|
Beckham's Allure Puts U.S. Soccer League in Hunt for Investors
03/08/2007 |
 |
 |
Major League Soccer is betting that its growth, aided by the fan appeal of English soccer star David Beckham, will convince entrepreneurs to invest in two new franchises.
As one gauge of the market, the 13-team league has tripled its franchise fee, the entry charge for new teams, to $30 million in the last year alone. It wants to add the teams in the next three years, says MLS President Mark Abbott.
Beckham, a midfielder, may help. The 32-year-old's resume includes six English Premier League titles with Manchester United. He also was captain of England's national team. And he enhanced his celebrity status when he married former Spice Girls band member Victoria Adams.
In January, Beckham joined the Los Angeles Galaxy, which plays its first regular-season match in Toronto on Aug. 5.
``The idea of bringing Beckham to the U.S. has the potential of paying real handsome dividends,'' says Randy Campbell, managing director at investment bank Societe Generale in New York, who scouts sports-business opportunities for clients. ``It wouldn't surprise me if eight to 10 years down the road, it will cost you $100 million to buy into this league.''
David Checketts, the 51-year-old chairman of the MLS team in Salt Lake City, Real Salt Lake, says Beckham will generate an additional $1 million this year for each of the league's other 12 teams by increasing league-wide merchandise, sponsorships and ticket sales.
``He has a rock-star image,'' Checketts says. ``All boats are rising.''
Ticket Sales
Beckham's impact has been immediate. More than 250,000 of his No. 23 Galaxy jerseys had been sold at $80 apiece as of last month, according to the team. Tickets to Galaxy road games were selling so fast that teams such as Washington's DC United and Toronto FC started requiring fans to purchase from five-game to half-season packages that include the Galaxy game.
The New York-based league's expansion fee was $10 million last year when Maple Leaf Sports & Entertainment, owner of the Toronto Maple Leafs hockey team, bought the rights to the expansion Toronto FC. Last month, Lewis Wolff and John Fisher, who also own baseball's Oakland Athletics, paid a $20 million fee for California's San Jose Earthquakes, which will start play in 2008.
The National Football League's last expansion was in 1999, and the fee for the Houston Texans was $700 million.
Stadium Costs
Abbott, 42, says that in addition to the MLS expansion fee, a host city will likely call upon investors to pay $20 million to $30 million to help defray the city's expenses for a soccer- only stadium. Another $8 million to $10 million a year is needed to operate the team. Abbott hasn't said which cities are prime targets for expansion franchises.
The risk to investors is that Beckham may fail to increase attendance and corporate interest outside the league's core Hispanic audience.
``Soccer has tremendous potential, but $30 million is still a lot of money,'' says Rob Tilliss, chief executive officer of New York-based investment bank Inner Circle Sports LLC. Risks remain, he says, even if soccer's ``vital signs are pretty good.''
``The league is expanding, bringing in new capital,'' Tilliss says. ``But how do you determine what's a fair price to pay? That's what determines whether this is a great investment opportunity. Are you paying for their current earnings or the earnings you hope they'll generate if things go right in the future?''
The league declines to disclose its revenue or profitability. Campbell estimates that some teams lost as much as $4 million last season.
Sponsors Since 2005
Since 2005, MLS has signed sponsors that include Anheuser- Busch Cos.' Budweiser beer brand, JPMorgan Chase & Co. and PepsiCo Inc.'s Gatorade. It also has negotiated television contracts with Walt Disney Co.'s ABC and ESPN, Los Angeles-based Univision Communications Inc. and Dallas-based HDNet that will pay the league a combined $200 million over the next eight years.
Galaxy Assistant Manager Tom Payne says the team has earned an additional $13.3 million, more than twice Beckham's $5.5 annual salary, from ticket price increases and new sponsorships this season.
Campbell say MLS clubs are poised to appreciate more than other U.S. sports teams. And Randy Bernstein, a former MLS executive who co-founded Premier Partnerships, a Los Angeles- based marketing and consulting firm, says investing in soccer is less risky than it used to be.
Risk Already Borne
``The league has suffered its share of trials and tribulations, and some of the early investors lost quite a bit of money,'' Bernstein says. ``But most of the financial risk has already been borne by others.''
Maple Leaf Sports has sold out each of its eight home games this season at its 20,000-seat stadium and is adding temporary seats for this weekend's Galaxy match.
``People have debated for 15 to 20 years whether soccer can succeed in North America, and we believe it can,'' said Tom Anselmi, chief operating officer of Maple Leaf Sports. ``We've placed our bets.''
(Source: Bloomberg.com)
|
| Back |
|
|
|
|
 |
|
