“Who are Ya?”

                     “Who Are Ya?” – The Economic Effects of MLS at the global level.

1.1 Pre-MLS and the Introduction of a U.S. League.

When the United States was given the rights to host the 1994 World Cup it was an event to the likening of Paris, France hosting the Super Bowl. It was unfathomable. It was shocking. It was… genius.
In order for the U.S. to host the most popular sporting event in the world they first had to lay the ground work for a professional soccer league. FIFA (The Federation of International Football Associations) mandated that the U.S. demonstrate their ability to provide and produce an audience for the most popular sport in the world.

The U.S. had routinely produced World Cup qualifying teams but had a lack luster history when it came to constructing and sustaining a viable, organized league from which to draw domestically. To say that the competition between the vibrant worlds of Major League Baseball, The National Football League, and The National Basketball Association and the game of soccer itself would be a contest would be a gross overstatement- There was no contest. Soccer was a truly “academic” sport in terms of its impact. On the university level it was a vibrant, fast paced and popular sport that produced the majority of the players that would regularly make up the U.S. Men’s National Team. Their future after leaving the collegiate level, however, was often left up in the air. For the players that were considered talented, that may actually be able to have a career as a professional, they would have to travel overseas in order to play for teams at the club level; this in and of itself was (and is) a very daunting task. These players were coming from a country that had relegated soccer to a “second tier” sport and now, in order to play the game for a living, they were going to have to take on the best players in the world in order to secure spots with teams that looked upon the American soccer player as “second tier” in their own right.

With the World Cup set to come to America in 1994, the ground work for Major League Soccer was laid. 10 teams would make up the league in its debut season. Teams were seeded in exceptionally viable sports markets as well as “surprise” locations like Columbus, Ohio. (Columbus would, however, go on to become one of the league’s most reliable and financially viable teams). Initially however, the league was not a success. Although money was being poured into the league, by 1998 MLS had to dissolve two franchises- both located in the state of Florida. The reduction of the number of teams along with the resignation of a few key executives within the league signaled a low point and the end was looking to be closing in rather quickly on the fledgling organization.

One of the key problems was the lack of any kind of soccer-specific stadium. Teams were forced to share venues with standing teams from other sporting leagues. The New England Revolution had to share Foxborough Stadium with the New England Patriots of the NFL. The Dallas Burn had to make use of The Cotton Bowl – a multipurpose stadium used by college football teams, track and field organizations, and other groups. This caused the league to have a somewhat nomadic quality about it. With no “home” teams were left feeling as though they were “living out of boxes” Investors like Lamar Hunt and Phil Anschutz were two of the many  figures who remedied this by investing into the construction of the much needed stadiums, revenue for facilities, and promotion of the league as a whole. There are still teams that share venues with other sports teams, but as an entity the MLS was beginning to keep its head above water.

1.2 World Cup 2002 and finding the leagues identity

            In comparison to other international soccer leagues, the MLS was a far cry from the elite in all terms- quality of players, financial income, as well as overall exposure. While American players were being recruited and brought in to the league at a rapid pace—as well as finally being able to show off their skills on a professional level– the eyes of the global community were only felt in momentary glances. The gold standard for the nationally based soccer league was, and arguably still is, the Barclay’s Premiership of England. Since its creation in 1992 The Barclay’s Premiership (or English Premier League) has been the home of the top-flight of English players, as well as a host of global superstars. It generates income into the Billions of €s on an annual basis and has sold television broadcasting rights around the world. One of the reasons for the leagues financial success is said to be its internal structure- The English Premier League is run as a corporation which is owned by all 20 of the current English Premier League clubs. Every football club is regarded as a shareholder each given 1 vote in regards to certain matters including: changes to the rules, endorsements, and contracts. The football clubs elect a Chairman, Chief Executive, and Board of Directors to oversee the day-to-day procedures of the football league. The English Football Association isn’t directly involved with the daily processes of the English Premier League, but they are classed in special status as a “special shareholder” when a Chairperson and Chief Executive are elected and should brand-new regulations need to be implemented by the football league. In contrast, MLS is run under a single-entity structure in which teams are centrally controlled by the league. In order to keep costs under control, revenues are shared throughout the league, player contracts are negotiated by the league, and ultimately players are contracted not with individual teams but with the league itself. A court ruled that even absent their collective bargaining agreement, players could opt to play in other leagues if they were unsatisfied. This internal organizational set up is seen by some international soccer/footballing organizations as the reason why MLS cannot compete on a league by league basis. However, given the relative infancy of MLS in comparison to leagues that have literally been around a century or longer it is important to realize that it is an ever growing body. Until 2004, it was estimated that MLS had lost close to $350 million since its founding, but with the completion of a soccer-specific stadium in Los Angeles (The Home Depot Center) in 2004 as well as others in the following years, teams began making definitive profits. The expansion of television coverage also helped trigger an economic renaissance. In 2006 MLS brokered a deal for television rights with international sports broadcasters ESPN and in 2007 another demographic was brought in when MLS penned a deal with Spanish language broadcaster Univision. Shortly thereafter, yet another broadcast package was constructed when Fox Soccer Channel agreed to broadcast MLS matches alongside U.S. Men’s National Team matches.

The U.S.’s performance in the 2002 World Cup did wonders for the fledgling image of MLS as well. With an underdog victory over Portugal and the defeat of bitter rivals Mexico, the U.S. team (again, made up predominantly of MLS players) caused a surge of popularity around MLS. Over the next 3 years the league expanded more and more as it introduced better talent in the form of players and managers and the creation of more teams themselves. To compete on the International level, MLS will need to start making adjustments to compensate for their different structural set up. The building of stadiums for each team is a step towards this goal because it will allow teams to gain their own revenue (rather than have to profit share with the stadiums of other sports teams). As teams have built their own revenue up they have begun to use this to gain the attention of international talent who are interested in playing in the United States. As an international entity, MLS is slowly beginning to take a more pro-active approach toward garnering international attention. A major area of rejuvenation is the slight transition from an outright competitive league to one of a more developmental nature.                                                                                                                        

With teams now concentrating on molding and creating young talent to be sold off to European and other international clubs, MLS is generating international revenue that it can funnel into its own development. In 2007 MLS officially allowed for its teams to adopt a mainstay of international soccer- the use of jersey sponsorships. European and International soccer clubs had, for decades, used their jerseys as a place for major corporate sponsorship. Companies like Red Bull, Volkswagen, Sony, Samsung, and others had paid teams millions of dollars for the right to have their logos emblazoned on the front of a specific team’s jersey. The exposure ultimately gains the team, as well as the company, financial success (usually). Xango became the first front of jersey sponsor in MLS buying the rights from Real Salt Lake for the 2007 season. The following seasons Herbalife, Best Buy, Red Bull, and with the introduction of a Seattle based team in 2009, Microsoft have all become jersey sponsors for respective MLS franchises. (It’s estimated that Microsoft’s endorsement is worth $4 million annually and if the ownership and stadium portions of Red Bulls endorsement are included in their agreement with the New York Red Bulls Franchise, that the total revenue generated is in the area of $100 Million annually).

1.3 International Notoriety and the “Beckham Effect”

In the ensuing build up of MLS over the past 3 to 4 years, certain players of international acclaim have expressed interest in playing in MLS; players who, in their native countries, are seen as sporting icons akin to Michael Jordan or Kobe Bryant. New York Red Bull forward Juan Pablo Angel began his career in his home nation of Columbia. He soon moved to South American giant River Plate where he became a sensation that caught the eye of English Premiership side Aston Villa. Villa reportedly spent (at the time a record signing fee) £9.5 Million to bring Angel to England. A start and stop performance that eventually showed Angel’s scoring ability allowed for Angel to be picked up by The New York Red Bulls and become one of the international figureheads of MLS. Freddie Ljungberg, former captain of the Swedish National Team and English Premier League champion with English powerhouse Arsenal, now plays for Seattle Sounders FC and is considered by many soccer writers to be the overall star of the 2009 MLS season. These players bring with them a major economic windfall with them in the area of overall marketability including jersey sales, image rights, and match ticket sales. None, however, have generated the financial windstorm or international appeal of David Beckham.

Seen as the “face of international football” by clubs such as Manchester United and Real Madrid, David Beckham possesses, according to Fortune Magazine, the most marketable face in the soccer world and is the 8th most marketable sports figure in the entire world. With endorsement deals for Pepsi and Adidas among many multi-million dollar agreements, David Beckham’s move to MLS and the Los Angeles Galaxy in 2007 was the shock of the sporting world. With him, Beckham brought the international notoriety that the MLS had only dreamt about up to that point. Jersey sales for the Los Angeles Galaxy sky rocketed with the name Beckham sewn across the back. Billboards with Beckham’s likeness and the logo of his new home league dot the California landscape. The international soccer world now takes notice of MLS on a much larger level. The economic “stimulus” brought on by the arrival of David Beckham and other international players cannot be understated in regards to its effect on the overall financial growth of the MLS as an international sporting organization. As time passes and MLS grows in financial and sporting competitiveness, there will begin to be a leveling of the playing field with European soccer leagues. The United States will no longer be left with an isolated arena of sporting competition within itself with the likes of the NFL, NBA, and Major League Baseball, but will now be able to fully compete at every level for the top talent and top endorsements with the world’s leading soccer leagues. MLS commissioner Don Garber predicts that by 2010 every MLS team will be profitable on its own overall. This, with a needed restructuring of the league’s player-to-team contract policy, will allow for the spending of international funds to enhance, exhibit, and export the talent that the United States contains in its players and fully afford MLS the opportunity to compete in business markets on an international level.