Fever Pitch

Examining the Prospects of Major League Soccer in Minnesota

It’s been talked about for years, but the prospects of the Twin Cities earning a MLS expansion team have never been better.  Two local ownership groups presented to MLS leadership last month, intent on earning one of the two expansion slots the league has announced by 2020.  Ownership groups from Las Vegas and Sacramento also presented, and the league is currently waiting on David Beckham’s Miami-based group to line up stadium funding. If the Miami group gets its financing together, they could take one of the two spots, or the league could choose to add three teams instead of two.

Minnesota’s two prospective ownership groups bring very different resumes to the table.  One group, is the Minnesota United FC group headed by former United Health Group CEO Bill McGuire. The other is the Minnesota Vikings, headed by brothers Zygi and Mark Wilf.  These two groups have widely differing ideas of what kind of facility the MLS team should play in. But before we get into the merits of each of the ownership groups, let’s look at Major League Soccer’s unique financial model.

Major League Soccer, unlike the other major professional sports, operates as a single, privately-held entity.  All of the teams are owned by the league, and all of the player contracts are signed with the league, instead of the individual teams.  The ownership groups in each city, then, aren’t franchise holders like in the other professional sports, but rather investors and shareholders of the league as a whole.

Each team has a salary cap (in 2014, the cap figure was $3.1 million), but similar to the National Basketball Association salary cap, there are multiple ways to circumvent the cap.  The average team payroll in 2014 was $4.7 million and the median payroll was $3.8 million (higher-spending teams in Los Angeles and New York drive up the average).

Similarly, average team revenues in 2013 were about $26 million per year, while the median revenue was $24 million.  According to Forbes, most teams in the league were profitable — not surprising, given the low payroll to revenue ratio of about 25% — which is about half of what it is in the NBA.

Many sources attribute the league’s profitability to its move over the last decade to emphasizing hosting its teams in soccer-specific stadiums — by 2017, about three-quarters of the league will be hosted in such facilities.

MLS stadiums

Like other professional sports, controlling the stadium environment is key to financial health, because you control the building’s ancillary revenues. Teams like Washington D.C., Boston, and Vancouver lag where you would expect them to be in revenues because they only control soccer-related revenue in the building.

The potential upside of a shared stadium, though, can be seen in Seattle.  Through savvy organizational effort, the Sounders have become MLS’s top revenue-producer primarily by driving attendance. The Sounders packed in over 43,000 per game into CenturyLink Field this season, nearly doubling Toronto’s second-place average attendance of just over 22,000.  Such large attendance, though, would be impossible in the sort of soccer-only facilities currently being constructed by the league.

Which brings us back to looking at the two groups currently hoping to bring the MLS to Minnesota.

McGuire’s Minnesota United FC is one of the finest and most decorated organizations in the North American Soccer League, the Level II league in North America. (Think AAA baseball as a rough equivalent, if you’re not familiar with soccer levels.)

McGuire’s vision is for a soccer-specific facility near Target Field and Target Center on the west side of Downtown Minneapolis. (A parcel near the Minneapolis Farmer’s Market is eyed under this plan.)  McGuire has rounded up some notable luminaries on his side — notably Minnesota Twins owner Jim Pohlad and Minnesota Timberwolves owner Glen Taylor — although it’s unclear if Pohlad and Taylor are involved at a level more than moral support at this point.  Also of note with the McGuire group is the backing of Hennepin County Commissioner Mike Opat, a key player in the negotiations over the funding package for Target Field.

McGuire himself has been cagey about the notion of whether or not a public subsidy would be required to build such a facility, not ruling it out after there were earlier whispers that the United group could build the stadium without subsidy.

MLS clearly has a preference for soccer-specific facilities — and certainly, the United group would be the clear favorite if it had a concrete plan to get such a stadium built.  MLS has waited to give Beckham a team in Miami — which certainly has shared stadium options available to it — for this very reason.

But the reality is that from a financial perspective, building a soccer-specific stadium with no public contribution is going to be extremely challenging.  Most expect that the prospective owner group will have to pay a $100 million fee to get the team, and the stadium itself will cost between $100 and $150 million dollars.  Assuming the McGuire group finances that entire investment, the group could expect a financial outlay of $15 to 20 million per year, depending on the specific amount and terms of the financing.  That amount isn’t workable unless the United are able to dramatically increase their revenues above the league average of $26 million.  The only way building the stadium without public support works is if McGuire himself is willing to write a big check (think $50 million or so) up front to get the deal done.

What about public support, though? The outlook here is extremely grim.  From Opat to Minneapolis Mayor Betsy Hodges to Governor Mark Dayton, politicians of all stripes have rejected the notion of public funding going towards a soccer-specific stadium in Minneapolis. There’s no realistic scenario for getting public support for a soccer-specific stadium through any of the possible elected bodies that could help fund it: the Hennepin County Board, the Minneapolis City Council, or the State Legislature.

Meanwhile, you have the Wilf-led Vikings group looking to host the team in the under-construction new Vikings stadium on the east end of Downtown Minneapolis.  The Vikings, who passed on an opportunity to by United before McGuire did in 2012, are working to overcome a perception that their only interest in soccer is born out of the business opportunity it represents for capturing the revenue from an additional 17 events in the building — current plans for stadium financing assume $340,000 in revenue annually from MLS-related rent.  This figure would represent significantly less than the soccer-specific stadium (if no public contribution).

Contributing to this concern is the fact that New England Patriots owner Robert Kraft has been considered one of the worst owners in the MLS, leading some to believe that it is inevitable that a MLS team owned by a NFL group will be of second priority.

Earlier this month, the team unveiled its renderings of how they would adjust the building to create a more suitable soccer atmosphere.

mls5.jpg
Rendering of the new Minnesota Vikings stadium in soccer configuration. (Drawing courtesy Minnesota Vikings)

The plan here would work similarly as it does in other such stadiums, with the upper-deck seating curtained off to concentrate the crowd in the lower deck and bring them as close to the field as possible.  With an active crowd (like those in Seattle), the atmosphere in such stadiums can still be quite good, but it is a risk.

Another potential downside to using the Vikings stadium is the artificial turf field, which is frowned on in the international soccer community for its increased bounciness over natural grass and concerns over wear-and-tear and injuries for players.  Attempts to use temporary grass fields over artificial turf have met with mixed success, as was discovered at TCF Bank Stadium last summer.

The decision, then, is going to come down to the attractiveness of the Twin Cities as a market and how strongly MLS believes a soccer-specific stadium is required.   There’s no doubt that the Twin Cities — from a market perspective — is viewed as more attractive than Sacramento or Las Vegas.

But, Las Vegas recently finalized its plans for a soccer-specific stadium, while the Sacramento group has committed to building a stadium without public assistance.  And MLS has sometimes strayed from demands for a soccer-specific facility, as demonstrated by the awarding of expansion teams to Atlanta (owned by the NFL’s Atlanta Falcons ownership group and slated to play in the new Falcons stadium) and New York City (owned by MLB’s New York Yankess and slated to play in Yankee Stadium while the team tries to develop a new stadium in the Bronx).

If MLS is committed to awarding franchises this spring, the Wilf group would appear to be in the lead unless the McGuire group can finalize its plans for a stadium quickly.  Logically, one might think that a combination of the two groups — pairing United’s soccer expertise with the upcoming Vikings stadium — would be ideal.  But such a pairing seems unlikely, as McGuire is committed to an outdoor stadium, and the Wilfs likewise committed to total control of a team that plays in their building.

If Minnesota doesn’t come away with a MLS team, our perpetual stadium dysfunction will be the cause.

(Header image is Kansas City’s Sporting Park, considered one of the finest soccer-specific stadiums in MLS. Photo courtesy Alistair Sutton.)

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