Tag / Atlanta

by Frank Maduri

Follow Up: MLS Expansion Update

In a follow up to a recent story covered here on my blog, Frank’s Forum, Major League Soccer (MLS) will, according to a number of high profile media sources, announce the expansion of the league to Atlanta.

 

This expansion franchise addition in Atlanta has been long rumored and the team will begin play in 2017, when the new downtown stadium for the NFL’s Atlanta Falcons is scheduled for completion. The official announcement is expected next week from the league, and Arthur Blank, the owner of the Falcons is expected to be named the owner of the MLS franchise as well.

 

I have written previously in my article series on sports expansion and demographics that Atlanta made sense for the future of MLS because it is a Top 10 TV market, the metro area population size, and the need for franchises in the Southeast.

 

MLS currently has no presence in the Southeast, and with the population demographic shifts in the U.S., they realized this needed to be addressed in future expansion. Atlanta will be the 22nd team in the league which currently has 19 teams split between two conferences. New York City FC will be the 20th franchise and will begin play next year along with Orlando, the 21st franchise and the first in the Southeast.

 

Miami is rumored to be the next expansion target for MLS with David Beckham heading the ownership group there, the bid is hinging on the finalization of both a temporary stadium, and more importantly, a plan for a dedicated soccer specific stadium being approved.

 

The South Rises

 

In the event that the Miami group headed by David Beckham gains approval for an expansion franchise, MLS will have 3 teams in the Southeast, reflecting the importance of the region to the future of the league. It will also create regional rivalries between Atlanta, Orlando, and Miami which MLS also prefers to cultivate in order to grow the overall intensity within the league and the fan base.

 

These expansion plans will launch MLS into the local and regional markets of some very large demographic areas which also have high yield population growth potential in the future. Each market in the South (Atlanta, Orlando, and Miami) has a nice blend of multicultural diversity which lends itself well to soccer with its strong homogenous global popularity.

 

Atlanta hosted a big international soccer match last month which drew the largest paid attendance for a soccer game in the city’s history. Orlando draws very well with their current minor league level club, and those numbers are expected to grow with the jump to MLS and the larger capacity in the new stadium.

 

Miami has been much maligned in the sports media regarding the previous failure of an MLS franchise called the Miami Fusion. The Fusion played four seasons in MLS from 1997 to 2001, and then the franchise was contracted by the league. The franchise failed for many factors: it played in Fort Lauderdale not in Miami, the team lacked corporate support, and it played in an old stadium, Lockhart Stadium, which lacked access to public transportation.

 

The ownership of the Fusion also lacked the financial resources to operate the team further after the losses they suffered, which will not be present in the group that David Beckham is bringing to this new franchise. The Fusion did spend money to convert Lockhart Stadium into a soccer specific stadium, which is a trend that lasts today and has contributed greatly to the financial stability of MLS.

 

The new Miami franchise will not have any of the same issues that beset the Fusion. The team plans to play in downtown Miami in a location with excellent public transit access. The latest rumor is that Beckham wants to purchase land for a stadium in the Port of Miami, which has caused the cruise industry to raise objections with the city regarding traffic and parking issues.

 

The cruise industry objection is a legitimate one being that the busiest day for the cruise industry is Saturday, and the busiest day for the MLS during the soccer season is Saturday as well. I am not sure how that situation will be resolved, but the Beckham group does not require public financing for the new stadium. That is a big factor toward this stadium being located basically wherever they want it to be located.

 

One More To Go

 

MLS Commissioner Don Garber has openly discussed reaching 24 teams by the year 2020. That leaves one more expansion slot left after these other plans which have been made public in recent months. My prior article in the series on sports expansion and marketing demographics speculated on where that other franchise might be awarded, and I still think it is most likely going to be in Minneapolis or in Sacramento.

 

The league has a hole to fill in the franchise coverage of the Midwest which would be filled by Minneapolis, which is also an excellent TV market with an established soccer fan base. The stadium used would be the new NFL stadium for the Vikings, similar to how the MLS plans to operate in Atlanta with the new NFL stadium there being used to host the soccer team during the spring and summer NFL off season.

 

The case for the growth of MLS is clear, the interest in the league here in the U.S. has never been greater, and the future only looks to be even brighter when these new franchises spread the game even further through America.

(Background data courtesy of AP.com, SI.com, AJC.com, and MLSSoccer.com)

by Frank Maduri

TV Markets and the Expansion of Sports – Part 5

This series has demonstrated the importance of particular demographic information on the decisions to expand a specific professional sports league. Each league has varied rationale behind the importance of this information and it can be weighted differently based on the respective league.

 

The first four parts of this series focused on the “Big Four” professional sports in the United States and North America. This final part of the series will focus on the emerging sport of professional soccer in the U.S. and their top league, Major League Soccer (MLS).

 

Unlike some of the other major sports reviewed in this series, Major League Soccer has already announced their intention to expand in the future. The league currently consists of 19 teams split into two conferences: the Eastern Conference and the Western Conference.

 

MLS Commissioner Don Garber has publicly detailed some of the future expansion plans for the league. Mr. Garber has indicated that the league wants to expand by 5 teams to 24 teams in the next four to five years. They have several candidates and have already announced 2 of those 5 expansion teams (www.mlssoccer.com).

 

The expansion criteria outlined by the Commissioner is:

  • Location
  • Ownership stability
  • Stadium Plan
  • Demonstrated fan base
  • Sponsors and TV market
  • Strategic Business Plan

 

Overall, the league has seen a drop in TV ratings, which they are going to have to address. MLS is currently televised by ESPN and NBC nationally, and many of the individual teams have deals for television coverage with Regional Sports Networks (RSN).

 

This past week, Forbes conducted a survey of the league and detailed the values of the franchises as well as providing some other data on the overall business side of league which just concluded its 18th year of operation.

 

On the Rise

 

The report noted that the average franchise value for MLS is $103 million, which represents an increase of 75% in the last 5 years (www.forbes.com). The most valuable franchise is the Seattle Sounders at $175 million.

 

The report continues by detailing the TV ratings slide on ESPN and NBC. The ratings for ESPN are down 29 percent to an average of 220,000 viewers. The NBC telecasts (air mostly on NBC Sports Network) are down 8 percent to 112,000 viewers (www.forbes.com).

 

However, the league is up for a new TV contract before the 2015 season begins, and MLS currently earns $30 million combined per year in national TV revenue from NBC, ESPN, and Univision according to Forbes. I have covered in other articles the trend toward huge sums of money being spent by networks to obtain the rights to live sports programming of any kind. MLS should be able to negotiate for a substantial increase in their next TV deal.

 

A particularly interesting note on the future TV deal negotiations is that Fox launched a new sports network, Fox Sports 1, in August. The Fox group lost the bid to retain the English Premier League television rights in the U.S. to NBC, so Fox will be looking to pay a premium to obtain the rights to MLS.

 

The Game Experience

 

The biggest statistic in the Forbes report was regarding the attendance figures for MLS for their games. In 2011, the average MLS attendance was 17,872 and in 2012 it rose to 18,611 (www.forbes.com). The figures for 2013 are not yet available, but the figures from both 2011 and 2012 are better average attendance numbers than both the NBA and the NHL. That is very impressive for a league that is only 18 years old.

 

Many trends drive that increase for attendance for MLS in recent years. First, the popularity of soccer is on the rise in the U.S. with so many youth leagues popping up everywhere. Next, the quality of players in the league has been dramatically upgraded. The league is starting to gain traction and so many youth leagues run trips to their local MLS team games and go in large groups.

 

The final and most lasting change in the trend toward attendance growth is that the younger people and teenagers who went to games in the early years of MLS entering the U.S. sports landscape are now older. They have jobs and disposable income and they spend it by going to MLS games with their friends. I am a perfect example of that trend because that is exactly how my affiliation with MLS progressed.

 

In fact, the average MLS team earned $26 million in 2012 from in-stadium revenue streams (tickets, merchandise, luxury suite sales etc.) according to the Forbes report.

In my own experience, I have gone to several games for my home area team, the New York Red Bulls. The live game experience is very good. The skill level of the players and the speed of that level of the sport translates so much better in the live experience compared to watching an MLS game on television.

 

However, I watch numerous Red Bulls games on TV and I think MSG Network (the RSN for the Red Bulls) has an excellent production value for their telecasts of the games. I do not like the camera angles or production presentation of the NBC telecasts, and I think ESPN does a very good job at presenting MLS, but most of their games are West Coast games which air very late in the Eastern time zone.

 

Two New Teams

 

The first two expansion slots of the five teams that MLS wants to add have already been announced. The league will expand to the following locations in 2015:

  • New York
  • Orlando

 

The long anticipated addition of a second team in New York will be a reality in 2015 and it is a very lucrative deal. The team will be called NYC FC and it is owned by a partnership between the New York Yankees and the owners of the English Premier League team, Manchester City (www.nbcsports.com). The ownership group paid $100 million dollars for the expansion rights in New York, which is a sign that MLS has truly gone up a notch.

 

The Yankees will be handling the logistics of building the stadium and operating the team in New York. The Manchester City side of the group will handle the player personnel side of the team, evaluating talent and stocking the roster with players. The team will be based in Queens, and the new stadium site has not been completely finalized but it is likely going to be constructed near the US Tennis Center and Citi Field in Flushing Meadow (www.nbcsports.com).

 

The league just last week announced the Orlando expansion approval. The city in central Florida has a very successful minor league level team called Orlando City FC, which will be elevated to MLS in 2015 (www.mlssoccer.com). The team is nicknamed the Lions and will keep that name and their purple uniform color scheme, which is extremely popular with the fan base there.

 

These decisions keep with the MLS expansion directives of a demonstrated fan base and strategic business plan. However, the biggest key piece in the Orlando expansion approval was the stadium plan approval by the government entities in Florida.

 

The new stadium will be built in an area of downtown Orlando that is in the midst of a huge development trend. The stadium is a major component of an MLS expansion bid and is required for any new teams to enter the league (www.nbcsports.com).

 

The new stadium requirement is very important to MLS because it significantly improves the live game experience for both the fans and the players. MLS began playing in the mid-1990s in mostly gigantic NFL or college football stadiums, which were not conducive to hosting soccer games. The adjustment to the configuration for soccer created some poor sight lines, and made the fans feel too far away from the action.

 

The MLS move to the Soccer Specific Stadium (S.S.S.) provided a huge lift to the revenues of the teams and the league. The teams were able to use the majority of the revenue to improve the quality of the players and the operations of the team rather than paying rent on a stadium that they were tenants playing within.

 

Potential Expansion Candidates

 

The following cities are currently on the short list for an MLS expansion team either by 2017 (three slots are left) or in a future expansion round. The revenues are going up so steadily for MLS that many analysts believe that they can add several more expansion teams in the future.

 

The league has openly discussed that they intend to target the Southeast region for near-term expansion (www.mlssoccer.com).  That region of the country has no presence for MLS currently and will have only the Orlando club by 2015. MLS prefers to develop regional rivalries, which will require additional teams around Orlando very soon.

 

The list of potential expansion franchises for MLS are as follows (all TV Markets data is courtesy of www.stationindex.com , the population demographic information is courtesy of www.census.gov and the Fortune 500 corporate data is courtesy of www.money.cnn.com ):

  • Atlanta, GA – the largest city in the Southeast is a major city of high interest from MLS for future expansion.

TV Markets Rank: 8th

Metro Population Rank: 9th

Fortune 500 Company HQ: 5

Synopsis/Overview: The Atlanta bid achieves many of the expansion directives for MLS. The rumor is that the current owner of the NFL’s Atlanta Falcons, Arthur Blank, is interested in owning an MLS team. Blank has a son who plays soccer and the Falcons are going to be moving into a brand new stadium in a few years in downtown Atlanta (www.nfl.com).  The stadium could be built with coverings that will drape the upper levels of seating so that it makes for a more intimate seating configuration for soccer. This is similar to the system currently used in Vancouver who plays in a shared stadium with a football team. The sponsorship support should be excellent. MLS has current franchises in all of the metro population centers larger than Atlanta, with the exception of Miami.

 

  • Miami – This bid is intriguing to MLS but could have some issues.

TV Markets Rank: 16th

Metro Population Rank: 8th

Fortune 500 Company HQ: 4

Synopsis/Overview: The Miami bid is a bit complicated because it centers upon David Beckham. Part of the bid by MLS to lure David Beckham to play in L.A. and raise the profile of the league included an option for Beckham to, upon retirement, gain an expansion team for a bargain price fee of $25 million in a city of his choice (www.mlssoccer.com).  It has been widely reported that Beckham intends to move forward with the expansion bid and that he likes Miami for the bid. The issue here is that he needs other partners to be able to finance the project, and he has had some trouble lining them up. Beckham has a December 31 deadline to get an ownership group together and get approval of a stadium plan (www.mlssoccer.com). It is not known if MLS will give him an extension if he gains an ownership group and needs additional time to gain government approval on a stadium deal. Beckham has approached basketball megastar LeBron James about partnering with him and James is interested in a piece of the MLS team but nothing is agreed upon (www.cbssports.com).  Beckham also has to find a temporary home field until the soccer stadium is ready. MLS seems interested in Miami and has stated that the demographics there have changed since the league was there previously (MLS had a team in the Miami area – Fort Lauderdale and the team folded because of lack of support and financial losses). Other sources say that MLS is lukewarm on the Miami market and wants assurances on the stadium financing before moving forward there. This bid has very strong potential if Beckham gets it done because MLS feels indebted to Beckham for putting the league on the global map.

 

 

 

  • Sacramento, CA – location in Northern California is an area where MLS has only one other team (San Jose) and the bid has many positive aspects.

TV Market Rank: 20th

Metro Population Rank: 27th

Fortune 500 Company HQ: 0 (several large companies located in city/metro area)

Synopsis/Overview – The Sacramento bid to MLS is one that is very positive but also has a few potentially problematic issues. The city has a solid TV market rank but the population of the metro area is smaller than other cities they would competitively bid against for a team. The bid has many moving parts because right now the city is fielding two bids on alternative tracks to gaining an expansion franchise. The first group is headed up by the co-founder of the Sacramento River Cats (minor league baseball) Warren Smith, who has purchased a USL-Pro minor league soccer team franchise to play in downtown Sacramento in 2014 (www.mlssoccer.com). Mr. Smith’s plan is to establish a fan base (part of the MLS requirements for expansion locations) build a front office that understands American pro soccer, and then deliver a new stadium downtown. The other area bid is from the suburb of Elk Grove which is being spearheaded by a public-private partnership involving Mayor Gary Davis and the City Council. The Elk Grove bid is focused completely on the business side of the scenario with the focus on building a brand new stadium on the site of an unfinished mall called Elk Grove Promenade (www.fox40.com).  The Elk Grove contingency has had discussions with MLS and is rumored to be the favored bid of the two. The area having two competing bids would not be good and would most likely resort in the city getting passed over by MLS. Mr. Smith has stated to local media outlets that if it looks like one bid is progressing better, they would all get in a room and rally around one bid for Sacramento (www.news10.com).  Time will tell if they are successful.

 

  • Detroit – The “Motor City” is in the mix for a MLS team but it is more of an outsider at this point at least in terms of the initial expansion to 24 teams.

TV Markets Rank: 11th

Metro Population Rank: 14th

Fortune 500 Company HQ: 9

Synopsis/Overview: The Detroit rumor of expansion to MLS began four years ago, when the Apostopoulos family and their company, Triple Sports & Entertainment submitted the winning bid for the Pontiac Silverdome, which is the former home of the NFL’s Detroit Lions. The dome has not been used much since the Lions moved out in 2002 to play in downtown Detroit. The Silverdome is about 30 miles outside of Detroit and can seat 70 -80,000 depending on the type of event. That would be too large for MLS standards, so they would have to renovate the stadium or tear it down and build a new stadium on the site (www.sports.yahoo.com).  The family has deep pockets and would control all of the parking and other revenues at the stadium, which MLS finds favorable in a venue setup. The family had an elaborate plan to renovate the site which has changed dramatically. Now, the roof had been deflated in early 2013 to save energy and it has been torn apart by high winds (www.mlive.com). The family has said it is installing a solar paneled roof and they have winterized the building. The TV market ranking is very good, the corporate sponsorship support would be strong as well. The big issues with the bid are the state of the economy in Detroit, the population demographics, and the ability of a fan base to support the team long term. At the time of Triple Sports buying the dome site, Detroit had not had a major soccer event since the 1994 World Cup. Since then, the city was awarded a minor league team, Detroit City FC, and they have pretty solid attendance numbers (www.sports.yahoo.com). The population demographics are trending on the decline and MLS is probably unsure of the long term fan support based on the bankrupt city economy in Detroit (though Triple Sports maintains that they need no public money to build the stadium). The very latest proposal is for a new soccer stadium at the old dome site along with a 275,000 square foot retail space development project (www.cbssports.com).  This bid seems like an outside type of bid based on the priority system of MLS at this point.

 

 

 

 

  • Minneapolis, MN – A very strong contender for the final expansion spot of the first wave announced by the league.

TV Markets Rank: 15th

Metro Area Population Rank: 16th

Fortune 500 Company HQ: 18

Synopsis/Overview: The Minneapolis area has all of the elements of a successful MLS expansion bid. They have a potential ownership group, they have an established fan base, and they will have a world class stadium in the near future. The media market size has been the draw for MLS, they need a franchise in the top 15 TV markets and in that northern region of the U.S. Midwest. The Minnesota United currently play in the minor league NASL and are the defending champions with an established loyal fan base (www.mnunitedfc.com).  The owner of the Minnesota Vikings NFL franchise has so much interest in an MLS team, he had the soccer configurations built-in to the plans for the new NFL stadium for the Vikings, which broke ground last week and will be completed by 2016 (www.nfl.com).  In a move that is very similar to the Atlanta bid, the roof would be lowered for soccer, or a covering would enclose the entire upper bowl of the stadium to bring the seating capacity in line with other MLS facilities. This is a very solid bid which has great potential.

 

  • San Antonio, TX – A rapidly growing city with a successful minor league soccer team and a diverse population.

TV Markets Rank: 37th

Metro Population Rank: 25th

Fortune 500 Company HQ: 5

Synopsis/Overview: The San Antonio bid for MLS has been ongoing for several years. At one point, the city was hoping to obtain an expansion franchise as a tenant for the AlamoDome, which was built with taxpayer dollars in the hope of getting an NFL team, and has never had a primary tenant. The city abandoned that plan and moved forward to explore other uses for that facility when MLS informed them they did not get an expansion bid in the prior round in 2007-08. A few years ago, San Antonio was awarded a second tier minor league soccer team, the Scorpions (www.bizjournals.com).  The Scorpions are regularly near the top of their league in attendance at their new soccer stadium, Toyota Field, which is considered by many to be among the nicest soccer facilities in the minor leagues (www.mlssoccer.com).  The stadium can be expanded to MLS standards, and most definitely would be if the bid was accepted. The ownership group would not be an issue and the corporate support for sponsorship would be very strong. The fan base is established through the Scorpions current presence in the market, and the population is growing there and is very diverse, which is attractive for MLS. The TV market is small, which could be an issue, but remember that ranking is of a lower priority to MLS than it is to other sports leagues (www.sportingnews.com).  San Antonio has great potential for an expansion bid, however, it may be in the second wave of expansion further down the line. The success or failure of this bid is tied to whether or not the Miami bid falls apart (because MLS is still a bit lukewarm on that market) and the progress of the Sacramento bid as well. Those are the main bid cities in competition for those last two slots with San Antonio in the mix.

 

 

In the end, the demographics of the TV market, the metro area population, and the involvement of Fortune 500 corporate support are all very crucial elements in the expansion of professional sports.

 

The role of government is also of paramount importance in the expansion of professional sports leagues because the politicians are involved in many facets of developing land for a new arena or stadium and to garner support for the team within the business community.

 

This article series covered the interaction between all of these elements as they contribute to a bid for a potential expansion franchise. The series also covered each major sports league, their respective current situation, and the challenges which are uniquely inherent to each league regarding expansion.

 

In a society that is becoming more technologically advanced, where job related stress is expected to rise due to many factors, and where family time together or time to spend with friends is becoming more limited; sports has and will continue to take on a larger role.

 

The outlet which sports provides through following a team or a particular athlete, attending games or events, participating in sports fantasy leagues on-line, and the interaction it provides with others: either family, friends, or members of fan clubs are going to combine to make sports increasingly relevant as a source of entertainment.

 

That demand for professional sports of all types will create a need for more teams or leagues. The demographics of the country will shape that trend as well with population shifts to other regions of the U.S., for instance the migration of people out of the Northeast to Southern states. The trend is also evident in the population increase in Texas due to the economic growth there and in the migration of more people to the Western United States.

 

It will be interesting to follow the developments over the next several years of some of these situations described in this article series. The scenario currently in Detroit with the bankruptcy filing by their city government is a case study into the rationale behind the impetus by these other cities to explore gaining professional sports teams. The theory being that if their city obtains one or more teams, they can develop and revitalize their downtown centers with an arena or stadium as the centerpiece.

 

The domino theory being that these developments will bring jobs and population retention keeping the tax revenue within the city and making their city vibrant for years to come. The future will determine whether sports will play a central role in the rebirth of the American city. One factor is clear, the money involved in expanding these leagues is too significant to ignore, so expansion is in our future. The other details will be filled in over the course of the years ahead.