MLS’s eternal expansion plan: Crazy like a fox, or just crazy?

Slow stadium news weekend, so I’ll take the opportunity to note my debut article for Deadspin that ran Friday, on Major League Soccer’s ongoing expand-o-rama and whether this is likely to end well for the league. (Consensus of myself and the sports economists I spoke with: Maybe there’s a chance if you squint, but don’t bet the farm on it.)

And since this became an issue in Deadspin’s comments section: Yes, I know about Soccer United Marketing, the MLS-owned marketing company that handles such North American events as the Gold Cup; no, just because MLS according to one report paid $450 million to buy back a 25% share of SUM to regain full ownership doesn’t necessarily mean the league is “worth” an extra $1.8 billion, any more than the fact that people are paying $150 million for expansion franchises means those are worth that much; and no, nobody really knows how much SUM is worth since it won’t release any revenue figures. It’s almost certainly worth something, but as University of Michigan economist and Soccernomics co-author Stefan Szymanski estimates, probably not enough to make a huge difference in the league’s profitability once it stops cashing $150 million expansion checks. I’m going to keep digging into this in the future, but for now that’s the best verdict available.

And if you’d like to hear me talk even more about MLS and its future, I was interviewed on 700 WLW in Cincinnati yesterday, which you can hear here starting at the 67:29 mark. And coming up tonight, I’ll be on 590 KFNS in St. Louis at 6:20 pm Central time, and then KXTG-102.9/750 The Game in Portland, Oregon at 5 pm Pacific time, which is right afterwards because I am apparently a time traveler. Or the earth is round, definitely one of those two.


51 comments on “MLS’s eternal expansion plan: Crazy like a fox, or just crazy?

  1. Meanwhile, Michael Eisner (former Disney exec) bought Portsmouth, a former Premier League club now playing in the third tier, for less than $10M.

    Given the naturally higher ceiling that exists for even the smaller clubs in Europe, it’s not inconceivable to think that more and more rich Americans wanting to get a piece of the soccer action will cast their eyes overseas, rather than plunk down nine-figures on an expansion team who may have to exist as a loss leader indefinitely

    Things could come to a head for MLS when they realize that people in Buffalo, Burlington, and Bakersfield don’t want to pay upwards of $200M to join their ranks

    • This site needs to be at SB Nation where one could REC a comment. You hit a World Series winning Grand Slam, Kei. That is how on-point your comment is regarding the world of sports, especially the MLS.

  2. Why do you write for media like Deadspin? You get readers like the posters who call you “dime store” but probably only took Econ 101 in college – if they went to college. And you get MLS fans with rose colored glasses who think the league is on par with Europe.
    You deserve higher level media outlets.

    • I actually think Deadspin does a terrific job covering sports politics and economics, and I’m pretty proud to finally be able to write for them. As for the comment section, there’s about one funny joke for every gratuitous insult, which isn’t a terrible ratio as the interwebs go.

      (Also, I know plenty of idiots who went to college. And I only took Econ 101, for that matter — most of my economic education has been since then.)

    • “You get readers like the posters who call you “dime store” but probably only took Econ 101 in college”

      The problem isn’t with people who only took Econ 101. It’s with people who only took Econ 101 and then thought that qualified them as economics experts.

      And Deadspin is a pretty solid sports outlet, IMO. I certainly get more valuable info there than I do from all the ESPN shouting panel shows combined.

  3. Deadspin overall is fair and love to cover MLS whenever they have a chance. Bet your article got them more clicks than anything else this weekend. Damn those millennials. Its why ESPN laid off so many hockey & baseball talent.

  4. Deadspin is widely known and I enjoy their sports coverage. I look forward to reading your article. As far the MLS goes, I hope it has a future. I get the national TV numbers are bad, I know I usually just watch (DVR) my team’s broadcast, but not any thing else. But I do hope it survives, I went this weekend to the Colorado Rapids, it is a fun, pretty cheap, and short (2 hours!) night of sport.

  5. I think the attempt to use a “limited time” “only two slots” expansion spin in order to get government money to build new stadiums has been a failure. They claimed they were going to announce the winning bids in “quarter 3” of this year and it does not appear to be the case.

    It is reasonable to argue that with a tightly cost controlled league, MLS can probably sustain more teams in different cities. They have loose enough rules on foreign players so that they can find bodies. I don’t even think the issue isn’t whether St. Louis or Cincinnati can generate the same $16 million in revenue Colorado does (according to Forbes). The problem is that there is absolutely, positively no reason for local governments should hand over land or give money to make it happen. Thankfully, most of these bids have been laughed at when going before the public or public officials. If a millionaire or billionaire wants to spend $150 million on a toy business that might generate $20 million, he can feel free to do so. In no way should taxpayers be on the hook for his toy.

    • Those bids aren’t laughed at in Frisco, TX, where the only thing the local politicians want to know is “How much?” instead of “How come?” whenever our many sports team owners come before them hat-in-hand.

      We not only built the Lamar Hunt family an $80M stadium, but now that it’s 10 years old and no longer “state-of-the-art”, we’re sinking another $40M into it for a sun shade and to build the adjoining “Soccer Hall of Fame” which, from what I can tell, is the Hunt family’s personal collection of soccer trinkets. It’s already gone broke and closed once and what I’ve read indicates it will not be open year-round. I haven’t seen the details, but I’m guessing it’ll be open only on FC Dallas game dates and when they have big youth tournaments in town…. meaning the SHoF itself won’t be driving any marginal traffic here since people will already be coming for other soccer-related activities….. meaning why exactly should the city sink such a huge amount of money into a proven money-losing venture? But no one asks those kinds of questions…. they simply break out the book of Big Ceremonial Checks and call a press conference.

      • GARY…..you forgot to mention it is close to $15.00 in tolls alone and 30m from downtown dallas…That and the fact it is 115 degrees at game time after dark doesn’t help attendance.

        You should see the Hunts suite in Arrowhead (Google it).

        On a side note, building a “new” (and smaller stadium) to improve attendance at Texas Rangers games is also a Forrest Gump move. The Houston Astros played in the Astrodome, and their attendance is even worse now they are in the juicebox Or Minute maid park or whatever they are calling it this week.

        • Not true.
          Astros draw over 31K per game. This year’s attendance will be 10th highest in their history, 9 of the 10 at Minute Maid/Enron.
          Not bad at all after 3 recent 100 loss seasons.
          Minute Maid capacity around 41K
          Astrodome baseball capacity was 46K
          Rangers move wil be very successfull, espexcially at the higher ticket prices (of course) as long as the team is competitive. It should be with the high revenue stream they have.

      • I can answer those kinds of questions my friend… the billionaire’s motto is ‘ the more politicians you own, the happier you will be ‘.

        • It is called bribery, and both the politicians and billionaires are going to get it in the end.

    • The main reason for limited time for approval is to get everyone involved to move fast. They have a timeline for new teams to enter and drive growth in time for next Rights deal. Everyone knows there is 4 slots available depending on what happens in Miami.

      • No. They tried to manufacture pressure on local governments for stadiums. You don’t try to force things to move fast if you want them to move effectively, but you might be able to sneak nonsense in budget bills that way. Any way, the tv rights you mention are for a product whose final gets 1 million viewers on network tv, so don’t confuse it with the NFL, NBA, MLB, or even Liga MX. The cable channels aren’t going to change their offer because of the Cincinnati or Raleigh market isn’t there. If this expansion attempt was about anything other than new stadiums, it would be done by now.

        • Yes , that was true when everyone watched on TV. Not anymore. Now with consumption shifting to streaming other factors come into play. For one let’s get one thing straight , except for the NFL regular season ratings for all major team sports are not that great. Compare cable ratings and the difference is even closer. Buyers are paying for content and advertising target market. Guess what ? MLS is the only league hitting the sweet spot for advertisers. Multicultural , families & millennials. Look at the face of the local MLS team and you see the face of America.

          • Steven, you have figures to show that MLS has higher viewership numbers via streaming?

            I’ve seen many a claim that MLS is popular among “millennials,” “families,” “urban residents,” etc. I certainly see a lot of young adults and kids at matches, but the former is also true of sports I wouldn’t consider on the cusp of mass-market success (roller derby, for example), and the kids are showing up largely because they’re getting free tickets, in my experience.

          • Don’t know if those numbers are available. What I base my statement on is polls , current TV ratings , trends and statements made by decision makers at corporations , media , and sports executive throughout the industry. With the shift in consumption habits TV ratings will be distorted and go down across all leagues around the world. So other factors will play an increased importance for media buyers. Doesn’t matter if NASCAR still provides a better rating if their demo’s are wrong for a corporation trying to reach Hispanic families or millennials. The Viagra market is already reached through golf advertising.

          • There are two very detailed polls showing 12-24 2nd favorite sport behind NFL “ESPN Lugar”. Age of TV viewing by sport. Medium age for MLS 39 & NBA 40. Golf 64 NHL MLB NASCAR all late 50’s. NFL 50.

          • Never said MLS has higher streaming numbers. I find most kids go to sporting events on free tickets.

          • Have a cheap phone. Its called Luker on trends. Bill Sutton or Roger Bennett do a good summary for their outlets. On average age of TV viewers sports. Jason Notte or Rob Oiler do good summary.

          • Is Soccer a good investment for American advertisers yet ? Jeri Smith the drum.com

          • Finally found the link for your “2nd favorite sport among 12-24 year olds” stat:

            http://sportspath.typepad.com/files/soccer-popularity-continues-to-climb.pdf

            Note that this indicates “pro soccer,” not MLS in particular.

            Also, Deadspin went to the trouble of asking Luker for his methodology, and he outright refused to share it, or even how he defines an “avid” fan of a sport. So, you know, maybe not the source you want to hang an entire economic analysis of a sport on:

            http://deadspin.com/that-espn-poll-claiming-mls-is-as-popular-with-kids-as-1539533010

          • As for soccer fans being younger on average: I’m sure they are! Because most people over the age of 60 in the US had no soccer to watch growing up, and they skew the averages like crazy when included. Other sports that I bet skew very young: roller derby, snowboarding, Minecraft. While I expect all of them to continue to grow in popularity compared to baseball as old baseball codgers die off, I don’t expect any of them to coe within a mile of catching it, in either US fan base or TV contract size.

          • My argument isn’t based on soccer being the 2nd favorite sport among kids. That was just one survey of 1500 people per month of the course of several years. Deadspin hates everything ESPN so of course they would go out way to discredit.

          • What you fail to take away from finds is when he started survey respondents didn’t know what MLS was and in latest survey claim to be fans. Also noticed you didn’t touch the Neilson findings in the sports business journal article.

          • I will make my argument as simple as possible. Advertising will go to the sport that deliver the the market they desire. They will take money away from other sports to reach that target audience that soccer can deliver. Its already happening and Target dropping NASCAR to concentrate on MLS is prove ! As networks get more in advertising dollars to broadcast soccer that will result in increase rights fees. Those fees will come at expense of other content properties that have a much narrow audience.

          • Consumption of a sport takes place on various levels and platforms. MLS can deliver that target audience on various levels. Therefore ratings are not the only stat advertising is factoring when buying ad time.

          • With the Colorado Rapids, who were good (for freakishly unexplainable reasons) last year but have returned to bad this season; free tickets are not around like they were 5 years ago. I agree though, I’d want to see hard social media numbers before I believed them.

          • If you want to live in an imagined world where MLS is more meaningful than it is, feel free. Facts will remain facts. Soccer fans in the US have no problem turning on the television for Liga MX. They seem to have a problem with turning it on for MLS and, frankly, any other soccer league. An average regular season NBA, MLB, or major conference college football games on ESPN pulls in about 3 or 4 times that of MLS. It is the same channel. Same access. This doesn’t mean there aren’t more cities where there are 10,000+ people who will go out to a soccer game and support a local team, but they are choosing not to watch it at home when they are choosing to watch other sports or leagues.

          • MLS gains in TV money won’t come at expense of the NBA or MLB. It will come from other inflated TV contracts to other sports properties. Just the same as Sponsorships have. Even based on your argument of ratings 3-4 that of MLS. Yet the TV rights deals those leagues receive are 10-20 that of MLS. Yet MLS delivers younger demo’s.

  6. It’s a comfort to know the ghost of the NASL lives. NOT.

    One has to wonder how soon it will be, before there are Veeck-like promotions, to boost attendance, for marginal teams.

    • Though Veeck’s sport, baseball, is still doing pretty well 40 years after his high point.

    • Funny, I used the term NASL elsewhere today, remembering the good old 70’s when I was a lad and people thought soccer would take over the U.S. sporting scene. 40 years later we are still waiting. But it’s good to see MLS owners greasing local bobos and grabbing some public gravy while they can. Warms my heart, even though their boring sport still has no real financial traction in this land.

        • http://www.theharrispoll.com/sports/Americas_Fav_Sport_2016.html

          It’s passed golf! Progress.

      • No financial traction , you might want to Google Adidas & Target in past week alone. Gee for a boring sport there doesn’t seem to be a need for a DJ , piped in music during the action , clubs , restaurants , zip lines , pools , huge menu’s , piped in crowd noise , announcers begging the crowd to make noise etc. Also the fans actually watch the game instead of playing on their phones.

        • Did I forget Cheerleaders …that noise you hear is my microphone hitting the floor.

      • Glad to see you joining the fun, Piggy!

        http://soccerstadiumdigest.com/2017/08/nashville-mls-bid-adds-wilf-family-to-the-mix/

      • “Warms my heart, even though their boring sport still has no real financial traction in this land.”

        The least-convincing anti-soccer argument imaginable is “it’s boring.” You think soccer is boring. Okay. I find the NFL boring as all hell. So what? What does any of that prove?

  7. Excellent article. Well referenced. And I like DEADSPIN for being a more honest and contrary info source. Keep up the good work.

  8. The expansion fees are definitely an unsustainable cash grab, but a ponzi scheme? They have real revenue PLUS cost control, so in order for your theory to be correct, at least one of two things would need to happen:

    1. Attendance and/or TV revenue collapses; or

    2. They lose their cost discipline and break the bank and get the top talent in the world (like the original ABA did).

    The premise in your article, I think, is that #2 will happen to prevent #1. I suppose that’s possible but as of now I see no evidence of that due to the way the league is structured.

    But then again I am from Portland so I
    may be seeing it from Rose (City) colored glasses…

    • Their bind is that they’re going to have to choose between keeping salaries nice and controlled like they are now OR seeing the level of play decline markedly. (And that is already a problem for them so a further decline would seriously harm the product.) No way to keep adding in teams with the talent pool they already have–they’ll have to raise salaries to bring in more overseas talent.

      • “Their bind is that they’re going to have to choose between keeping salaries nice and controlled like they are now OR seeing the level of play decline markedly. ”

        The level of play has been improving pretty consistently despite the expansion. There’s a couple of things going on:
        1. Teams are investing in development, so the pool of domestic okay-ish talent is larger than it was 10+ years ago.
        2. There’s no shortage in the world of technically competent players for whom MLS is a step up. Top-level European talent is coming to the US in any kind of numbers but it’s a different story from the Caribbean and Central/South America.

        Anyway, salaries are going up – just in kind of the weird-hacky way that MLS does things.

        • Yeah, I don’t know that an extra four teams will significantly impact the supply-and-demand of MLS-level players. If anything, it may just force the league to ante up for a few more aging Europeans to ensure there’s one to go around for every team.

          • Atlanta just came into league and signed most of their starting roster from foreign leagues. All 3 of their DP’s are under 25. MLS is becoming a destination league. Players are starting to come prior to their prime years. Is it the NFL that has multiple QB’s in their late 30’s but no one questions that.

  9. A bit late to the game but I love this quote from Adi, and it speaks to how to grow the league (more organic, less flash/quick cash):

    https://twitter.com/themikedonovan/status/895992581582012416