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Major League Soccer's $300+ million dollar bet on NY2 could be a mistake

MLS Logo 2
MLS Logo 2

This is a bit off my normal RSL beat, but I do believe that these decisions have a direct impact on RSL and all the other teams of MLS:

I have never been a fan of the league pushing a second New York based team, I think if the market demand is there a private owner/investor would step forward. However clearly Don Garber has a much different vision, a $300 million dollar plus vision and that just covers the cost of the stadium. Part of that vision came into view today, with an interesting report on that says Flushing Meadows it is, and that talks are further along than most thought.

Again let me be perfectly clear I don't mind them putting a second team in New York, I just don't think there is enough demand for it at this point. I base my opinion on a couple of factors, first New York isn't supporting the team they have currently, and you can argue about Red Bulls being in New Jersey all day long, so were the Cosmos during their heyday. Second, if it is so smart of a business move why hasn't a single private investor put in a dollar yet? MLS has had full time people, sold a portion of SUM and now are willing to pay the entire $300 million for a stadium, it is going to take either a very rich owner or a very long time for the league to get their money back.

So with MLS in the shape it is, you know where there is a huge gap between the great work done establishing the Academy system and having players MLS ready, with a reserve division that simply isn't working at fillign that gap. Or the fact that MLS has a salary cap system that increases less than the CBA mandated raises for players, so teams can't keep their players from year to year. Or where we still have professional soccer players making under $40,000 a year. Or where one the most prestigious teams in league history is forced to play in a stadium abandoned by other teams, and where 1/2 the stadium seating is unsafe to use. Forgive me if I think spending $300 million building a stadium for a team that doesn't exits is a horrible mistake, then add on the fact that MLS has spent millions more in planning and trying to come up with a location and plan. Forgive me if the league selling off a portion of SUM (their marketing arm that spends more time promoting Mexican soccer than MLS) to fund $100 million of the expense of this project, is a mistake.

more thoughts after the jump:

I can acknowledge that MLS likely wouldn't exist today without the leadership and ideas of Don Garber and the Single Entity structure of the league. However, I think that when you consider that none of the other 19 teams every had the league spend millions helping them get their stadium deals, at no point when there was no financing (DC United) did MLS step up with 300 million dollars to help them, you have to start to question the decision making of Don Garber. When the very structure of the league and schedule was sacrificed last year to "save money" you have to wonder if plopping down $300 million is an insult to the fans? To the players who have to take part time jobs or live with roommates to make ends meet because of the salary structure of the league, spend $300 million to lure more multi-millionare DP's to New York City is beyond an insult, a virtual slap in the face.

Now we know from the report done on that the stadium project still needs state approval before it can move on, and that will likely have to wait until at least November when the NY State Legislature convenes. It is also funny how MLS has pushed teams looking to build stadiums to try and get some level of public funding, but for it appears those rules don't apply to them when they are building one for a team that doesn't exist.

So here is my question, how does MLS pay for this? Do they sell the package deal of stadium and a franchise to someone, let's think about that for a second, we know that MLS has spend millions on the project to this point with full time workers, consultants, planning and design firms, then toss in the $300 million price tag of the stadium and a franchise fee that would likely be more than the $50 million paid by Montreal to join the league, and you are looking at a price tag of probably $400-500 million dollars. Now how exactly does MLS sell that, when no investor or group has been willing to foot a penny at this point? Is there a master deal in place with the Cosmos that would swap some of that debt to get that brand into the league? Who knows.

Maybe they do as Dave Clark suggest, they pay back the amount in smaller payments to each of the 19 current teams over the course of 5-10 years. Of course we know that most MLS teams still are struggling to make a profit, when last reported in 2010, only two teams had been profitable in 2009, let alone pay off debts like this. Maybe there is some hope that a new team in New York would revolutionize the TV deals, but given the reality of the ratings and the available number of matches it is very unlikely that MLS will get anywhere near the $70 million dollars that the NHL gets. Heck the story is that MLS took a lesser dollar amount to move from Fox Soccer to NBC Sports because the network was available in more households and promised some cross promotions that FSC couldn't match. Still when we consider that New York still is only watching MLS at a 0.5 Nielsen rating, it is hard to believe that anyone would up their current contract by almost 10 fold each year because of one team.

So we know that the stadium wouldn't begin construction until next spring at the earliest, and so it would be 2014 or more likely 2015 before a team could actually start a season there, is MLS really going to overlook other markets for 3 more years just to hope that someone will buy a team for this new stadium? What happens if nobody does?

That question has made me think a lot over the last few months, and the more and more I think about it, I don't know if MLS cares if nobody steps up. We know that a group bought the Cosmos name and will be playing in the NASL, where there is no salary cap issues to deal with, but if that group doesn't want to buy into MLS's franchise fee, or pony up for the $300 million dollar stadium, what happens? MLS couldn't afford to let it go empty, both the costs and the public impact would be devastating, so would MLS field a team?

Within the single entity system, the league really owns the contracts of all the players anyhow, they pay the players, they control a large number of the decisions made by teams. So could all of this lead to a team being "owned" by the league? Oh they wouldn't call it a league team, they would say it was a co-op team owned by all the other teams in the league, but that would only fool so many. Oh my you have to admit that it is an interesting concept, is it beyond MLS to put a contingency plan like that in place.

Now all of this speculation could easily be put to rest if MLS would simply be honest and transparent on this and other situations. I mean where are they getting $300 million from? Selling all of SUM, has MLS been sitting on profits waiting for this, are they going to borrow the money? What is the plan to recover these costs? How about that plan to be a top league in the world by 2022, what are the measurements and goals for that? Oh and what about that promised transparency from the Disciplinary Committee?

I love MLS but their clear attempt to limit debate and discussion on topics that they would rather avoid is kinda sad in this day and age, so they can continue to try being both the story and the reporters, but there are hundred of voices online and in the stands who will continue to wonder what is going on since MLS simply isn't talking.