Beckham Deal Finalized: Refunds for fans?

galaxyDavid Beckham’s long rumored “extended loan” has finally been announced; the Galaxy midfielder will complete the Serie A season with AC Milan before returning to MLS in the Summer.  Reports also state that Beckham will contribute a substantial amount of his own funds to the deal.  As part of the agreement, AC Milan will play a July friendly against the Galaxy in Los Angeles.  The friendly with AC Milan will necessitate the rescheduling of the Galaxy’s match with New York  from July 19 to July 16 (a Thursday night).

Given ESPN’s new MLS schedule, it makes sense that the League and the Network will bill the NY game as Beckham’s return performance and showcase the match in prime time.  The Beckham games at Giants Stadium have been very well attended, and have provided some of the best soccer of his MLS tenure.  As part of the announcement, the Galaxy also stated that they will be discounting tickets by 10% for the season and refunding 10% to those who have already purchased tickets.

The 10% refund is reflective of the difficulties in building a business model around one player.  A large number of fans bought tickets to see David Beckham, not the Galaxy or their opponent (certainly there has been a huge upside for the League as awareness and exposure is way up over the last three years).  Teams have continued selling 4 game packages and other promotions around Beckham’s visit to their stadium.  However, when he is hurt (as in his first year) or not around (as for most of the 2009 campaign), you get disappointed customers.  At the same time, the “hard core” fan gets turned off by the focused promotion.

Whether you think the Galaxy, MLS or AC Milan won or lost these negotiations (and opinions certainly run the gamut), Beckham’s overall economic impact on the League cannot be disputed.  We discussed that at length here.  For now, the Galaxy have a little extra cap room to utilize because Beckham’s “max” cap number will be pro-rated, and for a few months, the League can focus its attention on the coming expansion announcements and the inagural season in Seattle.milan

Should Beckham Be Released from MLS Contract to Join AC Milan?

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With David Beckham’s long rumored transfer to AC Milan seemingly imminent , it is worth examining the implications of the move.  First, a little background:  Beckham came to the L.A. Galaxy on a “free” in 2007 after finishing out his contract with Real Madrid.  While the exact terms have always been sketchy, it has long been understood that Beckham signed a five year deal including less than $50 million in guaranteed money, with most of the remaining $200 million wrapped into jersey sales and image rights.  Most importantly (for purposes of the move to AC Milan), there is an “opt out” clause that lets Beckham walk away from Major League Soccer after three years (November, 2009).

After the 2008 season, Beckham (with MLS’ blessing), secured a short term loan deal to AC Milan until March, 2009. His stated reason for taking the loan was to stay in shape for the upcoming world cup qualifying.  He was expected back with L.A. in plenty of time for the season opener at the end of March.  While in Italy, Beckham proved himself capable at playing at the highest level, and soon, AC Milan was banging down MLS’ door for a full transfer.

Given the forces at play, it seems unlikely that MLS will hold onto Beckham.  Selling him for a reasonable sum now would certainly seem to trump letting him walk for free in November.  However, a whole host of sponsorship deals and television contracts were signed with the understanding that the world’s most famous athlete would be wearing Galaxy colors.  Given the economic climate, it is not unreasonable to suspect that some of these companies may come back to the League looking for money.  Herbalife got far more than even they thought, when Galaxy jerseys sporting their logo became the “must have” uniform worldwide.  With Beckham gone, those sales are sure to plummet during the last three years of their (no surprise) five year deal.

beckhamFor MLS, the departure of Beckham is a definite mixed bag.  There is certainly an argument that his two years raised awareness of MLS to new heights both nationally and internationally.  MLS is now part of the worldwide soccer landscape and is part of the U.S. mainstream sportsvernacular.  Attendance increased league wide during his two years, especially during Galaxy away matches.  On the other hand, TV ratings stayed flat and the impression that Beckham is fleeing MLS could be taken as a black eye for the league.  There is a good discussion of both sides of this issue with sportswriter Stefan Fatsis on NPR.

I tend to think now is a good time for Beckham to be moving on.  When he came to MLS, the move was derided as a sunny retirement in L.A. for an aging superstar.  Fans of the European game refused to believe that a talented European would choose to play in the States if he was good enough to play across the pond.  Two years later, teams are clamoring for Beckham’s services, and MLS has become a destination for international talent and launching pad for budding Americans like Jozy Altidore, Clint Dempsey and Michael Parkhurst.

Off the field, I think the benefits of Beckham have peaked.   MLS raked in huge amounts of money with ticket sales, jersey sales and TV deals.  Arguably, the surge in soccer stadium construction is partly attributable to the Beckham effect and the upcoming changes in the Collective Bargaining Agreement will definitely be impacted by the increased interest in MLS.  There is no use keeping a player who wants to leave (and who can do so soon).  MLS will be best served selling Beckham for $15-20 million and perhaps reaping some additional benefits from AC Milan.  They can then turn that case into more players and as a crutch to ride out the economic storm.

UPDATE: According to Soccer By Ives, MLS has given L.A. and AC Milan until Friday to resolve the potential Beckham transfer:  http://www.soccerbyives.net/soccer_by_ives/2009/02/mls-ac-milan-has-friday-deadline-to-buy-beckham.html

With sponsorship deals under negotiation and tickets being sold, it only makes sense for the League to press.  They don’t want to get caught with sponsors claiming some sort of breach.