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*?
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.”