Why the MLS Won’t Become a Major League

This article was originally posted a while ago, but with the recent Beckham criticism and the new light shown on international futbol by ESPN, I thought it relevant

The 2006 World Cup garnered 17 million viewers in the US.

Soccer, or as I prefer to name it, futbol is the 2nd most popular sport in the United States. Stop! Before you go anywhere, just hear me out. Futbol is the 2nd most popular sport in the US, followed by Basketball. How you ask? Well, let me ask you the question. What would you rather do, play a pick-up game of basketball with friends or watch the current Chicago Bulls team at the family themed United Center? Would you rather play a game of flag football on Turkey Day, or watch an Indiana/Minnesota college football game? Well if you are anything like me (as in awesome), and are 35 and under, you would rather play the game than watch it. And that’s the same criteria used for my argument above. According to some random book I’ve read, Basketball and futbol are the most popularly played sports in the US. That’s pretty convincing reasoning to me that futbol is actually a widely appreciated and popular sport in the U.S.

As we know, this doesn’t necessarily lead to high TV ratings for MLS or even the NBA for that matter. More people watch and support their NFL teams than their MLS teams, including me. But that doesn’t mean that Americans are not interested in futbol. It just means they are not interested in MLS futbol. And I don’t blame them.

Popular opinion suggests that futbol will never take off in the US because fans are more dedicated to baseball, football, basketball, hockey and unfortunately, even NASCAR. Popular opinion is wrong. And so to it appears is the mindset of people running US Soccer and MLS franchises. The main competition isn’t MLB or the NFL, it’s the English Premier League, La Liga in Spain, Serie A in Italy, the Mexican leagues, and whatever they call the league in Egypt. The millions of futbol playing people in the US would rather watch a Manchester United/Chelsea game than a Chicago Fire/LA Galaxy game.

Still don’t get my point? Well, what would you rather watch: an NBDL game or an NBA game; the Arena League or the NFL; a minor league game or the Cubs’ game? Likewise, MLS is the developmental league of the futbol world. And not even a good one at that. The real feeder leagues are located in South America, Africa, the Tier 2 leagues in England, Spain, and Italy, and the youth squads of AC Milan, Arsenal and the like. The MLS is more like the Div. 3 School where maybe two or four guys make it to the big stage (playing in England, Spain or Italy). Basically, the MLS is Louisiana Lafayette and maybe, just maybe a team sitting in England might draft the Daniel Mannings and Charles Tillmans of the MLS world.

And this, more than anything that baseball or football can throw at futbol, is the reason that the MLS will always have a difficult time competing for US viewers’ attention. Still don’t believe me? The last World Cup Final (2006) garnered 17 million viewers in the United States. And that game was played between France and Italy. In contrast, according to the Baseball Almanac, the 2006 World Series had 15.6 Million viewers in games played by the Cardinals and Tigers. NBA you ask? The 2006 Finals between the Heat and Mavs garnered 13 million viewers. This isn’t to argue that soccer is more popular than Baseball or Basketball, it is not, just that futbol is actually a pretty popular sport in the US. Moreover, that the US futbol viewer is enlightened and would rather watch great futbol than MLS’s Div. 3 version.

And these figures shouldn’t be too surprising. The US is a melting pot. Almost everyone’s family at some point came from a foreign country where futbol dominated the sporting landscape. By no coincidence, the recent Mexican immigrant would rather watch Chivas play; the recent Scottish immigrant, Celtic; the recent Turkish immigrant, Galatasarey, or the recent Egyptian immigrant, Al Ahly. They may be living in the US, but satellites and sports bars allow them to see their team play even if those teams are playing thousands of miles away. Want further evidence that futbol is alive and kicking in the US? Go to Fado in Chicago on any Saturday morning and you’ll see it packed with American, English, African, and (insert nationality here) fans all watching their favorite English Premier League team. (While you are at it, grab a pint or tea and order some good Irish breakfast). Don’t even bother going to Fado during a major futbol sporting competition. During Euro 2008 (Think European World Cup, Spain vs. Germany) you couldn’t even get into Fado because it was filled to capacity.

In the end, like most people who grew up playing futbol in the States, I wish I could support a local futbol team like the Chicago Fire. But for now and the foreseeable future, I’ll stick to following Arsenal in England.

Chicago Cubs: The Implications of Selling the Cubs

This Article was originally posted in January, but the thought process still applies to the recent sale of the Cubs.

I would rather watch paint dry than watch a baseball game. Now, don’t hate me. I don’t hate you for not liking futbol (uh, wait. yes, I do). Let’s just agree to disagree. I love futbol, football, and basketball and I just don’t get into baseball, golf, and Nascar. Let’s move on.

However, I am interested in the whole Tribune selling the Cubs issue. I respect the tradition of baseball. I could see how people would get into the history of the ball park, its famous players and what the game means to Chicago and America. But, to me I’m more interested in the business side of the sport. So what does the Tribune Company’s intent to sell the team (and I assume the stadium) to a third party really mean?

Well let’s think about it like this. Assume we live in a rational world, with rational people. i.e. The type of people who are going to buy and sell a baseball team are likely pretty smart business people. They are not going to get ripped off. And the Cubs certainly won’t be selling for less (unless the current state of the Economy and lack of credit somehow hurts the buyer, but I doubt it). More likely, the Cubs will be sold for its full and fair price and maybe a little more if there are several bidders.

So what’s the fair price. I’m not an expert, but the person valuing the Cubs is likely going to look at the Cub’s cash flow historically and try to project it for each year into the future. Thus, they’ll figure out the Cubs expected future cash flow for each year from 2008 until infinity. Then, they’ll will discount each year’s cash flow to the present value and get some large number. Thus, the person buying the Cubs is going to be paying for the cash flow the Cubs will make from now until forever.

So what does this mean? Well it means that the guy paying for the Cubs is going to be paying a lot of money. But, if he’s paying exactly what the Cubs are worth (i.e. cash coming into the Cubs forever), he’s going to need to do something to make sure he makes a profit. Put another way, the new Cubs owner is going to need to find out a way to bring in more cash each year in the future (i.e. his profit/returns), then the Cubs were already going to make in the future (i.e. the amount he paid).

To belabor this point, say I sell you my lemonade stand. As smart people, we realize that in present value dollars my Lemonade stand will bring in $15 a year for 10 years (i.e. $150) dollars. You pay me the $150 and buy it. Now, in order for this to make sense you’ve got to figure out a way to make more than $15 a year for the next ten years. Basically, either you sell the lemonade for more or maybe you get cheaper lemons and thus increase your profits that way. But, if you can only manage $15 a year for ten years, well you’re an idiot. You’ve worked ten long years to make exactly zero profit.

So what does the buyer of the Cubs do to make his/her profit? You guessed it. He can increase ticket sales or somehow cut costs (i.e. pay for cheaper players). That’s probably too basic, but still pretty accurate I think. What else can they do?

1. Knock down Wrigley Field, and put up a state of the art stadium, with more seats, (likely Club), with tax payer money and fans putting up money for PSLs, all in an effort to…you guessed it make more money.

2. Start selling that $10 beer for $15 (i.e. concessions, merchandise, tickets, etc. all cost more).

3. Charge more for advertising in the stands. Most likely- corporate naming rights. Can you say “Boeing Field’?

4. Lower costs (fire some administrative people, reduce pay rolls, etc). Or you cut your highest expense- i.e. player salaries (trade your best players for cheap replacements).

You get the point. Unless the Cubs were wholly mismanaged (i.e. tons of unnecessary expenses), the new owner of the Cubs is going to need to make more money to obtain a return on his investment. Which really means that the average baseball fan will need to spend more money (tickets, PSL’s, taxes for new stadium, beer, jersey sales, etc). That, or attend games at Boeing Field, while watching less talented (hint: lost costly) players.

That’s all.