Leiweke: "Galaxy could be at $100m (a year?) revenues within a couple years".

While silly, most have been on the mark.

 

The Leafs will always be the Leafs, yes. Keep in mind, however, that TFC is owned by the Leafs and shares in their (and the increasingly popular Raptors) revenue...The Leafs just signed a Canadian TV deal that sees them get $700,000 per broadcast and gets their in-house TV station on basic cable at $2 a home.

Even now, TFC could afford to work under an open system (and would likely be far better on the pitch if they could). In future I expect that TFC will be a team that aggressively goes after DPs--particularly Italian and Portuguese players--and lobbies the league to loosen the rules.

 

If you want to get to $100m in revenue, it starts with having a plan to get there.

Personally, I think $100m is a ridiculous sum, especially when you compare it to established teams in Europe-- soccer is NOT big business and $100m isn't easy for other teams to come by. $100m puts you in company of reasonably big clubs like Valencia and Celtic-- there are only 15-20 teams that take in more. Even Real Madrid, with Beckham, only takes in $300m. So scaring up $100m revenue is really tough for a small business like a soccer team.

BUT I won't begrude the guy for having a plan to do it. I have no doubt it's a little embarrasing for the league to have such gradiose predictions made public, but AEG'd probably fire him if he wasn't trying to make this happen in private.

 

This is the kind of limited thinking I am talking about. What is the GDP of Spain? What is the GDP of the U.S? Or China?

Do you think more than a few thousand kids in the U.S. wear Beckham Real Madrid jerseys? How many will wear them when he's a "star" here? How many will have the Beckham/Galaxy lunchpail or "official David Beckham/Galaxy soccer ball" -- for sale at your nearest Wal-Mart -- after he starts popping up on U.S. TV shows and movies and tons and tons of commercials for products like Pepsi wearing his Galaxy jersey.
Think Star Wars.

Maybe Lieweke is crazy. But maybe BS soccer fans are thinking too much about on-the-field soccer and not nearly enough about business when they anaylize Lieweke's statements.

 

My thoughts exactly.

Christiano Ronaldo to Toronto in 2015!

 

If it were Red Bull New York talking this way, you'd have a good point.

But the Galaxy have played in 5 MLS Cups, winning 2 of them.

And last season was the first time they ever missed the playoffs.


You can criticize the Galaxy for a lot of things, but poor performance on the field shouldn't be one of them.

 

Ok, so how much do we think the Galaxy currently hauls in per season?

45 Million? Pre-becks?

And that's with an almost non-existant merchandise push. Next year, I wonder what those video boards will be worth.

 

Trust me-- I'm not bringing facts into the equation to "limit" thinking. A business plan can take you anywhere, but you need some facts before you can start writing one.

We know Real Madrid tried to crack Asia with Beckham. And they're still hovering around $300m in turnover. That suggests that it's actually pretty hard to generate revenue in professional sports. Although we're all very familiar with them as influential parts of our community, most clubs are actually pretty small businesses.

US merchandising is formidable-- and really is the best in the world at what it does. I wouldn't be surprised if the Galaxy made more money off of Beckham than Madrid or Man U ever did. But Real and Man U are not exactly marketing naifs-- this is a tough challenge.

Sure. Let's think about Star Wars. George Lucas is a billionaire. Revenge of the Sith took $380m. Hasbro's toy contract was worth $400m. Great numbers, but still pretty small. Those are bigger numbers than most of us think about, but they do show that it's hard to make a $100m.

Au contraire. All I am thinking about is the business end. Established clubs that are no slouches at marketing, with marketable histories, have had difficulties reaching $100m, even with worldwide marketing. You seem to be confusing the introduction of facts showing what needs to be done with the idea that it can't be done-- like I said, it all starts with a plan. I don't know how, but I'm glad they're thinking about it.

 

If the Galaxy can reach 100 Million without major overseas TV contracts it would be an amazing feat.. The clubs in the big money range all have a huge percent of their income from TV rights.. You can't talk about a team or league making it into the big money range without TV as a big/biggest part of the equation..

 

The handwriting is on the wall... Red Bull Austria is going to take notice, and to make money (serious money) on their investment, then consider the following:

If the Galaxy can come anywhere near what Lieweke claims, then Red Bull has to bend the rules and go after the whole enchilada, and that probably means only one person:

Ronaldinho Gaucho!

No one else could put butts in seats and sell marketing accessories like Ronaldinho. He would create a tidal wave of interest, and his team would do well on the pitch.

Then we could say MLS has both the most handsome and ugliest players in the world (but Ronaldinho's feet are very pretty)!

 

Then maybe we can expect Leiweke and AEG to pursue major overseas TV contracts by the end of the year. Why wouldn't they? They're trying to build a global entity, and if people are buying Galaxy merchandise, why wouldn't they want to watch them overseas?

 

Not really. Leiweke was the last guy in the room still saying things like "in 5 years soccer will pass X." I'm not saying he's a bad business man--I'm saying he sets targets he couldn't realistically hit.

 

Absolutely. But if the Prem TV contract gets each team US$60m, asking the Gals to do $40 or 50m on their own is ambitious to say the least.

Again, never say it can't be done. But do know what Leiweke is asking out of his club.

 

Star Wars!? I think that might be just a bit of a stretch.

 

Don't think I'm comparing the brand to Star Wars. I meant to compare the effort to Star Wars.
Star Wars was never just about the movies. It was about the movies and the toys and books and the cups at Burger King, etc., etc.
How likely do you all think it is we'll see Beckham/Galaxy cups at Burger King next summer? Could we be playing the Beckham/Galaxy "summer soccer game" at McDonalds where you can win tickets to a Galaxy game in your area, concerts tickets at AEG facilities or Galaxy schwag?
Is it true that Sports Illustrated plans a Beckham cover story for July? Will he be wearing the new Galaxy kit? Will Time and Newsweek and People follow? When was the last time MLS was on the cover of any widely read magazine?

I think $100 m. in revenue (remember revenue, not profits) is possible with that kind of effort and coverage. If not, well then Leiweke will just eat his words and the attempt to turn Galaxy into the new Cosmos will have failed.

 

The Leafs are a money making machine and according to Forbes last year, they pulled in $119 million in revenue. With the new TV deal, they will be making even more.

http://www.forbes.com/lists/2006/31/biz_06nhl_NHL-Team-Valuations_Rank.html

According to Forbes, Real Madrid did $374m. And $100m puts you in the Ajax, Celtic, Aston Villa, Everton, Marseille territory.

http://www.forbes.com/lists/2007/34/biz_07soccer_Soccer-Team-Valuations_Rank.html

 

with the way things have been going out here i expect LAG to pull in $100mil from parking alone by 2010.

 

Nice post which is worth highlighting. Like you, I take them at their word that they want to be a "super club." The question is whether they have the platform to become one.

First, a couple benchmarks. A $100 million club (or a €73 club at the current rate of exchange) is somewhere near the bottom of Deloitte's 25 richest teams in the world -- a bit below the Hamburg's, West Ham's, Benfica's, Lazio's, and Rangers' of the world, but roughly equal to the Dortmund's, Bolton's, Bayer Leverkusen's and Middlesbrough's. Those are the types of clubs that the Galaxy would like to keep company with.

In places like Germany where TV revenues are not large (comparatively speaking), you will see that of Hamburg's €101.8 million in revenue, 46% comes from commercial merchandising, 36% from match day income (tickets, boxes and concessions) and 18% from TV. That's what the Galaxy would have to do.

Of all of those numbers, the merchandising might be the most attainable, followed by tickets and concessions. TV, absent wildly successful pay per view, would be almost impossible under the current contracts. None of it would be achieved easily.

Even so, if this is Galaxy's ambition, there are going to be some flashpoints, and the first will be the salary cap. If they want to generate revenues equal to the 20 top clubs in the world, they will need more than a $2.1 million roster (with a DP or two thrown in) to do it.

It potentially puts MLS' most uncomfortable issue on the front burner: If MLS is to take a giant step forward, do clubs, especially clubs in very large, competitive markets, have to have the flexibility to bring in more expensive "name" players -- and not just one or two of them, but a roster that would be truly competitive in one of Europe's major leagues? If the Galaxy push that view and prevail, it will require a major re-thinking of the cap.

My guess is that the list of clubs who think so might be bigger than is generally believed. The three AEG teams, Red Bulls, Chivas and perhaps even Colorado and Toronto might be willing to do it, but keep in mind Kansas City was hoping to hit $9.8 million in revenues with a SSS. Either way, it will be interesting to see, and the outcome of the debate will have a profound impact on MLS.

But back to the beginning, I agree that the Galaxy's ambition is great. It remains to be seen if it is in their grasp.

 

what do you mean? Beckham has yet to arrive in America, and the Galaxy has already made enough profit to pay his entire salary.

 

I think you are right on the mark that the DP slot will be expanded, but since some teams have already traded for another DP slot, they will tweak it and distinguish it somehow, perhaps to allow teams to bring US players abroad like McBride back home or to retain an existing MLS player.

The thing about MLS though is it really isn't a profit sharing league. MLS picks up some of the I/Os expenses, players being the biggest cost, but unlike the NFL, the league itself retains the national TV and merchandising revenues. If the league allows a team like the Galaxy to pay for players beyond the cap from its own resources, absent more ticket sales, that really dosn't generate any new revenue sharing for a team like Kansas City. The Galaxy may do well, MLS may do well, but many clubs won't see enough benefit under the current structure.

While none of the MLS I/O groups is exactly living hand to mouth, AEG, Red Bull, TFCE, KSE and Jorge Vergara have enormous financial resources at their disposal if they want to use them, and they are involved with other teams that do spend money. Kraft and HSG have the money and NFL roots, but are pretty conservative in how they spend it in MLS. The other owners are (almost) mere mortals by comparision.

And we are talking big money to make this jump. The best numbers I have seen suggest that average annual club payroll in the EPL was £41 million in 2003-04 -- that's about $81 million -- and my guess is that it has increased significantly. That's not going to happen in MLS, but are there enough teams that might pay $15 million? $20 million?

It would be a very different league.


References:

Link to paper that notes EPL wages (page 15)
http://www.uclan.ac.uk/facs/lbs/dep...ing and Stadium Attendance Revisited - E.pdf

 

it won't prevail and i have no idea how they'd go about selling it, if they were so inclined. remember, MLS is courting these new I/O's based on the controlled economic system of the league (relatively low risk/high long term reward). IIRC, every single one of the new I/O's has mentioned that prominently as a reason they decided to buy in to the league. although I'm not sure that the DC folks mentioned it, but i suspect it came up somewhere. so if they're luring new owners to the league with that type of sales pitch, it stands to reason that the newbies probably wouldn't be on board for any sort of drastic changes, salary cap chief amongst those. for that reason I don't see any mega changes for the next 10 years.

this has been mentioned, but whatever changes they do make will have to be small enough so as to allow the non-compliers to still compete. i.e. DP rule affects only 1 player out of 11, so if you don't want to sign one, you can still compete (i.e. Rapids, Dynamo). i think they'll add the "USMNT" DP -- that, AEG should be able to usher through MLS board meetings (even though that would allow for 3 DPs on certain teams). beyond that, I really don't know what more the conservatives will tolerate. they'll tweak the salary cap to adjust to the American DP rule. other than that, i won't expect much.

I just don't think the Kroenkes, Krafts, Hunts, KC group, DC group, and Checketts would go along with a huge change to the salary cap structure. I don't even think Vergara would go along with it right now. maybe after everyone gets in their own stadia and the league financials start to show more improvement, but not now. i just don't see LAG/AEG ushering in that type of change.

 

I agree with this with the possible exception of Kroenke. If he gains control of Arsenal, he may be persuaded that increasing the cap could benefit him in Colorado. (The old "gotta spend money to make money" saw.) As you say, my guess is with a stadium Vergara would probably go along too. But that's at best six or seven teams. You still could see a sharp division over the issue because of the other I/Os you note.

The fight may be coming though.

Circling back, I just don't see how Galaxy can generate $100 million annually, with the worldwide merchandising and tour revenues that would require, without spending more on its roster. If that's really their near term goal, they are quickly going to be at odds with some fundamental principles of MLS.

Some interesting times ahead, both on the field and in the boardrooms IMO.

 

And all his detractors keep pointing to that one statement. In his defense. I bet you (Since it was an LA Times article) that he was infering that his LA Galaxy would surpass his LA Kings in popularity. I don't think he's off the mark do you?

The bottom line is. It really bothers me when some posters dismiss his comments, knowing full well that "WITHOUT" Lieweke, that MLS would not exist. He knows MLS, He knows business, and He has Uncle Phil's ear, and to boot he is a very intelligent individual. Of everyone associated with MLS, Tim L. is the one I feel has been the most influential -- besides Garber.

 

I may be wrong, but I just don't believe he's going to be that much of a marketing phenomenon here (and yes I know, what about Asia, etc.). Are kids going to get that excited about an aging soccer player that they might have heard of, but who doesn't necessarily stand way out above the rest on the field? And how many are tuned into MLS to begin with? There will be some media attention with his arrival and Posh and all that, but will it translate into toys and games at McDonalds? Someone like Jordan might have had that kind of influence in his prime, but he was winning championships in fantastic fashion in a popular sport, and he had a youth-attracting urban hipness factor that Becks may not have in this country.

OK then, I can make $100 million in revenue too. I'll set up a web site. Anyone who sends me $1, I'll send back $2. I'll have $1 million in revenue in [LeiwekeSpeak]"3 to 6 weeks"[/LeiwekeSpeak]. See, [LeiwekeSpeak]"at the end of the day"[/LeiwekeSpeak], I can do everything that Tim Leiweke says he can do. He says he has an open offer to Zidane. I have that too. I sent an email to his agent offering ZZ free Gatorade if he comes and plays on my rec team. (Not sure if he actually received or if I had the right email address, but I did make the "open offer".)