Footiebusiness

Guest Post: I have Been to the Mountaintop: Rethinking Success for MLS

On the road tonight, so here is an encore of the most popular guest post in Footiebusiness history.  The original generated a significant amount of comments. Back live on Monday.

Once again, we are fortunate to have a guest post from Dave Laidig.  Dave is a contracts attorney for a large corporation who occasionally submits posts about soccer.  He resides in Minnesota, which is not an MLS market.  And he may be a little bitter about that.  Thanks to Dave for some great thoughts and insight.  Drop a comment below to continue the conversation. And yes, I will take any excuse to drop the Whalers logo into a post.
A unique cult exists, American in nature, that patiently awaits the day of revelation.  The day when the masses are converted to Soccer – the beautiful game.  That soccer incites global passions is a true as America’s relative ambivalence to the sport is puzzling.  For those accustomed to early morning pub crawls to catch global stars ply their trade on Europe’s pitches, talk often slurs toward the debate, “when will Soccer make it here.”  The bitter may wonder how soccer can ever make it in a land where the NFL is supreme, MLB owns nostalgia as America’s pastime, and NBA stars catch out attention with excessive locker room gunplay.  Others dreamily believe the next MLS star, or the next achievement for the national team, will yield soccer devotion similar to other countries.  But success is not a sporting achievement, or a marketing campaign.  Success is a self-sustaining league that is competitive with the top European leagues.  And the MLS can compete with the EPL, Serie A, La Liga, and the Bundesliga without replacing the NFL, MLB or the NBA.  In fact, it’s another domestic league – the National Hockey League (NHL) – that might provide a better benchmark for MLS to compare itself against.

An honest review of MLS should give hope for soccer, not a sense of futility.  First, it’s true, as soccer-haters point out, that American sports leagues are currently dominated by the National Football League (NFL), Major League Baseball (MLB), and the National Basketball Association (NBA).  However, league dominance does not last forever.  In 1967, baseball’s World Series was the pinnacle of American Sports, and the Superbowl was a blandly titled AFL-NFL championship game with tickets to spare.  Now, the World Series skips Mondays in order to avoid competing with a regular season NFL game.  Sport dominance does not necessarily last.

Second, Americans already support the best soccer players in the world.  Exhibition games with European teams – and often playing a significant number of reserves – typically average more than 30,000 fans, with Manchester United versus the MLS All-stars drawing 71,000 last summer.[1]  In fact, the 2010 World Cup final had higher TV ratings than the deciding game the World Series and game 7 of the NBA Finals.[2]  And importantly for comparison purposes, the World Cup finals did not involve American players and did not have an American centric time slot.  To argue that Americans do not support soccer is to ignore the facts.

Ultimately, if MLS had the resources of the NHL, America’s fourth-place sports league, then MLS can compete with European leagues for the best talent, leading to an American soccer boom.  The NHL institutes a salary cap of $59.4 Million, which if applied to a 23 man soccer club, would work out to about $2.5 Million per player.  While salary figures are notoriously sketchy for European soccer clubs, the average EPL salary has been reported as $2.3 Million per player. [3]  Thus, quick analysis supports the argument that the fourth best league in America could compete with top European leagues for players.

However, my salary daydream extends into hypothetical rosters available for $59 Million.  For starters, the combined guaranteed salary for last year’s MLS All-Star team was about $9.3 Million.[4]  The starting XI made up about $4.5 Million of the total.[5]  The fourteen alternates – including Bornstein who did not play due to injury – added another $4.8 Million.[6]  And who wouldn’t feel comfortable fielding the current MLS All-Stars, especially if they had time to develop into a cohesive unit.

And if the All-Stars were not appetizing enough, then we would still have $50 Million for players.  We could throw in Dimitar Berbetov ($6,700,000) and Diego Forlan ($7,169,746) for some attacking flavor.  We could then add Michael Essien ($5,500,000), Ji-Sung Park ($4,700,000) and Ryan Giggs ($6,300,000) to manage and spark the midfield.  And John O’Shea ($6,800,000) and Christian Chivu ($5,013,000) and keeper Petr Cech ($7,400,000) to back them up on defense.[7]  Similarly, my hypothetical also assumes that a Canadian team would acquire Nigel de Jong ($10,500,000) because Canadians’ respect the role of enforcer, and we could use someone to hate.  Of course, the reality of transfer fees would cut into the amount spent on player salaries.  But many would still watch a league that had these players scattered about.  And the key question is: how close are we to the day that these types of players play in MLS?

For that, we can look at our benchmark league, the NHL:

NHLMLS
Teams in League (2011)
30/18
U.S. Metro Areas in
Top 10/Top 30/10/17/8/12
Number of League Games
1,230/306
Avg game attendance (year)
17,151 (2010-2011)16,677 (2010)
Avg ticket price (year)
$54.25 (2010-2011)$22.47 (2007)
TV Deal
Versus-NBC
$70 M/year
(+ team specific deals)FSC
$6.25 M/year (est. 2011)
Looking at our benchmark league, the NHL and MLS have similar per game attendance levels.  But the NHL has four times as many games, at twice the average ticket price, and a better geographic footprint.  Further, the NHL has more revenue from its TV deals.

MLS may be able to leverage cup and champion’s league competitions to add more sports content, but more TV exposure and revenue will certainly affect the viability of the league.  And this leads to the chicken and egg metaphor in a sports context: what comes first, the audience or TV coverage?  Perhaps the answer is neither.  Solid investors/team owners and expansion could lead to greater exposure in more markets and greater TV value, just by geography alone.  With more TV revenue – and perhaps a few more games – revenue could justify higher player salaries.

Instead of chasing fans, the league should be chasing committed owners with expansion of the mind.  And the sales pitch to the moneyed investors?  MLS is close to becoming a world-class league; a league with the added benefit of a financially sustainable model.  As the increased fees for new franchises show, investors are interested in the last, great entrepreneurial opportunity in sports – getting value out of an underdeveloped global sport in the world’s largest consumer of sports entertainment.[8]  As an added incentive, MLS may be even more competitive over the next five years as UEFA’s financial fair play regulations attempt to drive down salaries in Europe.  Further, once MLS begins poaching players, the price of adding follow-on talent will drop as others will see that they can make money, challenge themselves, remain visible internationally, and know they will not be discriminated against come time for World Cup play.

I wouldn’t expect the MLS to announce an aggressive expansion strategy, as that might reduce potential fees for new teams, but I do hope the league focuses on identifying and supporting new investment groups.  If the league can find itself squarely set up with a handful of new markets in the next 7-8 years (as UEFA’s rules start to hurt European acquisitions), we might have Saturday afternoon pub crawls with slurred discussions of what is was like before soccer made it in America.

[1]  Murray, K., Cass to Keep City on Soccer Kick, Balt. Sun, Aug. 2, 2010 at 1D (52,000 for Manchester United v. Kansas City; 44,000 for Manchester United v.  Philadelphia; 33,000 for Manchester City v. Mexico’s Club America; 32,000 for Celtic v. Sporting Lisbon; and 27,000 for Club America v. San Luis FC).
[2]  Grathoff, P., MLS wants to capitalize on America’s interest in the World Cup, Kan. City Star, Jul. 13, 2010.
[3]  Premier League Salaries Skyrocket!, Apr. 10, 2010, available at http://soccer365.com/english_premiership/story_28410191410.php
[4]  MLS salaries are from the MLS Players Union.
[5]  The MLS All-Star staring XI consists of Donovan Ricketts ($160,000), Omar Gonzalez ($157,000), Chad Marshall ($320,000), Jamison Olave ($240,000), Kyle Beckerman ($250,000), Dwayne De Rosario ($443,750), Javier Morales ($252,500), Marco Pappa ($108,000), Guillermo Barros Schelotto ($241,250), Edson Buddle ($188,448), and Landon Donovan ($2,127,777.78).
[6]  The MLS All-Star reserves are Nick Rimando ($131,000), Kevin Alston ($124,000), Jonathan Bornstein ($100,000), Heath Pearce ($207,500), Wilman Conde ($200,000), Sebastien Le Toux ($122,000), David Ferreira ($300,000), Brad Davis ($258,062.54), Shalrie Joseph ($475,000), Jeff Larentowicz ($150,000), Bobby Convey ($307,500), Juan Pablo Angel ($1,918,000), Brian Ching ($350,000), and Jaime Moreno ($185,000).
[7]  All of these international players are the highest paid athletes in their country as reported by ESPN Magazine.  Best Paid Athletes from 181 Countries, ESPN Magazine, May 2, 2011 at 60-61.
[8]  The same arguments apply to the sports networks.  As demonstrated by the ratings for the last World Cup, a network that significantly invests in the MLS, and commits to promoting the sport, can find itself holding a top-shelf, internationally-recognized sports property.

The draft is over, training camps are opening up and the season is less than two months away.  It has been a while since we looked at promotional efforts around the league, so we thought the early preseason presented a good opportunity to look at ticket sales efforts as teams gear up for the start of the 2012 campaign.  We’ll start in DC, where United is offering an autographed Dwayne DeRosario ball as part of its opening game ticket promotion.  The $118 package also includes 4 tickets to United’s March 10 home opener. The package is available at a number of higher price points and purchasers can get one ball for every four tickets purchased.

The Chicago Fire are offering a “Winter Four Pack” for their home opener.  The package comes with four tickets and four Fire scarves.  Tickets range from $92-$140 and does not include a shipping and handling fee for the scarves.

Teams aren’t only relying on ticket promotions to reach out to fans.  The always active RSL front office is throwing an open house as part of an effort to sell season tickets.  The team is opening Rio Tinto for a few hours on January 28, 2012 and will invite fans to tour the stadium, see the locker room and get photos in the facility.  Fans who successfully refer a new season ticket holder also get the benefit of a new RSL jersey.

Yesterday we wrote about the yet to be announced Chicago Fire jersey sponsorship deal with Quaker Oats.  The relationship became official today.  One of the biggest changes from the rumors to the truth is the deal is now worth a reported $8 million over three years, significantly higher than the previously reported less than $5 million over that time.   The Fire did a credible job with the announcement and roll out, offering this clever video now available on YouTube.  You can see that video here.

As with many of the jersey sponsorships, the deal is reported to include a number of additional items including business and marketing initiatives.  TThe deal includes placement at the MLS Cup and All-star game and a relationship with the Fire youth program.  According to the Tribune, the Fire have been working with Quaker since last Summer’s Manchester United match to bring the deal to the end.

MLS recently announced a relationship with the Boy Scouts of America.  According to the press release, “scouts participating in MLS markets will be provided access to MLS players, coaches, league and club executives, and unique programming tailored to the Scouts. Future plans include an opportunity for Scouts to conduct community service projects and be selected for in-game ceremonies at MLS stadiums, for “Scout Nights” that support local councils in the recruiting and retention of Scouts, and for local MLS players and executives to partake in formal discussions with Scouts on topics such as fitness and leadership.”

Finally, FC Dallas has entered into a 15 year deal with Legends Hospitality Management to run concessions at FC Dallas Stadium. Legends is a joint venture of the Dallas Cowboys and New York Yankees.

On Monday evening, Ed Sherman of Craine’s, broke the news that the Chicago Fire were nearing a $1.3-1.5 million dollar per year jersey sponsorship agreement with Quaker Oats. If the report is accurate, the new deal is a great score for a Fire franchise that went without a jersey sponsor in 2011 after Best Buy ended its relationship before the season started last year.

The finances of the deal are seemingly on the low side of those in place around the league.  On January 12, 2011, the Philadelphia Union of Major League Soccer announced a four year, $12 million dollar deal with Mexican food conglomerate Bimbo.   However, given how far MLS jersey deals have come (even in this down market), and that teams like FC Dallas and Colorado are still searching, a deal with Quaker would seem to be a winner for the Fire.  Last season, the BBC reported that seven EPL clubs carry sponsorship deals valued at less than $1.6 million dollars. According to a recent analysis conducted by SPORT + MARKT, the 18 remaining teams in La Liga (after Barcelona and Real Madrid are removed), average less than $2.5 million per jersey deal.  Similarly, with all 20 teams accounted for in France’s Ligue 1, the average jersey sponsorship is valued at less than $4 million dollars per team.

The Quaker Oats Company is one of the brands owned by PepsiCo and is based in Chicago.  A deal with Quaker would be a perfect fit for the Fire.  Quaker Oats is a local company with national cache that will be easily recognized at every venue around the country.  At the same time, this would seem to be a strange marriage for Quaker.  While some of the other PepsiCo brands would seem to be natural fits for the soccer demographic, Quaker Oats, despite its array of subsidiary brands, seemingly skews towards an older group.

The MLS SuperDraft is over and teams are now gearing up for the start of training camps later this month.  As typically happens this time of year, some of the best exposure for MLS came in the form of local newspaper articles about draftees.  By covering the success of their locals products, these hometown papers expose the league and its teams to new audiences that typically don’t receive coverage of soccer in their paper.  One great example is this piece from the Lancaster Intelligencer-Journal, the primary paper in Lancaster County, PA.  For the second time in as many years, Lancaster County has been home to one of the top picks in the MLS SuperDraft, and the paper has responded with solid coverage of both drafts.   The News Tribune in Tacoma Washington weighed in with this coverage of local product and Revolution draftee Kelyn Rowe.

CONCACAF announced changes last week to the C’hampions League format for the 2012/2013 version of the tournament.  The federation will do away with the “play-in” portion of the tournament, instead dividing the 24 teams into groups of 3.  One first place team will emerge from each group and enter the quarterfinals.  This will significantly reduce travel costs for the teams and will likely ensure that more MLS teams advance to the quarterfinal round.

CONCACAF was not the only tournament to announce big changes last week.  The US Open Cup is moving forward with a significant alternation in the fabric of the event.  All MLS teams are entered now and the host team will no longer be determined by sealed bid.  A total of 64 teams will enter the event with all matches concluded in August.

The MLS SuperDraft was held on Thursday and broadcast live on ESPN2.  After two hours of televised coverage, the feed switched to ESPN3.com. Adrian Healey manned the desk while Alexi Lalas and Taylor Twellman handled much of the commentary heavy lifting and despite some hiccups, the broadcast was generally well done.  The ESPN talent was not afraid to touch on some of the big issues facing the league during the event and Twellman and Lalas were able to provide some insight into the top picks in the draft.  On the downside, interviews with player were in short supply and the network lacked good college footage of the players.  Whatever the value of a 30 second highlight package, fans enjoy seeing the future wearers of the colors in their college days. We continue to believe that televising the SuperDraft is exceptionally important for the league.  Commissioner Garber has long talked about creating special moments, and the memory of seeing top picks receiving their scarf and shaking Garber’s hand will burn into the brains of fans, journalists and youth players

Not surprisingly, Twitter was awash in draft talk and carried the burden for those not sitting at home in the middle of the day.  Commentary, trade talk and general observations drove the Superdraft up the “trending” list for the social media site.  The league and teams effectively used the medium to connect with fans and broadcast information about the draft, picks and more.

One big business item that we mentioned on Twitter was the disappointing lack of coverage on new league partner NBC Sports’ website.  Other than a brief AP story, there was no evidence of the MLS draft on the site.  The front page, which includes a wide array of sports news, was totally devoid of coverage.  This was a big opportunity for the network to make an impression with skeptical MLS fans and the fell short.

Advertisers included presenting sponsor adidas, Weight Watchers, Geico and local ads.

As we do every so often, we thought we would take a look around the web to see how mainstream websites and publications are covering the annual SuperDraft.  We’ll start across in the pond in England, where  the Guardian continues its regular (and impressive) MLS coverage with a team-by-team look at the upcoming draft through the eyes of various team supporters. The piece is well researched and clearly required a substantial amount of effort to put together.   The comments after the entry are also instructive and worth a read.

Over at CNNSI.com, Avi Creditor has weighed in with a detailed piece looking at prospects and draft targets.  The article does a solid job listing some of the top talent from the college ranks.  Creditor also weighs in with an article looking at the various team needs across the league.  The effort from CNNSI should be contrasted with the absence of the usually excellent coverage on ESPN.com.   The draft is largely MIA on the Worldwide Leader’s website despite the upcoming broadcast on ESPN2.

Elsewhere, Canada’s TSN offers some thoughts on Montreal’s first Superdraft and adds some insight into Jess March’s thinking as the season gets closer. Staying North of the border, the Vancouver Sun’s soccer blog chimes in about the relevance of the Superdraft in MLS 2012.  Elsewhere in CONCACAF, the Jamaica Gleaner weighs in on the MLS prospects of local product Darren Mattock.  The day after the draft is typically replete with these types of articles from town newspapers covering the success of community residents.

Over the last couple of years, MLS has made a long string of significant decisions aimed at advancing the league and improving the quality of soccer on the field.  These have included the Designated Player rule in all of its iterations, the Generation Adidas program and recently, the mandating of team specific academies tasked with developing young players and retaining young talent in the league.  For those interested in the inner workings how those academy products become Homegrown players within MLS, Kyle McCarthy of Goal.com offers a great look at league rules governing these signings and how various teams work within those rules to sign local talent. McCarthy looks at recent signings in Portland, Philly and elsewhere to demonstrate the challenge of combining multiple academy models to fit one domestic league.

Perhaps the big soccer story Monday on both sides of the pond was Thierry Henry’s remarkable reintroduction to Arsenal at the Emirates in the Third Round of the FA Cup.  Just minutes after entering the match in the second half, the Red Bull forward scored the only goal of the game to advance Arsenal to the next round against Aston Villa while further cementing his legend in England.  For MLS, Henry’s dramatic return provides another shot of positive publicity.  All stories describing his return mentioned the Red Bulls and the two month loan from Major League Soccer.  Whatever the pros and cons of these short term winter loans, the league has found another way to generate publicity in the off season.

Finally, at last Summer’s All Star Game, Commissioner Garber mentioned (in response to a question from a journalist), that PPL Park was a likely candidate to host the 2012 version of the event.  This article in the Inquirer suggest that PPL remains a likely candidate for the event, along with LiveStrong, Sapute and BC Place.

The MLS Combine got under way on Friday with hopeful MLS draftees descending on the Fort Lauderdale areas to showcase their wares in front MLS coaches, executives and more.  MLS’ official website has really ramped up the coverage of the pre-draft events, including live streaming of all of the combine matches and video features.  The league also added an interactive social media contest for those following the combine online.  The Twitter contest offered fans an opportunity to win prizes from league sponsor sega.  For more on the business aspects of the combine, check out our interview with Buzz Carrik, now of ESPNDallas.com from the 2010 combine.  Mr. Carrick has become known as one of the MLS draft gurus and he provided some thoughts on the combine here.

In other news, ESPN2 will televise the SuperDraft starting at noon on Thursday.  Typically the network manages to cover the entire first round of the draft and provides insight into the players selected and the status of the league as the calendar turns to 2012.  Last year the draft coverage was hosted by the recently departed Rob Stone.  Also last year,the broadcast was presented by adidas, and commercial advertisers included McDonald’s, Taco Bell, Wendy’s, Scottrade, the Post Office and AT&T.

We’ve long discussed the benefits of Major League Soccer’s Generation Adidas program that allows underclassmen to risk entering the SuperDraft before graduation while retaining the ability to pursue a college education on adidas’ dime if their soccer career doesn’t pan out.  Now comes this piece from Ives Galarcep (wearing his Fox Sports hat), suggesting that MLS is now diverting Generation Adidas funds to signing MLS Academy products rather than college undergraduates.  Galarcep’s article is a must read for fans interested in the signing of young domestic talent by the league.

In 2011, the MLS schedule was released in February.  MLS fans eager for league news got a surprising gift on Thursday when the league released the entire 2012 schedule more than one month earlier than last year.  For business junkies, the most interesting part of the release is probably the announcement of nationally telecast games. New MLS partner NBC will televise 41 matches over the season, including three games on over-the-air television.  All of the games on the NBC mothership will come at the end of the season and two of the three will feature New York fans.  The late season games give the network to leverage its Sunday Night Football juggernaut to promote the matches.  The first match on the NBC Sports Network will feature New York and Dallas.

ESPN’s package is reduced to 20 games but includes a number of games on ESPN rather than ESPN2.

Last year we linked to an excellent article by Kyle McCarthy at Goal.com that included  his interview with Mark Abbott and Brad Pursel about the dynamics and challenges involved in creating a schedule for MLS.  This is a fascinating and under-covered topic.  From a business perspective, the most interesting aspect of the interview was Mr. Pursel’s discussion of the three biggest priorities in setting up a schedule: “maximizing attendance, creating a television schedule to maximize ratings and balancing the schedule from a competitive perspective.”  It is telling that business factors are the primarily driver behind the schedule making.