Who Could Have Predicted Such A Thing?

Is it just hypothetically possible that Saint Paul – a city run by people whose only experience with business is working for non-profits that harass actual productive businesspeople – has gotten the city into an epic Ponzi scheme?  

Neil DeMause at Deadspin  talks with a group of sports economists that aren’t especially bullish on this year’s hipster diversion, the MLS:

“When Forbes last looked at MLS finances, it had to perform mathematical contortions to explain why franchise values are rising even as annual losses continue to mount.”

“That business model and this financial trajectory suggests that MLS’s sea of red ink is either a loss leader or a Ponzi scheme, and it’s not always easy to tell the difference between the two until it’s too late. Several sports economists, though, aren’t optimistic.”

“The best indicator of expansion franchise worth is success at the bottom of the league” in revenues, says Stanford economist Roger Noll. For MLS, “that still looks more like AAA baseball except for a few million per year more in TV revenue.”

But as DeMause explains, the TV revenue isn’t going to happen – not the way the league is currently run – because there are already better leagues on the TV.  Mexican “Liga MX” games get better ratings; English Premiere League games on Saturday mornings get better numbers than MLS games in prime time.  


Because they have better soccer.  

But won’t the MLS improve?  

Not the way it’s currently set up.  Unlike *every* successful sports league, all MLS players get paid by the league – not their teams.  Instead of teams competing with teams around the US and world for talent that’ll make actual soccer fans interested, the league as a whole competes with leagues that are made up of teams that are competing with each other, and the whole world, for talent.   As a result, the payroll for the *entire MLS league* is lower than the *average* payroll for a single Premiere League team.  MLS spends at about the same rate as the Bulgarian national league .   The MLS model is designed to *control espenses*, not foster the competition that creates a watchable product.  

So all those new immigrants that are supposed to keep MLS afloat?  They’ve already got *good* leagues to watch.  MLS is to Premier or the German Bundesliga or even Liga MX as the Saint Paul Saints are to the Twins, in terms of talent.   Why would people from parts of the world were soccer is the main sport bother with a product that’s not only inferior, but *designed to stay that way*?

As the current TV ratings show – they’re not.  Not outside of New York or LA, anyway. 

And yet the cost for an MLS franchise has grown from $10M at the turn of the century to $150M today – a price tag that currently gets the owner a piece of $100M in losses, in a businesss that is structurally incapable of improving, and doesn’t even have the level of competition that “promotion and relegation” – moving the worst major league teams down to the minors, and promoting the better minor league teams to the majors, like in every major Euro league – brings.


“Whether current MLS honchos actually have this in mind now, or are still guzzling their own Kool-Aid, is tough to say. But for most big-market teams and early adopters, even if the expand-o-ganza goes south, it’s a fair bet they’ll be left with a chair when the music stops—franchises like New York and Los Angeles should be safe and potentially profitable, even if the likes of Raleigh or Nashville might be screwed.”
I gave the Minnesota franchise five years from the opening kickoff before it folds.  I’m feeling more optimistic about my prediction – if not about the “investment” the DFL forced me to make via my tax dollars – every day.

13 thoughts on “Who Could Have Predicted Such A Thing?

  1. This is generally an unpopular opinion on all sides, but it’s my cynical opinion. I am looking forward to the soccer stadium creating a thriving economic area. It will take four or more decades. But, I have actually seen a stadium do that. The former Met Stadium site (Mall of America and it’s surroundings) is pretty happening these days. But, then again, I could be wrong. Maybe the proximity to the airport helps that site….

  2. The Carolina Panthers owner is set to sell the team after the season. He stands to pocket about $580 mil in profit.

    After the sale is complete, who wants to bet the new owners won’t show up in Charlotte with their hands out?

    I pity the fool that ever suggests South Carolina will be just a hilly Florida unless we get a sportsball team.

  3. mjb, it’s worth noting that the former Met Stadium site, the Zoo of America, is only there because of billions of dollars of subsidies, from the MOA to the Death Train.

    Back to the original subject, given that each football club plays about 20-25 home games each year, and the proposal here is for a 20,000 seat stadium for $150 million, you’ve got to clear $750/year per seat ($37.50/ticket) before you start to pay the players, coaches, and other staff, and before you start doing maintenance on the facility. Tickets to the LA team–a far better market than MSP for the game–start at $30.

    It’s gonna take a lot of radio and TV money, along with a lot of gear sold, to make that one work.

  4. And yet the cost for an MLS franchise has grown from $10M at the turn of the century to $150M today – a price tag that currently gets the owner a piece of $100M in losses

    Between this and his exit from UHG caused by his involvement in the stock back-dating scandal, it’s a miracle that McGuire can maintain any financial credibility whatsoever.

  5. Tickets to the LA team–a far better market than MSP for the game–start at $30.

    Also, keep in mind: I bet the LA Soccer stadium has more parking capacity than the <300 spots the new MN soccer stadium will offer. I bet that after a few instances of 20,000 people fighting over 240 parking spots, and the necessarily draconian SPPD parking enforcement on the residential streets within reasonable walking distance, attendance at those games will never sell out the stadium. (Also, I'd be willing to bet that the SP city council, EVER concerned for the well-being of their constituents, will pass a law forbidding nearby private property owners from renting their yards out for game-day parking.)

  6. Part of the cost equation is simple; compare Wrigley Field with a total of about 150000 square feet (say 4 acres) and seating for 40,000 spectators with the 35 acre site for MLS. It’s worth noting that the original ballpark seated 14000 people and cost $250,000 to build–about $5 million today or so, maybe $6 million.

    Now I don’t think that you’d get the cost down to that of Wrigleyville, but I bet a nickel that if you put the stadium on a 5 acre site (approx) and provided some much needed parking for the area, I bet you could get rid of 2/3 of the cost and have something that would actually come close to passing financial muster.

  7. But St. Paul had to do SOMETHING to help downtown!!! Your such a hater for not seeing that they just had to do this to help! /sarc

    Let’s start by observing that watching even Premier League Soccer is almost infinitely more boring than even Major League Baseball, then ask how bright an idea it was thinking a boring, slow moving sport would rally young fans with the attention span of a gnat. It’s rare that we get a “major league” sports idea worse than the USFL with a far worse business plan, but MLS managed to do it.

    They should have built a parking garage attached to the stadium. That way they’d have had at least one money-making entity on site.

  8. Building the Saints stadium downtown meant fans could grab a bite, have a drink, and walk a couple of blocks to the game. The bars do make money when the Saint play, so yes, that helped downtown.

    The soccer stadium isn’t going downtown so it won’t help that economy. It’s going on the old Snelling Avenue Bus Garage site in Midway, which is halfway between the core cities, to far to park and walk (although the blight rail stops just three blocks away, if you happen to feel lucky).

    The site butts up against I-94, Snelling Avenue, Hamline Avenue and the Midway Shopping Center, right across the freeway from Seafoam Field (the football field for Concordia College). There’s nothing around for fans – no hotel, no parking, no nice restaurants (Hardee’s, McDonalds, Culvers, Little Caesar’s, Golden Chow Mein and yes, Perkins, but these are low-buck neighborhood places, they’re not going to generate big revenues from fans).

    The reason the site sat empty so long is no private investor was crazy enough to try to develop it on his own nickel.

  9. That’s good to know, Mitch. The last time my wife and I ate there was before we moved out of the neighborhood, so before 2003. I wanted dessert and asked for a slice of pecan pie but they didn’t have any. The server checked and was told “Pecans are out of season.” This, from a restaurant that sits in the parking lot of Rainbow Foods – if you held a bag of nuts in the grocery store window, I could have seen it from my restaurant seat. With customer service like that, it’s no wonder they’re gone; the wonder is they lasted as long as they did.

  10. The site reminds me of nothing less than Comiskey Park in Chicago, just without 81 games a year to make the finances work better. Just a slightly better neighborhood, really.

    Another good example of a stadium built on the cheap that’s stood the test of time, and which would have fit on that lot; the original horseshoe shaped Rose Bowl, built with capacity for 57000 fans for a budget of about $4 million in today’s dollars. I’ve got to bet that about 75% of the cost involved here is things they really don’t need, but since government is paying the bill, they can demand.

  11. Regarding Perkins, an experience my family had at a Rochester franchise indicates that it’s a national/global problem with their commodities distribution. My family’s order was held up for half an hour while they searched for an avocado that wasn’t rotten, in a restaurant that is 1/4 mile from a beautiful Hy-Vee. The food was Denny’s quality otherwise, maybe, which is a bad sign when you’re trying to charge a higher price for it.

    I would guess a lot more Perkins restaurants are going to be pining for the fjords if they don’t fix that. It’s actually a fairly apt analogy to the problem for player supply in the MSL–the league is not going to prosper unless they get a product comparable or superior to the Mexican league, and soon.

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