Industry looks for millennial recipe World Congress of Sports: They said it World Congress: VIPs and Champions Forty Under 40: Looking Ahead Sports Business Awards nominees World Congress of Sports: Reception Silver lines up input for media talks NHL shifts focus to ’15 Stadium Series NHL Winter Classic nets $20 million Hall looks to big ’14
Upcoming Conferences and Events
SBJ/July 11-17, 2011/Events and Attractions
International soccer heats up in U.S.
Revenue, costs skyrocket for summer matches with best teams
Published July 11, 2011, Page 1
“It was a hard negotiation, but for the biggest team in the world, that was a reasonable price back then,” said Toye, who oversaw the New York Cosmos, Baltimore Bays and Toronto Blizzard during his 30-year tenure with the North American Soccer League. “We earned enough [on the game] to make it worthwhile, but it’s not like we said, ‘Whoopee, we can all retire!’”
Fast forward 30 years, and the business of bringing the world’s finest soccer clubs to American fans has blossomed. Europe’s biggest clubs are regular attractions in the United States, and their “friendly” matches fill 80,000-seat football stadiums. Promoters sell lucrative television and sponsorship packages, while merchandise sales can run in the low seven figures. Ticket prices have skyrocketed: Cheap seats for the July 30 match between Manchester United and FC Barcelona cost $123.10.
One source said the overhead for a major international match runs anywhere from $5 million to $10 million.
According to promoters, Major League Soccer team presidents and Soccer United Marketing officials interviewed for this story, the profit margin for international games remains painfully thin. An inopportune rainstorm or scheduling conflict could result in sizable losses. “It’s not a business for those with a weak heart or a weak wallet,” said FC Dallas President and CEO Doug Quinn, former president of Soccer United Marketing. “Individuals who are looking for short-term gains and don’t have a strategic benefit lined out for [these matches] are wasting their time.”
Plenty of groups appear willing to take the risk, though. This year, more than 60 games featuring international clubs will be played on American soil. The absence of UEFA’s World Cup and European Football Championships means more premier European clubs will come to the United States to play. Of the 18 MLS teams, 15 will host international opponents this year. MLS clubs pay the appearance and promotional fees for their own individual matches against foreign teams, although Soccer United Marketing can choose to take on partial risk in those matches. SUM’s involvement is generally reserved for matches against marquee opponents.
Games range in size, stature and target demographic. The game between Mexican clubs Atlas and Cruz Azul, which was to be played Sunday at San Jose State University’s Spartan Stadium, is organized by Marquez Brothers, a manufacturer of Mexican food products. The Manchester United-FC Barcelona match, which is part of the World Football Challenge series, is organized by the two major players in the space, CAA Sports and SUM.
The partnership between CAA and SUM has added significant clout to the World Football Challenge, which CAA started in 2009. This year, the WFC encompasses 14 games and features Man U, Barcelona, Juventus, Real Madrid, Club America and Chivas de Guadalajara playing at major venues such as Gillette Stadium, Los Angeles Memorial Coliseum and Cowboys Stadium.
The WFC also represents a major turning point in the relationship between CAA and SUM, which formerly operated as rivals in the U.S. soccer space. The inaugural 2009 Challenge was seen as a direct competitor to SUM’s Gold Cup and FC Barcelona tour.
“It definitely felt like a rivalry, even though we worked with CAA with different properties, [such as] music and entertainment,” said Tom Payne, president of the Los Angeles Galaxy. “I think the difference this summer is that [the WFC] has become too big to do on your own.”
CAA did not hold the WFC in 2010 because of the FIFA World Cup, and instead partnered with SUM to bring Manchester United on a U.S. tour. The success of that tour led the two groups to partner in 2011 to bring back the WFC and incorporate MLS teams into the mix.
“The Manchester United tour was a success, and the WFC is a natural evolution for CAA and us,” said Will Wilson, executive vice president of international business with SUM. “Bringing MLS teams into the tournament has been a central focus.”
Before 2005, major European clubs favored playing Mexican squads over MLS teams during trips to the U.S., saying that the domestic teams lacked the skill level to compete. That, too, has changed. During this year’s WFC, Manchester United plays the New England Revolution and Chicago Fire, Manchester City plays the Vancouver Whitecaps and Los Angeles Galaxy, and Real Madrid plays the Galaxy and Philadelphia Union. “This is a way to communicate that MLS is not an inferior league,” said Nick Sakiewicz, CEO of the Philadelphia Union. “And it’s a way to expose [MLS] to fans of international soccer.”
Sources familiar with the WFC say the tournament makes financial sense for both parties. SUM brings its relationships with FC Barcelona and Chivas de Guadalajara to the table, as well as its corporate and venue relationships, and its depth of North American soccer contacts. This year, the WFC will be televised on Univision, ESPN and ESPN Deportes. The WFC games were included in ESPN’s MLS rights package. The tournament’s corporate partners include both longtime MLS partners — including event title sponsor Herbalife, Adidas, American Airlines, AT&T, Pepsi and Volkswagen — as well as non-MLS partners Bridgestone, securities firm Incapital, video game manufacturer Konami and Lowe’s. According to sources familiar with the tournament, stand-alone WFC partnerships are valued in the mid- to high six figures.
“Over the last seven years, we’ve seen consistency with [international games], which enables our partners to plan,” said David Wright, vice president of global sponsorship for SUM.
CAA brings its relationship with Manchester United and other top European clubs to the partnership. It also brings Charlie Stillitano, arguably the man with the most experience in hosting foreign clubs and one with strong relationships with the world’s biggest teams. Stillitano’s ChampionsWorld series was the first effort to bring major European club teams to play in the United States with regularity. Champions-World launched in 2000, and by 2003 was filling stadiums across the country with international matches. But the company filed for bankruptcy in 2005, and Stillitano’s former partners are suing U.S. Soccer and MLS, alleging that the 9 percent to 20 percent of gross ticket revenue fee charged by U.S. Soccer damaged its business and broke antitrust laws. The case could go to court in the fall.
Stillitano said the partnership with SUM has helped mitigate much of the risk associated with the games, but skyrocketing team appearance fees, he said, continue to drive the cost of the international matches. The fees, Stillitano said, shifted the business during the years he operated ChampionsWorld.
“Teams are charging more, U.S. Soccer is charging you, so the only way to do it was to bring in sponsors and create a national TV platform,” Stillitano said. “The model used to be [about] ticket sales. Now there is real TV and sponsor money.”
Other sources confirmed that the appearance fees for even midlevel European clubs have become prohibitive to individual promoters and even MLS teams looking for one-off matches. Cheaper Mexican rivals, such as Tigres and Pumas, will play for $10,000 to $50,000. While the Mexican teams may not fill football stadiums, they do provide good business in soccer-specific stadiums.
“It’s irrational at this point how much money these clubs want guaranteed,” said a team source. “We’ve turned down games because there’s no way we can make money on that.”
Laurent Colette, CMO for FC Barcelona, said the fees are based on market value for the team and that U.S. promoters are in competition with other promoters in Asia, who pay handsomely to host the squad. In 2008, the club signed a five-year deal with SUM that included six games to be played in the U.S. Colette said the relationship with SUM is more about expanding its brand in the U.S. than generating revenue from appearance fees.
“I think in the last 10 years we have seen the U.S. become a key market, and we hope this continues,” Colette said. “We are delighted to go [to the U.S.] every two years or so to further our relationships.”
Kevin Payne, president and CEO for D.C. United, said MLS teams and SUM should focus on solidifying those relationships in order to create a better business model. Most of the international games are one-offs, Payne said, something that does not promote growth into areas such as player sharing or development. In addition, the European teams confirm games late in the process, he said, which affects sponsorship and ticket sales. “There are no long-term relationships,” Payne said. “Everyone has the best intentions, but we haven’t gone beyond playing friendly games.”
Payne said the inability of MLS clubs to forge meaningful relationships with European teams leads him to believe the international games are more about appearance fees than brand extension. “Most of them talk about wanting to extend relationships here, but the end of the day, it’s about short-term money,” Payne said.
The legacy of the 2011 World Football Challenge could be the strengthening of the relationships between top European clubs and MLS teams, as well as the creation of a profitable business model for the major international promoters.
Whether the business of bringing international clubs to the U.S. becomes a sustainable industry or remains tied to brand building for local clubs is open for debate.
But it’s clear that the strategy of bringing the world’s top clubs to play in the United States has become more advanced since Toye’s day, when American teams held the games to drum up local interest. In the 1970s, Toye chose the foreign opponents based more on the ethnic background of the host cities than on the visiting club’s name. The Polish national team, for example, might draw tens of thousands in Chicago but would be a dud in Boston; Peruvian teams drew crowds in Paterson, N.J.
“It was all based on nationality; nobody cared about Manchester United or Liverpool,” Toye said. “I wanted those people from country X to come out and enjoy themselves so maybe they’d come back and watch my team.”