Sorry dominiond, but you really caught me on a bad day... WTF are you talking about? Do you know ANYTHING about the markets right now? When was the last bigtime IPO? How well is private equity doing right now? I'll give you a hint: pretty damn poorly. Right now is about the WORST time to try to attract investors with your clever idea and "significant negative cash flows"...
Kpaulson.....Don't confuse a high tech IPO with a sports franchise. Sure the markets are sour with IPOs...but the dynamics of MLS is so much different than IPO. Buying a franchise is not like floating an IPO. Franchises are bought and sold by the hundreds..daily in America. A franchise and a IPO are two totally different issues. You miss the whole point I am discussing. The league must create an engine that creates profits....renting a stadium does not. Making marginal profits in a rented stadium is treading water in mediocrity! I could buy any company in America like a corner 7-11 store that has positive cash flow! ...but what will the store create 1 ..3..5..years from now...still relatively the same cash flow with some potential increases...that's it! If I am spending $25 million for a franchise fee...I want to have an investment with the opportunity to create major increases in revenue ...and the value of the franchise to inrease dramaticly. By have 5 years of positive cash flow in a rented stadium...what will they get me? ...nothing much....and I am paying $25 million for this ???? The stadium is the machine that will drive the profits for the MLS....the quicker they get it ...the quicker they will get substantial cash flows...better crowds...a closer relationship with regional corporation (club seats, Corporate suites...etc.)....better product for TV....etc. As I stated before ....SSS and a lucrative TV contract are the two major components for sucess for MLS. The stadium is the first priority...the lucrative TV contract would follow....but having the strategy of positive cash flow for 5 years as a goal of MLS would be a major mistake!
Then why did you bring up "young aggressive corporate entities"? Buying a franchise is not like floating an IPO. Franchises are bought and sold by the hundreds..daily in America. A franchise and a IPO are two totally different issues. And MLS "ownership" is a totally different issue from a franchise-- because you buy into the league. And, you know what, given that the league is a "startup", there's a whole world of parallels. Even so, don't be silly and tell me how many 7-11 are bought "in a day!!!" because a sports team is such a unique commodity that it does not bear comparisons to the QuickieMart. You miss the whole point I am discussing. The league must create an engine that creates profits....renting a stadium does not. You don't even know what you yourself believe. Before you mentioned fat TV contracts as revenue engines. Why can't the league eventually get a fat TV contract in rented stadiums? Answer: it can. Stability of the league, organic growth and the growing entrenchment of soccer in America's sports consciousness will eventually get us a better TV deal. but having the strategy of positive cash flow for 5 years as a goal of MLS would be a major mistake! Having any strategy that doesn't immediately look to the bottom line would be a mistake. Figuring out how to turn a profit with what we have now is the smartest route, while actively looking for expansion into cities with good leases/SSSs and trying to find opportunities in current MLS cities to create situations where MLS controls more of the revenue.
Kpaulson...your strategy is the stategy of the status quo....doing what MLS has been doing for the last eight years...and what has it got the league...only 10 franchises owned predominately by two owners...static attendance...despite the high profile of two world cups (one in the U.S.) ...and spending through most of its initial capital (up to $250 million!). The league finds itself still renting super large football stadium...and still getting feeble TV ratings! The strategy of conistant positive cash flow is a great strategy for a corner mom and pop store...content with a conservative (marginal) cash flow...But for a major league sport business dealing with the worlds number one sport...I would strongly endorse a more aggressive approach! ...bite the bullet now...take the risk and underwrite new stadia for every team in the league. This is the strategy that will elevate the league!
domiond, are your posts serious? if we're going to have this discussion, there might be a few points you should learn before you get into it. 1. When (and where) the last few world cups have been You mention that MLS has benefited from two high profile world cups, including one in the US. UNfortunately, MLS was not around in 94, when the world cup was held in the states. 2. Basic business terms Like "liquidity". 3. how much the league has spent The league's spent well in excess of $250 million. 4. the league's growth pattern and strategy Neither one has been a straight line...
Kpaulson....are you serious about your post? ...do you understand liquidity, business plan, marketing, strategic planning? ...you don't appear to understand the basics or dynamics of business! 1. I mentioned two world cups that should of benefited U.S. soccer. The first was 1994 when the cup was held in U.S. ...very high profile and financially successful...I blieve the national soccer associated made well over $250 million (I don't know the specific amount). The profits from the world cup...I believe....was the seed capital for MLS...I would call that a major benefit from the world cup. The last world cup should of benefited U.S. soccer because of the fantastic showing by the U.S. National team.... 2. I understand liquidity...it is the basis for corporate survival. I am not saying that each team should have negative cash flows. I am saying that investing in an Asset (stadium) should be causing short term liquidity problems....until the asset is up and generating income. MLS has liquidity problems ....but for the wrong reasons (terrible lease arrangements in renting football stadiums). Even with a positive cash flow in rented stadiums...what value have you created? 3. The $250 million figure I used was the estimate of upfront capital the league got from hosting the World Cup. I believe they have just about emptied that account. I realise that the leage/franchises have spent more than this amount. 4. I realize that the league's performance has not been on a straight line....but the league is nearly at the same level of attendance and number of teams as when they started....that is static! Attendance per game has increased over the last couple years...but the number of teams have also been reduced...eliminating the weaker/low attendance franchise creates a more postive spin on per game attendance for the league. Also ...attendance is an interesting statistics...is it paid attendance...do you could a major concert after the game...or a high profile international match/doubleheader...how many free tickets...etc. Soccer has a great potential in the U.S.....all I am saying is that the strategy for promoting soccer in America has to change...some new, aggressive business plan has to be developed....and it is just my opinion that SSSs should be the number priority for the league. ....Kpaulson...don't question or belittle my knowledge of Business because you have a different opinion.
Liquidity is defined as the ease of an asset being transferred into cash. It is essentially irrelevant to the discussion as it has been shown that our current league investors are in it for the long run. Therefore negating the need for liquidity in their investments. Needless to say, any first year business major knows that the basis of corporate survival is profitability (or the future expectation of), and bottom line, not liquidity.
Kpaulson...when someone starts questioning someones intellegence...or knowledge, screams and swears abit...or starts diverting attention from the basic issues....you know he has lost the argument! I never even brought up the word liquidity until the last post where I will admit that I mistakenly used the word "liquidity" instead of cash-flow. My whole argument has to do with where a business invests its capital in order to achieve the highest return of cash. If you are so interested in liquidity...don't invest in a stadium for soccer...just cash out your assets ...and invest in CD's...one of the best investments for "liquidity"...or better yet a money market account. If you don't have confidence in the product (soccer)....if you feel insecure about building a SSS for long term profitability....you are in the wrong field. Again...the engine for for long term profitability for American soccer is SSSs.
No one here has done that, what are you talking about? Then why have you been defending your stance for the last 5 posts instead of just clearing up that mistake? Sure LONG TERM SSS's and TV contracts will add to profits, but this whole thread is about profitability in the short term . And in the short term, the majority of MLS's team can reach profitability in their current lease situations (sans Metrostars, and Chicago until they go back to SF).
Peledre....here are a couple quotes from Kpaulson... "WTF are you talking about?" ...(that's the swearing)....and the rest of his post tend to be quite condescending.... "I'm not questioning your knowledge of business because I have a different opinion. I'm questioning it because it's inadequate. You speak likes a sales guy (or worse, a first year MBA student) that doesn't understand the underlying business. if we're going to have this discussion, there might be a few points you should learn before you get into it"....etc. This doesn't bother me ...I can handle this type of debating style....but I get disappointed when people who feel so strongly about their point of view....that anyone who disagrees with them is not as intellegent as they are!...or does not have a grasp of all the issues! Bulletin boards are great venues to discuss issues....especially in areas where we are passionate about (promotion of soccer in America). That's all I'm doing is voicing my opinion on the issue of the profitability of soccer in America. Anyone can disagree with opinions...but lighten up...and respectfully disagree. All suggestions or opinions should be discussed....hopefully the right people will get insight from these opinions...and soccer will turn the corner and become a major force in Sports in America. No one organization or individual has all the answers.
Personally I think we'd have a pretty artificially high view of ourselves if we make ourselves to be that Don Garber and Phil Anschutz are scouring the BS boards for new ideas and lectures on the right business model for MLS. You are new around here so I'll clue you in a little bit. Your first couple months on the boards can be quite a bit of a "trial by fire". Most people around here aren't afraid to call a spade a spade and tell you what they think. Don't take it personally, it's just the way things work 'round here. Anyways back on topic...
I'll keep that in mind next time someone starts diverting attention from the basic issues. Listen, sorry if I was hard on you, but the fact is, you don't have the basics down-- we can't even talk about your conclusions until how you got there makes sense. These are not my opinions clouding my view-- these are just the facts. (and FYI, that's entirely different from questioning your intelligence, which I wouldn't dare do). I never even brought up the word liquidity until the last post where I will admit that I mistakenly used the word "liquidity" instead of cash-flow. Not true. You used it a couple of pages ago first in a way that immediately caught my attention because it didn't make sense. Also, now switching "liquidity" out for "cash flow" doesn't really fix your post. I'm not pretending like I'm the business messiah of MLS (and there's people with years more experience in business and soccer than me on these boards), but don't throw those terms out there if you're not clear what they mean. But back on topic: yes, SSSs are the engine for long term profitability for MLS. See? We agree on that. But before you make such a huge investment (and, special for you, probably decrease the liquidity of your investment), you want to get some sense of the viability of the business. In that sense, MLS remaining at the same level it has for the past five years would not be completely negative. Also, you overlook another important component to this whole issue. I'm sure MLS would LOVE to have SSSs in every city-- but you don't just click your heels and wish you had an SSS in your home. Finding financing is difficult (see the Metros and Dallas) Even if you have the money, you have to find the right site and get approvals. (do you know anything about Chicago's attempts to create an SSS?). So your "aggressive" plan already hits up against reality-- this is something that cannot be done quickly or easily. So take those factors into account. What are you left with? You're left with a business that still has to prove itself in its current situation (a) to survive until SSSs can be obtained and (b) to convince skeptical new investors or SSS financiers that the league will be around long enough to give them a return on investment. Anyway, to echo peledre's comments, welcome to bigsoccer; nothing says the conventional wisdom on these boards is gospel, but there's plenty of people that look at it like that (and trust me, bro, I'm not even the harshest of the bunch )