The Road from Here, Reprise

Discussion in 'MLS: Commissioner - You be The Don' started by triplet1, Oct 1, 2018.

  1. EvanJ

    EvanJ Member+

    Manchester United
    United States
    Mar 30, 2004
    Club:
    Manchester United FC
    Nat'l Team:
    United States
    The difference is that those three clubs are averaging exactly 1.5 points per game, and the MLS average is 1.39. In 2017-2018, Barcelona, Atletico Madrid, and Real Madrid combined to average 2.18 points per game. The top European leagues will never have the three richest clubs combined average only 1.5 points per game unless there's a Super League and clubs become the richest because the top clubs left.
     
  2. This would be the test for the statement in the USA clubs that get relegated (which is akin to this situation) get hammered in gate, tv and sponsor revenues.
     
  3. flange

    flange Member

    Jul 15, 2014
    Portland, OR
    Club:
    Portland Timbers
    Nat'l Team:
    United States
    This is a huge assumption. How do you think Portland fans will respond if Seattle gets included and the Timbers don't?
     
  4. This means the SL is dead on arrival. The "normal" leagues donot have that, so there still is room for billionaires to buy a club and take the place on the world stage of those who left the building.
     
  5. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    #130 triplet1, Oct 20, 2018
    Last edited: Oct 20, 2018
    Poorly. As I said, I think that would be a particularly difficult case. But let's take a broader view and plug in some numbers.

    Of the 16 teams remaining in what I'm calling MLS classic, assume they each average 300,000 regular season ticket sales a year. Using the data in the DC United pro forma, the average ticket is about $35, and each attendee spends an additional $12 in concessions. Let's round that up to $50 in revenue for every ticket that's sold and used.

    Okay, assume attendance in MLS classic is off 10% -- 480,000 tickets for all 16 teams. At $50 a head, that's a loss of $24 million, league wide. A big number. To make it up, each of the 8 MLS teams in the MLS/Liga MX super league have to pull in an extra $3M that they would turn over to the other 16 teams. And, you would assume, those 8 teams would also have to make an additional $9M each to keep for themselves -- roughly 3x what they would have to share. (That's consistent with the current formula that allows the operators keep two thirds of the ticket revenue and all of the concession revenue).

    So, can the 8 MLS teams in the super league pull down an additional $100M or so to make the economics work? My initial reaction is no. I think that's probably too much to generate -- meaning they probably couldn't both reward the 8 MLS teams taking more risk and fully make up the lost revenue the other 16 teams would experience. My preliminary conclusion is that if attendance drops even 10%, the 16 teams in MLS classic probably won't come out whole.

    Case closed -- or is it?

    There's another way to evaluate the risk. How much of the MLS broadcast contract money is at risk if the owners do nothing and keep the status quo? Again, I'm guessing after USSF gets it's cut MLS is making about $70M a year on those deals (which pay an average of $90M annually). Is $24M at risk on renewal? Consider that ESPN and Fox have to be paying MLS at least double that now. Do they cut that 50%? Or more? Again, put yourself in the shoes of an ESPN or Fox executive looking at declining revenues. Do you direct your money to hold the sports broadcast contracts that really drive a lot of people to your channel like the NFL or SEC football? Or do you keep that money in MLS, which pulls in a couple hundred thousand people for a typical game? Could MLS lose those national broadcast deals completely, if not in this renewal, the next?

    Here's what makes this hard. Given their druthers, I am sure MLS would much rather keep things as they are and get another nice, fat increase in its broadcast deals when they come up for renewal. But that's probably not realistic. Which means the question isn't really one of preference, but rather is the financial risk of doing nothing even bigger than the risk of trying a super league? I think it easily could be.
     
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  6. flange

    flange Member

    Jul 15, 2014
    Portland, OR
    Club:
    Portland Timbers
    Nat'l Team:
    United States
    Domestic leagues won't provide a world stage if the super clubs break away. What the normal leagues do will be irrelevant.

    Also, if money gets focused on one league the way it is in, for example, the NBA, it is in the league's interest to institute a salary cap to push wages down. No other league in the world will be able to complete financially for talent, so owners will have much more leverage over the players.
     
  7. Sorry, but Europe isnot one country like the USA, but a collection of countries. You cannot compare the European leagues, each operating within the borders of their country, with any league in the USA. European countries arenot USA states. They up till a few decades ago wage war against each other.
     
  8. flange

    flange Member

    Jul 15, 2014
    Portland, OR
    Club:
    Portland Timbers
    Nat'l Team:
    United States
    What about sponsorship? Merchandise? The millions being pumped into stadium renovations?

    My gut says this is wildly optimistic. I think you could have a full on revolt. MLS Classic Portland can't afford Valeri or Blanco, and has just been told it's not worthy of competing with Seattle. I think you need to start with the assumption that MLS Classic folds.

    There's no way existing "Classic" fans are going to follow your new super league after you relegate their local club, and no casual fan is going to support the second best super league in the world without a local team.

    As a Big 12 (Kansas) fan, I'm well aware of the economics of adding another mouth to feed with realignment/expansion. I've been following that conversation for years. So I understand you can't just take everyone. But I think you all are wildly off base with your conclusions that 16-20 teams are enough for a continental-level league.
     
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  9. Do you have a clue what you're talking about in European context?
    Money gets focused on one league, that SL?
    You mean that in all countries the fans will abandon their clubs and only watch the SL? Are you serious:rolleyes:
    Care to elaborate on this revelation of the money in Europe getting focused the NBA way?

    Care to elaborate also on the mechanism of that SL's instituting a salary cap that only will effect Bayern, Barcelona, Real Madrid, PSG, ManCity and ManUnited, because the rest pay way less than these clubs.
    The only institutions that can put in a salary cap are the UEFA with cooperation of the FA's. Why? Because the clubs are in the leagues on the terms of the FA's and the UEFA. If they donot want that they can withdraw from the league, no other option.
    That SL de facto invites the Superclubs to join them. That SL cannot exist without especially those 6 I mentioned. So it's these clubs that make or break that SL and they're not going to join that if it means sacrificing what they already have and what made them into superclubs.
    What does this mean???
     
  10. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    The premise of MLS has always been that it wouldn't offer top talent, but rather good talent coupled with a good in stadium game day experience. You're right, the remaining teams likely won't have high priced DPs, but Portland would still be much better and offer a better experience than the USL version that drew 9,500 - 10,000 fans its last couple of years in the league and it would be playing higher quality opposition. Maybe they would suffer a catastrophic reversal in attendance if they remained where they are, but that suggests that quality is more important than MLS has traditionally claimed.

    But let's assume you are right. That poses some troubling questions too. If the remaining teams do crash and fold because of a perceived quality gap with the new super league, what happens to MLS if it stays as it is when the national TV money goes away? How does MLS afford those better players then? The finances aren't great even now. The Forbes data shows half the league had a negative EBITDA in 2016 -- factor in those taxes and principal and interest payments, and it's likely even worse. As I write this, 13 of the 22 teams have reported lower attendance this year than last year (LAFC obviously is in year 1).

    If talent really is that important, the economic engine that pays for better MLS talent is stalling. That's hardly comforting. I get people don't like the choices, but remember MLS put Bonilla's warning on its own website. He could not have be more clear -- if MLS and Liga MX don't grow together to more effectively compete with the big boys, there is only going to be the rich guys in Europe and the rest of the world. The quality gap will be even more massive, concentrated in a single European super league.

    What does that mean for MLS?

    No, but the fans of the big Mexican teams that join the league will -- and based on social media presence, there are a lot more of them.

    The top 8 MLS teams by social media presence range from LA Galaxy, with 3.75 million followers, to TFC with 1.1 million followers. The rest of the 15 teams are significantly lower. They would be swapped out with some combination of these Liga MX clubs:

    Club America – 16,334,010
    C. D. Guadalajara (Chivas) – 11,706,921
    C. D. Cruz Azul – 6,303,648
    UNAM Pumas – 5,478,129
    UANL Tigres de Monterrey -- 4,582,839
    CF Monterrey – 4,091,557
    Club Leon – 2,881,011
    Santos Laguna – 2,657,834
    Deportivo Toluca – 2,435,280
    Club Tijuana – 2,362,486
    Atlas Guadalajara – 1,971,628

    Club America alone provides more followers than the remaining 13 teams in MLS combined.

    If you accept the premise that a sea change is coming, what provides the better chance for MLS? Combine the strongest MLS teams with some of the big Mexican clubs and try and reach a bigger audience, or keep things as they are and add Austin, Texas?
     
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  11. flange

    flange Member

    Jul 15, 2014
    Portland, OR
    Club:
    Portland Timbers
    Nat'l Team:
    United States
    What I mean is that there are many basketball leagues around the world, but none have anywhere near the financial resources the NBA has. All the most valuable teams play in the NBA. All the elite talent ends up in the NBA. The NBA is probably the closest thing in existence right now to what an ESL would be.

    The NBA has a salary cap to help control player salaries. Nothing like this exists in Europe now to my knowledge. I think it might be illegal per the EU, but also market forces currently work against it, as it is in each league's interest to have their top clubs be competitive in the CL. If an ESL is formed, the ESL will be the financial superpower in the soccer world and it won't be close. All domestic leagues that lose teams to the ESL will be hurt financially. They will all run far, far behind the ESL.

    If caps aren't legal in the EU, that's obviously a huge hurdle, but my point is that market pressure for a salary cap would actually flip in favor of it with an ESL, where as right now market forces are against it.

    In an ESL, all those clubs would no longer just be competitors, they'd become partners. Specifically, ownership of those clubs would be partners against labor (their players) and they'd want to keep a higher share of revenue for themselves. Thus the pressure for salary caps. (This also increases pressure for players to unionize.)

    If the ESL forms, UEFA's relevance in club soccer will be greatly diminished. Same with the FAs. They'll all be in survival mode trying to keep the national teams and World Cup relevant.

    Look, I'll admit I'm not intimately familiar with Europe. But I am familiar enough with watching sports leagues that are financially unmatched to have some idea of what direction they like to go.
     
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  12. flange

    flange Member

    Jul 15, 2014
    Portland, OR
    Club:
    Portland Timbers
    Nat'l Team:
    United States
    That Timbers team had already been accepted into MLS at that point. Attendance appears to have trended upward after Seattle got accepted to MLS in 2007. Prior to that, 5-6K was the norm. But that 5-6K team hadn't been unceremoniously dumped out of the 1st division because Portland isn't big enough, and it also had Seattle in the same league. So I'd expect something less than 5-6K in MLS Classic. (If TA boycotts MLS Classic, it will be so much worse.)

    We're also taking for granted here that ECS wouldn't stand with TA. Not a given. This change would get a far, far bigger reaction around the league than #savethecrew did.

    I think you recognize that the vast majority of the teams in leagues currently ahead of you would get massively damaged by an ESL. You recognize that talent below the ESL level would be getting a whole lot cheaper. You recognize that all your major competition stateside is likely going to be hurt by this change. You focus on disciplined spending to minimize your own negatives during this transition, and you look for opportunities along the way.

    Look, you're going to be #2 (at best) to an ESL regardless. A North American Super League isn't changing that. There isn't a lot of wealth behind Liga MX's social media following. Setup more games between the leagues, try to generate some cross league interest among fans, but gambling your current position on a North American Super League is a high risk, low reward proposition.
     
  13. flange

    flange Member

    Jul 15, 2014
    Portland, OR
    Club:
    Portland Timbers
    Nat'l Team:
    United States
    To be clear, I do think there is value to an expanded partnership between MLS and LMX regardless of what happens with Europe. I could see something structure like college sports having potential, where North America could be divided regionally for the regular season, with a continental level tournament/combined playoffs following. But 8 teams for the entire US is a non-starter.
     
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  14. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    The problem with that is a 40 plus team league isn't going to be accretive -- if every team is included, the combination doesn't generate much more revenue than the independent parts. Why bother?

    For any merger to drop more money to the bottom line, expenses need to be reduced, and that's typically achieved by eliminating duplication. You have to reduce the number of teams.
     
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  15. scoachd1

    scoachd1 Member+

    Jun 2, 2004
    Southern California
    I'd agree - I think those numbers were a very optimistic spitball, but the basic of the premise of the problem is probably right on. Lets start with the 10% number. For starters, you take away Zlatan & Galaxy you don't get huge attendance at MU tomorrow and quakes don't get their annual huge game against the Galaxy. Big named opponents drive a lot of fans and revenue to their opponents. Next as you point out, if you have less money, the DP's in the second tier cities are going to be less as well. So Triplet's math didn't work with an extremely generous 10% drop, its going to look even worse with a more realistic drop.

    But - his math was based on profits. If the current teams are losing money (and the most assuredly are if the leagues CFO's want to show this by sending elsewhere all the ancillary benefits like parking revenue, low cost stadium use, premier real estate value generation etc.) the league most certainly is. So accounting methodologies aside, if the top teams keep pushing costs for better product on the field, eventually there will be a point where some teams will start having financial issues. At that point bifurcation math becomes a whole lot better looking. Lower revenue can be more than offset by much lower costs and then some shared revenue in a league with a bigger footprint starts looking really attractive.

    Also MLS owners aren't going to say Portland, Colorado or New England or whichever team is struggling can't compete. They are instead going to go into some type of closed pro/relegation where results on the field do the dirty work for them. So instead of making it a big downer the you paint - the leagues honcho's will play it up as a celebration for all North American soccer fans by giving them what they've always wanted but in a way they will protect their team from going bankrupt. As Triplet suggests they'll absolutely keep it a closed club because the big play in sports is asset value and not operating income. As an added benefit, there will be plenty of room to expand when the timing is right. Plus the can negotiate with cities for better facilities saying the need better deals to play with the major players.

    It will also force the squatters like Kraft (who will quickly change his spots and become a big spender and a very profitable player if this plays out like I think) to invest or lose the opportunity to make bigger in the bigger league. They can also take create their own version of league cup and spin that into a Cinderella type March madness tournament as well - even bring in USL teams and Mexican2 teams to build interest all over North America.

    Finally the European super league isn't going to happen without some big fights as with much of the digital divide, there will be a few big winners and losers everywhere. At the end of the day, politics and the court system will not be the super teams friends. I see this period of turbulence a chance for Western Hemisphere to make significant inroads. Europe may have the best leagues, but this hemisphere develops the best talent and has a welcoming environment for them with games in similar time zones. It also has a less fractured market and a sports culture willing to make changes. Wealthy folks aren't making $250 - $500 million investments into something that likely has a bleak future.
     
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  16. flange

    flange Member

    Jul 15, 2014
    Portland, OR
    Club:
    Portland Timbers
    Nat'l Team:
    United States
    Agreed, which is why I don't think a merger happens. Enhanced partnership, though, definitely.
     
  17. mschofield

    mschofield Member+

    May 16, 2000
    Berlin
    Club:
    Union Berlin
    Nat'l Team:
    Germany
    When MLS starts raising for bar for what is needed for survival, what's the washout? How many MLS clubs could not survive and compete without the single entity setup?
    If MLS loses all of most of it's ~$70m a year in broadcasting revenue and doesn't have a new wrinkle to offer, isn't the league in a position of trying to tread water or drown, with actually swimming and making progress taken off the table?
    Fans in Portland would rightly be outraged. Owners in Portland, however, own a 24th share of MLS and whatever then whatever they own in Portland, stadium, training ground, etc. The property has value outside of soccer. The 24th share does not.
    I agree, I'd rather see everyone stick around and the game grow etc. I like MLS. I like the bund, and the Prem and La Liga and Liga Mx, etc. I like the national leagues. But I liked Nokia, and I liked Sears and i liked newspapers.
    Digital disruption is not pleasant. Earlier there was a comment that sports clubs are different, that people don't wear shirts of their newspaper or television station, but go back just a bit and newspapers were far more intertwined into the fabric of daily life than any sporting team ever could be. I took part in a couple case studies of newspaper moves in the 1990s that are now laughably idiotic but at the time were justified by the same sort of reasoning we want to apply to sports clubs: People love us, they need us, they can't replace us (the Knight Ridder-Monster.com case study, in retrospect, is both hilarious and tragic, but so is the decision not to use a small chunk of the cash on hand to buy google ten years later "They need us more than we need them, we produce the content" HAHAHAHAHAHA). And it is worth remembering that 2006 was a record breaking year for newspaper profits. 2008 was a bit different.
    This isn't to say it will definitely break this way with soccer. Maybe it is different, and every other industry before this was delusional in thinking they were different, when all along it was always footie that mattered.
    But there is a reason LigaMX and MLS are having these discussions right now, and to me, it seems like a really smart decision. Of course, this is only if the disruption model holds. But, no matter how beloved the vessel, it seems a bit odd to keep the crews painting the hulls on sinking ships.
     
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  18. You are familiar with one country and it's specific culture and politics in sports. Your comparison of the NBA with the non existent SL is quite funny, as there is already a superleague where stars go to, it's called the epl.
    Also, the contracts players/stars have signed with the clubs is for playing in a certain league. The chance is that a break away means that their contracts are void, which means an enormous leverage of the players over the wannabe SL clubs.
     
  19. A salary cap doesnot exist in the Chinese league. China is also a country that on it's own can form a superleague with a population bigger than the USA, Europe and Brasil combined. It is also a country that if the gouvernment think it's necesary can switch off access to the Euro SL in order to increase the revenues flowing to the Chinese league. So there's a dragon still sleeping, but with the potential power to kill a tremendous part of the revenues, judging by the amount the epl now collects over there.
    Salaries now payed over there are even out of the league of clubs like Chelsea, as these complained a few years ago when stars left for that league.
    So no, there's no possibility for a salary cap when there are clubs able and willing to pay more.
     
  20. League matches arenot played in mid week days. Matches era played in the weekends (=Friday/Saturday/Sunday prime time slots) plus mondays.
    These prime time days are essential for the clubs and leagues in terms of fans, sponsors and world wide viewership. What reason would those clubs and FA's have to give up that advantage to a competing SL? The very existence of league matches Europe wide (and donot make the mistake to believe the fans in Europe will switch to the "better" league, as in all European countries but the UK the viewership for the domestic leagues dwarfs the watching of the epl on the weekend) will be a threat to the SL as it willnot be able to draw those viewers away, just as the current SL=epl cannot do. So for the leagues it is essential to play in the weekend, while it's also harmfull for the earnings of the SL. Why would they give that up and hand over the cash cow?
    The epl superclubs are playing around 60 matches each year in competitions (EPL, CL/EL, cup matches) which is essential for sponsors world wide. That goes down to around 38 with a 20 team SL. That's a huge difference in eyeballs for sponsors.
    And if those matches also have to be played on a wednesday/Thursday to avoid the competition in the weekend of the FA leagues, they also have to reckon with the still existing CL/EL, which arenot going away.
    Furthermore a SL clubs will want to play it's match on a time it has all the attention to itself. In the weekends the FA's realize that by playing matches at different starting times. That's going to be a very hard thing to realize during the week, as during the week the prime time for sponsors is in the evening as fans arenot going to watch matches during the daytime. So the SL has an impossible job to schedule 10 matches in a timespan from 19:00 until 22:00.
    The FA's and remaining clubs arenot going to take over that headache from the SL wannabees.
     
  21. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    Yep. The problem is that the national TV money doesn't sound like a big number in the grand scheme of things, but the way MLS works, all of that money belongs to the league and is used to pay player payroll -- the broadcast deals provide about a third of the league's payroll money.

    What happens when those dollars go away? The league rips up the CBA and cuts payrolls by a third? Good luck with that. A long, bitter strike ensues and it will be over.

    You bet there is a reason MLS and Liga MX are having these conversations right now. They probably realize the World Cup gives them some time -- a true destination event for broadcasters that will generate interest in the domestic leagues too -- but if they don't come out of that aligned and streamlined, this won't end well.

    European Super League or no European Super League, the financial issues are ESPN and the other sports channels are very real. Last year, losses at ESPN dragged down net operating income at parent Disney by 22%. It's not getting any better either. Nielsen reported ESPN lost another 500,000 subscribers last April -- representing an additional $48 million drop in revenue ESPN will never get back. FS1 wasn't much better, dropping 328,000 while NBCSN lost a stunning 544,000. It was reported as "a cable and satellite subscriber bloodbath."

    https://www.outkickthecoverage.com/espn-loses-500000-subscribers-april/

    I'll say this as kindly and gently as I can: It doesn't matter what the fans want. It doesn't matter what the players want. It doesn't matter what the owners want. The economic model MLS, LLC is constructed on is not sustainable. That's why that piece about cooperation with Liga MX is on the leagues website.

    This is exactly why companies die in the era of digital disruption. Even if they see the problem coming -- typically they do -- they can't act quickly enough and boldly enough to save themselves. A few do, but most don't. The sad truth is that not everyone gets a seat in the lifeboat, and the squabbling over competing self interests wastes precious time. By the time it's so obvious it is no longer debatable, it is too late. The ship sinks.

    My guess is the issues others are pointing out here are all too real. Fans likely will revolt against any plan that has any chance of working, the weaker operators will demand too much or reject the plans and the players aren't giving up a third of their payroll wages. Stalemate. Some meaningless tie ins with Liga MX probably will get done -- SuperLiga II, This Time It's Real! -- but they'll never replace the broadcast revenue that they are going to loose, let alone grow the revenue they'll need to compete with the teams with a more global audience in the years ahead.

    And MLS as we know it dies anyway.
     
  22. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    I wanted to respond to this point because I don't think that's accurate. These numbers are a year older than the figures I quoted above, but 30% of the Liga MX social media followers live in the United States. According to Linkedin, this US Liga MX audience is "millennial Mexican Americans across the country, a passionate and loyal audience that also, according to Gilt Edge Marketing, "has significant purchasing power and influence within the family unit as well as the millennial audience".

    https://www.linkedin.com/pulse/liga-mx-usas-most-popular-soccer-league-josé-miguel-burgos

    That's exactly the audience to target IMO.
     
  23. On the topic of life long bans Dutch skaters have gotten a European verdict that actually nullifies that retaliation weapon for UEFA and FIFA.
    https://www.politico.eu/article/margrethe-vestager-orders-skating-union-to-change-rules/
    "The EU’s competition commissioner, Margrethe Vestager, warned sports federations across Europe that Brussels would step in if they abused their positions as she issued a ruling critical of ice skating’s governing body."
     
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  24. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    That's very interesting -- thank you for sharing it.
     
  25. I like facts in discussions and this one is crucial in relation to players having a choice.
    Wonder if the kneeling football player banned by all owners would be able to sue the living daylights out of them if similar rulings were present in the USA.
     

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