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McCarthy's Musings: Investors Enter Fray As MLS And Union Continue CBA Battle
Two MLS investors broke their silence over the MLS CBA negotiations earlier this week. Kyle McCarthy explores the impact of their statements.
Mar 17, 2010 4:12:00 AM
By Kyle McCarthy
In the ongoing Collective Bargaining Agreement saga between MLS and the MLS Players Union, investor-operators have remained silent and permitted top MLS officials to make the league's case.
No longer.
“Here's our issue, and I'm speaking on behalf of AEG,” AEG chief executive Tim Leiweke told the Los Angeles Times on Monday. “We have spent to the tune of $300 million on soccer. We have spent money on facilities. We at one point owned six of the 10 teams to keep the league alive. I don't even know how to react when I hear the players now saying that we have treated them poorly and they're going to strike. The fact is, the Galaxy isn't going to make money this year. There are only a couple of [MLS] teams that will make money this year. It's not like this league is a work of completion. It's not like we have accomplished what we have to accomplish to be stable and to know we have a great future. It's not like we have reached the potential of a soccer league in this country. So when I hear them talk about striking and shutting the league down, I've got to tell you, they're going to lose us when they talk like that. We do this out of passion. If this were a business, we would have quit this 10 years ago.”
Leiweke's point works on a superficial level because it is so simple. A few investors – AEG in Los Angeles and several other markets, Hunt Soccer Group in Columbus, Dallas and Kansas City and Kraft Soccer in New England and San Jose – have plunged hundreds of millions of dollars into soccer and don't want to alter the structure they see as integral to the sport's survival in the United States. Some recent investors see the single-entity structure as an effective means of cost control, even as a few clubs chafe at its restrictions.
Incorporating substantive contractual freedoms within the league – a movement the Union contends represents an affirmation of the fundamental rights for all soccer players and MLS approaches as another means of elevating costs and increasing compensation – would only harm those goals, according to the investors. And even if the investors wanted to implement those changes, the bottom line simply won't tolerate it.
Despite the clarity and the earnestness of Leiweke's point, the argument doesn't prove entirely persuasive within the current MLS structure. The years of red ink have yielded to a world in which more than half of the MLS clubs control their own facilities and schedule ancillary events to generate supplemental income. In addition to a variety of local revenue streams, investors hold shares in Soccer United Marketing, a venture that includes lucrative marketing (Barcelona, Chivas Guadalajara and the Mexican national team), television (the World Cup) and tournament (Interliga and SuperLiga) rights in the United States.
Registering a financial loss with a particular team may not reflect the actual value of the investment when other properties are taken into account. Since MLS/SUM keeps its books private (even to the Union and its players), it's hard to tell whether Leiweke is leaning on a familiar crutch or speaking the truth. Either way, the picture he paints probably doesn't reflect the entire story.
Seattle investor Joe Roth touched on the financial argument in an interview with the Seattle Times, but trained most of his focus on the practical impact of the looming strike threat. Roth, a Hollywood producer, said MLS can't afford a strike because of its tenuous place in the American consciousness and doesn't believe the Union will attain any benefits from a possible work stoppage.
“What happens if they strike? A strike happens, and then what happens,” Roth told the Times on Tuesday. “What happens then? The issues don't get any clearer. People don't change their minds. The sides don't change. Then it just becomes someone waiting someone out. I have been on both sides of these things. I think I'd have a hard time waiting out a billionaire. I just don't see how it profits anybody, a work stoppage. Again, it will leave a bad taste (in the mouths) of the only people that really matter, which is the fans.”
Roth's argument strikes the right chord by including the fans in the discussion and offering a practical, tangible explanation for why a strike doesn't make sense. The stance may, however, underestimate the considerable and repeatedly expressed resolve of the Union and ignore the need for MLS and the Union to continue to play their respective roles to ensure the best possible deal for their side.
MLS officials and Union representatives aren't the only ones jockeying for position as the negotiations rumble onwards. Based on the impassioned public comments over the past two days, it appears MLS investors believe they must assume a public part in the continuing drama as well.
Kyle McCarthy writes the Monday MLS Breakdown and frequently writes opinion pieces during the week for Goal.com. He also covers the New England Revolution for the Boston Herald and MLSsoccer.com. Contact him with your questions or comments at kyle.mccarthy@goal.com and follow him on Twitter by clicking here.
For more on Major League Soccer, visit Goal.com's MLS page.
In the ongoing Collective Bargaining Agreement saga between MLS and the MLS Players Union, investor-operators have remained silent and permitted top MLS officials to make the league's case.
No longer.
“Here's our issue, and I'm speaking on behalf of AEG,” AEG chief executive Tim Leiweke told the Los Angeles Times on Monday. “We have spent to the tune of $300 million on soccer. We have spent money on facilities. We at one point owned six of the 10 teams to keep the league alive. I don't even know how to react when I hear the players now saying that we have treated them poorly and they're going to strike. The fact is, the Galaxy isn't going to make money this year. There are only a couple of [MLS] teams that will make money this year. It's not like this league is a work of completion. It's not like we have accomplished what we have to accomplish to be stable and to know we have a great future. It's not like we have reached the potential of a soccer league in this country. So when I hear them talk about striking and shutting the league down, I've got to tell you, they're going to lose us when they talk like that. We do this out of passion. If this were a business, we would have quit this 10 years ago.”
Leiweke's point works on a superficial level because it is so simple. A few investors – AEG in Los Angeles and several other markets, Hunt Soccer Group in Columbus, Dallas and Kansas City and Kraft Soccer in New England and San Jose – have plunged hundreds of millions of dollars into soccer and don't want to alter the structure they see as integral to the sport's survival in the United States. Some recent investors see the single-entity structure as an effective means of cost control, even as a few clubs chafe at its restrictions.
Incorporating substantive contractual freedoms within the league – a movement the Union contends represents an affirmation of the fundamental rights for all soccer players and MLS approaches as another means of elevating costs and increasing compensation – would only harm those goals, according to the investors. And even if the investors wanted to implement those changes, the bottom line simply won't tolerate it.
Despite the clarity and the earnestness of Leiweke's point, the argument doesn't prove entirely persuasive within the current MLS structure. The years of red ink have yielded to a world in which more than half of the MLS clubs control their own facilities and schedule ancillary events to generate supplemental income. In addition to a variety of local revenue streams, investors hold shares in Soccer United Marketing, a venture that includes lucrative marketing (Barcelona, Chivas Guadalajara and the Mexican national team), television (the World Cup) and tournament (Interliga and SuperLiga) rights in the United States.
Registering a financial loss with a particular team may not reflect the actual value of the investment when other properties are taken into account. Since MLS/SUM keeps its books private (even to the Union and its players), it's hard to tell whether Leiweke is leaning on a familiar crutch or speaking the truth. Either way, the picture he paints probably doesn't reflect the entire story.
Seattle investor Joe Roth touched on the financial argument in an interview with the Seattle Times, but trained most of his focus on the practical impact of the looming strike threat. Roth, a Hollywood producer, said MLS can't afford a strike because of its tenuous place in the American consciousness and doesn't believe the Union will attain any benefits from a possible work stoppage.
“What happens if they strike? A strike happens, and then what happens,” Roth told the Times on Tuesday. “What happens then? The issues don't get any clearer. People don't change their minds. The sides don't change. Then it just becomes someone waiting someone out. I have been on both sides of these things. I think I'd have a hard time waiting out a billionaire. I just don't see how it profits anybody, a work stoppage. Again, it will leave a bad taste (in the mouths) of the only people that really matter, which is the fans.”
Roth's argument strikes the right chord by including the fans in the discussion and offering a practical, tangible explanation for why a strike doesn't make sense. The stance may, however, underestimate the considerable and repeatedly expressed resolve of the Union and ignore the need for MLS and the Union to continue to play their respective roles to ensure the best possible deal for their side.
MLS officials and Union representatives aren't the only ones jockeying for position as the negotiations rumble onwards. Based on the impassioned public comments over the past two days, it appears MLS investors believe they must assume a public part in the continuing drama as well.
Kyle McCarthy writes the Monday MLS Breakdown and frequently writes opinion pieces during the week for Goal.com. He also covers the New England Revolution for the Boston Herald and MLSsoccer.com. Contact him with your questions or comments at kyle.mccarthy@goal.com and follow him on Twitter by clicking here.
For more on Major League Soccer, visit Goal.com's MLS page.
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