Revenue Growth Critical to Improving MLS’ On-Field Product

JohnWallStreet

Major League Soccer is set to embark on its 25th season (begins Saturday 2.29). Two expansion teams will join the league in 2020 (Inter Miami CF and Nashville SC) bringing the number of clubs to 26. MLS will also add a pair of team in each of the next two years (Austin & Charlotte in ’21, St. Louis and Sacramento in ’22) increasing the number to 30 by 2022 (3x the # it had between ’02-’04). America’s top pro soccer league is growing rapidly and with “the demographics in [its] favor, both in terms of youth and diversity,” LAFC lead owner Larry Berg suggested the league could surpass both MLB and the NHL, in terms of popularity, within the next decade.

Howie Long-Short: Don Garber was hesitant to compare his league to the big four (he told a great story about how a fellow commissioner once wrote him a note suggesting he mind his own business after commenting on that league’s TV ratings). Instead, the Commissioner said he looks at how MLS stacks up with the top soccer leagues in the world using four criteria; “the quality of play, the relevance of clubs in their [local] markets, the passion fans [display for their team] and the state of [league] economics.” Garber said the league is making significant progress in “three of [those] four” areas and while the quality of play is still not comparable to the top “four or five” leagues in the world, it is getting better at a much faster clip than in years past. MLS’ on-field product is improving because teams are spending more money on elite players and investing heavier in the academy system (see: +/- $25 million in players “under the league’s first roster”).

MLS has been an undeniable success in cities like Atlanta, Portland and Los Angeles, but the league continues to lack relevance amongst fans in several of its legacy markets (think: Houston, Dallas, Denver). Garber says that turning around struggling clubs in major markets is among the goals for 2020 (along with continuing to grow the fan base, driving new commercial revenue opportunities and positioning the league to cash in on its next media deal). “The ownership change [in Chicago]. Bringing in a local guy named Joe Mansueto, who will invest significantly on the field and - at an enormous cost - [fund the team’s move to Soldier Field], when there is a free stadium to play in, is an example of what [the league] is thinking about in key market turnarounds.”

Berg acknowledges that “whether MLS can be a top-three [U.S. sports] league will really come down at the end of the day to money, [teams’] ability to compete for players.” Right now, MLS organizations cannot compete for the top talent globally - at least not on a dollar for dollar basis. Garber explained that clubs are managed “to an investment level” - the few teams operating at a profit are doing so because of “extraordinary” circumstances (i.e. Atlanta received a $27 million transfer fee for Miguel Almirón) - and there simply aren’t the dollars available to outspend teams in leagues like the EPL or La Liga. Speaking of which, Inter Miami owner Jorge Mas predicted at Wednesday’s 25th Season Celebration Kickoff event that MLS will be on par with - or of higher quality than - both of those leagues by the 50th Season Celebration.

MLS teams lack the money to compete with European clubs for players because media rights remain “the smallest piece of the [revenue] puzzle” (by comparison, more than 50% of NFL revenues come from television). But Garber is confident that the league will see a dramatic rise in media related revenues - and thus the ability for teams to further increase spending - come ’22 (when the current pact expires). In fact, he says the league’s young, diverse audience “will undoubtedly” result in greater demand amongst prospective broadcast partners the next time around.

Despite interest from cities and investors, Garber said there are “no plans in place to [expand] past 30 [clubs]”; the league's current focus is on successfully on-boarding the six franchises that have already been awarded. However, the Commissioner did leave himself a bit of wiggle room adding “it’s conceivable that in time we might look at a larger league [as a solution] to address some of the challenges [associated with scheduling].” Las Vegas, Phoenix, Detroit and San Diego were mentioned among the locales the league intends to remain in contact with.

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Comments (2)
JohnWallStreet
JohnWallStreet

Editor

Scott - You might enjoy this article we wrote. It gets at exactly what you just referenced.

No. 1-2
Scott Kennedy
Scott Kennedy

MLS isn't going to pass EPL and La Liga in quality of play in 25 years, and that's OK. It doesn't need to in order to be relevant. The franchise model and artificial watering down of the league is what keeps irrelevant teams irrelevant.

With the marxist system they have, prevalent in all of american sports, they'll never go pro-reg, so they'll always have meaningless franchises playing meaningless games. Expansion is only going to make it worse.


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