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U.S. Soccer, a World Cup Dud, Sustains Pro League With TV Deals
World Cup Ratings up 55% in US
July 7 (Bloomberg) -- Major League Soccer has learned not to count on stellar World Cup performances by the U.S. national team to sell the sport at home and add kick to its bottom line.
In 2002, when the unprofitable league folded two franchises, MLS Commissioner Don Garber heard the English-language U.S. television rights to the 2002 and 2006 World Cups might be bought on the cheap. Garber, 48, created a subsidiary, Soccer United Marketing, that paid $40 million for the TV package, then negotiated a deal to show the games on Walt Disney Co.'s ABC and ESPN channels.
His long-term goal was to be the sole marketing agent for all things soccer in the U.S. In the last two years, MLS says it has benefited from an infusion of $1 billion, including expansion fees and investment in new stadiums. Soccer United Marketing, or SUM, sells TV and arena ads and signed a 10-year, $150 million sponsorship agreement with apparel maker Adidas AG.
While nine of its 12 teams still lose money, MLS may have found a formula to stay afloat while investing in its future.
``All the indicators are there to suggest soccer is ready to grow in the U.S.,'' says Scott Guglielmino, vice president of programming at ESPN. ``Ratings are up, and MLS has done a nice job adding stadiums and sponsors.''
The U.S. audience for World Cup on ESPN is up 55 percent this year from the 2002 games, with the average match reaching about 1.6 million households. ABC ratings increased 108 percent to an average 2.77 million households.
Turning a Profit
MLS spokesman Dan Courtemanche says SUM expects to turn a profit from the World Cup broadcasts, though he declined to say how much. ABC and ESPN last year outbid News Corp.'s Fox network to buy the U.S. English-language rights to the 2010 and 2014 World Cup for $100 million -- two and a half times what SUM paid for 2002 and 2006.
For MLS matches, the average number of U.S. households tuned in on ESPN2 grew to 203,336 per match in 2005, up from 154,236 in 2002.
SUM, whose slogan is ``One Sport. One Company,'' now holds various commercial rights to the MLS, the U.S. men's and women's national teams, the Mexican national team's games in the U.S., and the eight-team Mexican club tournament InterLiga.
It also promoted the U.S. tour last year by Spain's Real Madrid team. And it is currently negotiating with ABC and ESPN for its first TV rights agreement to MLS matches after 11 years in business.
Future TV Contracts
Doug Quinn, 44, president of SUM, estimates the New York- based company will gain about $200 million in the next eight years from contracts with ABC and ESPN; Los Angeles-based Univision Communications Inc., the Spanish-language TV network; and Dallas-based HDNet, the high-definition TV production company.
``SUM helped launch us into an entirely different level of respect and credibility,'' says Garber, the league commissioner. ``It's raised the commercial value of the sport in this country. MLS is one of the boats in a rising tide.''
The league says it has eight soccer-specific stadiums, valued at $800 million, already built or scheduled for completion by the end of 2008. By owning venues, team owners can increase revenue from stadium ads, parking, concessions and non-match events. Now, they pay rent at oversized football stadiums and receive little ancillary revenue.
Garber says that if expenses can be kept in check, stadium income might be the difference between profitable MLS teams and money-losing ones. He declined to disclose the league's total revenue or SUM's contribution. Quinn says SUM is profitable and is funding the short- to mid-term growth of MLS.
Two Losses, One Tie
That growth might have gotten a bounce if the U.S. team had advanced beyond the group stage of this year's World Cup in Germany, where Italy will face France in the championship match July 9. The Americans flew home last month after two losses and a tie.
Major League Soccer started play in 1996, 11 years after its forerunner, the North American Soccer League, failed.
MLS began with owners that included Philip Anschutz, the billionaire entrepreneur and former chairman of Southern Pacific Railroad Corp. who owns soccer teams in Los Angeles, Chicago, Washington and Houston; Lamar Hunt, the oilman who owns the National Football League's Kansas City Chiefs and MLS teams in Dallas, Columbus, Ohio, and Kansas City, Missouri; and Robert Kraft, the paper-products millionaire who owns the NFL's New England Patriots and soccer's New England Revolution.
Chivas USA
In the last two years, the MLS has sold teams to Jorge Vergara Madrigal, founder of closely held Grupo Omnilife SA, a consumer products maker in Mexico, who also owns the Mexican Soccer League team Club Deportivo Guadalajara; Maple Leaf Sports & Entertainment, which owns the National Hockey League's Toronto Maple Leafs and the National Basketball Association's Toronto Raptors; and Lew Wolff and John Fisher, owners of Major League Baseball's Oakland Athletics.
Vergara owns the Club Deportivo Chivas USA team, which plays home matches at the Home Depot Center in Carson, California, near Long Beach. Maple Leaf Sports bought the expansion Toronto FC, which will begin play next season. Wolff and Fisher purchased a three-year option to start a team in the San Francisco area in 2008 or 2009.
Last year, closely held Red Bull GmbH, based in Fuschl am See, Austria, bought the MLS's New York MetroStars for $25 million, then spent $75 million more for ownership and naming rights to the team's soccer-specific stadium in Harrison, New Jersey, which will open in late 2008. Red Bull renamed the team the Red Bulls after its namesake energy beverage.
Expansion Fee Doubles
With demand for franchises rising, the MLS says it has doubled its expansion fee to $30 million for teams created after May 26. Average match attendance has hovered around 15,000 for the past four years.
MLS sponsors include Anheuser-Busch Cos.' Budweiser beer, Honda Motor Co., RadioShack Corp., PepsiCo Inc.'s Gatorade brand and Matsushita Electric Industrial Co.'s Panasonic brand.
SUM has succeeded by offering one-stop shopping for soccer marketing. In 2004, Adidas, based in Herzogenaurach, Germany, bought the exclusive right to sell MLS league- and team-branded products, plus a prominent advertising position in telecasts of the current World Cup.
Chris McGuire, soccer marketing director at Adidas U.S., says the company's sale of licensed products is projected to increase 400 percent this year from 2005.
``The deal will pay for itself,'' McGuire says. ``But we want more than that. The idea is to build the sport in America, to take it mainstream and build soccer icons. Sales will follow.''
18 Million Participants
He says Adidas sells $350 million to $375 million of soccer products in the U.S. annually. With about 18 million people playing the game in the U.S., Adidas says it wants to at least double sales by 2014.
``That's a conservative figure,'' McGuire says. ``We got here early, and we'll reap a lot of the benefits as time goes on. But we have to grow the sport.''
That may mean paying big money for high-priced international stars to build a mass audience. MLS payrolls run about $2 million per team. By comparison, the U.K. team Chelsea paid $145 million in team salaries during the 2004-2005 season.
`Solid Revenue'
Paul Swangard, managing director of the University of Oregon's Warsaw Sports Marketing Center in Eugene, says U.S. fans are too quick to compare the MLS to the world's other premier leagues, some of which were unprofitable for decades.
``You don't have to be Nike to be successful in the apparel business,'' says Swangard. ``You can be a good solid revenue producing enterprise, and that's OK.''
Quinn says SUM was created to ``prop up soccer'' in the U.S. until it could stabilize itself.
``Now, when we say we are turning the corner, it's not just hope,'' he says. ``We have economics to back it up.''
To contact the reporter on this story:
Curtis Eichelberger in Washington at
ceichelberge@bloomberg.net
U.S. Soccer, a World Cup Dud, Sustains Pro League With TV Deals
World Cup Ratings up 55% in US
July 7 (Bloomberg) -- Major League Soccer has learned not to count on stellar World Cup performances by the U.S. national team to sell the sport at home and add kick to its bottom line.
In 2002, when the unprofitable league folded two franchises, MLS Commissioner Don Garber heard the English-language U.S. television rights to the 2002 and 2006 World Cups might be bought on the cheap. Garber, 48, created a subsidiary, Soccer United Marketing, that paid $40 million for the TV package, then negotiated a deal to show the games on Walt Disney Co.'s ABC and ESPN channels.
His long-term goal was to be the sole marketing agent for all things soccer in the U.S. In the last two years, MLS says it has benefited from an infusion of $1 billion, including expansion fees and investment in new stadiums. Soccer United Marketing, or SUM, sells TV and arena ads and signed a 10-year, $150 million sponsorship agreement with apparel maker Adidas AG.
While nine of its 12 teams still lose money, MLS may have found a formula to stay afloat while investing in its future.
``All the indicators are there to suggest soccer is ready to grow in the U.S.,'' says Scott Guglielmino, vice president of programming at ESPN. ``Ratings are up, and MLS has done a nice job adding stadiums and sponsors.''
The U.S. audience for World Cup on ESPN is up 55 percent this year from the 2002 games, with the average match reaching about 1.6 million households. ABC ratings increased 108 percent to an average 2.77 million households.
Turning a Profit
MLS spokesman Dan Courtemanche says SUM expects to turn a profit from the World Cup broadcasts, though he declined to say how much. ABC and ESPN last year outbid News Corp.'s Fox network to buy the U.S. English-language rights to the 2010 and 2014 World Cup for $100 million -- two and a half times what SUM paid for 2002 and 2006.
For MLS matches, the average number of U.S. households tuned in on ESPN2 grew to 203,336 per match in 2005, up from 154,236 in 2002.
SUM, whose slogan is ``One Sport. One Company,'' now holds various commercial rights to the MLS, the U.S. men's and women's national teams, the Mexican national team's games in the U.S., and the eight-team Mexican club tournament InterLiga.
It also promoted the U.S. tour last year by Spain's Real Madrid team. And it is currently negotiating with ABC and ESPN for its first TV rights agreement to MLS matches after 11 years in business.
Future TV Contracts
Doug Quinn, 44, president of SUM, estimates the New York- based company will gain about $200 million in the next eight years from contracts with ABC and ESPN; Los Angeles-based Univision Communications Inc., the Spanish-language TV network; and Dallas-based HDNet, the high-definition TV production company.
``SUM helped launch us into an entirely different level of respect and credibility,'' says Garber, the league commissioner. ``It's raised the commercial value of the sport in this country. MLS is one of the boats in a rising tide.''
The league says it has eight soccer-specific stadiums, valued at $800 million, already built or scheduled for completion by the end of 2008. By owning venues, team owners can increase revenue from stadium ads, parking, concessions and non-match events. Now, they pay rent at oversized football stadiums and receive little ancillary revenue.
Garber says that if expenses can be kept in check, stadium income might be the difference between profitable MLS teams and money-losing ones. He declined to disclose the league's total revenue or SUM's contribution. Quinn says SUM is profitable and is funding the short- to mid-term growth of MLS.
Two Losses, One Tie
That growth might have gotten a bounce if the U.S. team had advanced beyond the group stage of this year's World Cup in Germany, where Italy will face France in the championship match July 9. The Americans flew home last month after two losses and a tie.
Major League Soccer started play in 1996, 11 years after its forerunner, the North American Soccer League, failed.
MLS began with owners that included Philip Anschutz, the billionaire entrepreneur and former chairman of Southern Pacific Railroad Corp. who owns soccer teams in Los Angeles, Chicago, Washington and Houston; Lamar Hunt, the oilman who owns the National Football League's Kansas City Chiefs and MLS teams in Dallas, Columbus, Ohio, and Kansas City, Missouri; and Robert Kraft, the paper-products millionaire who owns the NFL's New England Patriots and soccer's New England Revolution.
Chivas USA
In the last two years, the MLS has sold teams to Jorge Vergara Madrigal, founder of closely held Grupo Omnilife SA, a consumer products maker in Mexico, who also owns the Mexican Soccer League team Club Deportivo Guadalajara; Maple Leaf Sports & Entertainment, which owns the National Hockey League's Toronto Maple Leafs and the National Basketball Association's Toronto Raptors; and Lew Wolff and John Fisher, owners of Major League Baseball's Oakland Athletics.
Vergara owns the Club Deportivo Chivas USA team, which plays home matches at the Home Depot Center in Carson, California, near Long Beach. Maple Leaf Sports bought the expansion Toronto FC, which will begin play next season. Wolff and Fisher purchased a three-year option to start a team in the San Francisco area in 2008 or 2009.
Last year, closely held Red Bull GmbH, based in Fuschl am See, Austria, bought the MLS's New York MetroStars for $25 million, then spent $75 million more for ownership and naming rights to the team's soccer-specific stadium in Harrison, New Jersey, which will open in late 2008. Red Bull renamed the team the Red Bulls after its namesake energy beverage.
Expansion Fee Doubles
With demand for franchises rising, the MLS says it has doubled its expansion fee to $30 million for teams created after May 26. Average match attendance has hovered around 15,000 for the past four years.
MLS sponsors include Anheuser-Busch Cos.' Budweiser beer, Honda Motor Co., RadioShack Corp., PepsiCo Inc.'s Gatorade brand and Matsushita Electric Industrial Co.'s Panasonic brand.
SUM has succeeded by offering one-stop shopping for soccer marketing. In 2004, Adidas, based in Herzogenaurach, Germany, bought the exclusive right to sell MLS league- and team-branded products, plus a prominent advertising position in telecasts of the current World Cup.
Chris McGuire, soccer marketing director at Adidas U.S., says the company's sale of licensed products is projected to increase 400 percent this year from 2005.
``The deal will pay for itself,'' McGuire says. ``But we want more than that. The idea is to build the sport in America, to take it mainstream and build soccer icons. Sales will follow.''
18 Million Participants
He says Adidas sells $350 million to $375 million of soccer products in the U.S. annually. With about 18 million people playing the game in the U.S., Adidas says it wants to at least double sales by 2014.
``That's a conservative figure,'' McGuire says. ``We got here early, and we'll reap a lot of the benefits as time goes on. But we have to grow the sport.''
That may mean paying big money for high-priced international stars to build a mass audience. MLS payrolls run about $2 million per team. By comparison, the U.K. team Chelsea paid $145 million in team salaries during the 2004-2005 season.
`Solid Revenue'
Paul Swangard, managing director of the University of Oregon's Warsaw Sports Marketing Center in Eugene, says U.S. fans are too quick to compare the MLS to the world's other premier leagues, some of which were unprofitable for decades.
``You don't have to be Nike to be successful in the apparel business,'' says Swangard. ``You can be a good solid revenue producing enterprise, and that's OK.''
Quinn says SUM was created to ``prop up soccer'' in the U.S. until it could stabilize itself.
``Now, when we say we are turning the corner, it's not just hope,'' he says. ``We have economics to back it up.''
To contact the reporter on this story:
Curtis Eichelberger in Washington at
ceichelberge@bloomberg.net