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Volume 20 No. 42

In Depth

If everything comes together for Major League Soccer this year, the league will announce a second team in the New York market to begin play in 2016, receive a $100 million expansion fee for the franchise, finalize a deal for a $300 million soccer stadium in Queens, and introduce an extravagantly wealthy group as the owners of the club.

Going four-for-four and establishing the league’s 20th franchise would be a landmark step for MLS, which has come a long way since 2002, when it contracted franchises in Miami and Tampa Bay, and AEG owned six of its 10 teams.

The growing interest in soccer in New York was obvious in December when the Red Bulls helped open recreational soccer fields in Brooklyn.
Photo by: Getty Images
Still, MLS officials caution that more work needs to be done before any official announcements can be made. For now, the league is hesitant to talk about specifics.

MLS declined to make Commissioner Don Garber available for this story to speak about the issues surrounding his attempt to have a second club in the New York market.

In an email, MLS President Mark Abbott shared only the league’s view of why it wants another team in the New York area and what it is looking for in an owner for the franchise.

“We look at a wide variety of criteria when evaluating potential expansion teams, but the most important measures are a committed ownership group, a comprehensive stadium plan where the ownership controls the venue, and an appropriate market that is attractive to our partners, has the right geographic location and has a history of strong fan support for soccer matches and other sporting events,” Abbott wrote. “New York certainly fits all of our key criteria, and we believe another team in the New York area will build upon the momentum the Red Bulls have and ultimately create one of soccer’s great rivalries.”

According to an industry source, the Abu Dhabi United Group, which owns Manchester City of the English Premier League, is the front-runner to own MLS’s second New York franchise.

The group, led by Sheikh Mansour bin Zayed Al Nahyan, purchased Manchester City in 2008 and immediately spent money to upgrade the roster. Manchester City won the EPL championship in 2012 and is established as a perennial title contender with rival Manchester United.

Representatives from the Abu Dhabi United Group and Manchester City did not respond to requests for comment. Citingleague policy, MLS declined to comment on prospective owners.

With a personal wealth estimated at more than $5 billion, Mansour would have no trouble paying MLS’s $100 million franchise fee established for the new club in New York. The $100 million would more than double the highest expansion fees ever paid to MLS. The league’s most recent expansion teams in Vancouver, Montreal and Toronto each paid $40 million.

According to Dan Courtemanche, executive vice president of communications for MLS, “multiple” groups approached the league about buying the second New York franchise and were not discouraged by the $100 million fee. Courtemanche declined to reveal the names of any bidders.

Steve Horowitz, a partner in the New York investment firm Inner Circle Sports, has been involved in six MLS franchise transactions, including the sale last summer of D.C. United to Indonesian businessman Erick Thohir, and is currently representing an MLS team looking for investment. Horowitz said the potential for a new standard in MLS expansion fees is not a surprise.

“We may just look back on the $100 million expansion fee for a team in New York City as a steal,” Horowitz said.
“We’ve seen rapid growth in the price of MLS franchises over the past three years. There are many driving factors, beyond the increase in popularity of soccer in the U.S. It’s not a big reach to think that the next domestic television contract will be meaningfully higher than the present one.”

The New York Cosmos, once considered a top candidate to become MLS’s second club in New York, appear to be out of the running.

The New York Cosmos have passed on MLS for now, but still hope to build a 25,000-seat stadium in Elmont, N.Y.
Photo by: New York Cosmos
The Cosmos, a legendary brand from its Pelé-led championship days of the late 1970s, were revived in 2011 by an ownership group led by Saudi Arabia-based Sela Sport and Chairman Seamus O’Brien. After several discussions with Garber were fruitless, the Cosmos announced last July that they would join the North American Soccer League — considered the second-tier soccer league in North America.

“Instead of paying $100 million to 19 clubs owned by men good and true, I’m sure, for the pleasure of being MLS’s 20th team, we decided that actually wasn’t very appealing,” O’Brien said during an interview at the Cosmos’ executive offices in downtown Manhattan. “If we are going to spend $100 million, we want to invest it in our own assets.”

According to soccer insiders, the average fee for an expansion club in the NASL is $2 million. The NASL, which will have 10 franchises by 2014 and a goal of having 18 by 2018, does not have a salary cap and places no restrictions on club licensing.

The Cosmos, which own the rights to Pelé’s name on its merchandise in perpetuity, undoubtedly would benefit from the higher profile of MLS, but have the potential to make more money out of the gate in the NASL because of the lower expansion fee and unrestricted licensing.

Although four new MLS clubs have roots in the NASL — Seattle, Portland, Vancouver and Montreal — it appears unlikely that the Cosmos will become the MLS franchise at the Queens site. O’Brien accepts that fate.

“I’ve got no problem with Don [Garber] and MLS wanting to get big bucks in the big city,” O’Brien said. “As investors, we thought the NASL ownership model allows us to build the most sustainable business. Good luck to MLS, but we still feel the Cosmos can be America’s global team. That remains our vision.”

The Cosmos begin play in August at 13,000-seat Shuart Stadium on the campus of Hofstra University while attempting to complete a deal with Nassau County for a 25,000-seat soccer stadium adjacent to Belmont Park in Elmont, N.Y.

That site is no more than a 20-minute drive from where MLS hopes to build a stadium in Flushing Meadows-Corona Park in Queens, near the New York Mets’ Citi Field and the USTA Billie Jean King National Tennis Center, site of the U.S. Open. It is difficult to envision that area going from having no soccer stadiums to two state-of-the-art facilities in a short time — including one for the Cosmos, competing in a league below MLS.

MLS continues to meet with community groups about the 13-acre site in Flushing Meadows-Corona Park. So far,

opposition has been minimal.

Risa Heller, MLS’s spokeswoman for the Queens stadium project, said she did not expect community opposition to hinder the completion of a deal. “We’ve done hundreds of meetings with park users, local electeds, community groups and everyone in between. We plan to continue to do these meetings.”

Heller said it would be impossible to put a timetable on the process. “All I can say is we are committed to Queens and feel very optimistic,” she said.

Julie Wood, a spokeswoman for New York City Mayor Michael Bloomberg, said the city is “100 percent” behind MLS’s efforts to build a stadium in Flushing Meadows-Corona Park. Before focusing on Queens, the city and MLS considered many sites in New York City, including Randall’s Island, East Harlem and Pier 40 in lower Manhattan.

“This major private investment in Queens would create thousands of quality jobs in an area of the city where economic activity is badly needed,” Wood said.

MLS envisions its second New York club as a rival to the New York Red Bulls, who play in Red Bull Arena in Harrison, N.J.
Photo by: Getty Images
SHoP Architects, the New York firm that designed the Barclays Center in Brooklyn, has been chosen by MLS to be the architect of the proposed stadium in Queens.

MLS envisions its second New York club as a rival to the New York Red Bulls, who play in Red Bull Arena in Harrison, N.J. — just 34 miles from the proposed site in Queens.

In an interview in November on Fox Soccer, Jerome de Bontin, the first-year sporting director of the Red Bulls, was not supportive of MLS’s plans for a team so close to his, suggesting the league would be better off considering expansion to Minnesota, Atlanta and Florida.

Whether the Red Bulls heard from Garber about their public reluctance is unknown, but de Bontin has since softened his stance.

Asked for comment about the proposed second MLS club for New York, de Bontin pointed out that his focus was on building the Red Bulls into a contender and on his team’s efforts in raising soccer’s profile in North America.
Said de Bontin: “We will welcome another team in New York, if it does come to fruition.”

With the 2013 Major League Soccer season opening, six club presidents took the time to share their thoughts on some of the major issues surrounding their teams and the league. Here are highlights of what they had to say to SportsBusiness Journal MLS writer Christopher Botta.

What are the biggest challenges in your markets?

Manning: Two things for us in Salt Lake: keeping up in the revenue race with the bigger market teams and fielding a team that any year can win a championship.

David: We need to recover Chivas USA’s identity in the Hispanic market in Southern California and get the true soccer aficionados back at a time when parts of the economy are still struggling.

Bilello: We’ve been trying for years to get a project off the ground around Boston. Right now [in Gillette Stadium], we’re about 40 miles outside of Boston. If you look at how strong MLS has become, a lot of that growth has taken place in urban soccer stadiums with the young-adult demographic. We are still in a football stadium. Wanting to be in the city makes the process more difficult and expensive, but it’s really important for the team and the sport in Boston.

Hinchey: With the Rapids, we have a beautiful stadium [Dick’s Sporting Goods Park] that’s just 7 miles from Denver. But there’s a perception that it’s difficult to get there. That perception is wrong, and we’re in the process of changing it.

Kaval: Completing our new stadium for its opening in 2014 will enable us to launch the Earthquakes as a real major league franchise. We haven’t had our own home [San Jose has been playing at 10,000-seat Buck Shaw Stadium at Santa Clara University]. Getting our stadium up, building our fan base and fielding a competitive team are our major objectives.

Canetti: We’re just 7 years old, so I’d say simply trying to grow the game. We’ve got a lot of momentum in Houston, with a new stadium, strong sales and a winning team. It’s a constant quest to continue to win and grow the fan base.

How many season-ticket holders do you have? Are season tickets a tough sell for your club?

Kaval: We expect to double our season-ticket base when we move into the new stadium next year, but we have 5,000 heading into our last season at Buck Shaw. Keep in mind, at the old stadium we don’t have a lot of amenities that drive

Dave Kaval is looking forward to 2014 when the San Jose Earthquakes will be moving into their new stadium, where the club can offer fans more options and amenities.
Photo by: San Jose Earthquakes
season tickets.

Bilello: The Revolution will have between 4,000 to 5,000 at the start of this season, a little down from last year. When our stadium project is done, we don’t anticipate any problems selling tickets. In the interim, we’re investing a lot in customer service to show how we keep people happy.

Manning: I understand why the final teams without new stadiums want one. Before we opened Rio Tinto Stadium [in October 2008], we had 4,000 season-ticket holders. We will pass 10,000 this season in Salt Lake after having exactly 8,754 last season. The updated numbers are always on my desk. That’s how closely I stay on top of it.

Hinchey: The Rapids have gone from 1,900 to 4,000 over the last two years. We’re not where we want to be, but it’s a start. We’re not giving tickets away and we’re going to build up value with our team performance and customer service.

David: Chivas USA has 2,500 season-ticket holders. The sports market in L.A. is very competitive with the baseball and basketball teams. Many of our fans tell us they find it difficult to commit for a whole season. But with the soccer experience we plan on delivering, with a new roster and coach, that will add full and partial-plan holders as the season goes on.

Canetti: Season tickets are the backbone of our business. The good news for the Dynamo is we doubled our sales going to BBVA Compass Stadium last year. We should be at 12,000 season tickets this season.

What are the next big steps the league has to take to reach Commissioner Don Garber’s stated goal of being one of the world’s top soccer leagues by 2022?

Hinchey: We have to not lose sight that this is a long-term process.

David: We have to make soccer a bigger part in the lives of every citizen in this country. The potential is there, especially with the new generation of soccer players coming from our academies.

Bilello: The goal of 2022 is only nine years away, and kids in the academies now are going to be in the league by then.

Manning: The next television contract will be a big part of the equation [MLS’s three-year deal with NBC expires in 2014]. Just look at where we were in 2002, having contracted two teams, versus where we are now. Night and day. Now think about where we’ll be at this rate in nine years.

Kaval: Continued creative promotion of the game and league is essential. There’s a lot of competition out there for the entertainment dollar.

Television ratings are up, but not near where you want them to be. Agree?

Kaval: Who knows if by 2022, television ratings will even be the proper metric? Here in Silicon Valley, half the people in the Earthquakes’ office don’t even have cable or dish. They consume things through the Internet. With our young fans in MLS, we might have an even greater opportunity to stake out the digital area than other leagues.

Hinchey: At our quarterly presidents meetings, TV and digital numbers are a big part of the discussion. We’re seeing advances. People watching U.S. Open golf on NBC last summer saw regular plugs for the Rapids’ game against Philadelphia the next week. MLS has never had promotion like that before. It’s only going to get better with NBC also having the Premier League this year, too [see related story, Page 23].

Canetti: The Dynamo had a road game last season against the Revolution that went head-to-head with an Astros-Rangers interleague game. We beat them in the ratings. TV ratings locally and nationally will continue to climb.

Bilello: The ratings for the World Cup and other soccer properties show what this country is capable of. We’ll get there.

Do you think MLS should expand?

Kaval: We’ve seen the NBA and NHL, where they expanded and had some problem franchises. I know Don Garber understands this. Getting to 24 teams instead of the more typical 30 could be the way to go.

Colorado Rapids President Tim Hinchey (left) welcomed new head coach Oscar Pareja last year. Hinchey thinks 24 will eventually be the magic number of franchises for MLS.
Photo by: Getty Images
Hinchey: Twenty, to me, like the Premier League, feels like a good number for the near future, with 24 being the perfect total after we address the hole in the Southeast that we have.

Manning: As a native New Yorker, I’d love to see that team in Queens. Minneapolis would make for a good rivalry for us in Salt Lake. In the south, Orlando is worth exploring again.

Bilello: One more team in the short term would be great from a scheduling standpoint since we currently have an odd number of teams [19]. I’m sure we’ll look at other markets, but I don’t expect to see a lot of expansion in the near future.

Does MLS need another David Beckham?

David: At Chivas USA, we really need to develop our own stars and my belief is that now should primarily be the case for the league, too.

Canetti: I’m not sure there’s another one like David Beckham, who has the ability to transcend the soccer community and reach the pop culture marketplace. If there is another Beckham out there, we’d love to have him. But I wouldn’t say it is a need at this point to drive league business.

Kaval: With Beckham leaving for Paris Saint-Germain [in France’s Ligue 1], I feel like MLS closed one chapter on

soccer in America about bringing a European superstar here and seeing the impact he had. We’ve moved on to a new chapter, which to me is about what’s going on with the rabid support in the Pacific Northwest. Communities supporting their soccer teams at that high a level is more important than anything that one superstar brings.

Is your team profitable?

Canetti: The new stadium had a dramatic impact on our business in Houston. We saw huge increases in revenue, while our costs were under control. It put us into profitability. The plan is to stay that way and invest some of that profit back on the field.

David: I just got to Chivas USA in October, so I cannot tell you much about the past. But our new ownership is committed and resourceful. We will get on the road to being profitable.

Kaval: I can’t give specifics, but I can tell you the Earthquakes’ revenues have increased each of the last three years. We couldn’t generate enough revenue, even with selling all our seats at the current stadium. But we justified the new stadium with regular sellouts. When we get to the new stadium in 2014, we plan on being profitable.

Manning: Before taxes and debt service, Real Salt Lake is profitable. After that, we’re not. We expect, in the next year or two, to be completely cash-flow positive. We’re in the last year of a jersey deal, and the market has gone up considerably the last few years. That’s an area we see great opportunity in.

Scoring goals

Seattle Sounders: Led the league last season in average attendance (43,144) — 20,000 more than the second-place

The Seattle Sounders continue to be a crowd pleaser.
Photo by: Getty Images
Los Angeles Galaxy. The club starts the 2013 season with more than 31,000 season-ticket holders.

■ Portland Timbers: Seattle’s fiercest rival played to 106 percent capacity last season and has a waiting list of more than 8,000 prospective season-ticket accounts.

■ Los Angeles Galaxy: The two-time defending MLS Cup champions averaged 23,136 fans last season. The club reports that new ticket sales are up, even with the departure of David Beckham. With parent company AEG for sale, the Galaxy could command more than any club in MLS.

Yellow cards

■ Chivas USA: New ownership hopes that a move to a roster with a deep Hispanic influence will improve the on- and off-the pitch fortunes of a team that averaged a league-low 13,056 fans last season, down 12 percent from 2011.

Toronto FC has given fans plenty to vent about.
Photo by: Getty Images

■ Toronto FC: New President Kevin Payne must build a winner soon in Ontario. The club’s losing ways resulted in a 10 percent dip at the box office last season. To win fans back, Toronto FC reverted season-ticket prices back to 2007 prices — the first year of the club.

■ D.C. United: Average attendance last season fell 9 percent. D.C. United faces the same dilemma as another big-market franchise in the East, the New England Revolution. It must get out of its old football stadium (RFK) and into the soccer-specific venue every other MLS club has or will soon.

NBC believes that Major League Soccer’s television presence will benefit this season from the network’s deal to broadcast English Premier League games.

“What’s good for the goose is good for the gander,” said Jon Miller, president of programming for NBC Sports and NBC Sports Network. “We will promote our MLS games during our Premier League coverage. We’ll also look to schedule MLS games after EPL games. It will be good for everybody.”

NBC Sports Network will air 38 MLS regular-season games, while NBC will broadcast three.
Photo by: Getty Images
MLS is in the second season of its three-year deal with NBC. Last October, NBC signed a three-year deal with the EPL for $83 million per season. Miller said NBC has an aggressive plan for the EPL that the network expects to announce in the next month. The 2013 EPL season starts in August.

NBC Sports Network will air 38 MLS regular-season games, while NBC will broadcast three. Last season, NBC averaged 521,000 viewers for its three MLS telecasts, while NBC Sports Network averaged 125,000 viewers over 40 telecasts. The 125,000 figure was more than double the viewership on Fox Soccer in 2011, but Fox Soccer is available in roughly 40 million fewer homes than NBC Sports Network.

In addition to the broadcast on NBC’s networks, ESPN will air eight MLS regular-season games and ESPN2 will have 13. Last season, 13 of the 25 MLS matches shown on ESPN or ESPN2 were seen by more than 300,000 viewers.
UniMas, the Univision network formerly known as Telefutura, will broadcast 25 MLS games in Spanish this season.

While they wait for a possible bump from their EPL coverage, NBC and NBC Sports Network are placing their hopes on Rivalry Weekend, a complete day of MLS programming set for March 16. New York will face D.C. United on NBC, followed by Sporting KC-Chicago and Seattle-Portland on NBC Sports Network.

After play-by-play announcer Arlo White, analyst Kyle Martino and host Russ Thaler work the first game in New York, they will travel to NBC Sports Group studios in Stamford, Conn., to host studio shows on NBC Sports Network around the later games.

“It will be our first ‘whip-around’ programming,” said MLS President Mark Abbott. “We believe our supporters will really embrace it.”

Said NBC’s Miller: “As [NBC executive producer] Sam Flood says, ‘Hate sells.’ Rivalries sell.”

Miller said the rivalry games have been promoted in print, online and broadcast campaigns since the beginning of February.

Pierre Moossa, NBC Sports Group’s coordinating producer for soccer programming, said NBC does not plan many production changes from a year ago. “It’s a great game,” Moossa said. “We’re about executing the basics.”

Moossa said MLS clubs were very cooperative in handling NBC’s request for access and interviews. “The clubs learned the nuances of how we like to cover the game. It was a good first season, and now we’re ready to build on it.”