MLS teams are losing money. As such, the looming 2023 TV deal that the league will negotiate will be vital to the survival of the league.
Major League Soccer is growing as fast as any sports league in the world. Attendances are up, TV viewing figures are up, the standard of play is up and the general notice that the league demands, both in the American sporting landscape and the global footballing landscape, is up.
However, despite all these encouraging signs, which can very neatly be summarised by the increased price of admission — David Tepper paid $325 million for his expansion team based in Charlotte which will commence play in 2021, a massive $315 million more than Toronto FC paid in 2007 — the league is still losing money.
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Per Forbes, in 2018, the 23 teams that played in MLS combined for a $100 million loss. More concerningly, only seven turned a profit, and of those seven, three were by $1 million. Atlanta United made the highest profit in 2018 at just $7 million. As a league, MLS is losing money.
This is worrying in and of itself, but dig a little deeper and the circumstances are even more threatening. Not only is MLS already losing money; it is doing despite teams paying massive expansion fees to prop up the league’s finances.
Cincinnati and Nashville each paid $150 million apiece while St. Louis and Sacramento paid $200 million expansion fees. These fees are then split across the league. In 2018, MLS clubs made just short of $800 million in total revenue. In 2019, the league made half of that in expansion fees alone. And despite this huge boost in income, it is still losing money.
Don Garber has previously said that the league will not expand indefinitely. Charlotte will be the 30th expansion team and it seems likely that MLS will reach 32 teams, the same number as the NFL. But what happens to the league’s revenue when the expansion stops? If MLS is losing money with the expansion fees included in its revenue, what happens when they are not around to prop up sub-standard teams in sub-standard markets?
This is where Garber hopes the looming 2023 TV deal can set things straight. At present, MLS earns a criminally low $90 million per year from its TV rights. In 2018, per the Green Bay Packers’ financial reports, the NFL earned $8.1 billion from national revenue, which includes TV deals, merchandising and licensing deals. Of course, MLS is nowhere near the popularity and size of the NFL, but their $90 million is utterly dwarfed in comparison.
Garber has already instructed teams to not agree to TV rights deals beyond 2022 in preparation for these crucial negotiations. There is a growing belief that he and the league will negotiate a groundbreaking proposal that centralises the entire process, thus increasing the revenue of the league — and thereby the money that is shared between the teams — substantially. But as Forbes reports, “they’d need to increase [the TV revenue] several-fold to get the league to break-even, assuming expenses stay level.” And this is incorporating for the expansion fees.
MLS is growing at a rate that few leagues in the world are, and it offers an extremely rosy picture of what the future will be. But much of the investment in the league at present is expectant of increased revenue. It is based on potential.
When the league negotiates TV deals in 2023, the first steps to realising that potential will be made. It is why it is so vital to the survival and prosperity of the league.