United States
    The result of Szymanski's models are always pre-ordained by the assumptions he makes when he builds them. Somehow, he always comes to the same conclusion (MLS is garbage and is doomed) yet is always wrong. His piece last year about how MLS should shut down and just become farm teams for the EPL "because it's better for fans" was a real howler. Somehow his conclusions are always the exact same as your average internet Eurosnob.

    He's a huckster and a troll who happens to have degrees in economics.
     
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  22. Zoidberg

    Zoidberg Member+

    Jun 23, 2006
    In my decades of business I have found that 90% of economists can be placed in this category.
     
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  23. 4four4

    4four4 Member+

    Nov 13, 2013
    Land of 10,000 Lakes
    I have found accountants to be in the same category. ;)
     
    billf, jayd8888 and Zoidberg repped this.
  24. flange

    flange Member

    Jul 15, 2014
    Portland, OR
    Club:
    Portland Timbers
    Nat'l Team:
    United States
    @triplet1, thanks for sharing this. Your posts are always top notch, but this series is on another level.
     
    Revolt, bunge, jayd8888 and 1 other person repped this.
  25. scoachd1

    scoachd1 Member+

    Jun 2, 2004
    Southern California
    A very nice "parting" gift. Great consolidation of your many posts. BTW - the last Galaxy was abysmal. Basically half their players were replaced by NASL quality players and RSL didn't have their two best attacking players either. If I start seeing a lot more games like that I might be following in your footsteps as well.
     

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