The pool of investors supporting MLS is smaller now than it was in 1996. Now, the league is being propped up principally by three men: Phil Anshutz, Lamar Hunt, and Bob Kraft. While we all hope and pray for the continued good health of these three men, and trust that, like the president and vice-president, they never travel together in the same plane, the outlook for the league would be much more promising if there were more investors pumping more money into it. The lack of new investment is frustrating, since, from a certain perspective, MLS should be an attractive investment for the multi-millionaire looking to do something with his/her spare millions. Even more attractive than any of the "big four" sports. However, MLS has seen no new investors while it seems that the other sports are turning potential investors away. Off the top of my head, I can think of three instances which made me ask "why would they want to buy into that league and not MLS?" 1. About a year ago, two different groups made bids in the area of $600 - $700 million for the Red Sox. This was despite the fact that, at the time, baseball was facing a likely work stoppage and management was constantly crying poverty. Selig even floated the rumor that one or two teams might not make payroll. And although the sale of the Red Sox also included a cable network, Fenway Park is small and old, and building a new one will commence just after the MetroStars stadium is built. 2. Two different groups put in bids for an expansion NBA franchise in Charlotte, just a year after the previous Charlotte team relocated. Why on earth would the NBA return immediately to a market where it had just failed? I know the failure of the Hornets in Charlotte had something to do with the owner and lack of a new arena (problems which, I believe, have been resolved), but it is still eye-opening when two different groups will bid millions against each other for the right to go into a market which was a failure. 3. Two different groups bid for the NHL's Sabres. The Sabres are a small market team in a league without a salary cap and where there are predictions of a work stoppage when the current CBA expires. To me, they do not seem to be a particularly attractive investment, but two different groups wanted to buy them. One of these potential investors is/was Tom Golisano, a Rochester billionaire who self-financed his recent campaign for governor. Why would Golisano want to buy the Sabres, when he could invest in the Rhinos and join MLS? Why can't MLS attract investors? Recently Gus Martins in the Boston Herald (http://www2.bostonherald.com/sport/soccer/socc12302002.htm) offerred two reasons: single entity management, which scares off potential investors, and the economic downturn which has discouraged new investment generally. As to SEM, he offers no proof to support his position and, although I agree with him on this point, I know that there is maybe one instance only of a potential investor backing away from MLS because of SEM. As to the economy, it hasn't discouraged investors from buying into baseball, the NBA or the NHL, so that doesn't explain the lack of new investment in MLS. My theory: we soccer fans are not old enough, and therefore not rich enough to buy into the league. Most people with the wealth needed to invest in MLS are most likely over 50, and how many Americans in their 50s or older are soccer fans? Not many. think about when soccer "boomed" in the 1970s and youth participation exploded. If you were 10 years old in 1975, you are now 37, and probably a little short of being a multi-millionaire. What's my point? Well, other than venting a little frustration, I think it's going to take at least another 10 years before MLS has a healthy and diverse pool of investors. (sorry for the length of this post)
You would get much more response to this if you listed it in the Business section. While I have always publicly questioned Kraft's commitment to soccer, Bob passing away would not affect the Revs one bit. It was Sonny Kraft who convinced Bob to jump into MLS and it is Sonny who is the most active of the Kraft’s in MLS. The Hunt family is also not as much of a worry because Clarke for all intents and purposes runs Hunt Sports for the family and seems to have his dads soft spot for the sport (Clarke played soccer in college I believe). The biggest issue of course St. Phil as his media black out leaves little for us to understand what will happen should he pass. Obviously he by far the most important of the three, but as you have mentioned, MLS needs new blood and needs it pretty soon. Andy
One reason is because I haven't won powerball yet. I do think a second reason is that they know they will be losing a few million a year while supporting the league as a whole. I wouldn't be surprised to see investors be willing to jump on if they were allowed to be apart from the single entity and to take all their own losses as well as reap all their own profits.
It was reported that three MLS teams lost less that 500K last season and one report I saw (might have been in error) said that Columbus made a small profit. If things improve next season I expect more investors the year after. We still have no idea of how much of an impact the stadium in Carson for the Galaxy will have as an "ad" to prospective investors should it be a huge success. I am very optimistic for the next 3 years being very good for new investors and the league getting more financially stable.
Regarding SEM, I agree. I think with these wealthy guys owning sports teams, there's an ego element; they want to run the ship, they're confident they can succeed and they don't want to be burdened with others' losses. But the reality is that, with the exeception of the guy in DC who looked into buying United, no one has gone on record (to my knowledge) and said that they would have invested in MLS had it not been for SEM. So I don't know that we can explain the lack of investment by pointing to SEM. Regarding an unwillingness to take on losses, why would two groups of people bid for the Buffalo Sabres, a team which is apparently in bankruptcy, with the deck stacked against it in terms of becoming profitable, unless they were prepared to suffer losses.
The answer is simple. How many Americans have grown up dreaming of being so filthy rich that they can fulfill their fantasies by owning a professional baseball, football, basketball team? Not many. Most professional owners today are either looking for a tax write off or are living out their childhood dreams. They couldn't succeed on the playing field, but they now have enough money by god to put their own team on the field. Until the dream of owning a soccer team is fixed in children's heads and 40 plus years have gone bye, it will continue to have to be a "sell" job. People won't line up for the chance to throw their $$$$ away until they've wanted that opportunity for decades.
a) they aren't making any money b) not that many people like soccer i don't blame SEM, if the league were making money, people would be lining up to buy in.
True soccer in the States doesn't make any money. And owners can't really run their own team with the whole single entity thing. Let us not forget that most professional sports team owners are show-offs. When all the multi-millionaires and billionaires get together once a year at the Country Club for a little golf, saying that you own the MLS Champs isn't going to get you many 'wows'. The more likely response is:"What is MLS?" then "There's a soccer league? Here in the United States?" or "Hah!" However if you're teeing off and you say I own the SuperBowl Champs or the World Series Champs other billionaires will be like "he's such a prick". When the league gains mainstream notice, has a solid T.V. following, and owners can be envied and dispised by fans and talked about by other rich people, then MLS will attract more investors.
I think the ego is the big factor. Think about it, even if they don't mind SEM, being an MLS investor is still looked down upon by mainstream media outlets. Some jackass can buy the Redskins or the Mavericks and get his face everywhere. How many MLS investors get that kind of national exposure? Ownership, too often, is about who has the biggest balls in their own eyes. MLS, as of yet, does not provide a big enough market for that yet. What we need is young guys who don't mind taking a back seat for a few years and love the game. MLS is not a bad investment. I highly doubt that many of the newer owners out there (those spending hundreds of millions of bucks) have seen any of that money come back to them yet. Yeah, MLS won't bring much back right away either, but it costs roughly $30 million to get in and say about $30 million for a stadium. For that $60 million investment, most MLS squads in that situation (Crew and soon Galaxy) will come close to making money or breaking even within a few years. Even if they don't make money, they won't lose anywhere near the 700 million or more that they spent on the Big Four type teams.
How about....it is just too risky an investment....bad (perceived) r/r.. Anschutz has always been comfortable swinging for the fences, and swimming upstream against great odds....many millionaires are not (AFTER they've "made" it)..... Uncle Phil has enough (if he doesn't get convicted of anything) to even lose on this bet....not a ton of folks who can afford to do this either.. Phil leaves in the next 5 years, and the league would be on life support....probably won't happen, but ya never know
Great Thread with many great posts. I think SEM is the main obstacle. People who have the money to buy something like this want to run their own show, thats how they got rich in the first place by being a risk taker and making tough decisions. Secondly, I think people who like soccer in the US are fairly young, probably under 35. There's very few multi millionaires that young. The pool of people interested in soccer, very rich, and over 50 is probably very small. However, if MLS can continue to cut losses like they did this past year over the next few years, I think you will see more people jumping on board.
Patience is the key Contrary to what many of the gloom and doom media types have maintained, I think MLS has done pretty damn well in its short existence. The quality of play is good for the level of salaries the league pays, it's retaining its fair share of the young American talent, and best of all, it's survived this long. It's been written time and time again, but look at how long it took the other 4 sports to develop in this country. And look at all the problems these leagues had in their early years. SEM exists because it's probably the only way for a young league, at this point in time, to make sure costs don't balloon out of control. Unfortunately, the downside is it's tough to attract investors who have a few million dollars to play with and want to take a chance on a soccer team. Investing in MLS requires a longterm financial committment and in order to get that it probably requires more than a little passion for the sport. I think, ultimately, MLS's real growth -- and I'm talking about an explosion similar to what the NFL experienced in the 70's -- won't come until it moves beyond SEM. And that's not going to happen untill most of the teams and the league itself starts turning a profit. This will happen when: A. Every team gets its stadium situation resolved -- and remember, this didn't happen in the NFL till the 70's and 80's. And B. MLS grows its fan base to the point where enough people attend the games and enough sponsorship and merchandising money is generated to make a profit. This doesn't look like it's going to happen any day soon, so I think the key is for patience from everyone involved (fans, owners, media) and for obviously the committment from Uncle Phil and company to continue. Personally, I think it's 20 years before MLS turns the corner. That's the kind of patience and commitment it's going to require. Just one opinion but I'm guessing that's how long it's going to take to evolve totally from SEM. And that's when I think you'll see more of America's super wealthy buying in. And who knows, a couple of these guys may even be playing youth or high school soccer right now.
SEM & poor MLS management, is what keeps invetors out. http://www.olympvs.com/Service1.htm all markets want a SSS, yet we have one Lockhart SSS arguably the best pitch in US. YET, no team small investorts as Horrorbitch, can not afford loosing money in outside markets.. Fusion was going to be one of the first few teams that could brake even NY looses more money, than it took to operate the Fusion.... now how are going to sell that to the NEW INVESTORS ?
Whenever you bring up ditching SEM as a way of attracting new investors, you have to answer this question: Would the increase in costs from dealing with either (a) collective bargaining or (b) life without a salary cap be enough to drown the entire league? If you think that the answer to that question might even possibly be yes, then ditching SEM isn't even an option. It's better to have a stagnant and shaky ownership situation for a potentially viable league than a hundred investors in one that will go bust.
Still he speaks to a couple of valid points on why there is a problem attracting owners, related to the SEM You have to buy into this concept of shared ownership, and more specifically, shared losses So If I am going to be an owner/operator, no matter how well I run my individual team, I am still responsible to help foot the bill for the incompetancy (or infeasiblility) of other teams Potential owners with limited resources can't afford to sign up for this, and those with "unlimited" resources probably won't because its actually bad capitalism
I think a big step will be when one of the owner/operators actually sells a team at a profit (i.e. considerably greater than franchise fee + operating costs). Single Entity does affect the valuation of a team greatly - you never know when MLS is going to up and sell your star player to Europe for cash. It hasn't happened yet, but it is bound to before too long. But if Anschutz or Hunt sell one of their franchises, then investors as opposed to "soccer true believers" will be interested in getting involved. As it is, many pro sports reportedly don't make a large profit on their operations - the cash flow must be awful for a team like the Diamondbacks or Yankees. Some of this is likely due to tricky accounting so owners qualify for tax breaks, but it is a worthwhile consideration. Major sports team owners do get valuable intangibles (like advertising/publicity/fame mentioned above) and the value of the team increases immensely over time. The owners of the old AFL teams like Al Davis got started 30 - 40 years ago for a couple million and could now legitimately sell their teams for hundreds of millions. Baseball is the same way - guys like Carl Pohlad buy a team for around 30 million and in twenty years could get 150 million from baseball just to shut the team down. That is a pretty good return on an investment. The way it is right now, I don't think MLS teams are investment class. They may still make it big (like those old AFL teams) but they may also go the way of the USFL. The lack of control the operators have over the "capital" (i.e. the players) of their investment only compounds the vagaries of the situation. I think this is a really neat thread.
SEM must hang around for 5-10 more years (gasp). The league is no where near steady enough to stand on its own two feet. I don't know what the deal was in Miami. Maybe people don't like to sit out in the hot sun, sweat and watch El Pibe not play defence. Miami is one of the markets in the United States that doesn't draw well no matter what sport. Other sports have their bad markets too. I don't enjoy watching the Heat, Hawks, Expos, and especially the Nets play on tv either. And unless you live close to these markets it is pretty hard to find them on prime time b/c their stadiums/arenas are almost empty. It's not the case that all these teams are boring or bad. The Nets are a great and exciting team. The key to MLS on all fronts is to put people in the stadiums. Cut ticket prices and put butts in the seats. Period. Give people a reason to come to the games. If it's cheap and it's fun, then people will come and watch. Then tv deals will come and more owners will follow. The marketing of this league is just all wrong.
Just a note to my post above - I am not arguing that SEM is THE problem or that it should be done away with. I think that it is a much more complex situation than most of us realize. Whether SEM is right for the league or not, I think it does discourage true investors as opposed to rich soccer fanatics from investing in the league.
It does appear that Anschutz et al will need to wait another 5-10 years to ensure their "baby" works out...but ask yourself this....how many investments/ideas need 15-20 years to pan out, and cost you hundreds of millions of dollars to make it work?....is it any wonder that MLS can't attract investors? That is just way too long a success timetable for most rational investors... This is a love child...you either feel the love (and have the money) or you don't....it doesn't qualify well as an "investment" One could make an argument that with this kind of patience and money, indoor soccer could have become successful (profitable) as well...(naysayers...please think about that BEFORE responding)
This has already happened once. The syndicate that originally owned/operated Los Angeles GaLAxy bought in at $5,000,000 and sold to AEG for $25,000,000. No way they lost $20,000,000 in the three (I think) years they were in. BTW: The main guy in the syndicate is still a season ticket holder and could be seen around the Rose Bowl at most games last year.
I wasn't aware of that. I wonder what the actual profit was, though, because the losses were pretty heavy in the first few years. How many "minority partners" (MLS investors without teams) remain at this point in time? Someone mentions above that former operator Horowitz is still an MLS investor - are there very many people in his position? What equity do these folks hold in the league/how can they leverage it? Will they get a dividend when/if the league begins to turn a profit? I had forgotten about this investment route. This route could certainly be attractive to low-profile investors (as opposed to simply rich soccer enthusiasts) if the league starts turning an operating profit, which depends very heavily on SSS/stadium leases and could be affected if players begin leaving MLS on decent size transfer fees. I wonder what it would be like if MLS did a limited stock float - for say 10% of the shares in the league and allowed fans to buy shares (a la Green Bay Packers). They could even do a deal where you buy X amount of stock and they send you a nice framed certificate, ready for framing, as part of the deal. This would allow non-rich soccer enthusiasts to support the league in another way - especially those of us for whom season tickets are not viable (live too far from team, etc). That might inject cash for stadiums. Comments? Sorry for the ignorence if these are really newbie questions, but since this is in the general forum (not business) I don't mind asking for it.
SEM is only an issue as long as the league still has teams like the MetroScum losing tons of money. I don't think lack of profitability is the issue, after all what pro sports teams really make all that much money, in any sport? It's the idea of buying in and then sharing losses. You get rid of the bulk of the losses (ie: get the MetroSkanks into their own stadium, primarily), and then you'll I think find more people willing to invest, even if none of the teams is doing more than breaking even, because Pro sports is about visibility and prestige more than simple dollars and cents. Like the team owner in "North Dallas Forty" said: "My manufacturing division wasn't on the cover of Time magazine". Yet another reason why the MetroSallies stadium deal is so crucial to the league right now.