Investors have paid $325m for a place in MLS. But for how much longer? | MLS

Investors have paid 5m for a place in MLS. But for how much longer? | MLS

2023 was slated to be Sacramento Republic’s expansion year in Major League Soccer. After long and protracted negotiations to secure a franchise, it was provisionally announced in October 2019 that California’s capital city had been awarded a spot in the league. That may be the closest Sacramento ever gets to MLS, though, with billionaire Ron Burkle pulling out as lead investor amid the fallout of the Covid-19 pandemic. The club’s entry to MLS is now on hiatus.

According to commissioner Don Garber, MLS lost close to $1bn in revenue over 2020. “The losses have been dramatic,” he told reporters in December. “Clubs are going to have to manage their economics as diligently as possible.” Even more striking was that Garber, just a few months later, claimed MLS could lose close to the same figure in 2021.

For a league which has had perpetual, uninterrupted growth as a mission for the last decade-and-a-half, such assertions are concerning, especially when an investor like Burkle pulls out of an expansion franchise. So is the MLS bubble at risk of bursting in as economic uncertainty hits North America?

It’s not just the number of teams in MLS that has expanded rapidly since the mid-2000s, but also the expansion fees commanded by the league. In 2007, Toronto FC paid just $10m for a seat at the table. By 2015, New York City FC had paid $100m with FC Cincinnati, Nashville and Austin FC all stumping up $150m each. This was followed by Carolina Panthers owner David Tepper parting with a reported $325m in 2019 for a franchise in Charlotte.

To provide some context, $325m would buy a mid-table club in the Premier League or pretty much any of Europe’s other big five leagues, according to Forbes. In terms of market value, MLS is already keeping company with some of the biggest soccer leagues in the world.

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Unlike these long established leagues, though, MLS is still to reach maturity. It’s a work-in-progress and this leaves the league theoretically more vulnerable to the impact of Covid-19, at least in terms of its valuation. Past comments by Garber point to MLS growing to 32 teams in the not-so-distant future, and there will still be interest from across the United States and Canada in filling the remaining spots, but will investors be willing to pay such astronomical fees for the privilege? Continue reading

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