Insightful article which clearly demonstrates the frustration and speculation that is common on these boards. http://www.soccertimes.com/wagman/2003/aug18.htm
Thanks for sharing, SA. It adds further credence to my theory that MLS has painted itself into a corner in allowing McNair exclusivity in Houston. He has them by the short ones now. The Texans org seems quite happy making off-season money off of international matches. Wouldn't be surprised Reliant becomes a site for a 2004 "Champions" tour or tournament. Just like the Linc in Philadelphia or Seahawk in Seattle... also, by the way, playing cat to the MLS' mouse. No disrespect to the Rhinos, but MLS may have to swallow its pride and come down to Rochester's level for fresh blood. The A-League is actually making more positive noise at the moment, cleaning house and adding some new faces for 04. Meanwhile, after all the teasing, blustering and pomposity in print over the past year, MLS expansion seems to be going up in smoke, or down in goat dung, as you please. As the article states, MLS may indeed want to expand... but are there any investors who really want MLS on current MLS terms? Apparently, not Lurie. Not McNair. Not Allen. Ergo, all the US media sees: No Seattle, No Philadelphia, No Houston. MLS may learn what the rest of us know: Tails don't wag dogs.
This is what I've been afraid of all along. I don't blame McNair for not want the privilege of allowing somebody else to spend his money, and then take his good players away with the stroke of a pen. Perhaps SEM isn't so great after all. It's what William De La Pena of the LA Heat (APSL) called "socialized soccer" almost ten years ago, and he, like many others, wanted no part of it. I guess time will tell whether "the chickens have come home to roost."
I was actually hoping that for 2005, we would have a big market team (ie Philly, Houston, etc.) and a smaller market team added (ie OKC, ROchester) in the mold of Columbus. Now, I don't know... every time I feel I have a finger on MLS' collective expansion pulse, I get contrary news. I just hope Garber doesn't make a hasty decision to expand in an unenthusiastic market just to increase "our national footprint."
Perhaps ChampionsWorld is moving behind the scenes, promising a more extensive tour next year, to include Huston and possibly the new Soldier Field. It's easy to see stadium owners preferring big, one-off events over the uncertainties of a season-long league. ChampionsWorld, concerts, Temple and NFL would probably look like good business to the Linc ownership, and the Huton group might be looking at a similar plan for their stadium. Personally, I like Rochester following San Diego in 2005, along with new owners for some AEG holdings. Like DaBease said, he wouldn't mind playing in Huston again. Just not in the summertime.
This seems like probably one of the better cased scenarios IMO too. However, I wonder if Garber feels the same way?
It's the first I've really heard that it was Anshutz/AEG that wanted to first, divest itself of Colorado and San Jose (which I knew) and then, second, expand into Philadelphia (which I didn't know). Is there another place to play in Philly, or was/is Lincoln Field really the one and only? Philly would be a great market to tap into. Too bad about the Temple deal. Question: does McNair have an "exclusivity agreement" to bring MLS to Houston, or is just that he own Reliant Stadium which is the natural place to house a team? Sheesh, MLS expansion: one day you're up, the next day you're toast.
McNair odesn't have the exclusivity because of anything to do with MLS. McNair as part of the stadium deal with Harris County has the exclusivity for an MLS team in that stadium. If a team wanted to play in Houston they could just as easily play at Robertson field (University of Houston) which has hosted Libertadores games in the past. Downsides is no A/C and no retractable roof. Upsides is we are more likely to fill it for games (i.e. better atmosphere). With regards to McNair, I think he fears the single entity system more than anything else. If he wants to put buts in his seats, he would want to field the best team possible. However, that really isn't a possibility with Single Entity as there are constant restraints. So, MLS really didn't give McNair any exclusivity. The "owners" of the stadium, the Harris County Sports Authority, really did in that particular stadium.
McNair's right of first refusal I've excerpted the relevant provisions of the Tri-Party Agreement (the primary document that governs the relationship among the Texans, the Rodeo, and the Houston-Harris County Sports Authority regarding the use of Reliant Stadium) that deal with the Right of First Refusal (as well as other provisions, such as those dealing with luxury boxes and signage and whatnot, that specifically mention MLS) in the "Hope for Houston" thread in this forum (see bottom of page 3 of that thread). But in a nutshell, here's the deal in more-or-less plain English: [Note: for convenience, I'm going to refer to McNair and the Texans and any entity affiliated with McNair and/or the Texans as just "McNair"; I'm also going to use the term, "the Authority", to refer to any entity affiliated with the public entity that owns the Reliant complex.] What right does McNair have? McNair has a qualified right of first refusal, which I'll explain below, on any proposal to have an MLS team play in Reliant Stadium. He negotiated for this right in 2001 with the Authority. MLS has nothing to do with any of these legal rights. This means that if anyone makes the Authority an offer to put an MLS team in Reliant, then the Authority has to take that offer to McNair and give him the chance to put an MLS team in Reliant on the same terms. But this right of first refusal is qualified in two ways. First, it expires at the end of 2005. Second, McNair has to pay a one-time fee of $100,000 to the Authority. (This fee is referred to as the "Topping Fee".) There are also some time limits that apply to how long McNair has to respond, what happens if the Authority receives an additional offer, and a few other details, but what I've outlined above are the main points. So, what does this mean in practice? First, no serious proposal is really likely to emerge for an MLS team in Reliant from anyone other than McNair until his right of first refusal expires at the end of 2005. Negotiating is expensive. You've got to pay the lawyers, accountants, financial advisors, and any other consultants that you may use. You're going to do this for months. No one's going to want to do that unless the Authority can either (1) get a waiver from McNair on his right of first refusal or (2) agree to reimburse you for your reasonable expenses out of the Topping Fee. The problem with (1) is that McNair has no incentive to provide a waiver and the problem with (2) is that there's still the opportunity cost that you're never going to recover. Second, McNair has no incentive to hurry. He has a right of first refusal for nearly two and a half more years. He can take his own sweet time in negotiating with MLS because he knows that no one else is coming into Reliant.
Wouldn't you be? FWIW, I'm told by someone semi-close to the situation that if it wasn't for Jamey Rootes pushing for MLS to be even where it is on McNair's radar, it wouldn't even be on the radar.
rethinking SEM... From what I've read (and heard) in the last few months it sounds like there are several potential investors interested in MLS. Is the sticking point for all of them SEM? What are the pitfalls of disbanding SEM while maintaining many of the rules that allow for a competitive league, ie. salary cap?
Interesting observation. And actually not such a bad thing. Many deals get done mostly because a "sponsor" - some high-level officer in the company - pushes for the deal and convinces the big boss that it's a good idea. Obviously, it would be ideal if the sponsor also happens to be the big boss man, but that's often not the case. It's probably a good sign that McNair negotiated for the right of first refusal (you don't get them for free) after Rootes joined the organization and, presumably, advised him regarding the desirability of getting rights on MLS. Of course, that was a couple years ago, so who knows whether the big boss still thinks that piece of the deal was well-advised.
In practice, MLS is no more restraining than the league he invested $800 million to join. Or did I miss a press release somewhere along the way and the Texans are somehow exempt from the NFL's very rigid salary cap and revenue sharing plans. NFL owners are the absolute last ones that I would expect to be against SEM. And when all is said and done, it's probably not coincidental that two of MLS three' investor-operators are also NFL owners. Bob McNair spent all the money he did to invest in a league where the licensing rights to his team's merchandise are owned by NFL Properties and the revenues from that licensed merchandise is divided 32 ways. He spent that money to invest in a league where he only gets half of the ticket revenues. He spent that money to invest in a league where he only gets half of the sponsorship revenues. He spent that money to invest in a league where there's only marginal local TV revenues to be had and where the national TV revenues are divided 32 ways. He spent that money to invest in a league where the only money he doesn't have to share with the league is the money he makes off the stadium itself. He spent that money to invest in a league where his team cannot spend more in salaries than any other team. Bob McNair hasn't been slow to invest in MLS because he's philosophically somehow got something against all the hoops that SEM would make him jump through. He's gladly jumping through those hoops already by being an NFL owner. Bob McNair has been slow to invest in MLS because it's been a money pit so far. And I could certainly understand why he'd prefer for his involvement in soccer to be what it currently is. By holding a few big exhibitions a year, his overhead is pretty much just opening up the stadium, running ads, selling tickets, and paying appearance fees. There's no overhead of actually owning a team and paying players and trying to sell tickets for 15 games a year and on and on and on. It's low-risk and profitable, which are two words that do not currently describe MLS.
A measley five Temple home games a year surely is not what's preventing the MLS from coming to Philly, is it? Anyone with any sort of scheduling skill could find a way to accomadate the Eagles, Temple, and the MLS.
Well, they could, but I'm sure that it involves a lot of Friday night (at best) or midweek (at worst) games for a Philly team when the middle of August rolls around. After all, I get the impression that Temple's higher on the totem pole than a Philly MLS team would be. And the last time I checked, colleges are very particular about playing on Saturdays, unless some TV network is throwing lots of money at them to do otherwise.
No one in Philly really gives a rat's ass about Temple football. Yet for some reason everyone was pressuring Lurie and the Eagles management to gift their field to Temple. Here are Temple's home games for the upcoming season: Sep 6 Villanova (Lincoln Financial Field) Oct 11 BOSTON COLLEGE (Lincoln Financial Field) Oct 25 RUTGERS (Lincoln Financial Field) Nov 15 VIRGINIA TECH (Lincoln Financial Field) Nov 22 PITTSBURGH (Lincoln Financial Field) Not what I would call extensive. The MLS, the Eagles, and Temple could work together I think to allow all 3 squads to make use of the LINC.
I think it's more the fact that the Eagles want to charge Temple $15 million to host those games that's the problem. It's like the Giants Stadium lease problem times a gazillion.
Shep Messing stated in one of his columns for MSG that there have been several inqueries from several people already in the sports business about getting an MLS team and they always walk away because of the single entity concept. If this is true, maybe its time for MLS to move beyond single entity in order to grow. They could still have a salary cap to keep costs down. The problem is that people who have the money to own one of these teams usually have an ego to match their bank account and they don't want others making all their decisions. Imagine someone telling Mark Cuban he can't sign who he wants? I think this is what is keeping people out right now.
Someone please make this part of your signature. Clip it out and put it on your refrigerator, please. The next time someone says they just know that Millionaire X would love to have an MLS team because, well, you know, they'd just love to have an MLS team, and who wouldn't want to do something great for the community and have an extra 15 dates in their stadium and don't they know soccer has a tremendous upside and the investment will eventually be worth so much more, but until then it's a tremendous tax write off and if you let me get an MLS team I promise I'll take care of it and I'll feed it and clean up after it, show them this and then slap them fifteen times about the face and head. And, yes, that includes Shep Messing. Convincing men with lots and lots of money to ignore the heretofore checkered past of American league soccer as a spectator sport is the real trick. Single entity isn't what's keeping Mark Cuban and Jeff Lurie and, yes, Bob McNair from diving right in.
Man alive-having Cuban around would be a blast! I'd love to hear him griping about the officials and then paying those whopping $500 fines! He got more pub from his little Dairy Queen adventure a few years ago in the mainstream sports media than the MLS has ever received.... Heck-he could just have some of the Mavericks suit up for the Burn. Half of them are Euros and probably know how to play....Dirk Nowitski on the header anyone?
Great Post ElJefe. I'm glad someone set the record straight re SEM and the NFL setup. But it probably does bear mentioning that much of the merchandise money flows to the NFL teams individually. In fact, the Dallas owner Jerry Jones has been quite vocal on that front. But all in all, you know what you're getting with the NFL, and you know that 5 years down the roadt he investment will be worth more. In MLS you're unsure of what it'll be worth and whether it will be worth anything at all. Financial realities are such that there is no firm ground in soccer. While McNair paid to get the Texans, he, like Glazer and many other NFL owners, saw the stadium as a potential source of recouping some of those funds, and an MLS investment wouldn't really be doing that. So to him it's less about the MLS bottom line and more about the opportunity costs and the risk associated with investing in a venture like this. -Digital
Mmm...risk... Digital, great point about McNair's risk profile. Whether someone's comfortable investing in MLS will have as much to do with their own risk/reward appetite as anything else. I've worked on several risk management policies and have found that there's quite a range of risk appetite even among fairly conservative business people in fairly conservative industries. While I haven't reviewed any of their risk policies, such as they may have any, I still think it's pretty clear that Vergara has a comparatively aggressive risk/reward appetite. I don't know much about Kroenke (sp?, including how to spell his name), but if the reports are accurate, then his risk assessment maybe falls somewhere in between the likes of Vergara and the likes of McNair. But we can conclude fairly reasonably (again, assuming that recent press reports are accurate), that some investors, such as Vergara, Kroenke, and perhaps Televisa, have an appropriate risk/reward appetitie for MLS under certain circumstances. The question regarding McNair, and perhaps others, is whether MLS can offer material terms consistent with his risk/reward appetite. It's hard to evaluate these things without knowing more about the material terms of any proposed deal, including McNair's negotiations with MLS.