MLS Commissioner Don Garber issued a State of the League address prior to the MLS Cup final in Atlanta earlier this month, where he confirmed plans to revamp the league’s playoff format, announced intentions to become more of a “selling” league and vowed to explore expansion beyond 28 clubs.
- Beginning next season, the MLS post-season will transition to a single-elimination tournament (think: NCAA tournament). Previously, the semi-finals and finals would each consist of 2 legs, with each club hosting one game.
- With MLS Academy players electing to sign lucrative contracts overseas, Garber wants to see MLS clubs collect training compensation and solidarity payments (see: a share of the transfer fee for a player they helped develop). As it currently stands, the U.S. Soccer Federation does not abide by FIFA player transfer rules and thus are not fiscally rewarded when a player leaves to play for an international club.
- Cincinnati (’19), Nashville (’20), Miami (’20) and Austin (by ’21) have already been given franchises and Garber said the league would award its 28th club (assuming Columbus remains) in 2019; Sacramento, St. Louis, Detroit, Charlotte, Phoenix are among those under consideration. Conversations about further expansion are currently being had as Garber believes without a “doubt in my mind” that the “country can support having more than 28 teams.”
Howie Long-Short: The U.S. sports fan doesn’t grasp the concept of a side advancing on goal differential (we’ve been told “you play to win the game”), so increasing the importance of the regular season (by eliminating the home and home series) and moving towards a single elimination bracket is long overdue. Ratification of the league’s playoff format will also allow MLS to finish its season uninterrupted before FIFA’s November international break.
Garber’s change in philosophy re: the sale of homegrown stars is significant. MLS has long operated like the NFL, NBA and MLB do in terms of working to retain America’s biggest stars, but unlike those leagues, MLS doesn’t provide domestic top-tier talent with the highest level of competition or the financial resources to stay and thus maintains “a different dynamic in the global game.” Team financials have dictated that it’s simply too costly to develop and retain stars, so “selling players” seems like a necessity if the goal is to grow team revenues; unless the league can dramatically increase the value of its television contracts.
MLS’ decision to “sell” its best players is financially driven, so it’s worth asking what that decision will do to the on-field product. If the league becomes just a “seller”, it’ll never progress from the #5 to #3 sport in the U.S.; American’s simply aren’t interested in anything less than the highest level of competition. But, if MLS can successfully operate as both a “buyer” and a “seller” (like English soccer) then its clubs will have the financial resources (see: increased salary cap) required to build their rosters (beyond designated players) and the quality of league completion will improve. The trick though, will be to remain more of a “buyer” than a “seller”; a necessity to appease the fan base.
At 28 clubs, MLS is the largest top flight league in the world (of course, it doesn’t have promotion/relegation either). While it’s easy to understand why MLS would be interested in continuing to add teams (see: $150 million expansion fees), it’s reasonable to wonder if Garber is overselling the potential for expansion; 14/23 teams lost money in ’18 and no team made more than $6 million (Galaxy, Sounders). I asked Steve Horowitz, a partner at Inner Circle Sports, a leading sports investment bank with experience handling MLS and European soccer club transactions, if he thought the country “could support” further expansion?
Steve: The in-stadium experience is as strong as it’s ever been with record attendance throughout the league. New markets Atlanta, Minneapolis and LA FC are all having great success. Right now, it’s about investment; investments in the training facilities, investments in stadiums and investments in players. Clubs are setting the table for 5 years, 10 years, 20 years from now when that investment can be harvested, so I’m less concerned about the short-term losses as long as the league can continue to improve on the field relative to the rest of the world. Competition wise, with further expansion will come a dilution in talent, but that’s where the investment is going; to make sure more Americans will fill the rosters and to ensure they can continue supplementing them with international players.
Fan Marino: 2018 was a banner year for MLS. On average, clubs grew revenue +7.5% YoY (to $34.6 million), as the league set a record for paid attendance (7.4 million) and its 23 teams recorded a new high for the average price of a ticket sold ($30).
According to Forbes, MLS club valuations increased +7.6% YoY (to +/- $240 million). That said, Forbes valuations are historically conservative (see: controlling interest in D.C. United sold at +64% premium). Atlanta is the league’s most valuable franchise, worth an estimated $330 million; they also won the ’18 MLS Cup Championship and lead the league in attendance (53,000) this season.
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