The Los Angeles Galaxy of Major League Soccer (MLS) have been the darlings of American soccer since the league began in 1996. Winning a total of four MLS Cups and attracting some of the league’s greatest talent, the Galaxy are the most successful club in the league. In 2013, Forbes listed the Galaxy as the second most valuable club, worth $170 million with $44 million in total revenue. In 2012, the club signed one of the most prolific jersey sponsorships in the league, a ten year deal with Herbalife worth $44 million. The club has the highest average attendance all-time, amongst the league’s oldest clubs, at 20,688 per game (the second highest all-time average attendance is D.C. United with 16,861 per game all-time).
To add to their impressive financial history, the team earned an operating income of $ 7.8 million in 2012, one of ten MLS clubs to earn a profit that year. To understand the revenue disparity between MLS and European leagues, Barcelona FC, the second most valuable franchise in the world, earned around $665.7 million (€482.6 million) during the 2012/13 season. This kind of comparison may seem dramatic. However, to understand some of the limitations that MLS teams face, comparisons like these can sometimes be insightful.
The Galaxy plays at the newly-named StubHub Center in Carson, California, a 27,000 capacity stadium that the team shares with California State University, Dominquez Hills. Barcelona plays at the famous Camp Nou, a 98,787 seat stadium. Barcelona FC drew an average crowd of 71,235 in league games in 2012/13, which represents 72% of their stadium capacity. The Galaxy average home attendance for the 2012 season was 23,136, which represents 86% of their stadium capacity. While the Galaxy fills their stadium at a higher rate throughout the season, Barcelona’s sheer numbers trump the revenue of the Galaxy. Match day revenue is much more important in MLS than in other leagues around the world. One rough estimate from theshinguardian.com estimates that $22.8 million, or approximately 50%, of the Galaxy’s $45.7 million in total revenue in 2013 was from match day, whereas Barcelona reported that matchday revenues accounted for only 24% of their total earnings during the 2012/13 season. This financial comparison clearly shows that top European clubs generate most of their revenue from other sources, such as broadcasting and commercial sales, while MLS clubs still rely heavily on match day revenue.
Several weeks ago, the Galaxy fell out of the CONCACAF Champions League after a 4-3 aggregate loss to Liga MX club Tijuana. They played the first leg of the series at home on, Tuesday, March 12th, in front of a crowd of 15,159. Because the Galaxy shares their home stadium with California State University, Dominquez Hills, the team must limit the number of tickets they can sell for games played on a weekday. This agreement has been in place since 2003 when the Galaxy built their soccer specific stadium on the college grounds. Limited parking for students, faculty and staff of the university is the reason cited for limiting ticket sales for mid-week games.
For a club that relies heavily on match day revenue, it is a bitter pill for the organization to swallow, especially for a competition such as the CONCACAF Champions League where the organization is on an international stage. The club has played mid-week Champions League games in front of crowds as small as 7,500, a mere 28% of the stadium’s capacity. Capping attendance not only limits the Galaxy on the field but in their pockets as well. It would be unfathomable if Barcelona were forced to cap their attendance during their UEFA Champions League matches during the week. Camp Nou would only have 27,660 people in attendance if the club could only sell 28% of their total seats. This would result in an approximate -$1.8 million loss for each game Barcelona capped the number of tickets sold in the same way the Galaxy must. To put the overall impact into perspective, if we just look at the 2013/14 UEFA Champions League group stages through the semi-finals (should Barcelona make it to the Semi’s this year), that would be 6 home matches that they would have to cap at the 28% capacity, which in total would cost the club approximately $10.8 million in lost matchday revenue.
MLS certainly does not have the history or the opportunities to match the impressive financial gains of a club like Barcelona FC, at least at present. Many clubs in MLS have to maneuver around similar restrictions that limit their revenue. The league has made great strides to generate revenue from match day, however, if the league wants to compete with the likes of Liga MX and generate the kind of revenue that other American sports do, MLS needs to focus on growing television and commercial revenue sources and work through some of the limitations in their match day revenue source. To do so, as a start, MLS teams need to control their stadiums and grounds – a task much easier said than done in the current landscape.Posts
Scott Phillips, Staff Writer, Business of Soccer