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MLS business model is being eyed by European leagues
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 By
Robert Wagman
SoccerTimes
WASHINGTON, D.C. (Saturday. March 4, 2006) -- This past week or
so, I saw a number of unrelated sports business items that taken
together reinforce that Major League Soccer is doing many things
right.
MLS will kick off its 11th season in April. While league finances
are as closely guarded a secret as the list of Central Intelligence
Agency operatives in the Middle East, from every indication, MLS
has turned a corner financially. When the league started, it was
met with dire predictions of failure. But, while entering its second
decade, operating profits might still be in the future, stadiums
have been, or are being built, in a number of cities, the league
is on course in its expansion plans and, most importantly, the whole
operation is taking on the appearance of permanence.
Back to the items I have seen that led me to think about MLS's
success in establishing itself and controlling its finances.
The Manchester City football club in England has been around since
1894. While it is not one of the giant clubs of world soccer, it
certainly is representative of the established teams of Europe.
This past week, Man. City released its financial statement for last
year. It was very proud of the fact that, as opposed to the past
several years, last year it made a profit!
But digging into the statement shows this profit is a bit illusory.
On income of just under $50 million, the team suffered an operating
loss of $5.6 million and a pre-tax loss on all operations of $15.6
million. It was able to announce an overall profit because of income
from five rock-and-roll concerts that were held in its stadium,
the $36-million sale of midfielder Shaun Wright-Philips and some
accounting sleight-of-hand with player depreciation and other juggling.
The club called all this very good news. Contrast this with the
announcement by the DNCG (Direction Nationale du Contrôle
de Gestion), the body monitoring the finances of French league clubs,
that last year the 20 clubs of French League 1, recorded a combined
loss of $39 million. This deficit was encouraging because the teams
of League 1 lost $181 million in the 2002-2003 season.
The National Football League is having another of its periodic
financial crises. It is trying to negotiate a new collective bargaining
agreement with its players and the talks are near stalemate over
the issue of how much of revenue should go to player's salaries.
The owners have offered 56.2 percent of gross revenues, while the
players' union wants 60 percent.
By contrast, players' wages amounted to 98 percent of income for
Manchester City last year. For many of the clubs in Europe, a great
many, players' salaries amount to more than 100 percent of income.
There are two words that are being whispered in the soccer world
in Europe -- "salary cap." It is something that many team
owners want badly (almost all, except Russians and Middle Easterners
who can afford to spend billions to try to buy themselves social
acceptance). The mere mention of a cap sends players, their agents
and their unions into near apoplexy.
Something has to be done in Europe to reign in salaries and transfer
fees. If NFL owners are willing to slit the throat of their Golden
Goose over the difference between 56 and 60 percent of revenue,
think of the owners and team boards in Europe who are trying desperately
to lower their payrolls to less than 100 percent of income.
In the meantime, MLS's salary cap, at times rather ruthlessly enforced,
is one of the primary reasons that financial sanity has prevailed
in the league and one of the major reasons that 10 years after its
founding, MLS is looking eagerly towards it future.
This, of course, is not to say that MLS doesn't badly need to spend
more money on the product it puts on the field. The quality of play,
at best, has not improved over the past few seasons, and a reasonable
argument can be made that it has declined. But that is the subject
for another day.
The salary cap has protected the owners from themselves and has
allowed the league to stabilize financially. It is also why many
European clubs and leagues look at MLS, its single ownership structure
and its effective salary cap more than a little wistfully.
Here in Washington, it was announced the improving, but perpetually
losing Washington Wizards of the National Basketball Association
are going to raise the price of their best 1000 seats next season
by 59 percent to $175 per game. This is going to price some of their
oldest and most loyal fans right out of the building.
I am a D.C. United season-ticket holder. I buy seats for my family,
which attends most games. My season-ticket prices have not increased
in several seasons. Not only have they not increased, but they are
reasonably priced compared to every other professional sports team
in this area. This seems to be the same around other MLS cities.
A family of four can go to a MLS games, with parking, food, programs,
and maybe a souvenir or two, for less than many seats cost at a
NFL, NBA, National Hockey League and, more and more, Major League
Baseball games.
MLS gets criticized for what it does wrong and I am usually one
of the first to do so. But you read the other sports business news
and you begin to realize that commissioner Don Garber and the owners
should be recognized for doing some things right.
Remember the North American Soccer League and the Women's United
Soccer Association? Both are only fond memories. MLS is still alive
and well, ready to kick off another season April 1.
http://www.soccertimes.com/wagman/2006/mar04.htm
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