Reports: Charlotte to be announced as team #30 on 12/17

If people invested simply based on current earnings you'd have a compelling argument. But they don't. They invest in opportunity for growth. You ask what changed. The primary answer is Atlanta. MLS was always a futures game. MLS had Seattle but people could rationalize that as being a weird Pacific NW outlier that wouldn't be replicated. However, when a brand new team in the middle SEC country makes that much money as Atlanta has, it caught a lot of peoples attention and gave credence to the long term demographic argument that Anshutz jumped on long before other investors did.

The second answer is that ambition of Charlotte's owner. He was willing to pay a significant premium to cut in line because the thinks he can do just what Blank did. He might right not only is the region rapidly growing, but it is also a hotbed for soccer. ACC games have historically been some of the best attended NCAA games. Wake, Clemson, South Carolina, UNC have historically been in the top 15. Duke prior to Lacrosse fiasco was among the very top. Even UNC Greensburo has been in the top 20 recently.

 

I'd argue that it's not just Atlanta. To date, MLS has had a consistent, strong and pretty extensive string of very successful new franchise launches. Successful in terms of butts in seats and impressive stadium deals, not necessarily winning percentage.

I saw recently that Minnesota had a 94% renewal rate on season tickets, and was going to (I think) add a couple more thousand season tickets over the number they capped in 2019 from their 6000+ season ticket waiting list.

FCC had the 7th highest average pro soccer attendance in North America in its inaugural season.

Portland's ticket demand speaks for itself (they've been in the league only since 2011).

Obviously, there have been one or two less than stellar launches - like Philadelphia, though even there things perked up last year - but in general, new teams in MLS haven't been encumbered by the attendance malaise that affects so many MLS 1.0 clubs.

So, from a new investor perspective, buying into MLS looks like a pretty promising bet, and a helluva lot cheaper than what it would take to buy into one of the top 4.

I do wonder what'll happen when (not if) a new franchise kinda fizzles. Might that cause potential new investors to rethink? It might not matter much if the league's already at 30-ish clubs, I suppose.

 

I'd argue that it's not just Atlanta. To date, MLS has had a consistent, strong and pretty extensive string of very successful new franchise launches. Successful in terms of butts in seats and impressive stadium deals, not necessarily winning percentage.

I saw recently that Minnesota had a 94% renewal rate on season tickets, and was going to (I think) add a couple more thousand season tickets over the number they capped in 2019 from their 6000+ season ticket waiting list.

FCC had the 7th highest average pro soccer attendance in North America in its inaugural season.

Portland's ticket demand speaks for itself (they've been in the league only since 2011).

Obviously, there have been one or two less than stellar launches - like Philadelphia, though even there things perked up last year - but in general, new teams in MLS haven't been encumbered by the attendance malaise that affects so many MLS 1.0 clubs.

So, from a new investor perspective, buying into MLS looks like a pretty promising bet, and a helluva lot cheaper than what it would take to buy into one of the top 4.

I do wonder what'll happen when (not if) a new franchise kinda fizzles. Might that cause potential new investors to rethink? It might not matter much if the league's already at 30-ish clubs, I suppose.

 

Considering the utter crap that team has been for the majority of its life, I think it has done very very well. Yes it has not sold out every game but their attendance is not an issue, at least in my view.

 

The markets the league should worry most about are Dallas and Colorado. Those are handicapped by owner indifference. NE, Columbus, and Chicago have recently been issues but new owners for the latter 2 and hiring Arena seem to have increased local interest in the teams.

 

As far as the Hunts, I would just say that "being hands off" is not the same as "owner indifference."

 

I'm not willing to get very optimistic about Chicago. Not until they engineer a permanent stadium solution, anyway.

 

Charlotte has hit the ground sprinting... some impressive front office hires and this report that they’ve sold over 20,000 season ticket deposits in 3 weeks. That in addition to the previous report that they’ve sold 60 corporate luxury boxes for $100K a pop and have Ally lined up for their shirt sponsor. We could be asking if they open up portions of the upper deck vs if they fill the lower.

https://www.mlssoccer.com/post/2020...-season-tickets?amp&__twitter_impression=true

 

I can remember (though not find) a quote from Lamar Hunt in the early years of the league saying the break even point for profitability was around 15k in attendence.

And this was before stadium & shirt sponsors, with much less profitable TV & league sponsorship deals, and no expansion fees.

Got to believe virtually everyone is in the black nowdays, with everything considered.

 

As for poor situations, FCD is exceptional in other ways. They have the best Academy setup in the league by most metrics.

They & Colorado are in long term lease/stadium situations that are probably the worst of the SSS teams.

But still better off than Chicago & NYCFC. Of the league gets those two sorted, look out.

 

The question asked is what is driving the rapid valuation for Charlotte. While its "not just Atlanta," I think it is primarily Atlanta. Continued success of clubs like Portland, KC, Seattle, the LA teams etc have been the reason there has been a steady growth of interested investors.

Atlanta created a discontinuity. Look at the sudden change in behavior of owners with potential that weren't doing squat. Mansueto moved the Fire to Soldier field. Kraft hired Arena and now has legit DPs for the first time in over 20 years. Vancouver, which has been near the bottom in Revenue hired the CEO from Roma.

"We’re not a MLS team that’s constrained by a 22 to 25,000-seat building," Pannes said, referencing the potential for opening the upper level of BC Place. "As I was doing my research for this opportunity, one of the things that stood out me was that when the city of Vancouver was half as large as it is today, it was able to draw on occasion upwards of 50,000 people."

Vancouver and Kraft didn't suddenly become bullish because Seattle and Portland have been consistently drawing crowds or because Minnesota has a nice renewal rate. Arthur showed them they can make real money.

 

While that may hold for Charlotte, Charlotte & other pointy ball stadium teams are not the whole story on valuations & success. Nor the only owners shelling out big bucks (Haslam).

Yes, Seattle & Atlanta are a part. But so are LAG, LAFC, Portland, SKC, Cincy, and Minnesota.

This thing was trending upwards a while ago. Rapid expansion. DC's valuation. Precourt thought $68 million + a privately funded $200 million stadium in Austin was a bargain. Minny & Orlando. Cincy. LAFC. Columbus' new ownership. Sacramento. St. Louis. Miami. No 60k stadiums in those locales.

The growth of the sport in the USA. Increased geographical footprint. WC in 2026. Increased revenue from sponsorship deals. Better corporate support. The USWNT continuing to knock it out of the park.

I think looking for just ONE explanation, for anything, is usually a fool's errand.

 

And MLS isn't trying to convince your Aunt Mildred to sell cosmetics out of her home. David Tepper isn't buying into a Pyramid or Ponzi Scheme. He knows that there aren't another 30 teams coming in behind him for him to get paid back.

He's buying in because he wants to be part of MLS. And probably not for the ROI. He's not looking at bankrupting himself, but he also is likely to accept steady annual losses in the pursuit of the thrill and ego-boost of having one of the nicest toys of anyone in Charlotte.

One can't look at owning professional sports teams the same way the look at owning a percentage of some major company (well except for maybe Carl Icahn). Yes, some sports owners get filthy rich by buying low and selling high, but they rarely go into it expecting some massive valuation rise while they lose money on operations year after year. That's not rational. That's not why they do it. Nobody goes into it thinking they're going to go broke, but even Ken Horowitz wanted to keep the Miami Fusion going - he was willing to continue funding the Fusion's red ink, he just wanted to be left out of the league cash calls for a couple of years as it was the three league owned teams and his share of MLS HQ expenses that was too much for him.

 

As others have stated, the most compelling investment rationale for the higher current valuations are:

1.) The long-term growth potential and global implications of converting a meaningful percentage of the US sporting landscape to the world's favorite game. This is certainly based on a long-term, growth-oriented view and not some sort of net present value of current and short-term projected EBITDA. I'm personally bullish on the league over the long haul due to: a) positive domestic demographic shifts; b) the quality, capitalization and unique structure of MLS' ownership group; c) the desirability of the US and Canadian markets for talent acquisiton and advertising dollars; d) unique opportunities to evolve into the league of choice in the Western hemisphere as well as leading and monetizing this hemisphere's version of the EUROs and Champions League over time; e) Campeones Cup and inter-league possibilities with Liga Mx; f) global distribution potential, especially given the limited competition for our summer schedule programming and late-night-for-Europe, Pac-12 style inventory, and g) the positive impact of this massive investment on the USMNT and MLS' ability to monetize it through SUM.

2.) As @AndyMead and others have pointed out, billionaires are partially interested in the prestige of owning a professional sports franchise (at a relative discount in the case of soccer) and thus willing to overpay. It's a bit of a lifestyle business in a sense, similar to owning a winery only more expensive. The show Billions had a somewhat relevant quote which stated that "NFL franchises are the way we knight people in this country".

 

This is a solid list of the positive growth potential factors to MLS. One might nitpick at whether a couple of them are actually positives (e and g spring to mind), but I think this reflects the thinking of the existing ownership community well.

 

I want to start a soccer team that's also an MLM. "Supporter-owned" we'll say it is. Market it to the pro-rel zealots and NISA would probably take my money.

 

Marc Nicholls is no longer the Seattle Sounders' director of player development.

He's our technical director now (apologies if this was already posted, I fought through as many walls of text as possible).

https://www.mlssoccer.com/post/2020/01/07/charlotte-mls-appoint-marc-nicholls-technical-director

 

A bigger fools errand is trying to communicate with people that are presenting supporting arguments against positions that were never taken.

 

If you were talking about European soccer club owners I'd tend to be much more supportive of argument as many of these clubs have been run as a combination of noblesse oblige and having the coolest toy in town. However, US owners are a different breed. While scarcity and sexiness play a part in value, running a team in a US league is not like showing off your massive art collection in a local museum. They are primarily in it to make money which is why they aren't particularly well liked overseas. If you look at the long term investment, US sports teams have been a pretty darned good long term investment compared to other investment options.

 

Do you have a source that breaks down all revenue streams? Otherwise it's only assumptions. I'd really like to see how much expansion fees have contributed to overall revenue over the past several years. Where's the growth? Team valuations and number of teams? Median attendance was the lowest last year since 2014. TV ratings also haven't grown. The best regular season ratings on ESPN were in 2012. Is the popularity of the league at a point that it warrants adding six teams in three years? You don't think that expansion fees or the upcoming TV rights deal have played any part in rapid-fire expansion?

So I link articles to make my point and then I need to lie about them? Why wouldn't I just make a claim without citing the articles? Talk about delusional. Find me someone on here that believes anything Garber says about expansion. He talks in absolutes and provides timelines, and then walks them back, rather than simply not commenting or answering in vague generalities (we don't know when expansion will end). Before announcing Charlotte, he says, “These are limited opportunities. As MLS moves forward of going through a process of fully expanding our league there was only one team left." Now he's already saying that "32 teams will happen at some point."

Rather than comparing MLS to other soccer leagues, how about evaluating it based on its performance in the American sports landscape. Anyway, I've never heard of Sportcal before, but if you read what it's about, you'll find it's a sports marketing group, as in sports promotion. They didn't create that report out of benevolence. Some client commissioned that report and it would be interesting to find out who paid them to put it together. The timing of the report also raises questions. The date is June, 2018. MLS has added four expansion teams since then. I bet you won't hear anything about that report during CBA negotiations.

It's good enough for the league that it cites the report on it's website. But if you don't agree with the methodology, why not link a report that you don't have an issue with?

It does seem like Atlanta caused people to put on rose-colored glasses. They see a franchise that packs in 50K+ in attendance and think the league is doing great. But median attendance has gone down despite those huge crowds in Atlanta and Seattle. And two teams that began in 2015, NYC and Orlando, have actually seen a huge drop in attendance from their inaugural season (-7K and -10K). I'd agree that Seattle and Portland were going to be outliers because of the political leanings of those cities which furthers the perception of soccer as a liberal sport. But even Seattle had a 4K dip in attendance since its peak in 2015.

 

Yeah, I don’t know why you linked articles that don’t say what you said they did. Perhaps you thought embedding a link would add credibility to your argument and figured nobody would actually follow them and read what they said. Perhaps you didn’t bother to read them yourself. Perhaps you just like to troll and gaslight. I don’t know, but I agree, it is delusional.

The publisher of the report I linked, Sporting Intelligence, has been around for a long time and has published a highly detailed annual report on various metrics analyzing hundreds of league throughout the world for at least a decade. I’ve linked the most recent report they produced. You’ll note it is far more detailed than anything that Forbes produces, but yeah, try to discredit the author of the article I linked because he is actually employed within the industry vs a journalist with no business background. Myself, I always appreciate reading about topics surrounding various businesses from those who have an expertise in it. To each his own, I guess.

https://www.globalsportssalaries.com/GSSS 2019.pdf

 

What are your thoughts on Market value Tesla vs Ford & GM? Now I'm not going out and running to load up on Tesla stocks, but the most of that money is coming from professional money managers.

Now compare MLS to more valuable NHL franchises. There are parts of your argument that have merit. However, what undermines your credibility is you ignore a lot of things that support the significant increases.

You write about attendance, which in many cases the capacity is constrained so it was hard for attendance to massively increase. In the case of Orlando, it could only go down based on venue. How about ticket prices? How do think the average cost per seat has changed in the past 5 years? Perhaps some season ticket holder or can provide some insights. Assuming neither the MLPA nor the owners are stupid and the season starts without a hitch or some other abnormal event I think you'll find attendance will have a big bump this year.

What about Sponsorship. Adidas 5 fold increase from $25MM to $117MM doesn't support your theory of a stagnant league. How about Social media? LA Galaxy, the top MLS team would be #5 in NHL. I think you also underestimate the relationship with Liga Mx both in terms of increasing interest in the league and in increasing interest in raising the profile of soccer events MLS owners benefit through SUM.

 

2 points.

If that is based on annual profits, you are right. If it’s based on asset appreciation, Andy is right. I know which way I’m betting.

The NFL may be an exception, but my very strong impression and recollection is that in US pro sports, the annual return rate is below market. Anyone this deep into this thread is probably very interested in sports business and has been following it for years and can draw on their own store of memories.

 

Expansion fees are not revenue. They contribute nothing to 'overall revenue'. Maybe it's just your phrasing but still ......... it's misleading.