On October, 15, MLS announced that Brightstar Corp. CEO Marcelo Cuare , Barcelona FC President Joan Laporta and a number of the Miami-Dade public officials made a formal bid to be granted an MLS franchise as soon as 2010.
But this only put Barcelona into a very crowded playing field.
Simultaneously, MLS has announced that no fewer than seven formal bids were being launched by the perspective ownership groups in Montreal, Ottawa, St. Louis, Atlanta, Portland, Vancouver to go along with Miami’s.
Additionally, informal discussions have been held with other possible suitors in New York (headed by a New York Mets (baseball) proprietor Fred Wilpon and in Las Vegas (multiple investors).
Already, MLS has committed to adding a team in 2009 (Seattle Sounders) and in 2010 (Philadelphia) to take its guaranteed count up from the current fourteen to sixteen.
This is a remarkable turnaround for the league that as recently as few years ago could only scrape up four owners, with the largest of them, Anschutz Entertainment Group (AEG ), having a controlling authority over five of the ten existing franchises . AEG’s deep pockets were necessary when the league, without a paying TV deal and weak in-game attendances , was hemorrhaging money and the overall prospects of an organized professional soccer league in the United States appeared rather bleak.
There are several reasons for this turnaround but the most tangible seems to be “OPM”, (Other People’s Money).
Simply put, following the similar success of the professional American football, baseball and basketball leagues, MLS has made a concerted effort to persuade local municipalities into financing what it began to call “Soccer Specific Stadiums” – though, in practice, these smaller than the gigantic NFL stadiums venues are multi-purpose – in order to eliminate a major portion of the costs that were weighing it down.
One must have chutzpah to demand such favors from the tax supported authorities but, during the recently concluded economic boom, the US economy was strong and the local politicians were acting in a carefree manner with the taxpayers money. As the result of such policies, many of these municipalities are facing a severe cash flow and credit problems in the post-bubble environment. It’s highly doubtful however that MLS owners and operators are feeling much remorse for fleecing the taxpayers, especially because the stadiums proved to be a virtual panacea for the league that frequently still struggles to deliver a top quality product.
With $6-$8M in rental costs (organizations running the large NFL stadiums often charged upwards of $200,000 for one match’s rent) wiped off its profit&loss statements, the league has become profitable.
In early September, a well-respected financial magazine Forbes published an article on the values of the various MLS franchises. It estimated that the highest totals belonged to the LA Galaxy. David Beckham’s home team was alleged to be worth $100 million dollars, with its annual revenues running at $36 million a year.
While the Forbes speculative numbers ought to be taken with a huge heap of salt, it made the subsequent math simple. If an MLS club can be worth as much as $100M and the MLS expansion fees (the amount charged to a newcomer with a desire to join the league) in the $40M range, an opportunity to make a buck seems obvious. The only pre-condition to making a small fortune was a “Soccer Specific” stadium where all the revenues flaws from tickets to local advertising to concessions to parking belonged to the owners of the team … well, that and, as was the case of the New York Red Bulls owner Austrian born billionaire Dietrich Mateschitz, gobs and gobs of money and a minuscule aversion to losses.
Barcelona then has that “in” – the club is promised a full use of the cozy 21,000 seat stadium on the grounds of the Florida International University in Miami, Florida.
It also has an additional, rarely spoken, “in”, to MLS’s “marketing arm” Soccer United Marketing (SUM). This commercial entity is designed to handle the TV rights, soccer exhibition matches and the various related to soccer activities that MLS itself wants to keep off its books for a better bargaining position with its players.
With its membership consisting of the MLS owners and operators (one needs to repeat that, unlike the European leagues, MLS is run as a single entity, with the league negotiating players’ contracts and transfers as well as collecting a stipulated percentage from the ticket sales and national sponsors), SUM is capable of distributing whichever income it generates from these side activities directly to the owners and bypassing the league itself.
Barcelona, being a premier global soccer attraction, has dealt with the SUM on numerous occasions. Just in the summer of 2008, the club played two matches on the US soil (vs. Chivas de Guadalajara in Chicago’s Soldier Field and vs. the New York Red Bull in the Giants Stadium in New Jersey). Blaugrana’s matches were a phenomenal success, drawing in excess of fifty thousand paying fans to each match.
And this must, to some extent, explain the club’s daring request to be allowed to join the league for the 2010 season. In the American vernacular, Barcelona’s management must realize that it’s a “rainmaker”, a club that makes money for its partners.
In the business world, that counts for a whole lot.
All it has to hope for now that, if approved, not too much will end up pouring over the heads of its players. In Miami’s subtropical climate, a thunderous downpour is as frequent as Leo Messi’s goal celebration at Camp Nou.
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Further Reading:
Major League Soccer’s Most Valuable Teams – Forbes.com
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