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Expanding Major League Soccer Now

This relates to my previous posts on the level of available talent (Internationals and CONCACAFs) that MLS ignores in order to keep costs down, as well as my post on what MLS can be in 5 years.

You see Major League Soccer is currently accepting bids for its two team expansion for 2011. There are now only five cities (Miami, Ottawa, Portland, St.Louis, Vancouver BC) left competing for the two slots. Atlanta just dropped their bid as Blank had a stadium fantasy not a plan. Back in November MLS and Montreal disagreed on the language, but it appears that le Impact decided that their bid was so good that they didn't need to pay 40 Million US dollars in order to join the league.

What I am not going to do in this article is rank the remaining candidates. Duane did a fine job of that just prior to Atlanta dropping out of the race. Those numbers are a fairly good look at the situation in ways that remove my hatred for the Miami bid and the assumption that it will be a junior club for Barca.

I am actually going to be quite bold and say that the best way for MLS to improve overall quality of play, TV ratings, game attendance and its performance in international competitions is to expand rapidly NOW. While conventional wisdom says that expansion would dilute talent please recall that they only thing keeping talent low in MLS are the choices it makes in scouting international talent (recall that there are hundreds of MLS or better quality players that MLS can not afford to sign) and the fact that so many CONCACAF players are stuck on benches in Europe because they would rather make 150k there and not play than 100k here and play.

So what is the trick to basically double the salary cap (to basically 5M$ for 2010), raise the max salary 50% and adding 2 Designated Player slots (1 dedicated to CONCACAF players)?

Quite simple. Take five or six expansion teams total for both 2011 and 2013 this year. Recall the talent is there, it just needs more cash.

Simply the cash needed for Rosters only without DP considerations is just over 2.5 Million dollars right now. For 2010 that would be multiplied by the 16 teams for a total roster expenditure under the current rules of a mere 40 Million dollars. Oddly this is the same number that Garber and company have asked for from their expansion candidates. So if two teams join at 40 Million dollars they have basically funded two years of salary commitments, or one year of existence for all but the worst stadium situations.

That is what launched my concept. You see, each of the top 6 candidate cities all have pros/cons that could pull you towards any two of them, but if MLS decides to lower the fee to 30 Million dollars strengthening the St Louis situation, and causing a re-entry of Montreal into the process that would grant the 16 current clubs (we count Philly in this exercise) an extra 11+ Million dollars to play with, or two years worth of roster commitments at 5 Million dollars per year. That is a nice operating cushion for cap inflation in these troubling economic times, but it also allows MLS to bring talent back to it, while capturing more of the talent that it currently misses from South America, the Arab world, Africa and the English speaking nations scattered around the planet.

I am not so naive as to think that by doubling the cap that talent would double, but it would increase and for some teams (those that have the finances to sign more than 1 DP but current rules prevent it) quite dramatically. This would enable a few Super Clubs to exist in fact and not just marketing.

There are three major questions that I see that need to be addressed. One is could the American and Canadian people afford to pay to go to matches during the economic crisis? Could all six expansion cities be ready by 2011/2013 to participate in the much larger league? Lastly would all six potential investors in the league be interested in being 1 of 6 rather than 1 of two?

The Economics of Sports and Major League Soccer

Major League Soccer has the good fortune of being very competitively priced as compared to the other leagues in North America. For 2008 or 2009 the other four team sports had the following average ticket price.

NHL - 42$ - 41 home games
NBA - 48$ - 41 home games
NFL - 72$ - 8 home games
MLB - 25$ - 81 home games

Major League Soccer's average is a little more hidden, but is in the mid-20s similar to baseball, but has 15 home league matches, and similar to the NFL this means that with fewer matches each is more meaningful. So while yes, average attendance went down a bit for the 2008 season part of that is due to both San Jose and Kansas City playing in small facilities, but having access to larger ones. Neither would have their SSS open in time for 2010, but both seem likely to be in place for 2011. If they continue their current business model they will not have losses to due to higher roster costs, as the expansion fees will fuel that expenditure while the stadia are being built. The affordability of MLS in this economic climate will help it avoid situations like have already occurred in the NHL where a team nearly missed payroll obligations due to lack of attendance even with a brand new stadium but can't afford to run the team (Coyotes).

Soccer continues to be affordable and each year more teams turn a profit, as the controlled costs benefit ownership, TV revenue increases and fans can continue to go to games. Higher quality play will continue to build that profitability and should intrigue enough of the very large number of Americans that follow the EPL to give MLS a second shot. Since that Forbes story MLS had an "8 figure deal for International TV and online rights" and Seattle has proven that it will be massively profitable in year one. The league might even crack profitability in 2009, as there is a chance at another TV deal for the second televised Saturday game that used to be on HDNet. While the EPL had nearly 10 times the viewers in the USA than MLS, a small increase in talent may help that a bit.

The economics to this concept seem to be in MLS' favor. Because despite dire warnings of some, Major League Soccer is better poised to face this economic situation than any league in the world outside of the NFL and EPL.

Could the Expansion Cities be Ready by 2011/2013?

This answer is a resounding yes. I think that the longer expansion window is one of the primary reasons that Seattle will be a successful business in year one, and their participation in a competitive league (USL) will help at least 2 and as many as 10 of their players be better than the typical expansion team.

Granting a two or four year window to each of these cities will allow them to tune the business model and stadium plans in ways that San Jose Earthquakes, Real Salt Lake and Toronto FC were not. In St. Louis, Vancouver and Miami there are few enough issues that all three could have their bids be allowed for 2011 with a decent stadium. All three of these expansion cities will have clubs participating at some level in the USL which should help build the brand, as well as developing talent over those years. For the Montreal Impact this is also true, and I think with the lowered fee of only 30 Million dollars they may be interested. A twenty team two conference league for 2011 would fit 30 games perfectly and would be poised to take advantage of the MLS friendly World Cup 2010 TV contract. Those four cities would also give MLS a more national footprint in both the USA and Canada.

Portland and Ottawa both have major stadium concerns, but the extra two years would allow them the time to work that out, as well as provide the global economy the opportunity to recover. Announcing the expansion intentions and allowing partial payments over the years would help show the local governments that MLS is serious about both cities. The heavier saturation in both the Pacific Northwest and Canadian East would ensure multiple derby style matches as well. If Ottawa and Portland don't think they can get their stadium dreams ironed out in four years they should drop their bids now anyway.

In addition Garber should announce that though all six sites are announced now he would like to add an additional two teams for 2013. This would be the carrot for groups that did not bid, or that pulled out at this time. Wilpon and Blank could then have the extra time to figure out if they want in the league, as well as permitting cities/ownership groups that were once rumored to still have a shot at being part of a 24 team MLS with a truly national TV footprint. Cities of particular interest would be in the Carolinas, Puerto Rico, Las Vegas, San Diego, Phoenix, and Minneapolis.

At 24 teams the league would likely need to go to three conferences again to maintain its 30 game goal, which might be blasphemy to some, but it would also mean that the final week of the season could have more meaning with the playoff hunt being capitalized with through Conference match-ups with two wild cards available. Lastly re-branding SuperLiga as InterLiga (because that name makes more sense) and having the best four MLS teams that MISS the playoffs involved in that exhibition. Yes this would mean that Interliga (currently the FMF's competition for two Libertadores slots would be SuperLiga).

This would put 12 of 24 teams into "playoff" slots, not to mention the Open Cup and NCC. This would increase TV and attendance across the board, as well as providing most teams with either derbies or meaningful competition in the final few weeks. I would suggest that the last four weeks of the season be conference games.

Lastly would all six potential investors in the league be interested in being 1 of 6 rather than 1 of two?

I would have to think yes, just in that the arguments in favor are quite strong. They would have to be shown that using this one time massive expansion would be kindling for the fire, and not the fuel. Perpetual expansion of the top division can not be maintained, but if expansion such as the above results in higher quality play, greater attendance at matches, better TV ratings and larger shirt sponsorships (VW, Microsoft) as well as deep rosters that could compete better in the CONCACAF Champions League the answer for each should be yes.

The individual investors would each be making a smaller risk personally, while the league as a whole would be taking a greater risk. But I can't see any way in the league making the improvements in long term quality, in capitalizing on the 2010 World Cup and in Vancouver's case maximizing the impact of the Winter Games.

This larger league with higher quality of play would still not rival a top four league in Europe, nor Argentina and Brazil. But hopefully with the increased the increased cap, max salaries, and three Designated Players would result in a quality of play that compels a much larger number of Euro-philes and ex-patriots to love our two nation league. This idea isn't perfect it isn't without risk, and likely seems counter-intuitive, but expansion during economic crisis would be capitalizing on overall lower costs for advertising and costs of land, while the stadium construction in multiple cities would have a short term benefit that is needed in the USA and Canada. Having several of these stadia designed with expansion past the 40,000 mark would also mean that the USA would be in a stronger position for World Cup 2018/2022 and avoid placing those matches in NFL stadia and instead into stadia that host Major League Soccer.

Most of my readers have already voted in this poll, and if necessary I will post a new one.
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