How much is your team worth?
Alex Olshansky with Part I of II on assessing franchise value in MLS
Real Salt Lake owner Dell Loy Hansen recently stated in a Salt Lake Tribune profile of him: “One thing that’s black and white: I will never make money running this.”
Mr. Hansen is right.
And he is also very wrong.
He is right in the sense that vast majority of MLS teams run on a net operating loss. Based on that comment, RSL is likely among that group. But here’s where Mr. Hansen is wrong: hardly anyone in world soccer makes their money on operations. It is not a cash-flowing business. It is an asset-appreciation business.
Below is the most recent financial table of EPL clubs compiled by The Guardian. QPR and Swansea were excluded as some information was missing for them. Also, The Guardian’s formula was slightly altered to make the numbers more uniform.
As is the case in MLS, most teams are not making money on an operating basis.
Champions Manchester City lost nearly 100 million pounds (~$150 million), on revenues of 230 million.
And yet, according to Forbes, they are currently worth approximately $690 million.
If MLS aspires to be one of the top leagues in the world, as Don Garber has stated, then the league has a long way to go to resemble the EPL, the current gold standard of global soccer. Manchester United—by itself—is worth approximately three times the entirety of MLS.
So how does MLS stack up? With information so opaque, estimating a team’s finances and overall value is—at best— educated guesswork. To date, the most comprehensive attempt to value each MLS team was done by Forbes back in 2008.
For whatever reason, Forbes has not put out anything since.
The league has changed dramatically since then. For example, this piece of info from the 2008 article on “struggling teams.”
“The Kansas City Wizards are playing in a minor league baseball stadium and had just $5 million in revenue.”
One factor that makes valuing MLS teams so challenging is inextricable business relationship between the teams and MLS/SUM.
Among the peculiarities of this relationship is that the league—not the team—owns each player’s contract.
Additionally, SUM negotiates the sale of World Cup broadcasting rights in the United States, organizes international friendlies, etc. and profits from these ventures may or may not be distributed to owners of MLS teams. Therefore, to simplify matters, this valuation only takes into account revenue earned by each team. It also allocates any revenue from league-wide sponsorship deals (Adidas) equally amongst everyone.
Match day revenues were calculated based on average ticket prices from tiqiq.com and a blend of average attendance from 2012 and the first games of 2013. This value was “grossed-up” to account for non-ticket match day revenue. This calculation is based on guidance from a 2009 document (login required) prepared when the Portland Timbers were pushing for public funding for a stadium. The gross-up factor is lower for teams without their own soccer-specific stadia.
Television, with the exception of the LA Galaxy Time Warner deal, was allocated evenly across each team.
Team-specific sponsorship was generally limited to jersey and or stadium deals. Local and smaller deals could not be tabulated as those specifics are not publicly available.
For example, from the profile of RSL owner Dell Loy Hansen, he mentions that he expects RSL to generate approximately $10 million in sponsorship revenue.
But a contradiction?