What do I mean?
[MLS is a pyramid scheme.]
Over the last 5 years, there has been a flurry of MLS expansion teams announced — with Cincinnati and Nashville each paying $150M, St. Louis and Sacramento paying $200M each, and Charlotte paying an MLS record $350M in expansion fees.
With expansion fees being distributed throughout the league, both league-wide and team revenue has become artificially inflated.
Don’t believe me?
Get this — In 2018, MLS clubs reported total revenue just shy of $800M, but in 2019, they made almost half of that from expansion fees alone.
Over the last decade, MLS has seen the average annual value of their broadcasting rights increase from ~$8 million to $75 million — a massive increase, but still minuscule when you remember the NBA & NFL bring in over $2.6 billion and $8 billion annually from their TV deals.
To make MLS profitable long-term—assuming expenses stay the same and the league stops expanding—Forbes projects they’ll need to land a broadcasting deal in the range of $525M annually, or 7x what they currently get.
With negotiations starting now, is that even possible on their next deal?
It’s unclear — but as TV rights continue to expand at an astronomical rate for virtually every single professional sports league, why shouldn’t we expect the same for one of the fastest growing professional leagues in the world?
Spoiler alert: we should.
[Spoiler alert: we shouldn’t. T’ain’t gonna happen.]
Over the last 5 years, there has been a flurry of MLS expansion teams announced — with Cincinnati and Nashville each paying $150M, St. Louis and Sacramento paying $200M each, and Charlotte paying an MLS record $350M in expansion fees.
With expansion fees being distributed throughout the league, both league-wide and team revenue has become artificially inflated.
Don’t believe me?
[I believe you.]
Get this — In 2018, MLS clubs reported total revenue just shy of $800M, but in 2019, they made almost half of that from expansion fees alone.
...
Even worse, MLS can’t expand forever. They already have 4 teams on the docket for future expansion.
[Not any more. Sacramento’s main investor pulled out. No MLSac.]
—bringing the total to 30—but most believe they won’t go much further that that. Sure, as the talent pool starts to dilute through expansion, MLS could theoretically just pay more for players given the global nature of soccer — but that’s clearly not sustainable forever. Point being — expansion is going to stop soon.
[Point being—it’s a pyramid scheme. (You have a very annoying writing style.).]
So given they won’t be able to use expansion fees to prop up the valuation of sub-standard teams for much longer, what is Major League Soccers plan to turn these valuations into a sustainable long-term investment?
Broadcasting rights, of course.
Even worse, MLS can’t expand forever. They already have 4 teams on the docket for future expansion.
[Not any more. Sacramento’s main investor pulled out. No MLSac.]
—bringing the total to 30—but most believe they won’t go much further that that. Sure, as the talent pool starts to dilute through expansion, MLS could theoretically just pay more for players given the global nature of soccer — but that’s clearly not sustainable forever. Point being — expansion is going to stop soon.
[Point being—it’s a pyramid scheme. (You have a very annoying writing style.).]
So given they won’t be able to use expansion fees to prop up the valuation of sub-standard teams for much longer, what is Major League Soccers plan to turn these valuations into a sustainable long-term investment?
Broadcasting rights, of course.
Over the last decade, MLS has seen the average annual value of their broadcasting rights increase from ~$8 million to $75 million — a massive increase, but still minuscule when you remember the NBA & NFL bring in over $2.6 billion and $8 billion annually from their TV deals.
To make MLS profitable long-term—assuming expenses stay the same and the league stops expanding—Forbes projects they’ll need to land a broadcasting deal in the range of $525M annually, or 7x what they currently get.
With negotiations starting now, is that even possible on their next deal?
It’s unclear — but as TV rights continue to expand at an astronomical rate for virtually every single professional sports league, why shouldn’t we expect the same for one of the fastest growing professional leagues in the world?
Spoiler alert: we should.
[Spoiler alert: we shouldn’t. T’ain’t gonna happen.]
