Galaxy Strike New TV Deal

According to a story that broke in the Los Angeles Times on Tuesday evening, the Galaxy are set to announce a 10 year, $55 million deal with two new Time Warner Regional Sports networks to televise Galaxy games.  The new networks (one in Spanish and the other in English) are fighting for content in the crowded LA Sports market and this deal guarantees live programming from March to October.  According to the Times’ story, the deal will be officially announced on Friday.

The size of the deal is staggering.  NBC recently paid $30 million for 3 years of Major League Soccer on a national level and now Time Warner is offering $5.5 million per year for a team that never topped 16k viewers over the last year.  The deal is especially extraordinary because Major League Soccer’s national television partners will certainly demand that the league’s showcase franchise regularly appear on their broadcasts.  How many games will the new networks get as part of their package.  Moreover, the same story suggests that the network is also chasing the rights to the Los Angeles Dodgers.  Given the overlap between baseball and soccer, will Galaxy fans be subject to tape delay as part of the new arrangement?  The Lakers recently signed on with the same network on a 20 year deal worth a reported $20 billion.

From a business perspective, it is hard to find something to dislike about this agreement. A major television partner believes that the league is a worthy long term investment.  At the same time, the deal allows the Galaxy, the league’s most aggressive franchise in pursuing star players, to fill its coffers from a local television deal at a time when some franchises are receiving no money for their rights.  Will this deal tilt the competitive balance in the team’s favor?

 

Soccer Business Bits: Beckham is Back and More

galaxyIt’s been a while since we’ve discussed David Beckham in this space, but with the recent statement from MLS Commissioner Don Garber, Goldenballs is back in the news.  According to the Commissioner, MLS will receive $10 million from AC Milan and Beckham to extend the loan deal into July.  As we have previously discussed, there were a number of components to the Beckham deal.  These included extension of the loan, an AC Milan Friendly and the payment of a fee by Beckham.  As we have also discussed, Beckham’s contract has an out clause at the end of the MLS season.  However, with Becks riding the pine in Italy and MLS attendance struggling, one wonders if the League will find a way to hold on to its marquee attraction.

There is an interesting post about the business of MLS by Jeffrey Marcus at the New York Times.  Mr. Marcus discusses a point that we have previously raised, i.e. how to make MLS appeal to the legions of U.S. based soccer fans.  If 10,000,000 people watched the U.S. play Mexico, and pubs are over flowing with people watching Liverpool play Aresenal on Sunday morning, how does the League capture those fans.  In the post, Mr. Marcus quotes Commissioner Garber discussing the way to increase the League’s appeal by bringing more stars to the States.  Mr. Garber recognizes that the League needs to increase the quality of play (or at least create the impression that the quality has improved). The early years of of MLS unfortunately drove a large numbers of soccer fans away from MLS because of low quality.  The quality has improved over the years, but these fans have not come back.  The various promotional campagins we have discussed this season are largely targeting these fans and the League is making progress.  The League hopes that the economy won’t get in the way.

Business Bits: WPS Attendance, MLS TV and more

wpsThe WPS completed its first full slate of games this weekend with matches in New Jersey, California and Illinois.  In our interview with WPS Director of Communications, Robert Penner, Mr. Penner stated that the League was hoping for game day attendance between 4-6,000 per game.  During a weekend when MLS teams disappointed at the gate, all three WPS matches hit the mark with between 5-7k fans in attendance.

This weekend will be the first chance for ESPN2 to showcase its new game of the week strategy for MLS.  After two years of Thursday night matches, the Worldwide Leader will showcase the “superclassico” between Chivas USA and the L.A. Galaxy at the Home Depot Center.  These matches always provide the good atmosphere and big crowds important for “selling” MLS on T.V.  (both were missing from the RSL//Columbus game last week), but the 11:00 start time does make it more challenging to capture viewers on the East Coast.   The late start will do better on a weekend (in contrast to Thursdays), and may draw in some bar crowds  filled with younger viewers.  This will be a good test for ESPN’s new programming schedule.

Finally, the Galaxy are offering a massive discount on a range of tickets via their website.  The drastic reductions ($25-$61 per ticket) are a great benefit to fans, but also suggest some real trouble at the gate for L.A.  This is especially so in some of the higher priced areas of the Home Depot Center.  Remarkably, the available games include a match against Chivas USA, typically a big seller.  Not suprisingly, no such discounts are offered for the dates following David Beckham’s return from Europe. Many teams are struggling to sell higher priced tickets, and these discounts will help fill these seats.  There is a downside, because the Galaxy risk offending season ticket holders who have already paid for their seats.galaxy

Business Bits: Opening Week, WPS and Milan

wpsAmway International, the presenting sponsor of the San Jose Earthquakes, has signed on as the jersey sponsor of the WPS’ L.A. Sol. The sponsorship will include the Amway name on the jersey, stadium signage and placement on an array of Sol items.  Perhaps most importantly for Amway, Brazilian Marta, perhaps the most recognizable star in Womens’ soccer, will now wear the Amway name.  In a separate deal, Marta signed a three year endorsement deal with the company.

In Salt Lake City, RSL has announced an “open house” at Rio Tinto Stadium.  The free event will include a Friendly with the Austin Aztek of the USL First Division, a meet the players component and plenty of family friendly activities.  With the fall 2008  opening of Rio Tinto Stadium, RSL has a beautiful new venue to showcase.  The open house seems like a fantastic way to introduce potential fans to the stadium without giving away the proudct (i.e. free tickets to games).  Rio Tinto looked and sounded great on TV during the playoffs and reports suggest that season ticket sales are up for 2009.

The Galaxy have wasted no time in selling tickets for their negotiated Friendly with AC Milan.  According to the team website, tickets are now on sale as part of a package with tickets for opening night.  While the game is free for season ticket holders, the two game package prices range from $50-$600.  It is somewhat surprising that L.A. would pair the Milan tickets with opening day because it suggests that opening day tickets aren’t selling well;  we’ll know in a week.  milan

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

Beckham Loan Extended??

Ibecks2n a fairly remarkable twist, the L.A. Times is reporting that the David Beckham saga is finally nearing its end.  According to Grahame L. Jones, MLS has agreed to extend Beckham’s loan through the end of the Serie A season (end of May).  Once the July transfer window opens on July 15, Beckham will rejoin the Galaxy for the rest of the season.  According to Jones, Beckham will then exercise his opt-out clause, paying the Galaxy to release him from contract by the end of 2009.  Remarkably, the deal is supposedly for more than the $10 million AC Milan previously rejected.

From the League’s perspective, Beckham can be trotted out one more time to half of the League’s cities.  Because L.A. has a travel heavy summer, Beckham should still visit New York, New England, D.C., Columbus, Kansas City, Chicago and Houston. These visits will allow the League to pad attendance one more time on Beckham’s back.  Moreover, because Beckham’s salary is pro-rated, the Galaxy can bring in additional talent to improve the squad.

This move certainly seems strange.  AC Milan is seemingly out of the title chase and has little reason (on the field) to keep Beckham for the season.  He will be available in January, 2010 as a total free agent.  From Beckham’s perspective, this deal will cost him money, but he is probably hoping it buys some good will.  He will likely try to couch this as “the best of both worlds” and the last shot he wanted to bring the Galaxy to the promised land.  The fans will decide, but I suspect Beckham will face some harsh words upon his return.galaxy

MLS Contracts: Who owns David Beckham?

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If there is one thing the David Beckham situation has made abundantly clear, it’s that MLS does things differently.  During the negotiations with Milan, I’ve been repeatedly asked to explain the MLS contract system. In the traditional soccer model, players are owned by individual teams and transferred (i.e. sold)  when two clubs (and the subject player) agree.  Not so in MLS.

MLS operates as a “single entity” where teams are controlled by the League.  While the level of central control has lessened over the years, player contracts are still owned by Major League Soccer.  Thus, despite playing for the L.A.  Galaxy, Beckham’s contract is owned by the League.  Thus, to negotiate a transfer, both clubs, the player and MLS need to agree.

This obviously creates some conflicts.  Undoubtedly, David Beckham has enormously increased awareness of MLS worldwide.  Selling him now may not be in the best interest of the League and its owners, but very well might be in the best interest of the Galaxy on the field.  As of this writing, no deal has been done.  Galaxy owners AEG, have taken the party line with AEG President Tim Lewike stating, “I’m not sure they ever quite understood the magnitude of the losses the Galaxy and the league would have had to bear this season. They were very respectful discussions. We’re fine. There’s no issues here.”

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However, Lewike heads the business and not the soccer arm of AEG.  MLS teams are held to a tight salary cap, and head coach Bruce Arena would likely much prefer to dump Beckham and use the funds freed up under the salary cap, and transfer funds, to build a contender.  Instead, he may be left with an unhappy Beckham and another losing team.