MLS ends summit in good mood
League finances promote optimism
There was a time in the early 2000s when things looked bleak for Major League Soccer.
“We went from 12 teams to 10 teams and there was some doubt if we could go forward,” said Columbus Crew owner Clark Hunt.
MLS concludes its business summit today in Columbus, and the mood is one of optimism. Attendance, revenue and television ratings are up and several of its 19 teams are profitable, said Commissioner Don Garber.
The league’s D.C. United recently sold for $55 million, Hunt said, a sign that the value of teams is rising. The league wants to add a second New York team, and the expansion fee will be $100 million.
In 2005, the expansion fee was $7.5 million; Montreal paid $40 million to join MLS this season.
“We’re cautiously optimistic about our future and the opportunity for this sport to grow, and our business model will drive our success,” Garber said.
This business model is unique and was inspired, in part, by the NFL’s and its use of a salary cap and revenue sharing.
It was also inspired by the success of the New York Cosmos of the now-defunct North American Soccer League — at the expense of the league’s other teams.
“The Cosmos were a team of high-priced all-stars from around the world, and, in order to compete, other teams added high-priced international players,” said Hunt, whose father, Lamar, owned the league’s Dallas Tornado. “Then the league collapsed under its own weight from these salaries and went bankrupt.”
The goal of MLS, Hunt said, is to create a level playing field for the small-market teams.
“It’s certainly working,” said David Carter, executive director of the University of Southern California’s Sports Business Institute. “The pillars have been the increased quality of play, compelling, soccer-specific stadiums and penetrating new markets where there is a demand for soccer.”
MLS team owners are actually investor/operators who have the right to operate a team in a specific market, Garber said.
“The league signs the players,” he said.
The league’s salary cap is about $4 million per team, Garber said, although teams can sign up to three designated players whose salaries do not count against the cap.
“The fans were interested in big-name international players, and we needed to do it without turning the economics upside down,” Garber said.
Several revenue streams are shared equally by MLS teams, including national TV and merchandising revenue and expansion fees. Teams also share 30 percent of home ticket sales with the rest of the league, Garber said.
“Teams do keep their local sponsorship money and their jersey and stadium naming rights,” he said.
This is where big-market teams have an advantage.
“L.A. gets $5.5 million a year for local TV rights and Columbus gets nothing right now,” Garber said.
Crew president and general manager Mark McCullers said he has learned how to do more with less.
“We’re the second-smallest market with an MLS team,” he said. “And that’s what makes it sweeter when we beat the big-market teams.”