SBJ/Feb. 24-March 2, 2014/In Depth

Can MLS reach new heights?

Team leaders have a frank discussion on what the league must do to stand out among passionate soccer fans.

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As Major League Soccer prepares to open its 19th season in early March — a season that includes a two-week summer break for the FIFA World Cup in Brazil, SportsBusiness Journal conducted a roundtable discussion with five representatives of club ownership.

The executives were frank in sharing their opinions on the financial state of the league, television rights deals, the impact of the English Premier League’s popularity on MLS, expansion and the expensive player acquisitions made in the offseason.

Here are highlights of the discussion, led by SBJ soccer writer Christopher Botta:


SBJ: Heading into the 2014 season, what do you view as Major League Soccer’s strongest asset?


TIM LEIWEKE, MLSE: It’s the level of play. Look at what Seattle, Philly, L.A. and others have done, and what we’re trying to do in Toronto. Look at the talent coming into the league and look at the development of the players coming through our academies. This is a league that 20 years ago no one in the rest of the world or in the sports industry paid attention to. I absolutely believe that this season is going to be a watershed moment for us because of the product on the pitch, the anticipation of our players going to Brazil for the World Cup, and because of the amount of players on the U.S. men’s national team that are now playing in our league.

NICK SAKIEWICZ, PHILADELPHIA UNION: Tim and I have been in this league since day one, and I’d have to agree with him on the quality of play. When you look at where we were 18, 19 years ago, the conversations that we are having now — the reverence and respect that we are getting from our counterparts in the rest of the world — illustrate that we’ve come far. People in the big leagues in England, Spain, Italy and Germany are taking a hard look at MLS and view it as a future powerhouse league.

ADRIAN HANAUER, SEATTLE SOUNDERS FC: The strength of ownership, the increasing passion of our fans, and the relevance in our markets. The league has grown a massive amount in the last 10 years, and I feel it’s going to continue in that direction.

MERRITT PAULSON, PORTLAND TIMBERS: I would add the vibrant supporters culture in MLS. It’s a key differentiator for us. It’s a fundamentally different spectator experience. It’s a show in itself and there’s nothing like it in the other sports leagues in North America.

SBJ: What is the biggest challenge currently facing MLS? In what areas does the league need to take the next step?

Merritt Paulson, owner and president of the Portland Timbers, said: “The number of soccer fans in the U.S. is staggering, but MLS now needs to win the hearts and minds of a larger share of those fans.”
Photo by: Getty Images
ANTHONY PRECOURT, COLUMBUS CREW:
Growing our fan base is No. 1. Soccer is increasingly relevant in the U.S. and ESPN polls are showing that only soccer is behind the NFL in engaging young people. We need to increase our popularity locally and nationally, and I suspect our future television deal will play a part in that.

PAULSON: The number of soccer fans in the U.S. is staggering, but MLS now needs to win the hearts and minds of a larger share of those fans. We’re doing that in raising the quality of play and need to do that by growing our national TV ratings.

HANAUER: Also, every February and March, every fan in Major League Soccer has legitimate hope that they can win the championship. Parity plays a big part in keeping our fans excited and engaged from March through the playoffs eight months later.

LEIWEKE: That wasn’t always the case because, years ago, maybe four or five clubs had the best shot at the title because only they were really committed to doing what it takes. But now, look at this year: Just about every club has a chance to win because their ownerships are making the investments.

SBJ: In what areas does your club ask for or need support from the league office?

SAKIEWICZ: We look to the league office for assistance in the area of player development. All of the teams have
Said Nick Sakiewicz, CEO and operating patner of the Philadelphia Union, “The league is losing money because there has been massive investment in stadium and front office infrastructure, in practice facilities, in academies. The league is still in its formative stages and not fully mature.”
Photo by: Greg Carroccio / Sideline Photos
invested heavily in their youth academies. We’re seeing some bright talent coming through. The league is going to be helpful in guiding us in securing that talent and keeping it here in the U.S. But make no mistake: Foreign clubs are looking at these players. Many of those clubs have full-time scouts here. It will be a challenge to keep the players in our own backyard.

■ SBJ: What do you see as the keys to growing the fan base in MLS?

LEIWEKE: If you look at the NHL, NBA, NFL and MLB, most of the best players in the world are here, but that’s not the case in MLS. That presents a unique challenge. In soccer, there are many great leagues. Trying to compete with the EPL when they have a huge TV deal, or Serie A or the Bundesliga is difficult. But we’re making great strides. Not too long ago, we were probably viewed as the 20th best soccer league in the world. We fought hard and scratched hard to be one of the 12 best leagues in the world. Now people around the world view MLS as one of the top 10, maybe top six leagues in the world. Our attendance, our sponsorship, our ownership, our competitive level of play … it all bodes well for us becoming a dominant league. That will translate to better TV ratings and to people buying more tickets.

HANAUER: I would add one piece: the fan experience when they come to our buildings.

PAULSON: A lot has been made of the success we’ve had with Seattle in the Pacific Northwest, but look at Sporting Kansas City winning the championship in the Midwest. Philadelphia has strong support, Real Salt Lake, Toronto and many others.

SBJ: What are you seeing from your local TV rights deals? Many teams in the other major pro leagues are seeing big increases. Is the potential there for your clubs?

SAKIEWICZ: In Philly, we feel good about our ratings story. We had a 47 percent improvement last season over the previous year. We have awesome partnerships with our local ABC affiliate and with Comcast. We see it coming. We’re anticipating that in the next few years, we’ll be able to turn the corner on local TV. A big part of it is getting youngsters to watch.

Columbus Crew owner Anthony Precourt said his club still has a long way to go before it’s profitable.
Photo by: Columbus Crew
PRECOURT:
That’s something we’re working on in Columbus. I can’t really speak about it now, but we hope to have some positive news in the near future.

LEIWEKE: We’re a little unique, since our club is owned by the two distributors — Rogers and Bell. But they’re aware that Toronto FC is going to have a higher level of interest than in the past. We’re seeing good signs. TSN is going to spend the last week of Jermain Defoe’s time in the EPL following him with Tottenham. Sportsnet is talking about spending a lot of time following Michael Bradley at the World Cup. Above and beyond rights fees is the amount of media buzz that we now have around the team.

SBJ: With New York City FC and Orlando City joining in 2015 and plans to have 24 clubs in the near future, what are your thoughts on expansion? Any concerns about it being too much, too soon?

PAULSON: The league has gotten expansion right. We need to be in more markets to drive national ratings. I’m glad we’re going to be in the Southeast; we were the only major league that didn’t have a presence there. NYCFC, the second team in New York — with Manchester City and the Yankees investing, you know they’re going to build something spectacular there. I’m not worried about dilution of talent. There’s a global market for players and we’re doing a better job as a league developing our own players.

LEIWEKE: Montreal, Vancouver and Portland (which joined the league in the years around Toronto FC’s debut) all kicked our ass. I’m not worried about expansion. Many of the new teams, quite frankly, have been more competitive than some of the teams that have been in MLS a long time.

HANAUER: The league has expanded strategically and carefully, as I can assure you, having been in the room when it is discussed.

PRECOURT: And don’t forget David Beckham, who will have a franchise in Miami and bring a global profile and a very strong investor group. If he can get a stadium deal done, Miami is a very attractive market.

SBJ: There have been several major player acquisitions across the league in the last six months, including at least one by every club represented in this roundtable. Is that all positive for the league, or could it lead to some negatives — like an imbalance in spending?

HANAUER: You can’t have enough great players in the league. You can sometimes get player acquisitions wrong, so it’s risky to spend enormous amounts of money on players from other parts of the world who haven’t experienced MLS. But it’s the risk you have to take to improve the quality of your product and drive eyeballs to the television and people to the stadium.

SAKIEWICZ: The quality of play is paramount, but each club has a different definition of what quality is to them. It was great to see during this offseason how teams made decisions based on their own needs. Tim needed to do what he did in Toronto and it’s given him great success. Teams are taking control and making calculated decisions.

PAULSON: You’ve got to get the guy who made the splashy decisions to weigh in. It’s been a big Leiweke offseason (Toronto FC signed Michael Bradley and Jermain Defoe for six years each for close to a combined $100 million, including transfer fees).

SBJ: Tim, did you monitor the reaction to your big signings?
Tim Leiweke, president and CEO of MLSE, said: “I’m not worried about expansion. Many of the new teams, quite frankly, have been more competitive than some of the teams that have been in MLS a long time.”
Photo by: Joe Bielaski


LEIWEKE: My monitor was 17,000 season tickets in three weeks. That’s all that matters. We got about $3 million in new sponsorship already. We held off on asking people to renew until mid-January. We just closed the books on renewals and came in at 96 percent. We had a lot of years where we took from our fans. Ultimately, did we spend more than we expected to? Yes. When a Michael Bradley walks in the door, it’s like E.F. Hutton — you listen. We found a way to get it done. We know there’s no way that, for this season, it makes economic sense. But we’re looking to expand our stadium (from 21,000) to 30,000 seats and my guess is — looking at our waiting list — we could average 30,000 this season if we only had the room.

PRECOURT: I said publicly that I was thrilled that Michael Bradley came back to our league, and some of our supporters were surprised I would say that about a rival club. But in a single-entity structure, sometimes you are cheering for your partners. We’re in a smaller market in Columbus, so we won’t mirror what’s done in New York, Los Angeles or Toronto. We can look at best practices by clubs like Kansas City, Houston and Real Salt Lake, which have all had a lot of success on and off the pitch.

Seattle Sounders co-owner and general manager Adrian Hanauer said parity among the league's clubs keeps fans excited and engaged throughout the season.
Photo by: Seattle Sounders
SBJ: Soccer is drawing a lot of attention in the U.S. with the upcoming World Cup and the wall-to-wall coverage NBC has given to the English Premier League (to large ratings). Are you ever concerned that these outside forces, while positive for the game, could put MLS in the shadows?


SAKIEWICZ: It’s tremendous that there’s never been more soccer coverage in the U.S. because it allows the discerning fan to make a comparison between leagues. The feedback from our fans in Philadelphia is that, because of all the attention being paid to soccer, the Union has become even more relevant. The fans come to PPL Park, and they’re having a great experience — in some cases, a better experience than the fans have in some of the top leagues in Europe.

PAULSON: I agree with Nick that it feeds the soccer following. But I will point out that the Premier League coverage has become destination viewing, in set windows and very well-promoted by NBC. It’s essential that in our national broadcasts — and this is a key element of the new deals we’re working on — that MLS does a better job of really carving out defined telecast windows and promoting those windows. Right now, the broadcasters (NBC and ESPN, with their deals expiring after this season) have 100 percent control on scheduling. There are not a lot of promotional requirements baked into the deals. That needs to change.

SBJ: Don Garber said recently that the league is losing $75 million to $100 million a year. What was your reaction to that?

PAULSON: It’s very accurate. There’s a balance that happens in every league. The reality is that the league is
losing what it’s losing. There are a lot of strong trends and there has been a lot of great growth, but there’s more work to be done.

PRECOURT: As the newest guy with a seat at the table, I will acknowledge that we are losing money in Columbus and at the league level. When we purchased the club, we improved the fan experience — upgraded our seating, our scoreboard, locker rooms and training facility. Our promise to our partners and fans was to run a major league franchise, so I can say that we have a long way to go before we are profitable.

SAKIEWICZ: It’s very important for folks to understand that we’re only going into our 19th season as a league. The league is losing money because there has been massive investment in stadium and front office infrastructure, in practice facilities, in academies. The league is still in its formative stages and not fully mature. Ownership is still building the pillars that this league will stand on for decades to come. Ultimately, that investment will pay off.

LEIWEKE: The single-entity concept is why we have survived. Without it, I believe the league could have disappeared twice. A partnership between the players and owners has given us financial predictability, which is why you see clubs like Kansas City and Salt Lake competing for the championship last year. That has to continue. We need competitive balance and the predictability of our costs going forward, because I believe we are on the verge of greatness here.

GAUGING INTEREST IN MLS

At a news conference with MLS Commissioner Don Garber this month , soccer star David Beckham confirmed that he has exercised his option to buy an MLS expansion franchise in Miami. Among U.S. markets that do not currently have an MLS team, Scarborough Sports Marketing research shows that Miami has the highest percentage of fans who say they are “very interested” or “somewhat interested” in the league. Markets shown in bold already have an MLS franchise.

RANK MARKET FAN BASE
1 Seattle-Tacoma 15.7%
2 Los Angeles 14.1%
3 Kansas City 12.6%
4 Miami-Fort Lauderdale^ 12.5%
5 Harlingen-Weslaco-Brownsville-McAllen, Texas 12.2%
6 El Paso, Texas 12.0%
7 Houston 11.6%
8 Salt Lake City 11.0%
9 Portland 10.6%
10 Bakersfield, Calif. 10.5%
11t San Francisco-Oakland-San Jose 10.1%
11t Tucson, Ariz. 10.1%
13 San Diego 9.8%
14 Washington, D.C. 9.7%
15 Dallas-Fort Worth 9.5%
16 New York* 9.2%
17 Fresno-Visalia, Calif. 9.0%
18 Las Vegas 8.4%
19 Orlando-Daytona Beach-Melbourne, Fla.* 8.2%
20 Albuquerque-Santa Fe, N.M. 8.1%
21 Boston 8.0%
22t Hartford-New Haven, Conn. 7.9%
22t Austin, Texas 7.9%
24 Philadelphia 7.7%
25 San Antonio 7.5%
26t Denver 7.4%
26t Raleigh-Durham 7.4%
28t Sacramento-Stockton-Modesto 7.2%
28t Colorado Springs-Pueblo, Colo. 7.2%
28t Providence, R.I.-New Bedford, Mass. 7.2%
28t Albany-Schenectady-Troy, N.Y. 7.2%
28t Chicago 7.2%
33t Tampa-St. Petersburg 7.1%
33t Baltimore 7.1%
35 Oklahoma City 6.9%
36 Atlanta 6.8%
37 Columbus 6.6%
38 Phoenix 6.5%
39 Jacksonville 6.4%
40 Spokane, Wash. 6.2%

Note: Scarborough does not measure the Montreal, Toronto and Vancouver markets, each of which has an MLS club.^ Possible future market* Future expansion marketSource: Scarborough Sports Marketing USA+ 2013 Release 1

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