Laidig Speaks: Part 1: The Benefit of Division 2 Experience before entering MLS

scorpionsFootiebusiness Contributor Dave Laidig offers Part I of his tw part masterpiece with a look at the climb from the lower divisions of American soccer to MLS.  For more on Dave, and to look at a small sample of his always excellent work, click on the “Contributors” tab on the top of the page.

Major League Soccer (MLS) played its first games in 1996.  And after a period of contraction and strategy adjustment, MLS has been steadily growing ever since; in viewership, revenues, attendance, and in the number of teams. Since2005, nine expansion teams have entered MLS with varied success.  Here, we examine two types of MLS expansion teams; the teams elevated from the second division (D2), and those teams created just for MLS (Non-D2).

The “D2” teams are the five teams that entered MLS after playing the previous season in U.S. Soccer’s second division; Toronto, Seattle, Portland, Vancouver, Montreal. And the “Non-D2” teams are the four teams that entered MLS without an immediate D2 predecessor in the same market: Chivas USA (Los Angeles), Real Salt Lake, Houston, Philadelphia.  Please note that San Jose’s return to MLS in 2008 is not considered an expansion team because MLS existed in the market from 1996 to 2005, and the team was officially considered on hiatus.

And to compare D2 and non-D2 expansion teams, we will consider the entry phase, or the first 3 years, of MLS play. The first phase is the focus because after a few years, it becomes tough to assign a reason for any particular circumstances.  Consequently, the issue here is whether D2 status makes any difference on the average attendance during teams’ entry phase in MLS?

D2 Teams v. Non-D2 Teams

Because the expansion teams joined MLS over a seven-year period, and because average attendance has been slowly increasing each year, each expansion team had its average attendance over its first 3 MLS years are contrasted with the MLS average over the same period.  And for those teams with less than 3 years in MLS, we used all of the years available, and compared it to the same period in MLS.  The attendance figures for the MLS expansion teams can be summarized as follows:

Table One

The table indicates several key trends.  Notably, the rolling average of all-MLS attendance figures has steadily increased over time, an important indicator for the league.  This demonstrates the solid base of the league and its general stability in the last decade.  In addition, this table also highlights two key points related to expansion teams.

  1. Every Expansion team had better attendance than the MLS Avg. over its first three years in the league. This is true even for the most recent additions, when expansion teams (included in the MLS Avg.) nearly equal the pre-2005 teams.
  1. Every D2 team had a better attendance than the non-D2 teams. This is true even though the recently-added D2 teams are being compared to a larger number of other expansion teams (which all perform better than the league average – see point 1).  The results are interesting, especially since the best non-D2 team (Chivas) is located in Los Angeles and boasts a strong tie to the Mexican league in a market already used to MLS competition through the LA Galaxy, which one would expect to enhance attendance figures.

The D2 Effect on Attendance

The averages indicate that D2 teams have better attendance levels, with Non-D2 Expansion Teams expecting 1,008 fans above the MLS Average and D2 Expansion Teams expecting 5,984 fans. Thus, the size of the D2 effect is an extra 4,972 people per game, over the first three years of MLS play.

Looking beneath the numbers, the effect appears to be robust.  And it is notable that every D2 market outperformed every non-D2 market; a result which stands out considering that some non-D2 teams were placed in large markets like Houston, Philadelphia and Los Angeles.  Some possible reasons for this large effect may be evident from a review of the business issues.

In general, playing in D2 prior to entry into MLS may allow for positive outliers in team performance.  For example, by playing in the lower division, a soon-to-be MLS organization can staff-up, mature, and build institutional knowledge necessary to compete financially.  The D2 route effectively slows down to start-up process due to the lesser burdens of competing in the lower division. Further, a D2 experience creates the opportunity to prepare the market for new team, and to control the sports brand prior to MLS entry.  In a similar vein, the future MLS team can begin to develop analytics for its customer base while operating in the lower division, giving it a head start on sales leads related to a unique sport.  And for an on-the-field benefit, operating in the lower division allows the team to develop data on part if its potential labor force (D2 soccer players) that can improve results – thus making the game more attractive for local fans.

Stability of the D2 Effect – Better Attendance Retention

Importantly, not only does the D2 effect lead to higher attendance, but the data shows that D2 teams show growth after the novelty of the initial year wears off.  Thus, the data support a conclusion that operating a D2 teams strengthens a team’s connection to its fan base.

Table 2

This shows that the D2 effect represents not only a strong start, but also a strong structure for growth in the soccer market. While not analyzed here, this retention data suggests that the D2 effect may extend beyond the initial three years after MLS entry.

When one does not limit the analysis to comparing the first 3 years of teams, the D2 teams consistently outperform the both the non-D2 teams and the pre-2005 teams on a year by year basis.

Table 3

This table compares the average attendance for MLS teams, beginning in 2005, for three groups of MLS teams: the original pre-2005 teams, non-D2 expansion teams, and the D2 expansion teams.  Here, D2 teams have reliably outperformed the other groups, year after year.  Starting in 2007, the gap between the D2 teams and the other groups was nearly 4,000 fans per game, and the gap only grew wider as more D2 expansion teams were added.

The various ways of comparing attendance uniformly indicate that D2 teams have consistently higher attendance levels.  In Part 2 of this series, we will consider the potential value of the D2 effect to potential expansion teams.