The Thing That Scares Me About Money and MLS

By: Laurie | April 12th, 2007

MLS and money. A combination of topics that fascinates me.

I have an MBA in finance and accounting. (Which, by the way, you are welcome to borrow, because I am currently not using it.) But what this degree means is that for the rest of my life, I will have a strong interest in how things like revenues and expenses interact in any business, and in how long a business (and soccer IS a business) can be sustainable when expenses exceed revenues.

One thing I’m discovering in being an MLS blogger: Accurate information on league finances is hard to come by. Which is why I’m always grateful for articles like this one, from the LA Times. (Do read it. It has a lot of interesting money-related facts that I don’t have space to cover here. Oh, and? Anybody sending me links to articles on MLS finances will receive serious LA Galaxy Offside Gold Stars.)

Did you know that ten of the twelve MLS teams operated at a loss last year, MLS’s eleventh year of operation? Loss: Expenses exceeding Revenues. Money going out exceeding money coming in. And businesses operating at a loss are like people living off credit cards. They are generally not the picture of good, solid financial health. And they’re living a life that can’t go on forever. The money going out has to come from somewhere. (Or someone.)

This is an unhappy little fact that’s easy to forget when we get excited about our teams.

Of course, many (if not most) businesses operate at a loss in the first years as they lay the foundation for future success. And sports franchises are often a lot more than businesses. There’s intense emotion associated with sports teams, both in fans and in owners. This means that billionaires like Galaxy owner Phil Anschutz might be willing to keep plugging in the cash far beyond what they might sacrifice for a chain of fast food joints. (Think about it: Which garners more interest among the beautiful people at a cocktail party: “I own a hundred burger joints” or “I own a sports team”? And that’s true even if the burger joints are a far more profitable venture.)

And, as the article points out, there are a lot of positive financial signs for MLS. Ticket sales are up, sponsorship fees are up, TV deals have increased substantially in number. The Designated Player rule (and the consequent Beckham signing) have impoved the visibility of the league across the entire world, which may have positive consequences in things like merchandise sales. Ditto for our teams’ new international partners.

But none of these facts will impact the ability of the league to keep operating if we don’t keep one fact in mind: At some point, revenues (money coming in) must consistently top expenses (money going out.) Until that happens consistently, year after year, we won’t be able to count on the continued presence of soccer in the US.