Why Sepp Blatter is right about Major League Soccer

Sepp

If you have read my blog(s) in the past you know that I love MLS, but I am one of the first to say that the current path they are on is growth at snails pace.  I question many things the league does, and so when the head of FIFA says to Al Jazeera:

“There is no very strong professional league (in the U.S.), They have just the MLS but they have no professional leagues which are recognized by the American society.”

Full interview here

A lot of people take offense, I understand that as many players, coaches, media members and fans have poured a lot of blood, sweat, and tears into the league in the last 17 years, I count myself as one of them.  They are wrong to take offense, they should instead read that quote and demand answers, demand better, and demand accountability.

People quickly jump to say that MLS has grown and this year had over 6 million fans show up at matches this year, they are right but one has to look at where that growth has really come from.  First growth has come from expansion, we added another team in 2012, the Montreal Impact and they brought with them home attendance of just under 400,000 in their first year.

Growth has also come as a result of the Seattle Sounders, over 730,000 of the 6 million fans to attend MLS matches last year were at CenturyLink Field, their average of over 43 K per match puts them with the top soccer teams in the world when it comes to attendance.

There is also the 34 match schedule, adding more matches in the last two years than at any time in MLS history.  So yes when you have more teams playing and more matches scheduled your attendance will go up.  But read what Blatter said once again, he didn’t say MLS wasn’t growing, he said there was no strong professional league.

So I can not claim to know what Sepp Blatter means when he says that, but I can tell you what he might be looking at when he makes that type of statement.

First, understand that at 330 plus million people the United States is one of the largest nations on the planet, and our annual spend on sports is estimated at about 442 billion dollars (source: Top Business Degrees)  Now to be fair not all of that is on professional sports but let’s take a look at those numbers:

  • The NFL is the daddy of sports in the US with revenues of $9 billion dollars a year, a profit of $1 billion dollars a year.  The average NFL franchise is worth a cool $1 billion dollars.
  • Major League Baseball, generates $7.2 billion dollars in revenue a year, and posts a profit of $494 million a season.  The average MLB franchise is worth $523 million dollars.
  • The NBA, generates $4.1 billion dollars a year in revenue but has a low relative profit of just $183 million dollar a year.  The average franchise is worth $369 million dollars
  • The NHL, given all their issues over the last decade, including their current season being impacted by labor issues, still has an average of generating $3 billion dollars in revenue, and has posted an average profit of $160 million dollars.  Franchise value average is $228 million dollars

So when the head of the international soccer federation questions MLS’s impact on the larger sports market these are the things he is talking about.  Now we know that MLS is a private entity that keeps their numbers close to their chest, but we can pull some data out of various places.

  • Tickets – MLS announced that attendance broke 6 million for the first time in league history, we know traditionally that about 80% of tickets are actually paid for and in 2009 that ticket prices averaged out to about $24 per ticket.  So if we say that MLS sold 5 million tickets at $24 a pop – ticket revenue would equal about $120 million for 2012.
  • Internal MLS numbers show that in 2008 the league created just under $65 million dollars from sponsorships – naming rights, jerseys, stadiums and I am willing to say the league has done well in this area and bump them up to $100 million for 2012
  • Beyond that it is hard to find any type of numbers but we do know based on the data that the Portland Timbers used in 2009 as part of their stadium plan was that they expected revenue of between $14-15 million dollars each of their first 5 years in the league (tickets, suites, concessions, merchandise, advertising, and other streams).  They also estimated their expenses to bet between $9-10 million each of those first five years. That is before dealing with the League Capital Call (where MLS makes teams pay into the collective pot) which was estimated at $3.1 million a year and before they get the distribution from SUM (their share of collective revenues) estimated at $1.6 million per year.  Those numbers fairly well matched the numbers released by Forbes in 2007.
  • We know that MLS has seen some growth since then and I am willing to give MLS a big bump in the numbers from then, in large part due to the Sounders and several teams moving into their new stadiums.  I think it is fair to estimate that league average for revenue is now probably about $20 million dollars per team.  We still don’t know how many teams are operating at a profit in 2007 it was just 3 and I would estimate we probably are now around 6-7 (Seattle, Toronto, Philly, Portland, RSL, Vancouver,??), last year the L.A. Times reported that fewer than 1/3 of MLS teams were profitable (Source: SDB)

So if we even give each MLS an average income of $25 million dollars a year, we still don’t come close to generating $500 million in annual revenue as a league.  A far shot from the NHL and NBA.

This is why Sepp can make a comment like he did, on the landscape of American sports MLS is a blip on the radar and nothing more.  We are told that more kids now play youth soccer than any other sport, that soccer is the 2nd most popular sport with teens, and slow and steady growth will get us there.  Globally we know that soccer has a 43% share of the sports market, the NFL accounts for just 13% worldwide (source: ATKearny)

So in the market that spends over $400 billion a year on sports, where the top 4 leagues generate a total of over $23 billion in revenue, MLS is a non-factor.  On TV, MLS is a non factor with an average viewership of 311K on ESPN, out of their 98 million household, out of the 330 million people that live in the US.   In the $7 billion dollars the networks dish out for TV rights each year, our $20 million is a non-factor.  Our $100 million in sponsorship revenue is a non factor in the total $6.4 billion dollars total.

I could go on all day with those numbers, but everyone who says Blatter is wrong look at just one number, average attendance.  Great, we have a good gate at most of our stadiums, but it is all local.  We know there are a few markets out there that like MLS and don’t have teams, we see that in the TV numbers, but the majority of TV viewership comes from cities with teams.  The harsh reality is that MLS doesn’t make a ripple on the sports market in the US, in revenue, in TV ratings, it can’t even compare to the NCAA football teams in the same markets, let alone the other pro sports teams.  We don’t have to like it, but trying to deny that what Sepp Blatter said is correct, is like spitting into the wind, you may feel successful for a second or two but then you end up with a face full of spit.

So I say don’t get mad at Sepp Blatter, get mad at MLS.  I get that some believe that the slow growth policy is the way to go, but I don’t.  It had it’s time, but we have seen that MLS can be a huge hit locally, now we must establish it as a success nationally if we want to see our league become one of the top soccer leagues in the world.  It won’t happen with a $3 million dollar a year salary cap that grows at less than 5% a year, it won’t happen with .20 TV ratings,  it won’t happen as long as top US athletes who know the league minimum salary in MLS is 40K, and 375K in the NFL 473K in the NBA, and 525K in the NHL, they will go where the money is.

It won’t happen as long as MLS is looked at as inferior to other leagues around the world, the US sports fan wants the best, the best football is the NFL, the best basketball is the NBA, the best baseball is the MLB, the best hockey (when they play) is the NHL, until the best soccer is the MLS, casual sports fans in the US will not pay much attention to it.

It won’t happen as long as we shoot the messenger.  We are buying into a bill of goods that reminds me of the ”The Emperor’s New Clothes”, we have a league with dedicated people, dedicated fans, but if you really think that in 10 years time at the current pace that MLS will be a top league in the world or matter to the casual sports fan in the US, well good luck with that.

That’s How I See It.

11 comments

  1. JRP says:

    I appreciate the perspective. Don’t agree with it in the slightest. We have a damn fine league for 17 years in. In 40 we will have one of the top 10 leagues in the world but these things take time.
    But my main beef is your inability to comprehend basic statistic principles. The wisest adage in reporting is “follow the money.” And to follow the money you need to understand stats. Don’t go projecting or estimating revenues if you don’t know stats.
    That doesn’t mean you shouldn’t try. Just try harder.

    • admin says:

      Follow the numbers, really who else is talking about the numbers of MLS? Everyone is saying MLS is doing just great, based on a single number, a single stat which is attendance. I give you that MLS attendance is up, of course I also tell you that most of the growth comes from adding teams, adding more matches, and the incredible success of the Sounders. That success is part of the problem, everyone sees the local success of attendance, which in many MLS markets is a 80/20 mix of paid and comped tickets. There is no national impact by MLS, which is why you don’t have 10 markets with real offers on the table to get new teams (lots of talk but very little offers), it is why MLS itself has to spend money on getting NY2 going, it is why there are nothing as far as national TV ratings. MLS for 17 years has had national TV ratings that are a joke, those numbers will never lead to a big TV deal. Please find any other blog or mainstream media folks actually using real numbers from both MLS’s internal documents as well as the very few public documents with numbers in them.

      You may want to go back and read my posts about TV numbers and Attendance, plenty of numbers and stats there. If we continue down the same path for 40 years we will have a league that has a salary cap of $9 million dollars per team (based on current increases of 4.5-5.0% per year) those numbers barely will keep pace with inflation, and in 40 years we will have a league that still has no footprint outside of local markets, which is exactly what Sepp said was the problem.

      Please tell me what you think will make MLS a top league in 40 years (remember Don Garber has promised that by 2022, just 9 years away).

      • JRP says:

        If it is so messed up, what do you plan on doing about it? What are your plans for increasing fan base and revenue?
        I think a column saying everyone is looking at the stats with rose colored glasses is appropriate.
        But you are throwing around numbers without an understanding of what they mean. Average ticket price is a stat you can get, but you can’t project total revenues based on it with any sense of accuracy. Because tickets aren’t gold and don’t increase in value incrementally by the ounce. The interval at which they increase is irregular. So an average doesn’t mean squat.
        Nobody else does follow the money. I thank you for trying. But be careful. You can make the points you are making without pretending to draw conclusions you shouldn’t be drawing. Don’t be so sensitive or I will start calling you IvesSL. I appreciate your posts.

        • admin says:

          I pulled the average ticket price from the latest reported data, and of course you can project the revenue from them when the attendance numbers are made. If you sell 1 million of something that has an average price of $25 you can easily say that the revenue generated by selling it will be $25 million, that is the whole point of having an average price.

          While I have ideas on how to grow the league, and that post is coming (probably Friday) the reality is that it isn’t up to me to run MLS, that job is given to Don Garber. I can however question what direction we are on, based on the reality of what we know. The conclusions draw themselves, people may not like them, just like they may not like what Blatter said, but to question the accuracy of his statement by using the, “Well yes we do matter” without having any statistical proof of that is simply pride speaking. I get it, a lot of people have invested a lot of time, energy, money, and passion into MLS, and being told by the head of worldwide soccer that it isn’t working the way it was expected or should be, it a tough pill to swallow. Nobody likes to be told they are un-successful, but until someone can produce a single thing that says that MLS is a strong national league that is recognized by the larger American Society, then we have to suck it up and deal with the facts.

          As long as MLS refuses any type of transparency (their right as private company), then we are left to speculate based on the numbers that are made public or that we have access to. If we as fans of MLS want things to improve at a pace faster than what we have seen over the last 10 years, which in reality has been growth in the local markets by expansion and little else, as evidenced by TV numbers. Then we can either defend the league that thinks it will be relevant to casual sports fans by paying David Beckham more than the payroll of two teams full of players, and parading him out on Oprah, and the Tonight Show, well we only have to look at the TV ratings for his farewell match from MLS in which barely 1 million people watched him win his second championship. That number represents less than 1/3 of 1 percent of our population – the very point Sepp was making.

          Not at all sensitive about it, I love that you are passionate about what you believe, I simply ask this. If you are going to be critical of how I connect the dot’s or how I use “a x b = c” then please explain how that formula is wrong. Yes there are tickets that have different values but that is why the league measures them as an average, so using their numbers is really the only way you can get to anything close to an estimated amount of the revenue they are going to raise via them.

  2. Kevin says:

    Screw all those stats. Bottom line: It’s only been 18 years since MLS was founded and it is in the most competitive sports market in the world, by far. MLS is doing just fine (and I’ve been a supporter since ’96, and of the NASL before that). I am very pleased with our progress.

    I couldn’t possibly disagree with you more.

    • admin says:

      You don’t have to agree with me, but you can’t ignore the numbers. You can be happy with the progress that MLS has made in 18 years or you can believe like Sepp Blatter that in the largest sports market in the world the growth should be more. Blatter himself said that growth here will take time, but trying to say that MLS in 18 years has ingrained itself on the larger sports society of the US or is relevant on a national level in the US is just kidding yourself. More people in the US watch Liga MX than watch MLS, yes more people in the US watch Mexican League Soccer than watch MLS, more people watch the little league World Series than watched the MLS Cup final (you know David Beckham’s farewell match). So you can be happy with MLS is, there is nothing wrong with that and at a local level it is doing just fine, but it will never grow into a real national league until some things change, and without it making an impact on the national level there will be limited growth (expansion).

  3. admin says:

    So I kinda laughed as I read some of the reactions to Blatter’s comments. First you get ESPN, you know the network that has treated MLS like crap for a decade. They toss out this nugget:
    The league’s regular season attendance seems to belie Blatter’s contentions, as the average has increased from 15,504 in 2006 to 17,872 in 2011 and a record 18,807 this year.

    They are right, in 6 years the league has improved their average attendance by 3,003 people per match. Of course if you happen to subtract the Seattle Sounders from the equation, guess what half of the growth goes away. Then growth is 17,455. Or average of under 2,000 fans or a bump of about 350 people per year, not exactly amazing growth.

    ESPN then goes on to quote a bunch of things Blatter has said in the past that weren’t part of the interview in question, but they miss the point and perhaps nobody is in a better place to speak to what Sepp said than ESPN. He made the statement that MLS isn’t recognized by American society, with an average of 377K viewers of MLS matches broadcast on ESPN’s networks we see that their isn’t a national following of MLS.

  4. tdg says:

    I apologize ahead of time for the epistle…

    I’m a bit torn. On the one hand I agree with you and Sepp to a point. It does seem like after ~17 years MLS should be more established in the U.S. The slow growth is a bit frustrating in a Veruca Salt, “I want it now!” world. When you throw in U.S./Canada population numbers, then yes it really doesn’t make any sense why the league isn’t bigger than it is.

    On the other hand, there are more issues here to factor in that I don’t always think are taken in to consideration. First, how many other countries have 4 professional sports leagues that are considered top-flight in the world? How many countries have collegiate sports that can be just as popular as their professional counterparts? Then throw in all of the minor leagues of the above professional sports and it’s easy to see how the 350 million combined U.S./Canada citizens can be pulled in multiple directions.

    Next, it’s only been ~17 years. The other major leagues have had years to establish themselves in our market. The NFL began in 1920 with 11 teams. The NBA began in 1946 with 11 teams. The NHL started in 1917 with 4 teams. MLB started in (depending where you want to say they started) 1869 with 1 team! Were any of those leagues major hits when they first began? Unfortunately, these things take time (and progressive commissioners with owners who have millions of dollars to throw around without worrying about the consequences).

    Last, if we struggle competing against different sports that are well established here at home, how are we supposed to compete with world leagues in our same sport with the same characteristics of the above professional leagues? Was that supposed to happen overnight? I assume that answer is coming in your follow up post.

    All the above said, I can definitely see the argument for both sides. Yes, attendance numbers are going up. Yes, the numbers are a bit skewed when you look deeper at them. Yes, it is frustrating that the league is not growing as fast as most think it should. Yes, it would be nice if we could compete with the “big boys”. Yes, MLS probably needs a “David Stern” type commissioner to help expand globally.

    But for a league that had to contract 2 teams and restructure their approach financially almost 12 years ago, they could be in a worse place don’t you think? Just some thoughts that were rattling around in my head that needed to come out. I look forward to your upcoming post on Friday.

  5. Alain S.Levi says:

    Congratulations on the way you see the whole cenario.
    I’m representing a Brazilian Entertainment Group interested in invest on the US Soccer Market more specifically in South Florida
    Do you think we could share experiences or even hire you as a consultant?
    Regards,
    Alain S. Levi
    asl@motivare.com.br
    twitter : @asl_h888
    skype: asl1818
    Linkedin : Alain S. Levi

  6. Jadrian says:

    I’m really interested in looking at average ticket prices for clubs, especially some historical prices to see how they compare. If you have that information (or know where I can get it), let me know!

    thanks!

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