The Recession and MLS

recession-bloggersKristian Dyer’s great piece at ESPN arguing that MLS is well placed to survive the recession is a good read. MLS has seen attendance drop but so have other major professional sports. Part of the rationale behind MLS’ slow growth model was to ensure that the league survive in the case of an economic downturn. Fortunately, the league didn’t get caught up in the economic boom of the last decade and speculatively splash the cash and should be very well positioned as we hopefully emerge from this recession.

Nevertheless American soccer leagues have been around before and the usually one of the biggest culprits in their demise is an economic downturn. The American Soccer League, which had emerged in the 1920s as a major professional league, looked set to became an established American league – it had good attendance and rivaled the new professional football league – but the great depression essentially wiped it out and it finally closed its doors in 1933 after 12 years. The NASL also ran into economic difficulty in the late 1970s and early 80s when the country went through a severe recession. There were many other factors contributing to both leagues’ collapses, but the economic downturns were hugely important, as there was simply less cash available to invest in projects that were not yet profitable.

The current recession has definitely impacted the league. Attendance is down – in some cases significantly – in most cities (Seattle and Toronto break the trend and make league wide numbers better than they are). The momentum that had built behind soccer specific stadiums has slowed or collapsed in some places. The situation in San Jose looks bleak, plans in Houston and Kansas City continue to be in flux, and DC United – one of the leagues flagship franchises – saw a move out of the city to PG county collapse due to public outrage over the recession; has seen little progress with the DC city council; and even contemplated relocating. Soccer specific stadiums are very important to the long term viability of most franchises, as they allow the teams to control all the revenue coming in and a sense of permanence that is important for the league’s overall image.

However, in this light MLS’s expansion decisions look brilliant in retrospect. The decision by MLS to expand to Portland and Vancouver, instead of perhaps a more difficult and expensive markets like Miami or New York or Atlanta looks very shrewd. MLS smartly realized that in this economy those are probably the only two cities (save for Montreal) that were sure things. (Philadelphia was made a few years back when state funding for stadiums was still very possible.) Neither Portland and Vancouver have significant stadium issues (yes Portland has some but we aren’t talking about the need for a new stadium for soccer), both are proven soccer markets with solid fan bases, and will give the league some tremendous rivalries. The addition of both these teams will bolster the league’s attendance and authenticity from the get go and will add to the perception that the league is very financially stable.

Investors are sure to be impressed that MLS was able to successfully expand in the midst of this recession. And Garber has done a good job being ever present on Wall Street. Furthermore all the bragging about MLS’ that he did in London, was not about trying to convince Europe to copy the MLS model but about shrewdly talking up MLS as a sturdy and financially successful league.

Another key will be next year’s World Cup. The hype that is going to be put into the tournament by ESPN – the drivers of American sports – will likely remove any doubts about the game’s viability in the U.S and raise soccer’s profile. This, added to the massive attendance for the European club tours this summer (which came in the midst of the downturn), and the fact that MLS not only survived, but grew stronger in the midst of the worst economic downturn since the great depression, should leave investors lining up to pump money into the league as the country pulls out of the recession (fingers crossed) over the next few years.

This should leave MLS well placed to continue expansion into more capital intensive markets like Miami and Atlanta. As Kartik at MLS Talk has noted, growing the television audience is key to increasing the leagues revenues. To grow the audience, the league has to have a presence in the south and must get more out of New York. Coming out of this recession, the league should be better placed to do just that.

In the end, Clemson economist Raymond Sauer, who is quoted by Dyer, is exactly right:

MLS will have to spend more on talent if they are to build a generation of fans for their own home-grown teams. There are plenty of challenges ahead.

The league should keep this in mind and take the longer view when hammering out a new deal with the players union this winter. For talent to increase, salaries must increase, and therefore the salary cap needs to start going up. Improving the quality on the field is ultimately most important to the leagues long term prospects.

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11 Responses

  1. A real history story–interesting!!

  2. […] *Sounders, not Beckham, leading MLS into the future *DC United stadium deal? *The Recession and MLS *Debate over MLS Re-branding *Improving MLS TV […]

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