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Sports Business Journal Reporting MLS To Sell 25% Stake In SUM

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Daniel Kaplan and John Ourand have joined together in a story to report that Major League Soccer is exploring selling a significant share in Soccer United Marketing. The 25% share is possibly being sold to Providence Equity Partners for between 125 and 150 Million dollars. It turns out big investment firms like to make money, and it seems that MLS through SUM is doing just that right now.

With all the talks about how individual teams may or may not be making money, the narrow salary cap and the absence of fans at what should be high profile games why is it that only 25% of SUM would be worth so much? The answer is quite simple - the World Cup. SUM controls the US TV rights for the next two World Cups already (selling them on to ABC/ESPN). But that isn't their only big property. Turns out some really famous soccer brands are within the SUM umbrella;

all commercial rights to Major League Soccer; the United States Soccer Federation; promotional and marketing rights to Mexican National Team games played in the United States; and the marketing and promotion of the CONCACAF Gold Cup™. Since 2008 SUM oversees a long-term partnership with La Liga’s historic club FC Barcelona, which includes tours of the legendary Spanish club. SUM also manages promotional and marketing rights in the United States for Mexico’s most popular sports team, Club Deportivo Guadalajara (Chivas).

Every MLS ownership group already owns a share of SUM, and they make money from this endeavour. The Mexico v Bosnia-Herzegovinia friendly in Atlanta will make made the Seattle Sounders money. For MLS to explore a sale of this much of their cash cow could indicate a few things about the future of the league and the business of soccer in America.

First, it means that big money sees even more money in soccer in the mid and long-term future. Equity firms don't get involved for quick dollars but with an eye at longer curves. That a major (reported 22Billion in funds) equity firm specializing in global media, entertainment and communications would show interest indicates the fundamental strength of Don Garber's leadership on the business front.

Second, MLS is about to get flooded with money that dwarfs the expansion fees. This one payment would be the equal of adding the Impact, Timbers, Whitecaps and Union - at once. Where MLS founders once lost about 350 Million dollars from founding to 2004, they may have finally cleared those debts. That can change every thing about the way the league works. This is where speculation can get fun.

If the recent expansion fees, SUM payments, MLS on NBC fee and this large injection of cash can clear the debt books the tight salary cap can be loosened by a lot. The complaints about MLS business practices tend to ignore the massive debts, but within the past three years between MLS has had a few hundred million dollars injected into it. When MLS can make salary cap and marketing decisions based on revenue-expense=profit model without a huge cloud a of debt hanging over themselves the potential to become a much better league quickly is no longer laughable.

MLS is on NBC in 2012 for up to 20 Million dollars. They could be about to clear their decades long debts. The US Olympic soccer team is about to be about 50% MLS players, and the British team will have David Beckham. If you are the type to think that things are about to get much better, this is one of the biggest business years yet.