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BayernTFC
08-19-2009, 04:41 PM
I was trying to find some information on the historical profits/losses of MLS clubs, and I stumbled upon this article:

http://www.thisisamericansoccer.com/tias-barometer/the-barometer-39/


Is SUM MLS? MLS, SUM? I start thinking about money again. Who makes what, where does it come from, who is making out, who is getting the short stack?


In that same piece, SUM President Doug Quinn said that “the objective of securing that property (World Cup English-language broadcast rights) was to secure the stability of soccer in the United States and to assure that English-language television was available for the soccer fan. Hopefully, the benefits of the U.S. national team and frankly, the growth of soccer in the country would then impact the development of Major League Soccer. That’s why we do anything and everything.”


So everything SUM does is to impact the development of MLS. Hmmm. MLS profitability isn’t public either.
If SUM includes “MLS investor-operators”–that term given to what are essentially franchise owners under the MLS single entity structure–than besides being able to apply for jobs at both places on one website (http://web.mlsnet.com/about/jobs.jsp), this means that a franchise expansion fee goes at least in part to the purchasing of some share of SUM. According to MLS, each group of MLS investor-operators has a seat/seats on the Board of Governors and a share in SUM and SUM’s profits.

Hmmmmmmm...Now where have I seen this type of structure before...


Beginning a pattern that would repeat itself over and over again, Goldman got into the investment-trust game late, then jumped in with both feet and went hog-wild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund - which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah - which, of course, was in large part owned by Goldman Trading.


The end result (ask yourself if this sounds familiar) was a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line ....
http://www.correntewire.com/great_american_bubble_machine_0

Hustle
08-19-2009, 08:28 PM
So an investment in MLS is more importantly an investment in SUM because buying a franchise in MLS means much more than just the tickets receipts from your home club. It means a portion of commercial rights generated by The United States Soccer Federation, marketing and promotional rights of Mexican National Team games in the US, The CONCACAF Gold Cup, The Interliga, Superliga and Pan Pacific Championship, as well as Barca and Chivas marketing in the US.

troy1982
08-19-2009, 08:36 PM
To the first poster:
MLS isn't a public company and has no similarity to the shinanigans at Goldman Sachs.

Basically when you buy into MLS you get a piece of SUM (which is hugely profitable).

TFCRegina
08-19-2009, 09:23 PM
MLS gets tons of cash from SUM for it's participation in that joke known as Superliga.

It's what makes the league profitable, despite their claims of being perennial losers in the cash department.

Good accounting keeps you from having to increase salaries. It's despicable what they do, robs the fans of a better product.

CoachGT
08-20-2009, 07:12 AM
So an investment in MLS is more importantly an investment in SUM because buying a franchise in MLS means much more than just the tickets receipts from your home club. It means a portion of commercial rights generated by The United States Soccer Federation, marketing and promotional rights of Mexican National Team games in the US, The CONCACAF Gold Cup, The Interliga, Superliga and Pan Pacific Championship, as well as Barca and Chivas marketing in the US.

But then the question becomes how does soccer in Canada benefit from any of this? Does TFC (and eventually Vancouver) provide any support, financial or otherwise, to USSF? Or is there some means for TFC to support Canadian soccer in a similar manner to how the US clubs support the USSF?

Oldtimer
08-20-2009, 07:38 AM
SUM is a net profit centre, probably the most profitable part of soccer in America. Goldman Sachs' shell companies were just that, they didn't make any money.

TFCRegina
08-20-2009, 08:15 AM
But then the question becomes how does soccer in Canada benefit from any of this? Does TFC (and eventually Vancouver) provide any support, financial or otherwise, to USSF? Or is there some means for TFC to support Canadian soccer in a similar manner to how the US clubs support the USSF?

TFC, and all the US teams, get about 800 grand each for Superliga. Pays a third of the year's salary cost for players.

JamboAl
08-20-2009, 08:27 AM
^$800,000? That seems ridiculously high for a competition no one watches or cares about. You sure there isn't an extra zero (or two) there somewhere?

SilverSamurai
08-20-2009, 08:28 AM
But then the question becomes how does soccer in Canada benefit from any of this? Does TFC (and eventually Vancouver) provide any support, financial or otherwise, to USSF? Or is there some means for TFC to support Canadian soccer in a similar manner to how the US clubs support the USSF?

I would think TFC doesn't really give much if anything to the CSA since MLS is an American league.

What I would like to know is if the CSA has contacted SUM in regards to marketing Canadian footy here in Canada...
Can't be worst then what's going on now...

CoachGT
08-20-2009, 08:41 AM
I would think TFC doesn't really give much if anything to the CSA since MLS is an American league.

What I would like to know is if the CSA has contacted SUM in regards to marketing Canadian footy here in Canada...
Can't be worst then what's going on now...

Not that I have much faith in the CSA anyway. MLS was intended to be a development league for the US. With Canadian teams, should they be footing a bill for US development of should they be contributing to Canadian development, especially if US players are considered imports to a Canadian roster?

BayernTFC
08-20-2009, 10:30 AM
SUM is a net profit centre, probably the most profitable part of soccer in America. Goldman Sachs' shell companies were just that, they didn't make any money.
Well, I am sure that SUM's books say that it is profitable, but how do you know how successful they are? I'd like to see the numbers if you'd care to share. My impression was that MLS/SUM didn't disclose that type of information:

They make money, but it’s a private company so no one knows exactly how much.
http://www.thisisamericansoccer.com/tias-barometer/the-barometer-39/

Is it enough to offset the hundreds of millions of dollars of MLS debt that continues to grow? Will the profits at SUM increase at a fast enough rate to cover additional stakeholders? Seattle, Philadelphia, Portland, Vancouver...Sure wouldn't want to see a drop off in television contract values or the need to partner up with Versus somewhere down the line like the NHL did.

Pumping and Dumping works great for the guys who set the scheme up and start out on the ground floor. In the end, the Goldman subsidiaries collapsed because too many shares were being issued at an inflated price that could no longer find support.

Hence:

The end result (ask yourself if this sounds familiar) was a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line ....

Goldman Sachs (the parent company) survived because it shielded itself sufficiently from its subsidiaries and saddled them with the debt even though they were all the same company.

BayernTFC
08-20-2009, 10:57 AM
To the first poster:
MLS isn't a public company and has no similarity to the shinanigans at Goldman Sachs.

Basically when you buy into MLS you get a piece of SUM (which is hugely profitable).
You are correct that MLS is a private company, but that means that they aren't required to report earnings to the public. Even private companies have to follow rules and standards. Private companies can have investors too.

We certainly have a lot of people in the know on these boards. Please PM me with the financial details of SUM. I'd certainly like to examine the financial statements of this hugely profitable business.

It's kind of hard to keep asking for an increase in franchise fees and convince anyone that league and team values keep rising as debt continues to grow. Having a profitable wing of a company doesn't help with sales if the revenue from that side of the business doesn't lift performance of the overall business enough to show sufficient growth. So spin off that portion of the business as a marketing tool to drum up new business. Don't worry, television revenue will be huge and if the "parent" company goes down, you'll have an untouched piece of a "profitable" business to show for your investment. Don't worry, we'll diversify and cover all types of televised soccer events not just MLS. Television is the wave of the future. Viewership can only ever go up and contract values always increase. Trust me. Look at how well the NFL has done...

scooter
08-20-2009, 11:36 AM
this is all interesting stuff and raises a lot of questions about soccer development in the US of A because their system is working and look at the national teams success
if that is due to SUM's money then i am all for it
i hope as the years go on that lots more money can be pumped into our player development so one day i can watch CANADA win a world cup
i know tfc academy and vancouvers are a start but they are not catering to the grass roots players and how many great young talents are being missed
we need to go the academy route but the fees need to be subsidized cause for a lot of families they are far to expensive

Oldtimer
08-20-2009, 11:59 AM
We certainly have a lot of people in the know on these boards. Please PM me with the financial details of SUM. I'd certainly like to examine the financial statements of this hugely profitable business.

It's kind of hard to keep asking for an increase in franchise fees and convince anyone that league and team values keep rising as debt continues to grow.

From one of the city proposals (I can't remember, Philly maybe?) it was disclosed that the dividends from SUM are nearly $1 million per franchise. The earnings were around $3 million per franchise. Not earth-shattering, but decent for this sport in the U.S.

I'm not sure where you get "as debt continues to grow" part. Do you have privy to some private information? It is certain that MLS lost hundreds of millions in it's first few years, but that period is over. At least 3 teams are profitable, and if you count undistributed SUM earnings, most teams are profitable.

TFCRegina
08-20-2009, 12:06 PM
^$800,000? That seems ridiculously high for a competition no one watches or cares about. You sure there isn't an extra zero (or two) there somewhere?

I'm absolutely certain. The SUM compensation to MLS is very high. SUM's job is to promote Mexican futbol in the US, and Superliga is one of the mediums through which they do it.

BayernTFC
08-20-2009, 12:53 PM
From one of the city proposals (I can't remember, Philly maybe?) it was disclosed that the dividends from SUM are nearly $1 million per franchise. The earnings were around $3 million per franchise. Not earth-shattering, but decent for this sport in the U.S.

I'm not sure where you get "as debt continues to grow" part. Do you have privy to some private information? It is certain that MLS lost hundreds of millions in it's first few years, but that period is over. At least 3 teams are profitable, and if you count undistributed SUM earnings, most teams are profitable.

Debt is growing because the league still isn't profitable. In 2008, Garber said he didn't expect profitability for the league until 2010 and a lot has changed since then:


and Garber expecting MLS to turn a profit in 2010 http://www.nypost.com/seven/07182008/sports/soccer/a_new_galaxy_120406.htm



The league is hundreds of millions of dollars in debt, more than 350 million from the tally in 2004 by BusinessWeek:

But it's still way too early to proclaim a turnaround in a pro league that has lost more than $350 million since its kickoff in 1996.http://www.businessweek.com/magazine/content/04_47/b3909099.htm?campaign_id=search%20Soccer:%20Time%2 0To%20Kick%20It%20Up%20A%20Notch



more recently (2007):

That said, in the 12 years since the inception of M.L.S., club owners have invested hundreds of millions of dollars without showing profitability across the board. The league’s revenue of a reported $20 million in annual television rights fees and $150 million in licensed product sales is pocket change compared with that of professional football, baseball and basketball leagues. And although the quality of play in M.L.S. has improved significantly in recent years, it is still viewed by many as a lesser league.http://www.nytimes.com/2007/07/08/sports/soccer/08beckham.html?_r=1&ex=1186372800&en=8ac84814e27d5891&ei=5070



Here are Forbes estimates for profit/loss of teams for last year:

I'll summarize the data in chart form:

(numbers are in the millions)


Value Revenue Income
CHI 41 16 -3.1
CHV 24 10 -1.0
CLB 23 6 -4.5
COL 31 11 -2.2
DAL 39 15 0.5
DC 35 13 -3.0
HOU 33 10 -1.8
KC 22 5 -2.9
LA 100 36 4.0
NE 27 10 -1.5
NY 36 10 -4.5
RSL 30 7 -2.1
TOR 44 17 2.1



TOTAL 485 166 -20.0http://usasoccer.blogspot.com/2008/09/forbes-mls-team-values-revenue.html



Are SUM earnings included in MLS balance sheets and income statements?

Also, bear in mind, attendance is down in some markets. The marketing budgets of many companies have been slashed and TV advertising revenue is down:

Annual negotiations with big media-buying agencies 'most acrimonious in years' as sales drop from $9.25bn to $7.2bn

The amount of advertising (http://www.guardian.co.uk/media/advertising) money secured by the five main US networks in their annual "upfront" negotiations with media buying agencies for the new TV season has declined 22% year on year to $7.2bn (£4.3bn).


Overall, the five main US networks - Fox, NBC, CBS, ABC and The CW - could get nowhere near the $9.25bn they landed at last year's upfronts, in a further sign of the impact of the advertising recession.
http://www.guardian.co.uk/media/2009/aug/07/us-tv-upfronts-ad-revenue-fall



The collective bargaining agreement runs out on Jan 31, 2010. Will salaries stay the same?:

The current Collective Bargaining Agreement (http://www.mlsplayers.org/cba.html) between Major League Soccer and the MLS Players Union ends on January 31st, 2010. So the league and the players are already sitting around a big table to discuss a new deal.http://www.theoffside.com/world-football/is-mls-ready-for-free-agency.html



Americans are saddled with debt and many continue to cut spending. Millions are unemployed and job cuts continue. It's not just about profitability anymore, there needs to be large growth to retire debt and support new membership. How long can the league hold out for sufficient success with such a large debt load? How much interest does MLS pay on its debt? Does anyone know?


Please post sources if you can.

Oldtimer
08-20-2009, 01:05 PM
Forbes estimates are wayyy off. See Paul B's post on that subject on this board.

MLS teams count dividends from SUM earnings, but not the earnings themselves.

TFCRegina
08-20-2009, 01:07 PM
Hahaha, when you believe what they're saying about 350 million in debt, it makes me laugh...

The league would have ceased operating 10 years ago if they were in that bad of shape. MLS' financials are in great shape due to the nature of shady accounting practices which are not only legal but encouraged in North America to avoid tax payments.

Oldtimer
08-20-2009, 02:00 PM
Hahaha, when you believe what they're saying about 350 million in debt, it makes me laugh...

The league would have ceased operating 10 years ago if they were in that bad of shape. MLS' financials are in great shape due to the nature of shady accounting practices which are not only legal but encouraged in North America to avoid tax payments.

Or to put it this way, would you pay $40 million (plus stadium costs) for the exclusive right to lose money? Plus fight with other investors over which city's investors get to lose the money?

The league shows "losses" for two reasons:

(1) Sports teams are a tax write-off. Unless you have teachers' pensions to pay, force a tax-loss. The shady (or should I say "clever") SUM accounting is just one example of this. Since MLS clubs tend to be held by a small number of investors, they can be very aggressive with their reporting, and everyone who needs to know will know that they are doing this. BTW it's much easier to do this sort of manipulation in the U.S. than in Canada, due to different accounting standards and a laxer tax code.

(2) The "poorer" MLS seems, the more they can play hardball come CBA renegotiation time. MLS didn't dispute the Forbes article publicly because it was in it's interest to appear poor.

Hustle
08-20-2009, 02:06 PM
I would think TFC doesn't really give much if anything to the CSA since MLS is an American league.

What I would like to know is if the CSA has contacted SUM in regards to marketing Canadian footy here in Canada...
Can't be worst then what's going on now...

This is exactly what I was thinking. With Vancouver and Montreal coming in, The owners of those Teams MUST push SUM for funds to support our soccer development in this country. It only makes sense as their are alot of players in this country that could be developed into MLS potential if our system was better.

SilverSamurai
08-20-2009, 02:15 PM
Not that I have much faith in the CSA anyway. MLS was intended to be a development league for the US. With Canadian teams, should they be footing a bill for US development of should they be contributing to Canadian development, especially if US players are considered imports to a Canadian roster?
I mean SUM promoting the game in Canada paid for by the CSA.
The league/CMNT would be a bit blurred though.

I don't mean promote the CMNT in the US or the MMNT here in Canada.

mighty_torontofc_2008
08-20-2009, 02:25 PM
This is exactly what I was thinking. With Vancouver and Montreal coming in, The owners of those Teams MUST push SUM for funds to support our soccer development in this country. It only makes sense as their are alot of players in this country that could be developed into MLS potential if our system was better.


first off Montreal coming in is not a sure thing...and SUM should not be bullied by Vancouver and or Montreal, who should support the game here
themselves instead of depending on someone else..if Vancouver and Montreal are not prepared to support the game in this country on their own
then they shouldn't be let in. Vancouver would survive long term in MLS , Montreal would be another columbus and who needs that!! Not MLS

BayernTFC
08-20-2009, 02:29 PM
Hahaha, when you believe what they're saying about 350 million in debt, it makes me laugh...

The league would have ceased operating 10 years ago if they were in that bad of shape. MLS' financials are in great shape due to the nature of shady accounting practices which are not only legal but encouraged in North America to avoid tax payments.
What makes me laugh is that there are some people who are willing to readily accept "shady accounting practices" as good business. So what if some companies get the shaft when they come to collect on debts outstanding or when communities and tax payers lose out when a franchise goes belly up, right???

It's okay if these guys laugh all the way to the bank while others are left holding the bag??? I guess you're a big fan of the tax payer bail outs in the U.S. too, huh? Garth Drabinsky and Myron Gottlieb did the perp walk for similar practices and so should anyone in the MLS who does it:


Real crooks — that’s what Drabinsky and Gottlieb are now labelled after Justice Mary Lou Benotto on Aug. 5 rejected their claims that they were victims of an elaborate conspiracy to frame them for accounting crimes they did not commit. Their punishment for masterminding a massive fraud, misstating Livent’s finances between 1993 and 1998: seven and six years in prison, respectively.
http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20090914_10008_10008

Ivan
08-20-2009, 04:22 PM
Interesting that a marketing firm can have so much influence over the national teams of two countries (US and Mexico) and the league play within two countries.

Since the MLS ultimately holds the contracts of all its players, SUM has influence over the CMNT, too.

If SUM profits from TFC profits, are TFC proftis benefitting the US and Mexican National teams?