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'Hidden revenues' a key to MLS growth
September 20th, 2006 6:52PM
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Any business leader or entrepreneur knows the dangers of "hidden costs," those troublesome expenses, sometimes unforeseen, that can doom the most promising startup.

MLS fans, perhaps perplexed at why operator-investors are sinking their money into facilities and not players, are mostly unaware of what might be called the "hidden revenues" that come with running your own place.
 
By now, the MLS mantra of controlling dates and vacuuming up ancillary revenues such as parking, concessions, merchandising, etc., in addition to renting the facility for concerts and the like are chapter and verse.

Yet other forms of income flow to the landlord as well, as evidenced by the announcement that Toronto FC, which has yet to play a game, has already sold naming rights to BMO Financial Group for a stadium that won't be ready until the spring. Figures were not disclosed, but naming rights for MLS stadiums are valued between $500,000 and $1 million per season.

In the case of Red Bull New York, approximately $20 million has been earmarked so Red Bull Park, which held its groundbreaking this week, will bear its name. League financial formulas are complex; does the $20 million in naming rights paid by Red Bull go to itself, or to the league office, to be thus distributed amongst the partners, with presumably the lion's share going back to - or being retained - by the limited liability company (LLC) formed by Red Bull to run its American soccer team?

Also figured into the financial mix are luxury boxes and suites, which are valued between $25,000 and $30,000 per season in Chicago, for example. The team should earn between $750,000 and $1 million a year if it sells these out. For a modestly budgeted league like MLS, that's good money.

These revenue streams may mitigate somewhat the relatively tepid response from fans to new facilities in Dallas and Chicago. Average announced crowds at Pizza Hut Park are 14,374; Toyota Park is averaging 13,382. Neither is hitting the league average of 15,114 despite Dallas leading the Western Conference and Chicago opening its new stadium just three months ago.

And since the league admits its attendance numbers ("tickets distributed") include single-game sales, group sales, season tickets, tickets computed as part of sponsorships or luxury-box sales or other deals, plus any other tickets that are randomly given out by whatever means, the other revenue streams had better be flowing.

The Fire opened with a nine-game road swing until Toyota Park opened June 11, and thus its home games are backlogged into the final two-thirds of the season, so a clearer picture may emerge next year with its home dates spread out throughout a full season.
MLS has also not released its season-ticket figures, which were supposed to be spurred by smaller-capacity stadiums and thus reduced availability.

The league is preparing an announcement on its player development program, by which teams can find and groom players without losing their rights through the SuperDraft and other distribution procedures. It has a new TV deal in place by which it sheds production costs and reaps a rights fee, and by next season seven of its 13 teams will be playing in their own stadiums.

Upgrading player quality is an obvious task that would also help bump up attendances. The emptiness of many facilities for many games is still an eyesore and with 26 ESPN2 Thursday night games scheduled for next season, if the league can't buy up a few players with real drawing power, it had better put some muscle into promoting midweek games televised to its largest potential audience. Otherwise, both it and its most important broadcast partner will look bad, real bad, week after week.

ABRA CADABRA! Poof, just like, the Wizards are back! On TV, that is.

New Kansas City owner OnGoal LLC has announced its match this weekend against New England will be televised in the Kansas City area by Metro Sports, a regional sports channel that carried Wizards games until Hunt Sports Group pulled the plug.

Kansas City usually ranked last among MLS teams in the number of regional games produced, with only a handful being shown most seasons. Six regular season games were televised in 2003, but none the past two years.

For years, critics have labeled Kansas City a dead market. More pointedly, it's the team that's been in a marketing and promotional coma. By putting the team back on local television, OnGoal has taken a small yet vital step in giving the team, the sport, and the league a fighting chance.



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