The cost of $100 million

The cost of $100 million

I remember sitting in my British literature class at the clueless age of 16 and reading George Orwell’s dystopian masterpiece, 1984. Admittedly, I think the book should be required reading for anyone who thinks they understand the landscape of American soccer.

Years later, one of many of the book’s loaded lines aptly applies to the reality of American soccer discussions, arguments, and narratives that continue to divide people who love the game into fractious subcultures all vying for their argument to be taken as gospel. The line, “Who controls the past controls the future. Who controls the present controls the past” is the party slogan for Ingsoc, the English Socialist Party. Was George Orwell onto something?

According to findings from Forbes and Businessweek, franchise fees in Major League Soccer have increased at a rate of 18 percent since its inaugural season. In 2012, the franchise fee for the Montreal Impact was approximately $40 million. The franchise fee for New York City FC was valued at $100 million in mid-2014 and 2015. The average value of a franchise in Major League Soccer is approximately $103 million, reflecting an increase of 175 percent over a span of the last five years according to Forbes. It’s not hard to see the financial gain the owner-operators in Major League Soccer covet and vehemently protect.

According to Major League Soccer valuations conducted by Forbes in 2008, “The league had just 14 teams that season, with the Seattle Sounders joining the following year on an expansion fee of $30 million. The average MLS team was worth $37 million and losing money. The LA Galaxy, the league’s most valuable asset, had an enterprise value of $100 million.”

As of 2013, half of the league’s teams make a profit, taking into account (pardon the pun) earnings before interest, taxes, depreciation and amortisation. The Seattle Sounders were valued at $175 million, a 483 percent increase over its 2009 sale price. According to Major League Soccer commissioner, Don Garber, the franchises in MLS lose over $100 million annually with losses being attributed stadium expenditures, player acquisitions, and “league infrastructure” (which includes the $30 million the league allocates towards development).

Investment and seemingly unabated expansion are goals for Major League Soccer. In terms of stadium plans, MLS wants the check first, and then it wants the stadium blueprints and plans. But first it wants the check, despite a 20-year history of some teams playing in giant NFL-grade stadiums, on shoddy artificial turf, or in the case of New York City FC, on a converted baseball field. MLS wants control. It expects a “soccer-specific” stadium that seats at least 20,000 people as such structures allow teams to control the various revenue streams such as parking fees, ticket sales, advertising and marketing displays, rental opportunities, and concessions. Of course, there are exceptions and workarounds, so long as MLS receives the exorbitant expansion fee and believes the chosen market strong enough to consistent growth, the league will belay the immediate “requirement” for a soccer-specific stadium as evidenced by a team playing in Yankee Stadium.

This is the path forward in the eyes of Major League Soccer and the United States Soccer Federation, which fully supports MLS to the point one wonders what entity is actually making decisions on policy and overall direction. Surprisingly unbeknownst to many outside the United States, the soccer structure does not reward development. The system is closed, rife with roadblocks and alternatives that delay or halt maximum player development as promises of a college scholarship or a reasonable pay-cheque in the corporate workforce pull many away from the path to professional soccer. Development Academies are placed in locations of relative affluence to ensure a steady stream of parents with large chequebooks can absorb the costs associated with the outfitting, playing, training, and travelling for their son to be part of the academy. That is the reality.

Now, I invite you to imagine alternatives. One is conventional and has been done before – and the other, well, let’s just say it’s ambitious and fun to consider.  

What if there was another way to spend $100 million on a true soccer club in the United States? What if I told you the sport was bigger than Major League Soccer in the United States? The commonly accepted narrative, which reads more like a company line, is that in order for the sport to grow, Major League Soccer must lead the way. The reality, however, is the majority of the American soccer market prefers the version of the game played abroad. Make no mistake, Major League Soccer is here to stay and it intends to call the plays from its amorphous rulebook, but there could be radical alternatives available should one come to possess $100 million by hook or by crook.

The first option is the North American Soccer League with its significantly lower expansion franchise fees. The NASL is also free of many of the rules and constraints that MLS places on its franchises such as draft system, salary caps, unrealistic free agency conditions, centralized league controls of media, and complex player allocation rules to name a few. However, what is seen by those paying attention to Major League Soccer’s expansion trends and plans is the readying of markets for Major League Soccer by the North American Soccer League. Even if a team in NASL had $100 million, the likelihood, for now, remains that it would eventually make the profitable move to Major League Soccer to solidify a greater return on investment in the advent of the upcoming television deal and in the absence of the possibility of being relegated no matter how disastrous a season a franchise experiences.

The second, more radical option would be to invest the $100 million into an independent and possibly rogue club with no affiliation with Major League Soccer, the North American Soccer League, or the United Soccer League (formerly USL PRO). The reality is this club could be an amateur club and take part in the U.S. Open Cup (America’s version of the FA Cup). With $100+ million at its disposal, it’s plausible this club could defy the system, so to speak, by attracting the best available talent it could afford – players who would likely be paid more than the majority in Major League Soccer.

The club could even invest in its academy the same amount as Major League Soccer invests across all its franchise academies (incidentally, this is considered a “loss” in MLS). A stadium deal might not be an initial necessity as the club wishes to forgo a cost-heavy and lengthy stadium development deal and litigation process since it has learned from the pitfalls of teams that are candidates for inclusion into Major League Soccer vying for land to build a stadium.

Money talks and this club happens to be savvy enough to purchase and maintain a location for an academy, pay qualified coaches a liveable wage to develop talent identified by a paid scouting network. Family income isn’t a factor at the academy and players admitted into this academy are included based on ability, learning capacity, and their potential to become professional players to play at in the senior team one day or sold for a profit, which is reinvested directly into said club’s structure.

As part of this wild experiment, a club with the freedom to invest its money freely could attract further investment from local, national and international businesses that don’t want to be told what to do with their money from a league. These investors see in this sovereign club an opportunity to make a splash in many of world soccer’s lucrative industries. In an open market, sponsorship deals are forged, revenue can be streamlined to manage and maintain both capital and operational expenditures.

Descending deeper down the rabbit hole of possibilities, perhaps this club can acquire the type of player talented of making a deep run in the U.S. Open Cup and possibly winning it. Instead of rigorous league play, this team is capable of scheduling 38 “friendlies” with teams across North and Central America, in Europe during the winter break, against K-League and J-League teams before their seasons start in early Spring, and high-profile matches against teams in the Middle East.

These markets all love soccer and might just jump at the chance to see a self-assembled, autonomous American club team come and take on its clubs. Should teams wish to travel to play this rogue club, a venue would be rented with game day profits allocated accordingly. And the craziest part of this whole thing might just be the lack of league standings for a jet-setter team opting for the route of adventure.

The business plan may be seen as aggressive – and it is – but the model isn’t new. Such a globetrotter approach has deep roots in American soccer’s history as teams used to travel across the Atlantic to tour and compete with American teams representing their cities, ethnicities, and communities. The foundational history and the current state of the American game has been fractured by a history of in-fighting between rival closed leagues and a competitive sporting landscape that still views the world’s game as something other than American.

There’s an absence of a true soccer culture that represents the unique cultures that comprise the melting pot of the United States. Imagine a team touring the world, showcasing the relentless pursuit of footballing excellence the way the established teams abroad do so on American soil. As outrageous as it may seem to those who only subscribe to the directive of Major League Soccer, the game is bigger than the league attempting steer the sport in whatever direction it believes is best-suited not for the sport, but for itself.

The game is more than something that is shoehorned into a mould, rebranded, and packaged as the solitary path for a nation by Major League Soccer. People will continue to operate on the tenterhooks of trepidation so as to not disturb the “progress”, but the reality is Major League Soccer – which aims to be “a top-five league by 2022” – has yet to produce a single world-class player (rest assured, it intends to produce its own Lionel Messi according to its propaganda machine), doesn’t allow the complete freedom of movement of its labor force within the league, and is yet to pay them on a competitive scale in comparison to the alternatives inside and outside the industry (unless the league deems a player marketable and talented enough to justify a hefty wage).

Some are convinced there is only one path to the summit of the game. Imagine having the courage to dare to think of an alternative that will be considered maddening, confronted with doubt, and labeled blasphemous.  And perhaps there’s a reason that the line “In a time of universal deceit – telling the truth is a revolutionary act,” is truly Orwellian.

The truth is George Orwell was right. So be advised, dear reader: “Big Brother is watching you.”

By Jon Townsend. Follow @jon_townsend3