SBJ/July 24-30, 2017/Leagues and Governing Bodies

MLS rebuffs rich offer tied to relegation

MP & Silva would pay $4B for 10-year global media rights deal, but league isn’t interested

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MLS quietly rebuffed a bold offer that would have quadrupled its media rights fees a full six years before those rights even came to market.

There was one catch to the offer. And it was a big one. The league would have had to put a promotion/relegation system in place — the same system that makes up the backbone of most global soccer leagues.

Such a contingency, which was made last month by international media company MP & Silva Group, would doom any media rights offer regardless of the price. MLS Commissioner Don Garber has long been on record as saying that the league has no interest in promotion/relegation, where MLS’s worst two or three teams leave for the NASL to be replaced the next season by the NASL’s top two or three teams.

With the league seeking $150 million for each of the four expansion teams it’s currently evaluating, it’s unthinkable that any prospective MLS owner would pay that much for a team that would face the possibility of relegation, as any relegated club stands to lose millions in revenue.

Recently, though, MP & Silva Group tried to entice Garber and MLS owners to change their mind through a huge influx of cash for the league’s worldwide rights from 2023-32, after its current deals with ESPN, Fox Sports and Univision end.

MLS quickly dismissed the offer.

“As Commissioner Garber stated in his letter to Mr. Silva, we are not in a position, nor are we interested in engaging with Mr. Silva on his proposal,” said Dan Courtemanche, MLS executive vice president of communications.

Promotion/relegation was the focus of a June 26 meeting at MLS’s New York office, when MP & Silva Group founding partner Riccardo Silva told a group of MLS executives and owners that he would pay $4 billion to pick up the league’s worldwide media rights — including the U.S. and Canada — for 10 years, an average of $400 million per year. That huge payout — nearly four times higher than the league takes in today for media rights — was contingent on MLS adopting a promotion/relegation system with MLS, NASL and USL. MP & Silva then would have turned around and sold those rights to TV companies in the U.S. and around the world.

MP & Silva is well known in the global media rights world. It sold MLS’s international rights from 2008-14, after which MLS replaced the company with IMG. Its owner also stands to benefit greatly from promotion/relegation, as Silva is a co-owner of the NASL soccer team Miami FC and has been a consistent critic of MLS’s current structure.

Currently, ESPN and Fox split MLS’s English-language domestic rights for $75 million per year. Univision pays another $15 million per year for Spanish-language rights. So the league, now bringing in an average of $90 million per year in domestic rights only, would experience a huge media rights increase under MP & Silva’s plan.

SportsBusiness Journal obtained a letter Silva sent to Garber on July 13 that spelled out the proposed deal and detailed how added media revenue can help drive the league’s growth.

“This is a message that I have repeated over recent weeks in conversation with a number of MLS owners … all of whom share a passion for the growth of soccer in the U.S.,” Silva wrote.

Those owners or team executives, who were cc’d on the letter, included: Handy Soetedjo and Erick Thohir (D.C. United); Flavio Augusto da Silva (Orlando City); Tom Fox (San Jose); Brian Bilello and Jonathan Kraft (New England); and Ferran Soriano and Jon Patricof (NYC FC).

In the letter, Silva cited the viewpoint that promotion/relegation tends to drive fan interest among teams in the bottom of the standings, as they fight to keep from getting relegated.

“I believe that MLS would be the major beneficiaries of an open, meritocratic system because it would stimulate greater fan interest, excitement, quality and engagement in the domestic game,” Silva wrote. “As a result, greater commercial revenues would flow not just to MLS and MLS club owners but also to all tiers of the U.S. soccer pyramid.”

Regardless, MP & Silva’s bid is evidence of the increased interest in MLS and provides an early indicator that rights fees may continue to increase.

The global sales agency indicated its offer remained on the table.

“If MLS, its owners and other key stakeholders are open to further discussion, MP & Silva would be pleased to begin a dialogue at a suitable time and, subject to our board approval, to submit a formal offer in the appropriate way,” the letter continued.

But don’t look for any change from MLS, as Garber has said consistently the league remains committed to its current structure.

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