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A little look at MLS finances

So in the article I mentioned yesterday in a comment on the CBA post it is made to sound like MLS is rolling in money, well I am sorry I just don't think that is true

First I think the number are exaggerated, RSL and Chivas paid 10 million for their franchise.  I believe the current amount paid by Vancouver and Portland will be 40 million, so thinking that those two plus the previous 3 teams all paid that amount is wrong.  Seattle paid 30 million, I believe Philly paid 30 million, TFC paid 10 million.  The math is simple 80+60+30 is $170 not $200 million,  I found a number of cases where the match in article didn't quite balance out.

So consider that the 80 million for the two teams joining in 2011, that money will go to 16 teams or 5 million a team, the 30 from Philly goes to 15 teams or 2 million each, the 30 from Seattle goes to 14, or 2.14 per team, 10 from TFC goes to 13, under a million.  So while that number may seem like a lot, consider that Dave Checketts paid his 10 million in 2005 and has gotten back his initial 10 million he invested, but what about the 65 million of Rio Tinto that he is responsible for, what about the 2 million a year in salaries for 5 years now, the travel costs, the staff costs, marketing and advertising.  I believe the number was about a  1/4 million in loss for each match played at Rio Tinto, so 50 matches there is 12.5 million in debt.

I think the league is sound but I think trying to make it sound like the owners of the franchises are rolling in money is silly.
Our estimates indicate the league is not yet profitable, with its 13 teams posting an operating loss (in the sense of earnings before interest, taxes and depreciation) of $20 million on revenue of $165 million. But there are signs of hope. In 2007, the three teams that were in the black--Los Angeles Galaxy, Toronto FC and FC Dallas--had a combined operating profit of $6.7 million. From Forbes

The numbers from that article go on to value RSL at 30 million with revenue of 7 million and a loss of 2.1 million in operating income for 2008, now we know that with Rio Tinto those numbers have gone up but not enough to erase 4 years at Rice Eccles.

So as the CBA is being negotiated it is being pointed out that about 220 million in income from expansion fees and TV deals has been raised since 2004, I think that number is closer to 190 than 220, but the reality is that in the first 8 years of the league (1996-2004) owners lost a lot more money than that.  According to Business Week the league lost about 350 million those first 8 years.  Read that article it brings up some great points about how it really was 3 very rich billionaires who laid the foundations and took a lot of losses, it is also interesting that 2 plus years before the deal that saw Beckham come to MLS, the idea was already floating around the heads of people trying to figure out how to market soccer in the US.

All that being said I still think there are some rotten things going on:

I think the use of SUM as a separate business is unethical, I believe if you are going to use it as the marketing and merchandising arm of MLS that is should be a part of the MLS organization. I think having the same person running both of them has the potential to end up with poor decisions being made.  Example is the pay structure for SuperLiga (a SUM property), which would have the league getting a larger portion of the 1,000,000 purse than the players.  The league knew the purse would follow the "Bonus" rules of the CBA and that would get more than the players, they could easily have updated the CBA to adjust the rules. 

I think the salary issues are at the bottom of the scale not at the top end, and that there should be some plan in place not only in form of at 401K but to assist players with education and career placement after their playing days are done.  I have always thought it was a shame to see NBA and NFL players struggling to get by later in their lives, and MLS should do better by their players.

I have said for years that I believe the days of the league owning contracts and controlling all things MLS has to end, this could align with the players desire to get some form of free agency.

For the last couple days as I have thought more and more about the CBA and things that some people think are the cornerstone issues it leads me to a topic that I will talk about more tomorrow and one that I have been thinking about since the baseball strike of 1994-1995.