Inconceivable: MLB Realignment Proposal Gets Leaked

The award -winning publication, Baseball America, ran a story on Wednesday with a leaked proposal being considered by Major League Baseball that would realign the divisions, shorten the regular season, and add more playoff teams. The theory being that the reduction in travel costs will offset the revenue lost from the shortened schedule.

The proposal would eliminate the American League and National League as baseball fans have grown accustomed to throughout the history of the sport. The new realignment would group the teams geographically without allegiances to the current divisional groupings.

The new realignment concept would include expansion of the league by two teams to bring the total number of teams to 32; allowing the realigned proposal to divide the teams evenly. The new plan would create four divisions with eight teams each, and the two teams mentioned in the expansion component are Montreal and Portland, Oregon.

I have covered the expansion plans for all the major sports leagues for about four years now. I completed a huge series of articles on expansion about two years ago which considered several factors for different potential markets for new teams in each sport. These two cities are not surprising as top expansion destinations for baseball to consider at this point.

The support to bring back the Montreal Expos has been growing in the past few years and they have a potential ownership group and a few different sites identified for a downtown ballpark which I covered in a piece I wrote last year. Montreal makes sense because they have a built-in fan base from their first iteration that MLB can draw from and grow. The trepidation that some will have, and it is understandable, is that the city had a team and lost it already, that same type of fan apathy can happen again. That situation would be obviously very unideal for the league.

Portland came in “second place” in the race to get the relocated Expos in the early 2000s. The city has some solid demographic evidence to support a team and some potentially problematic detracting factors (media market size, weak potential corporate sponsorship) and they have no current stadium to support a team.

However, according to this report and some other research, the ownership group in Portland can still access a state grant for funding for a portion of the new stadium which was approved for the pursuit of the Expos relocation and still has not expired.

The last time MLB expanded was in the late 1990s and the valuations on those teams have gone through the roof relative to their initial expansion entry fees. The formula for the expansion fee for the two teams added in this proposal would apply the average franchise valuation and factor in the increased value based on revenue models as well as the average value increase over the past twenty years.

The new expansion fees will provide significant revenue to each owner and would be incentive enough for them to add two new members to the ranks. The newly proposed alignment would put teams like the New York Mets and New York Yankees in the same division. The format would put the Chicago Cubs and Chicago White Sox in the same division, and would break up certain rivalries that the average fan has grown to enjoy.

The Mets would be in a division without any of the other members of their current division, the NL East, and the Minnesota Twins would play all of their road games in the Eastern time zone. The questions will almost certainly arise around the designated hitter rule with the dissolution being proposed of the two league structure in place currently.

The purists are going to have several issues with this proposal including the marked increase in the number of playoff teams. The realigned league would have 12 playoff teams: the four division winners, and eight “wild card” teams that would play each other to determine who plays the four division winners in the Division Series, then the final four teams would compete to determine the World Series participants.

The shortened regular season would lead to more playoff games which would invariably increase the value of the television and media rights deals that MLB would seek to broker with their broadcast partners in the future.

The debate will most certainly be spirited regarding the expanded playoffs and the value of “making the playoffs” only to play a winner takes all one game elimination wild card game. The other side will defend the decision with the rationale that the league will have two more teams, and the expanded number of postseason slots should keep more teams in contention. This will translate into better interest in late season games in more markets which should help attendance levels in late season games with a reduced regular season.

The detractors to this proposal will inevitably feel that the elimination of the divisions we have grown traditionally accustomed to (i.e. AL East, NL West) in favor of a completely different / highly geographic setup which eliminates some historic rivalries will damage the television ratings for the sport.

In my view, baseball is different than the other major sports because it does not have the same national appeal. The television ratings for MLB have proven that it is a regional sport and while the nationally televised “Game of the Week” is nice, that game does not generate ratings the way a national broadcast for the NBA or NFL “Game of the Week”.

The argument could be made that this new proposal will become too specifically focused which could hurt the interest in the sport. A good example is who is going to care about a Baltimore Orioles versus New York Mets game outside of those two markets? Not that many people.

The new proposal is also going to face resistance from certain team owners especially in the western regions and some of the small market teams which will be placed into divisions with several larger market teams. The team owners in the eastern regions and the southern areas will most likely support this type of proposal because it will drastically reduce their travel costs, which is becoming a growing concern for team owners across Major League Baseball.

The league has other issues though that this proposal, or one of similar type, will not repair. The pace of play situation is a huge problem for the sport. The league has been looking at ways to speed up the length of games because millennials and younger people are not interested in anything that takes three to four hours out of their life to do. The average length of a game went down a couple of years ago and this season is up over three hours and five minutes. That needs to get resolved or else they will have a more difficult time maintaining fan interest in the future.

The long- term viability of certain franchises, namely the Oakland A’s and Tampa Bay Rays needs to be clarified before they expand and add two new teams to the league. Those two franchises are struggling to generate attendance and revenue and their respective owners are trying to get new stadiums built for them thinking that will solve all of their issues.

The proposal is radical, it is inconceivable to me that they would alter and eliminate the National League and American League and dissolve the current division structure and playoff structure. Then, I think of the changes to the league structures when they moved Houston to the American League which made necessary an interleague series all year long because of the unbalanced number of teams. The MLB offices did that to slowly dissolve the lines between the two leagues, to prepare the fans for something else in the future: one league.

The debate will continue as the months move forward. It should be noted that MLB knew what it was doing when it “leaked” this proposal. This was a calculated move to soften the ground around making these types of changes. It is a test sample, this does not mean this proposal for realignment is set in stone.

Conversely, the league has certain issues that you might consider giving them credit for recognizing: the cost of travel for a whole roster of players and support staff is getting very expensive, the amount of games in different time zones is draining the players, and the season is a six month grind with not enough off days (this proposal would give one day off a week to players and allow for travel the next day rather than overnight flights which can be a safety issue).

Major League Baseball has some issues that they must resolve and they are also trying to adapt to a changing landscape for the viewing of sports content and for maintaining fan interest in a world full of other distractions. This proposal seems radical, bizarre, and doomed to a baseball purist like myself.

However, we must all realize that this was just a test, the real changes are coming down the road, and I cannot imagine how inconceivable the actual realignment will be when it rolls out in the future.

MLS Expansion: LA, Miami, “Group of 12”, Future of Soccer In America

MLS Commissioner Don Garber announced recently that the newly rebranded Los Angeles Football Club (LA FC) which are the initials they will be known by in the future, will be entering the league alone in 2018. This is a deviation from a trend of expanding the league by two teams at a time, and it also casts some doubt on the state of the Miami expansion bid.

It was anticipated that the Miami bid spearheaded by former soccer superstar, David Beckham, would also begin play in 2018 with LA FC. The Miami bid has had numerous setbacks, most notably with securing land for a stadium as well as securing total private financing for the stadium.

When the calendar flipped to 2017, the news out of Miami was, that after striking out on their attempts at obtaining land at the Port of Miami, Museum Park, and a plot of land across from Marlins Park; Beckham had secured land in the Overtown section of Miami. The group does need to acquire the adjacent lot which is owned by the county for municipal vehicle storage.

The Overtown section is north of Miami’s main downtown and is notably a high crime and economically depressed area with a very diverse population from several countries. The Beckham group proposal has the jobs generated from the stadium and team being located there as the primary piece in his pitch to the government.
The plan for the stadium, according to local news sources and the MLS site, is for a 25,000 seat venue that will cost around $200 million in the final estimates. The Beckham group is currently reported to be seeking out additional minority investors to help come up with the rest of the financing needed to get the stadium facility built successfully. The target date now is for Miami to join the league in 2019, but all parties involved caution that those parameters could change in the future.

The league has issued statements of support for Miami, which also happens to boast the highest overall TV ratings for soccer in the U.S. (which is a huge reason why the MLS has been so patient) and a demographics mix that is favorable for supporting a soccer club for the long term. In my prior coverage of the expansion of MLS, the media rights deal for the television packages both regionally and nationally has come into focus.

The league wants to grow their presence in large TV markets so they can increase their revenue capture in the next TV rights deal. The addition of Atlanta and Minnesota as expansion clubs this season and the second team in LA in 2018 as well as potentially Miami in two years, will be a huge bargaining chip for MLS to get more revenue dollars out at the negotiating table.

The second LA team mentioned earlier, LA FC, has a star studded ownership group and is the rebranded entry for the disbanded Chivas USA which shared the Los Angeles market with the Galaxy for a period of years in MLS history. The Chivas experiment was a complete failure, as the club never gained real traction in L.A. and shared a stadium with the Galaxy, which did not help their marketing attempts.

LA FC will have their own modern stadium which is under construction currently on the site of the former LA Sports Arena which is just south of the LA Memorial Coliseum. The location is very good and very convenient for fans, and the league will be releasing information on the expansion draft to help them construct their roster in the near future.

Group of Twelve

The addition of LA FC in 2018 will bring the league to 23 teams, the first time in a while they will have an odd number of teams, which will be a scheduling headache for the league office. The Miami bid looks like it is eventually going to get done as the 24th entry to MLS, which has a stated goal of expanding to 28 teams.

The remaining four spots for expansion will be decided among what is called the “Group of Twelve”, the twelve cities that submitted proposals for consideration for an MLS expansion franchise. The group consists of: Tampa/St. Petersburg, Cincinnati, Detroit, Indianapolis, Nashville, Charlotte, Raleigh-Durham, Phoenix, Sacramento, San Diego, San Antonio, and St. Louis.

I have produced individual articles on some of these cities and their quest for an MLS expansion franchise in the past, I have also completed larger summary articles on each of these bids as well as others which were not included in the “Group of Twelve”. It should also be noted that MLS executives intend on reducing down this group to a smaller number, potentially as early as this summer.

In my view, and I have no indication from the league on this part of the process, it would make sense to cut the group down from twelve bids to eight, since only four slots are available. Then it could either be cut again to six bids, or the four approved bids could be announced.

The summary of each bid can be found below:

Tampa/St. Petersburg – see my full article on this emerging and popular bid. The Tampa Bay Rowdies have an established fan base, a passionate owner, and plans to renovate and expand their existing stadium on the St. Petersburg waterfront. The stadium plans do not require any changes to the city street grid or any “fill” in the bay to complete which is a big positive with local government and the residents. MLS executives are intrigued by the stadium site and the size of the market for TV purposes. They also have a very organized social media campaign.
The negatives would be that the Tampa Bay area is already part of the territorial rights for the Orlando City FC franchise and they would have to agree to another franchise joining MLS from the same region. Orlando City would also have to be compensated for the alteration to their territorial rights, which could get very sticky and expensive.
Some analysts see that territorial issue and the fact that the league had a team in Tampa which folded in the early 2000s as two major issues with the bid. I think it is still very much in play because of the size of the market, the fan base of the team, the ownership, and the stadium.

Cincinnati – The bid has many strong points such as an established fan base for their current minor league club, strong attendance figures at those matches, and a committed ownership group with great resources. The Midwest is an area of need for MLS expansion when looking at the current footprint of the league.
The negative point for the Cincinnati bid is a big one: the stadium. Their current stadium for their minor league club is too old and too small. The successful bid for this city would need to include a new stadium plan that is actionable. The government seems supportive of that concept and the stadium is a vital component to an MLS bid because the league needs full control of the facilities that their clubs play in for scheduling and maximum revenue generation purposes.
Some analysts feel that this bid only needs a vote on the new stadium and it is going to be one of the approved bids out of the this “group of twelve”. I am not so sure because the spots are limited and MLS executives are very high on the presentations by St. Louis and Detroit and may think those two cities will be an adequate representation of the Midwest at this point.

Detroit- The bid for Detroit is also a process which I wrote a separate article about several months back, it has risen from a long shot to a very real possibility for one of these last four spots on the MLS franchise expansion list. The strong points are: an ownership group that includes two billionaire professional sports owners, one of the largest untapped TV markets for MLS, a diverse population with a history of supporting soccer, and it is the second most populated metro area after Phoenix in the “group of twelve”.
The downsides to this bid: they have no high level minor league presence in the market. Detroit City FC is essentially a fifth tier team that is supporter funded, though they have done a great job on a small scale with marketing the club.
The other main issue is the stadium site. Dan Gilbert and Tom Gores, the two principle potential owners are eying a site in the rapidly redeveloping District Detroit, where the other sports stadiums are located. The site is a few blocks from Ford Field / Comerica Park and is currently a failed municipal construction site for a proposed jail. The budget money ran out and the site has been abandoned for some time. Mr. Gilbert and Mr. Gores have proposed essentially a land swap where the jail would be moved to another area in the city and they would acquire the former jail site to build the soccer stadium. The city is mulling the proposal, and if they turn it down, there is no contingency plan for a site for a stadium. There are some analysts and soccer media people who feel that the stadium site could sink this deal, and others who believe that MLS is so interested in reviving Detroit that it could still move forward with a successful bid.

Indianapolis- This city which I have visited several times is one of the most underrated sports cities in the nation. The downtown is very easy to walk and all of the stadiums are in the same area which makes it very convenient. MLS favors the downtown urban setting for the stadiums for their franchises and the league has appeal with millennials, who also favor the concept of living in a downtown area with access to sports as well as entertainment options.
The city has an upper tier minor league team called “The Indy Eleven” which play in Carroll Stadium and have garnered some impressive attendance numbers. The support of this club is seen as a very strong aspect to the bid. The club has a very wealthy and well connected owner that is very driven to get into MLS.
The city also has robust support from the local and state governments, which just created a tax zone for the area that the proposed new stadium would be constructed. The tax revenue from gate receipts (ticket sales), concession sales, and tax revenue from those that work at the stadium would comprise the public portion of the new stadium funding. The proposed site is near the Colts NFL stadium downtown.
The negative aspects to this bid are that the minor league club does not have an established history, the Midwest could get crowded if the league decides to grant access to St. Louis and Detroit as well, and the last negative is the stadium. The proposal for the tax zone may not gain passage before MLS decides on the last two bids for expansion. In the event that the financing plan for the stadium is uncertain, this bid will fail. I view this as more of a long shot bid.

Nashville- A bid that has gained some traction in recent months is the proposal from Nashville to join the largest soccer league in North America. This push is being spearheaded by the Ingram family worth billions of dollars and enjoys outstanding governmental support. The city is the smallest metro area of this group of twelve applicants, and it has never supported a soccer club on any level.
The stadium site has gained some clarity now that the Nashville Fairgrounds has been zeroed in as the proposed area for development of that facility. The city has a large millennial population and a growing diversity in their population which MLS executives have noted as strength areas.
The fact that they have a strong ownership group and substantial potential corporate sponsorship support are the positive aspects to this bid.
The negative aspects are that they have no attendance figures or history of supporting a soccer club, the size of the metro area, and the lack of a definitive stadium plan puts this bid in jeopardy of being passed over for one of the final spots in this process.

Charlotte- The bid by Charlotte is one of two from the state of North Carolina (Raleigh-Durham is the other) and MLS Commissioner Don Garber has stated that the league would like to expand their presence in the Southeast. There was some confusion between the potential owners and the city council because of the timing of their request for public funds to build a soccer stadium on the site of the old American Legion Memorial Stadium. The municipal government felt it was rushed, and that is because essentially Charlotte came late to the MLS expansion party and had to apply prior to the deadline.
This bid will most likely be for one of the final two spots in the process because other cities are at a more advanced stage at this point. The positives for Charlotte are the location and the passion of the potential owners, the powerful Smith family of NASCAR fame and wealth. The political support is a bit split with the mayor on board and the county level officials on board with the bid and the stadium plan, and some city level officials that are seeking more time to evaluate the use of funds for an elite level pro soccer team.
The stadium site is fairly convenient as it is close to Charlotte’s Uptown area, which is where the NBA’s Charlotte Hornets have their arena. However, in recent weeks there seems to be some uncertainty being reported by the local media around the stadium plan and the financing for the project. That is obviously never good news when it comes to the prospects for an MLS expansion team. The other positives include the corporate sponsorship presence, the size of their media market, and the support of their other sports teams.
The Independence are a minor league affiliate of the Colorado Rapids of MLS, and they play in Charlotte currently. The support for the team will be part of the evaluation of the bid as will be the robust support that the residents there provided to the U.S. Men’s National team games held in the city recently. My view is that the demographics and some other metrics make this bid interesting, but if the city council blocks the stadium deal, this bid will be eliminated.
Raleigh – The other Southeast bid is from Raleigh, which has a successful minor league team (Carolina RailHawks re-branded recently as North Carolina FC) a dedicated ownership group led by businessman Steve Malik, and a demographic mix of highly educated professionals transplanted from the Northeast as well as millennials starting their careers.
The corporate presence is a bit lacking in major Fortune 500 types, but several large multinational corporations have a presence in the “Research Triangle” area. The bid proposal stressed the fact that the area has just one major pro team, the NHL’s Hurricanes, and that the population can support an MLS team. It also stressed the teamwork between the owner, the local government, the corporations, and the local residents.
The media market size is on the smaller side, but MLS has clubs in small markets that have done very well. The all-important stadium situation is the area where the most progress is needed. They have a design concept, a mid-20,000 seat stadium with a translucent roof. The renderings look amazing, but the site is still not determined. The North Carolina FC club plays currently in a small facility in Cary, which is outside of Raleigh. MLS prefers downtown urban stadium locations with access to public transit. The stadium will be mostly privately financed.
Raleigh is an interesting bid, I still think if Charlotte gets the stadium plan voted through it may have an advantage. Many analysts close to the league feel that North Carolina will get one of the four teams. Then, others feel that Atlanta and Orlando are so dominant in the Southeast that the league may look to hit other areas where they need a presence.

Phoenix- The entry of this city into the group was a surprise to some because the market has not done particularly well supporting their lower tier minor league team through the years. The market is the largest metro area without an MLS club and they have no competition, the next closest MLS club is over 300 miles away so that makes this bid unique.
This bid by Phoenix is a mixed bag of positive and negative elements. The positives are that they have a current minor league club: Phoenix Rising FC, they have an ownership group, and they have a stadium plan as well as a site. There are groups within Phoenix that believe that the support for the minor league club was not strong because the stadium location is not convenient. The new stadium would be in Scottsdale, an ideal location for accessibility.
The negative elements are that the corporate support for the potential MLS club is tepid, the city has other major sports so competition for entertainment dollars is steep, and the market has limited soccer heritage or history to draw upon.
In my view, the stadium moving to Scottsdale is a key component. The population and TV market numbers are very compelling. I think Phoenix has a strong chance because I think MLS wants to be there just from the size of the market and the demographics of the market, just from that perspective. I do have reservations about the ability of the area to support a team and whether it would work, particularly playing matches in the summer months in Arizona.

Sacramento- The soccer world was anticipating this expansion bid to be a virtual “lock” based on the progress that this group made in all phases of the process. The events of the past few months, however, have put the Sacramento bid in a degree of jeopardy. The capital city of California has been working tirelessly over the past four years to obtain an MLS expansion franchise. The demographics are ideal for MLS, the market size has some attractive attributes, and there is little competition with only one pro sports team in town: the NBA’s Kings.
The other main positive to the bid is that the minor league club, Sacramento Republic FC, has been a huge success in that market. The club has set attendance records in their league and was the initial reason behind the interest level for MLS being so high in potential expansion to that market. The branding of that club clearly has connected with the community and it “checks all the boxes” as far as MLS criteria for a minor league club presence and established fan support base.
The stadium site is also a positive attribute to their quest for one of the last four spots in MLS. The new facility is designed and the project is shovel ready in a tract of land in the Railyards section of the Sacramento downtown, which is part of a huge redevelopment project being spearheaded by the city.
The ownership component is a bit tricky because Kevin Nagle, who is leading the MLS bid process did not have the rights to the branding of the Republic name, logo, and colors. Those rights are controlled by Warren Smith who runs the operations of the minor league club. The two men caused the issues with the bid alluded to earlier in this section because at the time the bid was due to MLS, Nagle submitted it without the Republic being a part of the submission. This created concern within the league over whether the local ownership was fractured. In the end, an agreement between Nagle and Smith was made about four days later, and the MLS process will move forward with the Sacramento Republic being the name and branding used for the potential expansion team.
The other issue with Sacramento is the emergence of San Diego as an exciting candidate for expansion, which raises the question of whether MLS would add two more teams in California.
In my view, this bid is still very solid and MLS cannot ignore the unbelievable success pattern that Sacramento Republic FC has had over the past few years. The ownership situation appears to be solidified as far as the transition of the branding for the minor league club. This bid seems more reliable than others in the group.

San Diego- This city, along with the two bids from North Carolina, are the most recent additions to “the group of twelve”. The San Diego attempt at MLS expansion gained a huge amount of momentum when the city’s longtime NFL franchise, the Chargers, relocated to Los Angeles in January. The city officials, seeking to fill a void, moved quickly to facilitate a comprehensive proposal to obtain an elite pro soccer franchise for San Diego.
The proposal has several positive attributes from the outstanding climate, the proximity to other franchises in the league for rivalry purposes, and to the favorable demographics. San Diego has a growing millennial population and has strong potential corporate sponsorships available as well.
The other positive attribute is the stadium proposal which calls for a comprehensive redevelopment of the Mission Valley site that was home to the Chargers football stadium. The old stadium would be torn down and a new smaller venue for soccer and college football would be built there along with other housing, office, and retail space for the university.
The downside is that the San Diego bid is up against some stiff competition with cities who have been honing their MLS bids for years. The government is supportive but the league also currently has teams in California and may want to use the expansion slots to grow the game in other areas of the country.

San Antonio- The bid from this city is interesting because the support for the minor league team is solid, and that club was just recently purchased by the same group which owns the San Antonio Spurs of NBA small market success. The ownership group is the strongest aspect of this bid. The renovation and expansion plan for the facility where the minor league Scorpions club plays currently is very unclear, and thought to be the negative that could eliminate this bid from the whole process.
San Antonio has the right demographics and millennial population, but it is in a similar predicament as San Diego. MLS has two clubs already in Texas and may not want to add a third franchise there, especially when FC Dallas has struggled to connect with the fan base in that market over many years.

St. Louis – The bid is similar to San Diego, this city also lost their NFL team (Rams) to a relocation to Los Angeles. The plan is to build a soccer stadium on land near the Union Station railway hub downtown. I wrote a separate article about this city and the quest to gain an MLS spot. The ownership is dedicated and passionate and the city has great soccer heritage as well. The downtown site is ideal.
The city has hosted some high profile soccer matches which were well attended recently. The expansion there would fill a hole in the Midwest on the MLS map.
The negative aspect is the unproven aspect of being able to support a team long term from both a sponsorship and fan base perspective. The other red flag on this bid is the stadium proposal. The Governor of Missouri has pulled the state level financing, and the city has amended a bill to try to gain tax revenue for their portion, but the use of tax revenue is going to be decided by the voters.
Commissioner Garber was in St. Louis on Monday ahead of the vote on both propositions for the proposed stadium, trying to drum up support. The long and short view of this bid is that MLS wants to be in St. Louis, but they have to iron out the financing of the stadium or this bid will not be approved. The option to privately finance the stadium project is still on the table but ownership is already reportedly going to pay $150 million in an expansion fee to MLS, then they committed another $80 million toward the stadium costs plus the overruns. They would need private financing of another $80 to $100 million to get the project completed.

In the end analysis, my own view of this situation with expansion of MLS in the future is that it is a very fluid situation. The Miami club will most likely be granted into the league at some point in the near future. The league has spent an inordinate amount of time, money, and resources trying to make Miami a viable situation. That would leave four open slots for twelve teams.

The most likely group that will emerge in my view of the situation are: Sacramento, San Diego, St. Louis, and Tampa/St. Petersburg. The league is really intrigued with those four markets for various reasons. However, in the event that St. Louis cannot get the stadium deal done, Detroit or Cincinnati could slide in as a replacement in the Midwest. That is provided that they get their own stadium deals in place, if the jail site land swap fails, Detroit is out of the running.

I know two California teams seems like a wild concept, but Sacramento is the most ready of all the bids and is such a great fit as an MLS market it makes too much sense for them. The league is really taken with San Diego, and they have a fairly straightforward bid because the city owns the land in Mission Valley and is supportive of the development project there.

In the event that the St. Petersburg group cannot reach an agreement with MLS and Orlando City FC on the territory rights, that could doom that bid. In that case, I think the league would go with one of the North Carolina bids to fill a spot in the Southeast. The stadium issues being resolved either in Charlotte or Raleigh would be the deciding factor in which bid moves forward.

I also understand that many fans and those with interest in this topic feel that Cincinnati has a great bid, and they do, but they are in a small media market. I think a spot opens for them only if one of the spots fails to seal the deal, namely St. Louis. I do not see the league adding two Midwest teams.

The interest in the league is growing and the speculation around how the league will look in the next few years is an exciting prospect. The theme of this whole process is that soccer in America has really gained a foothold and is gaining popularity.

The expansion process will play out in the next several months and it will be interesting to see from the vote in St. Louis, to the land swap in Detroit, to the city council decision in Charlotte, and to the negotiations for the St. Petersburg territory; which bids will be successful in joining the league. The process will play out and the league will have some exciting new cities on the franchise map in the near future.

MLS Soccer Expansion Update

Major League Soccer (MLS) has been in the sports news lately with more announcements regarding the expansion of the burgeoning league to new markets in North America. The league currently sits at 20 teams and plans to get to 28 as a target number at some point in the future.

The first round of expansion sites gained more clarity over the last few weeks with the league announcing that Atlanta will join as the 21st franchise and Minnesota United will join as the 22nd team in the fast-growing top league in America. Both teams will begin play in 2017, which was the long rumored expectation for Atlanta because they will play in the new NFL stadium downtown; but a surprise in the case of Minnesota.

The Minnesota expansion bid had been mired in a stadium land site situation that was finally resolved with the club announcing it will construct a new facility in St. Paul but that project is still in the initial phases. The team will play in 2017 (and beyond until their stadium is ready) at TCF Bank Stadium on the campus of the University of Minnesota. That facility just finished a stint serving as the temporary home of the NFL’s Minnesota Vikings while their new football stadium was being built. MLS has been targeting Minnesota and the Twin Cities market for years to fill a geographical and TV market / media market void and now achieved that goal. The new facility that will eventually open in St. Paul looks amazing.

Atlanta FC, which is owned by Arthur Blank, announced that their franchise broke the MLS season ticket record for an expansion team with sales of close to 22,000 season ticket plans since the announcement. The Atlanta area also represents a huge television market and a growing population that is increasingly culturally diverse and interested in the sport of soccer. That expansion decision looks like it will be a “home run” for the league and they will play at the new downtown domed stadium which will have a system that will cover over the unused seating levels, similar to the system used in MLS currently by the Vancouver Whitecaps.

The Next Round

The next round of expansion will feature the rebranded LAFC and the Miami re-entry with David Beckham and his investors. Both of these bids have had some twists and turns. They are also similar in that they are both in cities where the MLS is currently (L.A.) and was previously (Miami) and they are both essentially reboots from past league miscues.

LAFC as it is currently known is the rebranded replacement for the now disbanded Chivas USA, which was a team that shared the L.A. market with the Galaxy and also shared the same stadium as the Galaxy, and none of that worked or connected with the fans.

Chivas USA was owned by the same group as a major pro team in Mexico, and those owners treated the MLS team like a minor league farm team and invested little to no money in it. The results were very bad for the league and for the on-field product and resulted in a league buy out of the Mexican group and the disbanding of the team a couple of years ago. MLS made a concurrent announcement that they were planning a new rebooted LA team to take the place of Chivas USA at a later point.

LAFC has some big name Hollywood owners and a lot of star power. The owners secured land for their own stadium near the old LA Sports Arena where the Clippers used to play their home games. They will be launching with a whole new look and will no longer share a stadium with the Galaxy. The league and those involved with the new club there look like they will get this right, after the first attempt at a second LA franchise went so completely wrong.

Miami is a whole other story, but a similar narrative. MLS was in that area with a team called the Miami Fusion back around 2000-01 and they played their games out in Fort Lauderdale. That proved to be too far from the city center and the attendance and the whole concept eventually was disbanded. The league has not returned to that city until now, and this bid has been handled very differently.

David Beckham was given a clause in his contract when he came over from Europe to join MLS and play for the LA Galaxy that allowed him to become the owner of an expansion team to play in a destination he chose for a greatly reduced entrance fee. The superstar chose Miami, and the team will play downtown and will look to correct all the issues which went wrong when the league tried and failed with the Fusion.

This Miami bid has had several stadium site selection issues and temporary stadium issues but it is all starting to take shape and looks like it will be a successful venture for the league in an important market for US soccer.

Done Deal

Once Miami and the new second LA team join the circuit that will bring MLS to 24 teams. The next bid that is all but a done deal to be approved is Sacramento. I have covered their quest for a MLS franchise in the past, and the smartest thing that they did is consolidate their bids because, at one point, the city had two groups bidding to land that coveted spot.

Those involved in the Sacramento bid moved forward with the group that operates the Sacramento Republic club, which plays in a minor league currently, but has set attendance records for that league. The city of Sacramento, which fought hard to keep their NBA team from leaving and were successful, banded together to move quickly on a stadium proposal to present to the MLS. The new stadium is planned for the area downtown around the old railroad yards.

The stadium built specifically for soccer is the key piece to any MLS expansion bid because it allows the teams and the league to enhance their profitability through control of the revenue streams. A club which would be leasing a stadium and playing as a tenant would not be financially viable over the long term.

Sacramento has gained some highly reputable investors and has impressed the MLS executives with their persistence in gaining a franchise. They are also in the position of offering a scenario where the league has a natural rivalry with the San Jose Earthquakes in the same region (also important to MLS expansion) and that the team will not compete for fans with another major league team, for the most part, because the NBA season ends in April and the MLS season gets underway in March.

The bid does lack some important aspects such as Fortune 500 companies in the area for corporate partnerships, and the media market is a medium size compared to other bidding cities. However, MLS will have added the second team in LA, the Miami franchise, Atlanta, and Minnesota which are all large media markets; by the time they would consider adding Sacramento. The Kings also enjoy the support of some pretty strong regional corporate sponsors, and the capital city of California has some attractive features because many companies of all types visit there to do a variety of business matters.

The Sacramento Republic minor league team has an established fan base which would remain loyal to the team in their transition to MLS, which is a very important aspect of any expansion bid. I have to give credit to Sacramento they worked together and made took this bid from an outsider to what experts feel is the consensus pick for the 25th franchise in MLS.

Gateway to the West

St. Louis has long been known as the “Gateway to the West” and they have a long and rich tradition for soccer in America. The city has drawn upon that deep history coupled with an opportunity that arose out of a separate situation which was initially very negative, to put together a bid for an MLS expansion team. The St. Louis bid is said to have impressed the MLS executives with decision making authority so much that reports state that their bid is on a fast track for approval.

The roots of professional soccer began in America in the early 1900s, most people do not realize the hotbed that St. Louis is for the sport in our country. The city has been host to a number of professional teams through the years for both indoor and outdoor soccer. The St. Louis Stars played in the old NASL for ten years from 1967 to 1977 before moving to California.

The St. Louis Steamers were an indoor soccer team which set attendance records, and the city is currently home to St. Louis FC which plays in the USL Pro minor league system. The city has attempted to bid for an MLS team in the past and failed, most recently when the league expanded by two teams in 2010.

St. Louis submitted a bid, but due to some issues with the stadium plan and lacking a viable ownership group, it lost out to Portland and Vancouver. MLS at that time did not like the idea of their team sharing a facility with the Rams or playing at Bush Stadium and sharing that with the Cardinals. The plan back in 2010 for a new soccer stadium had several issues.

The three keys to a successful MLS expansion bid are fan support, a stadium solution, and local ownership. The St. Louis bid is building their fan support through the USL Pro team, they have multiple local ownership groups with some prominent people from the sports and business community involved, and the stadium solution is taking shape.

The stadium plan for the St. Louis bid is probably the biggest issue they have right now overall, but as I wrote earlier, they are taking a negative situation and turning it into an opportunity. The negative situation was that St. Louis lost their NFL team, the Rams, who relocated to Los Angeles this spring. The opportunity is that the city officials and those involved with the push for an MLS franchise are planning to use the land that had been initially set aside for a potential new stadium for the Rams as a site for a soccer specific stadium.

The land is on the riverfront adjacent to the Gateway Arch, which FOX Sports, ESPN, and others have reported that concept for the stadium site appeals to MLS Commissioner Garber. The city is also in close proximity to Kansas City and Chicago to form regional rivalries with those teams, which is another appealing aspect of the bid. It is going to take a significant amount of time to get all of the key elements aligned, but St. Louis is gaining traction toward the goal of adding a MLS team now that the city lost the Rams. It is a really interesting bid.

Motor City Gains Ground

The Detroit bid for MLS expansion has gained some serious ground in the race for the final three spots if you believe that Sacramento is basically in as the 25th franchise. The league has kept close tabs on Detroit for years regarding potential expansion because it fills a void in their national footprint in that region, it is a large television market (which enhances the value of future media rights deals), it is ethnically diverse which fits for the fan base of the “global game”, and it has excellent potential for corporate partnerships compared to other cities.

The latest in the Motor City bid is they are grooming a fan base with their minor league club, they have deep pocketed business leaders (billionaires Dan Gilbert and Tom Gores) interested in getting a seat at the MLS table, and they have a plan for a new soccer stadium in the same downtown area as the new Red Wings hockey arena. This bid bears watching as it continues to gain traction.

Charging Through

The San Diego bid for an MLS franchise is in some ways similar to the St. Louis bid because it is tied to the fate of an NFL team, in this case, the Chargers. In the event that the Chargers fail to get a new football stadium deal approved for the downtown waterfront district on Election Day, then I think the parties involved on the city and county level will turn their attention to getting the MLS into San Diego.

The bid is a lower priority in compared to keeping the mega bucks potential that the NFL provides the city, which is much the same way it played out in St. Louis earlier this year. In the event that the Chargers relocate to Los Angeles, the most likely course for a soccer stadium for the MLS bid would probably be a massive rebuilding and reconversion of the old Qualcomm Stadium in Mission Valley to seat around 30,000 and convert the other space for alternative use.

The trend in MLS has been toward stadiums in a downtown or centralized area in an urban setting, but that cannot always be the case for every city in the league. The downtown concept gets tricky with the San Diego bid because the city does not own the land.

The Mission Valley scenario is a more viable option because the city owns the land and businessman and former San Diego Padres owner, John Moores, got the exclusive rights to bring professional soccer to the area when he signed the deal allowing the team to change hands when they moved into their new downtown baseball stadium.

San Diego could be a destination city for MLS with the great weather, the proximity to the other teams in California, the diversity of the population base, and the commitment of local ownership. The issues with the bid are that the stadium would most likely not be downtown, and it is very close to two other teams in the league in Los Angeles which could be seen as market oversaturation.

The Outsiders

These cities have bids that are, at this time, equivalent to the outsiders looking in: Phoenix, Nashville, Cincinnati, San Antonio, and Austin. These bids would stand a better chance if MLS eventually determines they have enough financially viable markets with sustainability in place to expand beyond the 28 team target to 30 teams.

The league would undeniably be interested in Phoenix because of the size of the metro area population and the role that soccer could play in that marketplace. The issue right now with their minor league team is that it plays way out in the Valley suburb of Peoria, which MLS stated will not work for their league.

The local ownership could be a problematic scenario as well as getting funding for a soccer stadium in downtown Phoenix. I think this bid has too many issues to be a serious candidate until some of these issues can be resolved. The local government does not want to pay for improvements to be made to the MLB Arizona Diamondbacks stadium, so I get the feeling they are not going to jump to publicly finance a portion of a soccer stadium.

Nashville could be a really good fit for MLS and they would run mostly opposite the NFL’s Tennessee Titans schedule, so the overlap would not be a big issue. The bid has many potential owners interested but it lacks corporate sponsors and is not a very large media market, which are detractions. The stadium site and financing plan also could bear out some major concerns. This situation would take several years before the bid could merit serious consideration.

Cincinnati is a whole other story even though it is relatively close in proximity to Nashville. The “Cinci” bid has one very big positive that the MLS brass in New York have noticed: tremendous fan support for a market of that size. They have had great turnout which is the first part of the three traits I covered earlier. The other two components: local ownership and a stadium plan are the two areas which need details to be worked out. The corporate sponsorships have better potential than other bids and some of those business leaders may step forward and head an ownership group. The government support seems good but not great in so far as the stadium and other hurdles that need to be cleared.

San Antonio has long been a rumored destination for MLS expansion with the minor league team, the Scorpions, being the best selling point for the bid. The MLS execs do not like the location of the current stadium (which would need to be expanded and renovated anyway) and reports indicate that they want a downtown site near The Alamo before they consider this city for expansion. The stadium is a huge piece of the bid for an MLS team because it is the main revenue driver.
The league was also not thrilled with the Scorpions management but they were just sold recently to the owners of the NBA’s San Antonio Spurs (one of the best run franchises in all of sports). The Spurs management should be able to successfully market that team and present a pretty compelling pitch to MLS executives for expansion to that growing market.

I must state, in full disclosure, that I am a proponent of the MLS expanding to San Antonio, I think it would work really well because it is a growing population base with the right age and cultural demographics. However, I have read that the league views this as more of a long shot, especially if they favor two other bids from other markets. San Antonio could be left without a seat at the table.

Austin is the final market I will touch upon in this feature piece on MLS expansion. It is certainly an interesting market because it fits with the overall millennial/youthful targeted marketing for MLS at this point. It is also a high growth area for jobs and the team would have good corporate support. The team would be the only professional sport in the city, which the MLS looks at very favorably because they are not competing for dollars with other teams.

The team would have political support both locally and regionally, but it lacks a viable ownership group at this point in time. It would also be the smallest market in MLS if it gained entry, which will be a concern and leave some to think that San Antonio might be the more sustainable option in that region for expansion.

Austin does have a USL team currently but it would need a stadium plan for a new facility that is up to the standards of MLS. I think that is too many variables and hurdles to put together to have a viable bid for expansion even by 2020.

It is clear to me through my research and covering this topic in the past that MLS soccer is growing in popularity and has a significant number of interested cities for potential expansion. The downside to that scenario is what the league and the current owners must be wary of, and that is that rapid expansion was the main culprit for the demise of prior major professional soccer leagues in America. MLS must remain cognizant of this fact if they do not wish to meet with similar peril.

The Desert Drama: The Battle Between The Arizona Coyotes and Glendale

The Arizona Coyotes hockey franchise and the City of Glendale agreed recently to a new 2 year arena maintenance deal following another round of acrimony in what has been a saga surrounding the team and the city for years. The City of Glendale voted recently to terminate the team’s lease on the Gila River Arena in order to renegotiate the terms of the agreement with the team.

 

I have covered this debacle for a few years now, and if you strip away all of the other minutia to the situation it comes down to money, like any other negotiation. Under the terms of the new agreement, the amount that Glendale will pay to the Coyotes is trimmed from $15 million per year to $6.5 million annually. The team gains $6 million in revenue from parking, ticket sales, and naming rights that originally had gone to Glendale in the prior deal. The team is staying put for now, but the length of the new lease is shorter and raises speculation about the future of the team. Both sides are saying they are committed to making hockey work in Glendale.

 

However, it does raise the distinct possibility that the franchise could be relocated to another city in the near future. The new agreement provides the Coyotes ownership with an out-clause in June 2017, which is a full year earlier than the mechanism that would have triggered that clause in the original lease.

 

The NHL recently opened the process for expansion and groups from Las Vegas and Quebec City submitted formal bids. The now infamous exclusion of the expected Seattle bid from the process made headlines. The NHL has strong interest in the Seattle market and it would help balance the league which has two less franchises in the Western Conference. The main issue though is a lack of an arena suitable to host an NHL team for 41 games a season.

The three groups potentially interested in bringing hockey to Seattle have different plans for getting an arena built in that marketplace. Since none of the proposals were progressed far enough it is the reason given for their absence from the expansion process this past week.

 

I could see a scenario where the Coyotes are potentially relocated in a couple of years to the Seattle market once they have the financing and approval as well as begin construction on a new arena.

 

Valley of the Sun

 

In recent weeks, another potential option has emerged which could resolve this issue between the current ownership group of the team and the City of Glendale while allowing the team to remain in Arizona.

 

That resolution revolves around a proposal which was introduced recently in the state legislature regarding the construction of a new arena in downtown Phoenix. The proposal originally was targeting the use of the arena as an upgraded facility for the NBA’s Phoenix Suns, but now some politicians have floated the idea of including the Coyotes as a co-anchor tenant for the new arena.

 

In the event that this proposal is acceptable to all sides involved and the respective league officials involved this could be a win-win situation for the Valley of the Sun. The State of Arizona would keep both their NBA and NHL franchises, the teams would get a new building to call home, the fans would keep their teams, and the leagues -in particular the NHL- would not lose a top TV market.

 

Phoenix also could solve the attendance problems which have plagued the Coyotes because any area resident will tell you that rush hour traffic issues getting to Glendale coupled with the fact that the area around the arena in Glendale never properly developed, are two main reasons behind the difficulties with drawing fans to NHL games in that market.

 

The downtown arena in Phoenix would solve the issue because it would be far more accessible to fans travelling in from the suburbs or coming from work, especially for weeknight games. The NHL would probably support this move because they have been dogged in their determination to keep the Coyotes in the Phoenix market for years.

 

Alternate Plans

 

The situation surrounding the Coyotes future in Arizona gets far more uncertain if the public funding for a new downtown arena in Phoenix fails to gain passage in the state legislature. The current arena in Phoenix which houses the Suns is not a viable option for hockey because it requires an odd configuration to fit the ice sheet which causes many seats to have obstructed views, it is the reason why the Coyotes moved out to Glendale in the first place.

 

The alternative plan some have suggested of relocating the Coyotes to Las Vegas in two years certainly makes some degree of sense especially given the geography of the move. The team could stay in the same division and play within driving distance of their former home territory which could translate into a crossover fan base.

 

Conversely, the NHL would not be too keen on this idea because they would stand to gain a lot less revenue from this maneuver. The difference between a current team relocating and the addition of an expansion team is that the NHL can charge a new expansion team with an entrance fee. The entrance fee if the NHL expands into Las Vegas with a new franchise is said to be around $500 million which would then be split between the league and the owners.

 

A relocation of the Coyotes to Las Vegas would translate into a forfeiture of the entrance fee, and therefore, would probably not receive league approval. The same could be said for a relocation to Quebec City, which the NHL plans to ask for a potentially larger expansion fee based on the popularity of the sport in Canada.

 

I know someone who recently mentioned to me that the relocation of the Coyotes could be to a second team in the Toronto market. The issue with that move though is the outlandish fee that the NHL will make that team pay to the Maple Leafs to be able to share the market with them. That has been cost prohibitive to other efforts to add a second team to hockey’s largest market in the past. That scenario could work if they were to share the arena because the owners would save on that cost, but I think the NHL would prefer to have a team expand into that market for the same reasons I outlined earlier: the expansion fee would be much larger than a relocation of an existing team.

 

Therefore, if the Phoenix plan falters, the remaining move on the board, at least at this point is for the Coyotes to move their operation to the Seattle market. I think it will take two to three years for the Coyotes to make a determination on whether a move to downtown Phoenix is enough to save hockey in the desert. In that same vein, it will take Seattle two or three years to get their arena situation squared away.

 

The more information that comes out about the Seattle groups and the arena plans they have, it seems more improbable that it will get done unless something changes along the way. The Tukwila proposal would cost $500 million total financed privately by the business community and the potential ownership group. The Coleman group bid is connected to the downtown arena proposed to be built for an NBA team that may not ever happen (see my article on the new Bucks arena which was the best chance for Seattle to get a relocated NBA team and now is vanquished) because any change to make the arena project for a hockey team would require a change in the MOU between the city and the investors who own the land which is not happening.

 

The third ownership group has a plan for an arena in Bellevue but the issue is quite simple, they do not own the land to build it. The land in that suburb is not readily available and is not cheap. It could take four or five years to get the project done. The NHL is said through sources to prefer the downtown arena option over the suburban plans, but they all have issues on one level or another.

 

In the end analysis, as I wrote in the beginning this is all about money. The future of the Coyotes franchise will be wherever they can maximize revenues, if that is in Arizona they will stay. The more likely scenario is that in a few years this team and hockey in the American desert will be gone, and I feel terribly for their fans, it will be reduced to nothing but memories.

 

Major League Soccer Expansion Update

In a follow up to an evolving topic I have covered previously on Frank’s Forum, Major League Soccer (MLS) made an announcement recently about their expansion efforts. The premier soccer league in North America plans to expand from their current level of 20 franchises to 24 franchises by the year 2020.

 

In my prior coverage of this expansion effort I detailed the bid from Atlanta which was approved and they will enter the league in 2017. The league also sold Chivas USA and the new ownership group renamed the club “LAFC” which will join the league in 2017 after rebranding and attempting to build a second soccer-only venue in the Los Angeles area for their team to have a whole new identity.

 

This leaves two expansion positions and many potential bids from interested markets. The interest is so strong regarding expansion that MLS now appears to be considering the idea of going beyond that 24 team goal for membership in the league. The following are the latest potential candidates and the latest news on the bids:

 

Minnesota / Twin Cities: MLS Commissioner Don Garber announced that the league has entered what he termed “advanced talks” with the Minnesota United bidding group regarding an expansion franchise. The Twin Cities area originally had two bids in play for MLS expansion: the Minnesota United bid organized by the ownership group of the minor league team currently playing there, and a bid from the owners of the NFL’s Minnesota Vikings who are currently building a new state of the art multi-purpose stadium that could be used to host an MLS soccer team. However the league office announced that the Vikings bid has been eliminated and that MLS is moving ahead with the United bid. That group is rumored to have plans to build a privately financed new soccer stadium somewhere in downtown Minneapolis. The fact that this announcement was made comes as no surprise because MLS has been eyeing expanding into Minnesota for a long time and for many reasons. It fills a void on their league map as far as regions where they lack a geographic presence, it is a big television market, and the fan support and interest for the Minnesota United is very robust. It is likely that they will be one of the bids selected in the next round of expansion.

 

Miami: I covered this bid in my earlier coverage but essentially this bid has a leg up on the others because David Beckham is the key. Some background for those who do not closely follow MLS, Beckham had a clause in his contract when he came to the US to play in the league for the LA Galaxy that he could get his own franchise for a greatly reduced expansion fee and choose the market it would play in. Beckham and his business partners chose Miami for the expansion bid. The one main issue since that announcement about 14 months ago has been the stadium. MLS stated that it will not approve their bid without a solid plan for the construction of a new stadium. Miami has been unwilling to approve the sites that Beckham has proposed. A temporary stadium has been approved by the city officials at FIU Stadium on that college campus for the team to use until the permanent stadium is constructed, which Beckham thinks could take 3 years. Some other land in the greater Miami area is under consideration at this point. The Miami bid should be accepted by MLS once the stadium issue is resolved. The demographics and size of the market there in South Florida make this expansion a good fit for both sides involved. However Beckham needs to get the stadium land deal secured soon in order for that to happen.

 

Las Vegas: This bid will be easy to summarize and update. MLS sent a letter about six weeks ago to the Mayor of Las Vegas stating that the city and their bid for expansion was no longer in the running. The league has walked that statement back slightly in now repositioning and some sources report that Las Vegas is out of consideration for this current round of expansion to 24 teams, but they may be a candidate again in the future. So the door is not closed, but I never got the feeling that MLS would fit well in Vegas, it is so hot there in the summer during three months of the league’s playing season, I also think MLS does not want to be the first pro league to expand there.

 

Sacramento: The Sacramento bid had (up until the announcement regarding Minnesota) made the most progress and built the most momentum. The ownership group has grown to include business leaders who own the NBA’s Sacramento Kings and the San Francisco 49ers of the NFL. The Sacramento Republic club in the USL Pro league has set attendance records consistently over recent years. The city leaders support the construction of a privately financed soccer stadium, which after the MLS press release regarding Minnesota’s bid, they emerged yesterday to state that they are refining their pitch to MLS specifically around the stadium proposal. Some sources report that this bid made such a positive impact on the league office that MLS may decide to go beyond the 24 team limit to add Sacramento by 2020. I have seen other reports that state that the league will eventually expand into this city at some point if the last two spots do indeed go to Miami and Minnesota in this round of the process.

 

San Antonio: MLS officials have met with the delegation from San Antonio in the past and in my view I think the market makes sense for MLS from a geographic, population growth, and demographic perspective. They have a minor league team in place with a solid fan base (which is a preference of MLS for expansion candidates) and they would have to approve expanding their current soccer stadium to meet MLS specifications. In the end perhaps the biggest issue with their bid is the fact that MLS has two franchises in Texas already and the league may need to use the 2020 round of expansion to enter regions where it does not have a presence currently.

 

St. Louis: This city is very passionate about soccer and has characteristically drawn large crowds for numerous events involving the sport. However it lacks a current minor league team and the bid is very closely tied to the proposal for a new NFL stadium for the St. Louis Rams that would also accommodate an MLS team. The approval for the stadium plan on the riverfront is still in doubt, and it is unknown whether the Rams will remain in the city or move to Los Angeles, as it has been rumored. St. Louis is considered the birthplace of American soccer and the local support for an MLS franchise is undoubtedly there, but they need to still put together an ownership group and they need a stadium. When you consider that the last stadium built there for the Cardinals in 2006 was done with mostly private funding, their bid requires an ownership group with deep pockets that could afford both the expansion fee and financing the construction of a stadium.

 

MLS has stated that they will make an announcement in 45-60 days on expansion of the league. The television ratings have been up significantly over last season in the nationally televised games particularly. The popularity of MLS is growing, and soon the league will have an announcement regarding the growth of the number of teams in the league and people in many cities wait for that news eagerly.

 

(Background information courtesy of NBC Sports.com, Yahoo! Sports, ESPN, The Sacramento Bee, St. Louis Business Journal, Miami Herald, USA Today, and the Associated Press)

 

 

 

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)

NHL Expansion Follow Up: The Case for Seattle

The NHL is just returning from their Olympic break where game operations were suspended so that the players could represent their respective countries in Sochi.

 

In a relatively slow news cycle for the NHL at this point, one story did gain some traction, and that is the discussion by NHL executives with the media regarding the potential expansion of the league to Seattle.

 

This is not the first time Seattle has been mentioned relative to the NHL, the city was rumored to be a potential relocation target for the struggling Phoenix Coyotes franchise prior to the start of this season. I have covered the situation surrounding the Coyotes ownership changes and potential relocation to Seattle, so this will serve as a follow up story to a situation that I have a great deal of knowledge about.

 

The NHL has discussed the potential for expansion recently especially after the lockout hurt revenues in 2012-13. The expansion fee for a new franchise to enter the league would represent a significant revenue injection for the other owners in the NHL.

 

The western United States is a target area for the league at this point with the realignment causing the Eastern Conference to have two more teams than the Western Conference. The Pacific Northwest is seen as a having significant growth potential for the NHL, and the key market in the region is Seattle.

 

The potential expansion of the NHL to Seattle would add a large TV market (12th largest) which will provide greater leverage for the league in their next television rights contract negotiations, and greater revenue from TV advertising.

 

The addition of an expansion franchise in Seattle would also bring the NHL into another large population center as Seattle has the 15th largest metropolitan area population in the United States. In fact, between the TV market and the metro area population statistics, Seattle would be a larger market for the NHL than 10 other domestic U.S. markets where the league has current franchises in operation.

 

Heading North

 

A group of business, civic, and political leaders from Seattle recently traveled north of the border to Vancouver to meet with the front office and executives from the Vancouver Canucks to learn how the team conducts the business of professional hockey.

 

This trip is another indication that the expansion of the NHL to Seattle is becoming more serious. The business side of an NHL franchise is very unique, and this meeting was a very good idea, especially when members of the Seattle Sports Commission told the local media that some members of the delegation travelling to Vancouver had never seen a live hockey game before.

 

The rumored ownership team for the prospective expansion franchise in Seattle is Ray Bartoszek and Anthony Lanza. These two businessmen were also the principal people involved when the NHL considered relocating the Phoenix Coyotes to Seattle in the summer of 2013. The qualifications of an ownership group represent a huge hurdle in the decision for a league to award an expansion franchise, it appears that Seattle has a well-financed group in place.

 

The other big issue in the case for Seattle to be awarded an NHL expansion franchise is the arena situation, which is another huge piece to consider in this process. The NHL has stated that if it were to expand the league, the added team or teams would begin play in 2015-16. This time frame may give Seattle enough time to gain final approvals and construct the proposed new arena near the other two sports stadiums downtown.

 

However, that brings a new issue to the table, the funding for the arena is based on an agreement between the City of Seattle, King County, and investor Chris Hansen that calls for an NBA team to be the primary tenant of the new arena. Therefore, the public funding agreements would need to be changed should the city be granted an NHL team before they gain an NBA franchise.

 

 

The time frame for expansion is appropriate because it will take a couple of years to hire personnel to staff the front office and the business operations side of the team, organize a marketing campaign, and sell luxury suites or season ticket plans.

 

The expansion fee is expected to be very large with estimates in the media of close to $250 million. Then factor in approximately $500 million for the new arena, and Seattle is poised to make a huge investment in professional hockey.

 

I have reported on the potential expansion of the NHL before, and the league will most likely expand by two teams in 2015-16. The media speculation is that the NHL will most likely select Seattle and then either Quebec City or Kansas City with the other expansion slot.

 

The result of all of this, in the end, it looks like Seattle is going to have an NHL hockey team to cheer for in the near future.

(Credit to NBC Sports.com and Seattle Times for some background information)

 

 

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.

 

 

TV Markets and the Expansion of Sports – Part 4

The demographics of a city or metropolitan area, their media market size, the support of the political leadership in the city and the support of the business community are important aspects in determining the expansion of a professional sports league.

 

In this fourth installment of this series, the focus will be on the National Hockey League (NHL) and the potential expansion opportunities for a league which is rapidly growing in popularity. The NHL has witnessed some outstanding revenue growth in recent years which enabled them to obtain a huge television and media rights deal with Comcast/NBC (www.nbcsports.com).

 

In 2012 and 2013, every playoff game from every series was televised nationally via the Comcast/NBC for the first time in the history of the league (www.nhl.com). The NHL has long been considered the “fourth league” of the “Big 4” professional sports in the United States, but the ratings are growing exponentially.

 

The 2013 Stanley Cup Final between the Chicago Blackhawks and the Boston Bruins was a ratings record breaking series on NBC (www.nbcsports.com). This was in a year where the league had a lockout shortened season over a revenue dispute between the owners and the players union.

 

Realignment

 

The NHL realigned their divisions for the 2013-14 season into two conferences with two divisions in each conference. However, unlike other sports, the conferences are unbalanced.

The Eastern Conference has two divisions of eight teams each for a total of sixteen teams. The Western Conference consists of two divisions of seven teams each for a total of fourteen teams. That brings the total number of teams to 30, but many reports have indicated that this uneven conference split was done with expansion in mind.

 

The most obvious expansion would be by two teams to a total of 32 and have both of those teams be added in the Western Conference to balance the league. Numerous sources close to the league have reported that the increased revenues from two additional future expansion teams via the league entry fee and the entry into two new markets was part of the discussion during the lockout negotiations (www.cbssports.com).

 

The other rumor circulating throughout the media is that the NHL may expand by four franchises in the near future. If those reports are true, that would mean a significant revenue infusion to the league through the expansion franchise entry fees and subsequent introduction into four new marketplaces in North America.

 

The TV market metrics are probably the least important in hockey than in other sports because the average person and the consensus among the casual sports fan is that hockey does not translate well to the medium of television. Now, NBC has tried to enhance the broadcasts to change some of that perception and offers some unique camera angles and outstanding production value to their hockey telecasts.

 

However, the NHL makes their money with the live game experience. Last season, following a protracted labor stoppage, the hockey arenas in the NHL averaged game attendance levels at 95% of capacity (www.nhl.com). The NHL live game experience is, in my opinion, the best sporting event to attend.

 

The NHL executives and franchise owners know that they will get their die-hard fans in the building for the games and they have proven that, in a recession or otherwise, those fans will spend money at the games. So the addition of four potential new franchises could bring in more revenue through in-game expenditures, season ticket sales, luxury suite sales, and merchandise sales.

 

North of the Border

 

It is important to note that unlike the other major sports, Canada is a legitimate expansion area for the NHL, and a likely area of future expansion. The sport of hockey is so well loved and supported in Canada, that the NHL could put a franchise basically almost anywhere in that country and it would be a successful venture.

 

That type of widespread and virtually assured support cannot be found in the U.S. hockey marketplace, but it is surprising how well the NHL has done in cities such as Nashville, Tampa, Dallas, San Jose, and Anaheim.

 

The list below will also demonstrate that the interest for an NHL franchise in some U.S. markets is very high at this point.

 

Potential Expansion Markets

 

The following cities are potential candidates for expansion franchises in the NHL (all TV markets data courtesy of www.stationindex.com – all Fortune 500 company information courtesy of www.money.cnn.com – and all Metro Population data courtesy of www.census.gov ):

 

  • Seattle, WA – Has emerged as a very strong candidate for expansion based on the plans to build a new arena in the downtown area. The location, and population size and demographics make it a good fit for the NHL.

TV Market Rank: 14th

Metro Area Population Rank: 15th

Fortune 500 Company HQ: 4

Synopsis/ Outlook: The Seattle bid gained traction with the league when the Phoenix Coyotes looked as if they may relocate. The NHL quickly lined up Seattle as a potential alternative site to move the franchise. They even had an ownership group lined up. The location is key for this bid because it addresses a region (Pacific Northwest) where the NHL has no current presence other than the Vancouver Canucks. The population and TV Market sizes are very good, and corporate support would be strong. The population is hockey-savvy as they have several youth hockey and minor league hockey teams in the region. The arena situation would be the murkiest part of the bid today. The team may have to play temporarily at the Key Arena, which would be very small for hockey and has a strange configuration for hockey. The new arena being planned (see Part 1 of this series) is primarily for the NBA expansion team. The hockey team is viewed as the second tenant. I do not know if they would build the arena solely for a hockey team with no assurances from the NBA on a future expansion franchise for the city. Overall a very strong bid.

  • Quebec City – The second most widely regarded bid from NHL insiders is the bid from Quebec, which of course, was home to the Nordiques until they moved to Denver in the mid 1990s. A historic city with a rabid base of hockey fans.

Synopsis/Overview – The TV markets and other data does not apply to this Canadian city. The potential for regaining an NHL franchise is of tremendous importance to this city. The Mayor and the city government in Quebec City approved a new arena without a team or the assurances of an expansion team. In a “if we build it they will come” type of move they are currently in the construction phase of the new arena which is next to the old arena where the Nordiques once played. The NHL was so impressed with the confidence of the government and the people there, that the Quebec bid is thought to be a very strong one among league insiders.

  • Houston, TX – A “dark horse” candidate but a place that has shown interest in the past. It was one of two cities (Hartford was the other) that was used as a bargaining chip by the Penguins ownership to get the new arena in Pittsburgh done.

TV Market Rank: 10th

Metro Population Rank: 5th

Fortune 500 Company HQ: 23

Synopsis/Overview: Houston has some very strong positives for a NHL expansion bid including excellent demographics and TV market rankings. The city has a rapidly growing economy and is home to a whopping 23 Fortune 500 companies – so the right ownership group and strong corporate support would not be an issue. Due to the rapid economic growth the city has a changing population with transplanted residents from across the country. The bid would pitch the fact that the changing demographics mean more hockey fans living within the city metro area. The arena is state of the art and hosts the NBA’s Rockets currently. This bid has potential, and hockey has been successful in Dallas, but the league may be resistant if they are unsure of long term fan support with all the other major sports already having a presence in that market.

  • Markham, Ontario (other Toronto area city) – Toronto is the largest hockey market in the world. It currently has one team, the Maple Leafs, and they have struggled for a long period of time to get back to relevancy.

Synopsis/Overview: Since the other metrics do not apply here in a Canadian market, I will summarize this complicated bid. The issue here is that the league office and ownership had great support behind a bid for a second team in the Toronto market. In the past two years, some of that support has waned. The reports I have read indicate now that the Markham bid, or a bid by another Toronto area city, would very likely not get approved if the league expands by two franchises. It would have a better shot of getting in during the next round of expansion by two teams. The rationale behind this is two-fold: 1. The Maple Leafs are not thrilled about sharing the market with another franchise, especially an expansion franchise that will cut into their revenues directly. 2. The front runners for expansion at this point are not two Western cities which the NHL would need to balance the two conferences. Tim Leiweke who is a top executive with AEG (owner of arenas and sports teams) did a presentation last week and during the Q & A session which followed he stated the second Toronto team may not happen at all. He stated that the meetings he was involved with have Seattle and Quebec as the two front-runners and Kansas City and Las Vegas as very strong contenders for the second round of expansion(www.yahoo.com)  This would make sense because Quebec would bring the Eastern Conference to 17 teams, and Seattle would bring the West to 15 teams, and then the potential additions of two more Western teams would balance the league at 17 teams in each conference (total of 34 teams). Markham just approved financing of $350 million for an NHL caliber arena north of Toronto (www.cbc.ca). It could be very interesting what happens here with this bid. The University of Toronto commissioned a study which was reported by the CBC that the country of Canada could easily support 12 NHL teams (they currently have 9 teams in Canada). However the concentration of wealth in Toronto is what makes that market so attractive to the NHL. It is a risk to build an arena, but Markham decided in a slim margin in their city council vote, that the risk was worth taking.

  • Las Vegas, NV – One of the most popular tourist destinations in the world would provide a very robust stage for the NHL to showcase their international star players.

TV Markets Rank: 42nd

Metro Area Population Rank: 31st

Fortune 500 Company HQ: 4

Synopsis/Overview: The Las Vegas bid is considered within many circles close to the NHL to be a very strong potential contender for a franchise. The TV market ranking is a little low (Buffalo has an NHL team and is 51st) and the TV market as I stated earlier is not looked at in hockey as crucially as it is for other sports. The population is low too, but the league has several current franchises in smaller metro areas currently. The three biggest issues with a potential Las Vegas expansion bid are: the selection of a stable ownership group, the ability of the metro area population to support a team for the long term, and the arena. The NHL offices have expressed issues with the arena situation there numerous times in the past through various media reports. The largest arena in the city, The Thomas & Mack Center, does not have an ice sheet. That means that the temporary home for the team would have to be the MGM Grand Garden Arena which seats about 16,000 for hockey which is small (www.cbssports.com). However, MGM and the before mentioned AEG group recently announced a joint partnership on a brand new 20,000 seat arena to be built between the Monte Carlo and the New York, New York Casino Hotels (www.finance.yahoo.com). Just last week, the first renderings of the new Vegas arena went public. It will immediately be able to host an NBA or NHL team. The project is slated to begin in April 2014 and be finished in 2016. This project addresses the key issue the league had with Las Vegas. The NHL has always talked about wanting to be the first professional league to tap the Vegas market, and one final note, Jerry Bruckheimer is very close with the top executives at AEG. He has openly discussed wanting to own an NHL team in Las Vegas. A very strong bid made stronger by the new arena project.

  • Kansas City, MO – An interesting bid it would open up that part of the Midwest to the NHL and create an instant rivalry with the St. Louis Blues.

TV Markets Rank: 31st

Metro Population Rank: 30th

Fortune 500 Company HQ: 2

Synopsis/ Overview: Kansas City was also included in the NBA potential expansion bids. The strength of the bid is still the arena, Sprint Center, which is world class and has no permanent tenant. The taxpayers want a team for the building since they approved tax money to build it. The political goodwill is very strong here, and the corporate base would be supportive of an NHL team, though that support could be better in other cities with less sports teams already (Kansas City has the Chiefs in the NFL, and the Royals of MLB) and the other issue that may or may not be a mitigating one (depends on what reports you read) is that the NHL was already in Kansas City (the Scouts) and it lasted only a couple of years and the team struggled to get attendance and fans, so they moved to Colorado and rebranded as the Rockies. The Rockies eventually moved to New Jersey and became known as the Devils (www.nhl.com). So much has changed economically and demographically since the time of the Scouts that I think it is an unfair comparison to hold against Kansas City at this point. This city has a solid bid and the NHL brass will have to determine if it is worthy of a team when comparing all the variables as compared to the rest of the cities on this list.

 

The Future

 

The unique aspect about the NHL part of this series on sports expansion is that the league intends to expand. The other leagues talk about expansion as an eventual thing if all goes well, other leagues like the NBA only want to expand by one or two teams to avoid splitting revenue dollars further.

 

The NHL is fairly aggressive in their expansion goals. They have talked at media events in the past about expanding within certain time frames. This list is a very viable list of cities that could very well be hosting an NHL team in the next three to five years.

 

In the event that the reports are true and Seattle and Quebec City are the front runners for the two expansion spots, that would probably create a second round of expansion because of the geography and politics involved.

 

The entry of Quebec into the Eastern Conference would still leave the East with more teams, so the NHL would have to add two more teams in the Western Conference to balance the league. The relocation of one of the current teams in the East being sent to the Western Conference would be highly problematic from a political point of view.

The owners of the Detroit Red Wings and Columbus Blue Jackets fought for years to get moved into the Eastern Conference, and now that they have moved East, then the league will be reticent about moving one of them back to balance the conference sizes.

 

If you are a hockey fan, that is exciting news, and if you are not a hockey fan, but you are a sports fan; then it could give you something else to do while on a long weekend in Las Vegas in the future.

 

The final part of my series will be up next and that is the future expansion of MLS (Major League Soccer).

TV Markets and the Expansion of Sports – Part 3

The role of TV markets in the potential expansion of professional sports has been well documented in the first two parts of this series. The first part dealt with the potential expansion of the NBA, the second part dealt with the potential expansion of Major League Baseball, and this third part of the series will deal with the potential expansion of the National Football League (NFL).

 

The focus on the NFL is timely, since the expansion discussion was again central to the media coverage of the league recently. The NFL began playing regular season games in London calling them the “International Series” beginning in 2007 (www.nfl.com). The most recent game in London was played on October 27, with the San Francisco 49ers taking on the Jacksonville Jaguars.

 

In the media events leading up to this game in London, NFL Commissioner Roger Goodell spoke openly about the determination for the NFL to place a team in London and Los Angeles. He added that he did not care which city went through the process first, but that they are both targeted areas for the NFL to have a presence within in the future (www.cbssports.com).

 

The initial expansion talk for the NFL began around the Super Bowl in 2012 when the Commissioner discussed the league expanding from 32 to 34 teams. In recent months, the NFL owners committee has stated that they like the league at 32 teams and that any changes would most likely come by relocation of struggling franchises.

 

 

Current Situation

The NFL is currently made up of 32 teams split into two conferences of 16 teams each. In each conference the teams are split into four divisions of four teams each, so the schedule is perfectly balanced. The alignment makes sense and they have an excellent system for rotating the schedule for inter-conference and inter-divisional games.

 

The NFL is the most watched sport in the United States, and has a huge level of interest that dwarfs the other members of “The Big Four” major sports leagues. The number of people to support and watch additional NFL teams is there, so the debate will always rage on about potential expansion of this tremendously successful league.

 

The NFL frequently has seven or eight of the Top 10 most watched television events every year. The Super Bowl, of course, is the most watched television event on the calendar in the United States. It has set records in recent years for TV viewership, which some reports have speculated is driven by the recession in the U.S. and more people staying home to watch it in smaller groups.

 

Sunday Night Football on NBC is the most watched network primetime show every year. The importance of the medium of television to the NFL is very crucial for an expansion market, more so than with other sports.

 

Potential Expansion Markets

 

The potential for expansion in the NFL is a much shorter list than for the other leagues because the league has publicly stated that it does not want to expand much beyond the 32 franchises they have currently. This is also due to the fact that the owners do not want to split the revenue sharing “pie” too much further.

 

Here are the most likely candidates for an NFL expansion franchise:

(TV markets data courtesy of www.stationindex.com , Metro population data courtesy of www.census.gov and the Fortune 500 data courtesy of www.money.cnn.com )

  • Los Angeles, CA – The largest city and the largest TV market without an NFL team. It has been on the NFL expansion radar screen for a long time. At one point the city had two NFL teams that both left, which is why support for a replacement franchise lagged for many years.

TV Market Rank: 2nd

Metro Population Rank: 2nd

Fortune 500 Company HQ: 10 (in general area)

 

Synopsis/Outlook: The Los Angeles bid is a very likely expansion or relocation destination for an NFL franchise or two. The population density, the huge TV and media market, and the corporate sponsorship capabilities are definitely sufficient to support 2 teams. The plan at this point would be that those two teams would share a stadium similar to the Giants and Jets currently. The downtown stadium plan supported by AEG has lost support politically and will not happen. The City of Industry plan is still on the table and is the most likely site for a future state of the art NFL stadium. The temporary stadium would most likely be the Rose Bowl in Pasadena until the new stadium construction is completed. The most likely relocation candidates would be the Oakland Raiders (who have a major stadium issue with the Coliseum and no public dollars to fix it in Oakland), St. Louis Rams (who have an “out clause” in their lease after next season and are fighting with the city of St. Louis over a renovation plan for their current stadium), and the San Diego Chargers (they are just a couple of hours down the road and they have been working on a new stadium deal for over 15 years now). The NFL and the owners have all made statements indicating that they will be in L.A. sooner rather than later. One final note, MSG Network interviewed former basketball legend and current L.A. Dodgers part-owner, Earvin “Magic” Johnson during halftime of the NY Knicks game recently, and he publicly stated that he wanted to help bring an NFL team to Los Angeles. When high profile men with money and connections start talking about their desire to do it, we have all seen that it is only a matter of time before it gets done.

 

  • San Antonio, TX – The second largest city in the country by population without an NFL team. The city has a diverse group of potential fans, and the area is known for being very loyal to their other professional team, the Spurs of the NBA.

TV Markets Rank: 36th

Metro Population Rank: 25th

Fortune 500 Company HQ: 5

 

Synopsis/Outlook: Many reports I have read throughout the media reference sources from within the NFL that believe that San Antonio and Toronto are the only other markets outside of L.A. which could successfully support an NFL team. The issues with San Antonio and a potential bid for expansion are still numerous: the city is in the territorial rights zone for the Dallas Cowboys, the metro population is good but the suburbs are non-existent, the TV market is good but not great (though the NFL has current franchises in much smaller TV markets), and the stadium is problematic as well. In order for a bid to be successful, Cowboys owner Jerry Jones would have to approve the move into his territory (he has made statements of support in the past). The right ownership group would have to emerge with enough capital to compete against the Cowboys (who are immensely popular in the entire state) and the Houston Texans (who play about a 2 hour drive away). The final piece is the stadium, they have the Alamo Dome currently, but it was built several years ago. It would need by some estimates between $100 million to $500 million in renovations to be an NFL level facility. Most people believe that for a San Antonio bid to be accepted, the Alamo Dome would be used as a temporary home while a brand new stadium would be built for the NFL team. The government willpower and support is there to undertake that project, they have a growing economy, and the corporate sponsorship for such a venture is there as well. If the right pieces fall into place, this is also a very likely future expansion location for the NFL.

  • Toronto – Intriguing potential expansion opportunity for the NFL to fully integrate into Canada.

Synopsis/Overview: The TV market and other demographic data are not applicable for this Canadian city. The potential bid does have some very strong attributes. Toronto has a very diverse population base which appeals to the NFL and their strategic interest in growing the sport internationally. The city currently hosts one regular season game each year under an agreement with the Buffalo Bills. The game in Toronto regularly plays to a sold out crowd, so the demand is there for the NFL product in Canada. The other potential avenue outside of expansion is the potential for the Buffalo Bills to relocate to Toronto. However, the City of Buffalo just committed a huge amount of money and resources to the renovation of Ralph Wilson Stadium and the Bills signed a new lease in Buffalo as well, making that relocation rather unlikely. The stadium in the short term would be the Rogers Centre (formerly the SkyDome) and then a new stadium would be built for the expansion NFL franchise. Corporate support would not be an issue, nor would the right ownership group. A solid potential bid.

  • London, United Kingdom – The London bid is gaining tremendous momentum at this point. It would bring the NFL into the global stage faster than the other major U.S. sports leagues.

Synopsis/Outlook: The situation in London is similar to Toronto, the TV markets and other demographics do not apply. The NFL has an “International Committee” which has been studying the potential for international growth of American football for years now. Some sources inside the NFL in the reports throughout the media say the committee should be named “the London Committee”. London is really the only viable option for international expansion. The corporate support, with London being a major financial and commercial hub in Europe, would be excellent for a future NFL franchise. There are fans who question why the NFL would want to put a team in London and believe that it is a bad idea. If you take away all the other positive attributes about the city, the only statistic needed for the rationale behind why the NFL wants to have a full time presence in London is: population. Some estimates have the population of London within city limits at 9.7 million, the greater metro area estimates are 13 million to 21 million people (courtesy of the Greater London Authority). The NFL is not currently in LA, so after the New York/New Jersey metro area, the next largest metro area the NFL has a franchise in is Chicago at approximately 9.5 million people (www.census.gov). The potential expansion to London would add another market with the population base of New York or Los Angeles. That offers the NFL a very unique way to expand the league into a very large marketplace. The bid would be solid as the team would have several potential ownership groups and they could play at Wembley Stadium at least initially. In fact, Fox Sports, reported over the weekend that the London based professional soccer club, Tottenham Hotspur, is proposing to build a brand new 65,000 seat stadium that could be shared with a future NFL franchise. When that sort of project is being proposed it validates that the NFL and the city of London have had several behind the scenes meetings about the expansion possibilities there. The relocation route could be another potential avenue into London, with the Jacksonville Jaguars being the most likely franchise for relocation there, according to several media reports. The owner of the Jaguars, Mr. Khan, has ties to London and the Jaguars have the lowest merchandise sales in the NFL. They also currently play in the league’s smallest market, Jacksonville, and they have committed to playing 3 games in London over the next 3 years.

 

Final observations

 

 

The NFL is the most popular professional league in the United States, and it is poised to expand into a few of the remaining markets left that they have not tapped. In my opinion, I think the NFL needs to be in Los Angeles, the game translates so well to the medium of television and it makes no sense to not have a franchise in the second largest TV market in the country.

 

Furthermore, I think the league would do very well with a team in San Antonio, but I do not think it will happen for a long time. The Toronto move is less likely now that the Bills are staying in Western New York, and the London move is complicated. On the surface, I understand why they want to make the move over to London, but logistically that would be a major headache for the NFL.

 

Every U.S. based team that played over there would have to have a bye week the following week, and the London based team would have to fly over here and spend three to four weeks straight on the road in various regions of the U.S. (Northeast, Midwest, etc.).

 

An additional consideration is the conversion rate of the currency, if the contracts for the players are in U.S. dollars, and they are living during the season in London and using the Euro, that is going to be a problem. London is also one of the most expensive cities to live in, so most of the players would opt to leave their families back in the U.S., which I think will definitely impact how the team in London would be able to attract top players to sign to play over there.

 

So each expansion possibility has unique issues here, even the L.A. bid, it will be interesting to see what the future holds for the NFL. The next part of this series will focus on the National Hockey League (NHL) and the potential for that league to expand, which is very realistic in the near future.