Why Don Garber went to Zürich

Why Don Garber went to Zürich

US Soccer’s concept of professional league divisions is a farce and a red herring, because it masks Major League Soccer’s real agenda and intention.

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MLS’s real agenda and intention is simple: what today we call the lower professional divisions (Divisions II and III, for respectively NASL and USL Pro), will eventually become MLS’s official minor leagues. Major League Baseball (MLB) maintains exactly that structure, so why not MLS? Or so the reasoning goes.

We all know that the NFL, the NBA and the NHL have the NCAA to rely on for a pipeline of talent, but MLB is unique in that they rely on the NCAA; baseball’s minor leagues, however, are an essential spoke in the wheel of MLB.

MLS wants what the NFL, MLB, the NBA and the NHL have – monopoly status, which means no competition at the team or league level.

By creating scarcity with their imposed monopoly, MLS can remain mediocre compared to the global standards of football excellence (i.e. the English Premier League and the Bundesliga), and yet still occupy the privileged position of the top league in the USA and Canada, without in fact being a top-tier league by global standards.

Don’t believe the hype that, by 2022, MLS wants to be among the best leagues in the world.  See Futbol, Excellence & Mediocrity, for a refutation of that thesis. In fact, MLS does not want to be the best football league in the world, because their mandate is to avoid that at all cost.

The NFL, MLB, the NBA and the NHL represent the global standard of excellence for their respective sports. And that is exactly what MLS is structured, managed and politically positioned to avoid.


NASL’s days are numbered


The handwriting for NASL’s demise is on the wall. We simply do not know how long this will take.  USL Pro, the official Division III league, has already been chosen by MLS to be the lower division darling.  All MLS owners are now obligated to maintain a “farm team” in USL Pro.

Eventually, some of NASL’s franchises will move down to USL Pro and comprise soccer’s minor leagues. Other NASL franchises will possibly “move up” to MLS – Minnesota is an example – or simply disappear. NASL, as a league organising body, will simply dissolve because over time the USL Pro–MLS relationship will begin to have financial impacts (some of those impacts are happening already).  As MLS’s expands, USL Pro will expand, and eventually the trickle down to USL Pro from MLS/SUM will begin to occur. The longer it takes NASL to get to Division I status, the greater the likelihood that Don Garber’s trip to Zürich will bear fruit.

NASL is also in a troubling position for reasons that have nothing to do with MLS or US Soccer.

NASL’s branding model and strategy, which is largely a throwback to the original NASL, is underperforming, and in some cases, dramatically so. The brands simply do not resonate with the fans. The numbers tell the story. The league is averaging 5,361 over the past three years (2013: eight teams at 4,670 average attendance (aa); 2014: ten teams at 5,501 aa; 2015: 11 teams at 5,912 aa), generates a mere fraction of what MLS generates commercially (i.e. licensing and merchandising, corporate sponsorships, etc.), and does not have a nationwide TV contract that comes close to rivalling MLS’s TV contract (the latter’s$90 million eight-year deal (2015-2022) is a paltry 1/27 the size of the EPL’s $2.7 billion a year TV deal).

In short, on the basis of the three key revenue drivers of the sport (venues, commercial and TV), NASL is so far behind MLS that any reasonable investor would have to conclude that the only viable future is one that guarantees NASL teams promotion and relegation, from Division II (NASL) to Division I (MLS).

Without promotion and relegation the NASL valuation analysis, the actual justification to make an investment in NASL, based on a strict cash flow and traditional return on investment analysis (especially where that analysis relies heavily on franchise appreciation potential over time) falls apart. There is little or no justification from a strict ROI standpoint to invest in a league whose prospects do not include promotion and relegation.

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While laudable in principle, the idea that NASL owners are totally independent and can craft their own business models has meant that they are largely copying the freedom and practices of the original NASL owners from the 1960s and 1970s, without nearly the same capital base. NASL, it can be argued, is a league of single digit millionaires, versus MLS’s league of billionaires.

NASL is offering nothing new, and it shows. The only meaningful change that impacts analytics is occurring outside of NASL and independent of it, namely the compelling demographic trends in the USA and Canada that support the sport of football.

From the standpoint of monetisation, the problem is that NASL has simply been unable to take advantage of those demographic changes and trends. And neither has MLS. In fact, no professional football league, past or present, has ever generated a profit since the launch of the original NASL in 1968.

Eventually, when current and possibly future investors get the message that NASL will inevitably become a permanent minor league, which is clearly MLS’s intention, the prospect of big investment money to create a legitimate rival Division I league to MLS will dry up.

Certain NASL teams and cities may survive by migrating either up or down, but NASL as a league does not have a future, without some dramatic and extremely well-capitalised new ideas. Changing the branding strategy and business model is key, but nothing on the horizon indicates that NASL today is capable of those kinds of adjustments.

When coupled with what can only be described as a strange expansion strategy, that is largely focused on secondary and tertiary media markets, the owners in NASL have to be wondering how they will ever achieve Division I status, particularly given that they do not control US Soccer’s decision-making process and MLS does.

Instead of structuring themselves to compete head-to-head with MLS in the largest media markets that drive audience and TV revenue, NASL is structuring itself to run away from head-to-head competition. Winning the US Open Cup will do nothing to change this.

NASL will point to its new franchise commitments in Miami, San Francisco, OKC and Puerto Rico, but nothing about these announcements, much less NASL’s hands-off approach to value creation, is enough to convince the major media companies and corporate sponsors that NASL is serious about challenging MLS and then going beyond MLS to compete on a par with the Premier League, the Bundesliga, and La Liga in terms of excellence on the field and off, which of course implies comparable revenue generation when juxtaposed with those global benchmarks.

The one element that today is a wild card for NASL, MLS and US Soccer is the recent saber-rattling that NASL’s attorney mustered, in the face of a new set of proposed rules by US Soccer for Division I status. NASL’s attorney, Jeffrey Kessler, alleging possible anti-trust violations in announcing the new rules, appears to have caused US Soccer to back-off “officializing” the Division I proposed changes. That may have bought NASL some time, but how much time and will it be enough is the question.

Clearly, a formal announcement of USL Pro becoming an official minor league will not happen soon (if ever given the FIFA issue, see below), but that it is part of MLS’s game plan, there can be no doubt. Don Garber has made it clear repeatedly that promotion-relegation is not in the cards as long as he is MLS Commissioner; an interesting statement given the fact that the call is not his, but US Soccer’s. There is little doubt about who runs this sport in the USA. It is Don Garber.

The argument, from Garber’s perspective, is how can you justify investors in MLS paying as much as $100 milliom to join the league, and then tell them in a few years their team has been relegated to NASL or USL Pro. The answer of course is in Europe. There have been several billion dollars worth of club acquisitions in Europe in just the past five to ten years, and in every instance the purchase price is a buy-in into a football league that has promotion and relegation.

Suffice it to say, there is something else to the story of MLS’s opposition to promotion and relegation.

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Read  |  Futbol, excellence and mediocrity

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The assignment by US Soccer of certain professional leagues to a given division is really a ruse. It appears to be a signal to FIFA that things are evolving toward promotion and relegation, when in fact nothing could be further from the truth.

The political and institutional squeeze is on NASL, and Don Garber’s visit to Zürich was to make sure that NASL, nor any other men’s league with Division I aspirations, will ever see the light of day.


Don Garber in Zürich


Don Garber went to Zürich for the FIFA election, because he is the most powerful man in the sport in the US and Canada. He went because he wanted to and needed to horse trade. But for what?

The 2026 World Cup? Sure. Absolutely. Especially given the election of Gianni Infantino. The positioning Sunil Gulati effectuated with the Prince Ali vote in the first round, with the promise of Infantino support in the second round, created the impression that the USA delivered the win for Infantino. The logical conclusion, given FIFA’s history of doing business, is that there has to be a quid pro quo. But what is this something-for-something at the FIFA bargaining table between Gulati, Garber and Infantino?

It isn’t the World Cup in 2026 – that is a given. The USA is already positioned and the pressure from the Department of Justice (DOJ) is still with us and will be for some time. If for whatever reason Qatar falters, the USA is also positioned. Russia appears to be a done deal. And clearly after Infantino’s election, neither Russia nor Qatar are being seriously reconsidered (unless the DOJ or the Swiss authorities turn up some additional and truly powerful and irrefutable evidence of corruption).

No, the real reason Don Garber went to Zürich was to do one thing and one thing only – to make it clear to Infantino, that Infantino’s election and US Soccer’s support were in exchange for Don Garber being able to maintain the status quo in the USA.


What does maintaining the status quo in the USA mean?


It means that MLS controls US Soccer and the entire pyramid for the sport from the top (the pros) to the bottom (youth), and it has the rubber stamp approval of FIFA.

It means that football in the USA and Canada remains fragmented, both at the professional level and at the youth level, and all levels in between, which perfectly serves MLS’s game plan for the sport.

It means MLS/SUM further consolidating their power, by winning the rights for the Copa América Centenario, after the DOJ forced Traffic Sports and its partners (respectively from Brazil and Argentina), to relinquish their event organisation right’s package.

It means that the weighted voting structure at US Soccer – which essentially disempowers grassroots youth soccer and simultaneously empowers MLS – continues to guarantee MLS’s disproportionate power and control over the sport.

It means that the Yedlin case continues to be a symbol of US Soccer’s war on soccer itself, particularly given that solidarity payments are a FIFA requirement.

It means that the war on women continues, not only with the USWNT and the CBA, but also and recently with the counter-move that the women have taken with their equal-pay-for-equal-work filing with the US Equal Employment Opportunity Commission.

It means that labour generally (the players and referees) will remain at a distinct disadvantage for years to come.

It means that the war against the NASL continues, which is in essence the struggle for – and against, from MLS’s perspective – promotion-relegation as a cornerstone for the sport.

It means the mediocrity that MLS symbolises becomes more entrenched.

It means that Don Garber and MLS can continue to carry out their real mandate – to strategically limit the upside and revenue generating potential of the sport.

It means the European hegemony for the sport remains in tact, because today only the USA is positioned to rebalance the global power structure of the sport in the short-term, and that rebalancing (which means not only CONCACAF but also CONMEBOL) has the potential to create an UEFA-like presence in the Americas.

It means that the fans in the USA and Canada may never have the clubs and the league they deserve – clubs and a league that compete on a par with the top European ones as global standard bearers of excellence.

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We will have the Copa América Centenario in 2016, again coordinated by MLS/SUM.  That event naturally fits in the mid-off year schedule between World Cups, and like the European Championships – which take place this summer – has the potential to becomes a natural part of the football landscape (or not). If it doesn’t become part of the landscape, you can be sure it is because MLS thinks that too much progress is being made.

Garber’s mandate is not what you think it is. His mandate is not to take this sport to the highest global standard of excellence on the field and off. His mandate is to make sure that that does not happen. Garber is there to make sure that we do not have a world-class league to rival the best in the world.

The question is whether Gianni Infantino will go along with this. Is this the deal he struck with Garber? Were Don Garber and Sunil Gulati explicit in their demands? Or did they craft their proposal in vague and looser terms? Does Infantino really understand what Garber and Gulati mean when they say that the USA’s plan for the future of football must take into account the “American Nuance”?


What is the American Nuance?


As long as MLS controls US Soccer – and make no mistake about that fact (the change to weighted voting inside US Soccer was done strictly for that purpose) – they will do everything in their power to limit football’s upside potential in every aspect, making sure in the process that the fan base does not expand too much, and more importantly, that football does not monetise too much.

The American Nuance is maintaining the status quo of the current MLS paradigm: no promotion and relegation, a salary cap considerably below the global standard, average stadia size of approximately 21,000 (below the English and German second divisions), a TV contract that reflects the league’s embedded mediocrity, four professional leagues across three divisions, a dysfunctional pyramid from top to bottom, MLS revenues at roughly $500 million year with 20 consecutive years of losses, and a burning desire to convince others, particularly FIFA, that this is a great business model and the best thing for the sport.

What everyone needs to realise, and Infantino in particular, is that the concept of the American Nuance is Orwellian. It is pure unadulterated double talk.

The NFL, MLB, NBA and NHL all embody the classic case of the American Nuance for professional sports. But MLS is different, because MLS has no intention whatsoever of becoming the best league in the world. If that were the case, this article would not be needed.

The reason this post is being written is exactly because MSL, and by default US Soccer, want to convince FIFA and the world that the American Nuance is exactly MLS’s game plan. That, like the NFL, MLB, NBA and NHL, MLS will eventually become the global standard of excellence for football. And that is simply not true.

As has already been explained, MLS is the lid on the pressure cooker of demand for football in the USA and Canada (see Futbol, Excellence & Mediocrity). Don Garber’s task is maintain that lid in place.

Are we suppose to believe that it is a coincidence that SUM (read MLS) won the rights to the revamped Copa América Centenario? After those rights were taken away from Brazil’s sports promotion agency Traffic (and their partners), all of whom were indicted by the DOJ.

No one is questioning SUM’s competence, but the question is what kind of corruption is the DOJ capable of identifying? Clearly, wire transfers in support of bribes, money laundering, extortion, etc. occurred via banks based in the US and this is why and how the US Racketeer Influenced and Corrupt Organizations Act (RICO) statute got triggered.

But the real question is, is there another form of corruption that we are missing? A corruption that is staring everyone in the face, including the DOJ, FIFA, US Soccer, MLS, NASL, the fans – everyone? One that no one can see it?


What the USWNT needs to know


What is going on with the sport of football in the USA today is a crime. It may not be a statutory crime, but it is at least a moral crime and an affront to fans everywhere.

Equal pay for women is not a solution for this crime. That is the minimum women and everyone must demand (and go on strike if necessary to get it). For a more thorough discussion of the challenges and value of the USWNT versus the USMNT, see Futbol, Excellence & Mediocrity.

Unequal pay is a symptom of a much more serious institutional disease. And this disease is its own form of corruption. It is a special form of corruption that dashes the dreams of the young and their families, that wastes hundreds of hours on the road and thousands of dollars per year per child by fathers and mothers, in pursuit of that dream.

In its own special way, this disease is just as sinister as the misdeeds being prosecuted by the DOJ and its prosecutorial equivalent in Switzerland. The disease is a hidden agenda. A hidden agenda to keep the sport in the USA from becoming what it could be, and what it naturally tends to be in the greatest country in the world.

This hidden agenda is there to quite literally bar, block, obstruct and eliminate whenever and wherever possible the global standard of excellence from arising – particularly from the grassroots up.

The idea behind this disease is to maintain the USA as is, in the firmament of world football – namely as a colony of Europe to be exploited in a 21st century version of the past. A colony to be exploited by the most powerful clubs of European football in our summer months, but also, and more importantly, as a colony that is kept in check so as not be a threat to the entrenched sports establishment of the USA.

The current closed system is simply anti-American. It is anti-entrepreneurial, anti-grassroots, and is about creating another closed billionaire boy’s club. We have nothing against billionaires, but they too can learn to survive and compete in an open system. The Lord knows they can afford it.

Is the DOJ listening? Is Gianni Infantino? Is Sunil Gulati? I hope so.

By Robert Wilson. Follow @siliconbeachvc

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