A Question of Growth for Major League Soccer

Dr Clinton J. Warren

Posted: December 11, 2014

Tagged: fans / football / leagues / revenues

It is clear that American interest in soccer continues to grow. For example, Americans purchased the second most tickets, behind only the host country, at the 2014 FIFA World Cup in Brazil. Additionally, cities across the United States saw massive World Cup watch parties drawing as many as 30,000 people to view the game on video boards at National Football League stadiums. The top domestic league in America, Major League Soccer (MLS), is continually growing as well, and it is working to make its way into the mainstream American sport conversation and global football conversation.

MLS Commissioner, Don Garber, has stated that his goal for the league is to be “a league of choice” for players and one of the “top leagues in the world” by 2022. A recent article published by “The Scorecard,” clearly lays out the “Big 5” domestic leagues in Europe. England’s Premier League, Spain’s La Liga, Germany’s Bundesliga, Italy’s Serie A, and France’s Ligue 1 are widely regarded as the top 5 leagues in the world concerning quality of play and commercial clout. For Garber’s dream to come to fruition, MLS needs to take massive steps forward.

Over the league’s 18 year history, MLS has experienced a modest increase in average match day attendance. The first five seasons (1996-2000) saw MLS average 14,872 spectators per match. The most recent five seasons (2010-2014) yielded an average of 18,220. Additionally, the average match ticket price has increased as well.  Overall, this suggest strong revenue growth and the assumption that quality of play on the pitch is improving commensurately. While MLS is growing and improving as a league, a further analysis reveals this attendance jump is largely attributed to one club’s success. Since Seattle Sounders FC joined the league in 2009, the club has averaged more than 40,000 spectators per match. If Sounders FC is removed from the most recent five season average that number drops to 16,789.

Massive growth in spending in the Big 5 European leagues can be attributed in part to growing television broadcast rights fees. In 2015, MLS begins the first season of an eight-year broadcast partnership that was reported to be worth $725 million. As part of this agreement, MLS now has greater control over the TV schedule and advertisement sales. Without question, this TV deal is a significant step forward for the league. However, the league’s broadcast partners (ESPN, FOX, and Univision) have taken a significant gamble. In 2013, MLS broadcasts on ESPN drew an average of only 220,000 viewers. While the league has stated its belief that its new broadcast partnership will significantly help from a broadcast strategy perspective, it is nonetheless alarming to see such small viewership numbers.

One of the other manners by which rapid growth can occur is through billionaire ownership investment. The Big 5 leagues in Europe have all experienced recent upticks in foreign investment from multi-billionaire ownership groups. This investment has come from the United Arab Emirates, Russia, Malaysia, and the United States to name only a few. Interestingly, MLS is beginning to see a similar trend. Sheikh Mansour and the ownership group for Manchester City FC purchased New York City FC, a MLS club that will begin play in 2015. Vincent Tan, the billionaire owner of Cardiff City FC of the Premier League, has purchased a large ownership stake in the new Los Angeles FC. LA FC will begin play in 2016. These types of investments have put MLS in a better bargaining position with corporate partners. Recently, Etihad Airways and Heineken have agreed to large-scale sponsorship agreements that will involve significant activation strategies that are similar to those executed in Europe. If this trend in ownership continues, there is reason to believe the financial position of MLS will dramatically improve.

While MLS has shown recent growth and further strong growth potential, a recent release of MLS player salaries compared to salaries in domestic league’s worldwide shows just how far the league is from Garber’s stated goal status. The Premier League (£2.27m), the Bundesliga (£1.46m), Serie A (£1.31m), La Liga (£1.21m), and Ligue 1 (£988k) were the clear leaders in player compensation in 2013. MLS (£136k) ranks 22nd on the list. This puts MLS directly behind the Greek Super League (£145k) and just ahead of Columbia’s Primera A (£130k). While MLS is able to lure a small number of high priced, high profile players via its Designated Player Rule, the number of players being compensated at a rate even near the average of the world’s top 5 leagues barely allows for a reasonable comparison. As a league with a hard salary cap on player spending, the previously discussed growth potential is clearly limited. With collective bargaining negotiations between the league and its player’s union ongoing, it is possible that some change will be on the horizon in the area of player compensation. However, until significant changes occur in that area, it is nearly impossible to imagine the league in the world’s upper echelon. The league’s new billionaire owners, $725 million television broadcasting deal, and gradually rising attendance suggests MLS is on the rise, but making any meaningful comparisons to the top leagues in the world at this point are imprudent.

About Dr Clinton J. Warren

Clinton Warren holds a Ph.D. from the University of Minnesota. He primarily studies ticket sales strategies and ticket sales force management. He is particularly interested in how the customer experience of sport spectators and sport industry corporate partners impacts sales. He has a special interest in studying these concepts at work in soccer in America. He is an Assistant Professor at Illinois State University and tweets via @Clint_Warren.