Copyright 2014 The Atlanta Journal-Constitution
The Atlanta Journal-Constitution
The rich price Arthur Blank paid for an MLS expansion team in Atlanta, about $70 million, reflects the rapid rise of franchise values in the league.
"It was a little bit of a sticker shock," Blank admitted.
Still, he decided it would be money well invested, the same conclusion other sports moguls have reached in putting MLS on a growth spurt from 10 teams a decade ago to 19 this season to at least 22, including the new Atlanta team announced last week, in 2017.
MLS, now in its 19th season as the United States' top professional soccer league, still is not profitable overall and still struggles in TV ratings. Yet, impressive gains in ticket and sponsorship sales have fueled revenue growth that has generated much optimism about the league's future and a bull market for its franchises.
"None of our owners are looking at this business and saying, 'I made a bad choice.' Quite the contrary," MLS commissioner Don Garber said. "More are trying to get in than we have teams ultimately to offer them."
Five or six years ago, an expansion team could be had for about $30 million. Next year, an Orlando team and a second New York team are set to enter the league for reported expansion fees of $70 million and $100 million, respectively.
Even at such prices, the new teams will have a financial upside, judging from Forbes magazine's study of MLS franchise values last year. Forbes put the value of the Seattle Sounders at a league-high $175 million and the average value of existing franchises at $103 million, up from $37 million in 2008.
Blank's passion for soccer fueled his desire to secure an MLS team to play in the planned new Falcons stadium, but the billionaire made this clear: "If it was bad business, we wouldn't do it. We think it is a really good business opportunity.
"We look at total investment, total opportunity, the uniqueness of the sport, the passion, the community aspect of it," Blank said. "All those things ... add up to a tremendous opportunity for us that we have to take advantage of."
Launched in 1996, MLS struggled early, contracting two teams in 2002 before finding its footing and then moving into growth mode.
The league posted an average attendance of 18,611 per game last season, more than the NBA or NHL claimed. Seattle averaged 44,038 per game, about double the next highest-drawing team.
But there was a disconnect between attendance and TV ratings.
The 20 games shown on ESPN/ESPN2 last season drew average audiences of 220,000 viewers, while the 36 games on NBC Sports Network averaged 112,000, according to Sports Business Journal. Those are tiny numbers for live pro sports programming. MLS said the NBCSN audience has almost doubled for this season's first five games on that network.
"As we look forward, it's a big area of emphasis for us to increase our viewership," MLS president and deputy commissioner Mark Abbott said.
This is the final season of the current TV deals, and the league is close to completing new agreements with ESPN, Fox Sports and Univision. Despite the ratings, those deals will bring "dramatic" increases in rights fees, Garber said. The new deals with ESPN and Fox will bring in about $70 million per year, double the current deals with ESPN and NBC, according to reports.
Taken collectively --- the league and all of its clubs --- MLS is not profitable, Garber acknowledged. "Some of our clubs are profitable. Some of them aren't. Some of them are breaking even," he said, declining to quantify each group. The league could become profitable "tomorrow" simply by cutting expenses, but that would be short-sighted, Garber added.
"If you're a local team operator, you should make money in this business," he said. "There's enough opportunity commercially and from a television, sponsorship, ticketing and stadium-operations perspective."
Perhaps the strongest endorsement of the league is that sophisticated sports operators keep investing in it. In addition to Falcons owner Blank, four other NFL owners have stakes in MLS.
The league's teams last year generated revenue ranging from San Jose's $15 million to Seattle's $48 million, according to Forbes, mostly from ticket sales and sponsorships. While that is a small fraction of the revenue of NFL, MLB and NBA teams, expenses are a lot smaller, too.
Each MLS team is allotted a $3.1 million player-payroll budget this season --- $130 million less than the NFL's salary cap. But each team can have up to three "designated players" whose salaries exceed the budget, enabling MLS to recruit or retain some star power. A dozen such players are making more than $1 million this season.
The league operates with what it calls a "single-entity business structure," meaning each owner buys a share of the overall league as well as operating rights to a local franchise.
Abbott, who has been with the league since its start, believes a wide range of factors are paying off, including improved player quality, stadiums designed for soccer and demographic trends.
Hispanic fans make up 33 percent of the MLS audience, a higher percentage than any other U.S. sports league, according to market-research firm Scarborough. Millennial (ages 18-34) fans comprise 40 percent of the audience, also higher than for any other U.S. league, according to Scarborough.
"There really are two broad demographic trends that professional soccer benefits from," Abbott said. "The first is the continued diversification of the country, with more first-, second- or third-generation people from places where soccer has been a dominant sport historically. The second is what I call the maturation of the soccer generation. If you are 25 years old, you were 6 when MLS began, so you don't remember a time without the league."
League launched: 1996
Current teams (19): Chicago Fire, Chivas USA (Carson, Calif.), Colorado Rapids, Columbus (Ohio) Crew, D.C. United, FC Dallas, Houston Dynamo, LA Galaxy, Montreal Impact, New York Red Bulls, New England Revolution, Philadelphia Union, Portland Timbers, Real Salt Lake, San Jose Earthquakes, Seattle Sounders FC, Sporting Kansas City, Toronto FC and Vancouver Whitecaps FC.
Announced future teams (3): New York City FC and Orlando City Soccer Club will begin play in 2015. The Atlanta team will begin play in the new Falcons stadium in 2017. (Miami also could begin play in 2017 if a stadium is ready by then.)
Schedules: Teams play a 34-game regular season, 17 at home and 17 away. This season's schedule started March 8 and runs through Oct. 26, followed by playoffs.
2013 champion: Sporting Kansas City