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The Recession Killed Profits in MLS

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So we all know the Forbes study about 2007. We should all know that it did not include the money from Soccer United Marketing. SUM makes a lot of money. That will be true in recession or not, but recently the Timbers had to publicly declare how they as an MLS side would make money and pay back the city for all those great tax breaks, etc.

Let's first look at 2007 though - only 3 teams were "profitable" without SUM money.

THREE - Los Angeles, Toronto and Dallas. One could argue that with SUM money that another 3-6 clubs likely made money in that single year. At least it could be argued. Let's also remember that sports teams almost never make money on a year-to-year basis, but instead are like real estate, and have annual costs past their income, but when sold makes the owner some bank. This is true for all but the top 10% of teams in pretty much any league in the world.

But since 2007 the world has changed. Iceland nearly doesn't exist as a financial entity. Governments in most democracies have changed their ruling party. The WORLD has reached a Recession nearing on depression. How did that hit MLS?

The answer is HARD. It hit MLS very hard. Despite the Seattle Sounders magical attendance numbers the league was still down. This is a league that makes more money off of gate than it does off of TV, and that hurt. The shine of Beckham is gone. The newness of TFC is GONE. Dallas still doesn't know how to market in Frisco.

So I did some math. Really basic stuff, but the Portland release filled in some data points and I could extrapolate a range of profits for MLS sides in 2009 based in part on the 2007 study and in part on how the Timbers plan to make money.

Things in MLS aren't really that good. Revenue is high, but profits aren't following, unless you include SUM. There are some mysteries surrounding how that money is distributed, but let's ignore SUM for a bit.

Only 2 clubs turned a profit in 2009 - Seattle and Toronto. I'm going to have to deal with ranges, because the math is a bit fuzzy, and I had to estimate, but Seattle took in about 36M$ in revenue. No joke. In the down economy Seattle launched to a perfect storm. No other team in any American league will ever do that again. Toronto barely turned a non-SUM profit though. While Seattle had a non-SUM profit of between $10 and 17 Million, TFC only came in at about $1 to 3 Million US.

No one else likely made a profit during the Recession. If we count SUM money the way Portland does (which isn't necessarily the "right" way to do so, as I have heard that it is an incentive rather than even distribution) the following "profits" were made in MLS, accounting for gate, and announced sponsorships since 2007:

The Galaxy had about $2M less in Gate revenue from 2007 to 2009. Dallas still mainly makes money from non-soccer revenue, so it was harder to estimate. Salt Lake will start climbing the revenue ladder as it starts to pay off the stadium.

In all things in MLS aren't good. A 12% reduction in attendees crushes a league that depends on gate.

Seattle 15,322,672
TFC 2,819,697
RSL 934,144
FCD 678,151
San Jose 501,318
LA 259,161
Houston 258,397
C-USA -612,923
NER -962,664
CR -2,079,073
KCW -2,278,705
DCU -4,203,862
CCrew -4,232,625
Chicago -4,348,156
NY -6,068,760

Obviously these are ugly estimates. Quite rough. One would likely be better having a range, based on some unknown factors not listed in either report, so let's do some jujitsu on the numbers;

Seattle 10m to 17m
TFC 0m to 3m
RSL neg2m to 0m
FCD neg2m to 1m
San Jose neg2m to 0m
LA neg5m to 2m
Houston neg3m to 0m
C-USA neg3m to neg1m
NER neg4m to neg1m
CR neg5m to neg3m
KCW neg4m to neg3m
DCU neg7m to neg5m
CCrew neg6m to neg5m
Chicago neg7m to neg4m
NY neg8m to neg7m

There are still teams that despite having labor costs in the $2-3M range are losing twice that much money. At least if the Forbes estimate and Portland numbers are remotely accurate. Yes, a majority of clubs are making money if we COUNT SUM, which is technically a seperate entity, but let's also remember that almost ZERO MLS players are responsible for the earnings from SUM.

SUM holds the rights to the World Cup, the Gold Cup, the WPS, the US MNT, the Mexican NT when in the USA, Barcelona in the USA, Interliga, Superliga and the PanPacific Championship. Those last two are the only ones that MLS players participate in by nature, and they are also the only two that don't exist in 2010. Should MLS players get a portion of that money? Likely no.