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    Default The economics of MLS

    Article in La Presse had an interview with a VP of Montreal Impact Richard Legendre. Copying facts from BigSoccer thread

    A french journalist got a thus far unprecedented amount of detail out of team vice-president Richard Legendre.

    Here are some salient points translated:

    -The Impact expect revenues of $19 Million and plan on making a slight profit this year, which they did not do last year

    -The team expects to do better than last year, and has already reserved dates at the Olympic stadium for a potential MLS cup final, on December 7th and 8th.

    - To break even, the team plans of selling 8000 season tickets and getting an average of 18500 people per game at Saputo Stadium. Last year they averaged 17000 at the Saputo stadium matches.

    -This also depends on how many group and discounted tickets they sell. Last year they sold many big group sales and discounted ticket packs.

    -Playoffs would be nice, but are not a prerequisite for financial success.

    - 75% of spectators are under 45 years old. 45% are between 18 and 35

    -Going from NASL to MLS has led to significant growth, it has tripled our revenues from $6-7 million to $19 million(estimated) this year.

    - One month away from the home opener on March 16th, the team has sold 7000 season tickets, going for $300-$1000 each. The team wants to do better than last year, where they sold 8000 season tickets.

    -Also, the 34 suites of 8-12 seats have been sold out. 250 premium mezzanine seats(terraces) have been sold. a 20 seat terrace costs $25,000 for the season or $1300 per game

    -The team still has work to do on the broadcast front. They drew an average of 150,000 on 10 games on RDS(TSN/ESPN afiliate with priority selection on games) and 50,000 on TVA sports(New channel, less known). 200,000 people watched the 2012 season opener against Vancouver. For comparsion, 1.3 million people tuned in to RDS to watch th
    e first post lockout hockey game between Montreal Canadiens and Toronto Maple-Leafs.

    RDS and TVA sport are french language channels, almost exclusively serving Quebec's population of 8.1 million. RDS games are all broadcast on TSN nationwide in english, those numbers are not included.

    http://affaires.lapresse.ca/economie...3_section_POS2
    http://translate.google.com/translat...3_section_POS2

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    http://www.mountroyalsoccer.com/2012...er-vs-montreal

    541,000 people watched the season opener

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    $19 million in revenue, a 2.7 million team payroll and they're only just breaking even? Even with travel and many more costs of the higher league being factored in, you have to think there's some capital writedown for the stadium going on there.

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    Quote Originally Posted by jloome View Post
    $19 million in revenue, a 2.7 million team payroll and they're only just breaking even? Even with travel and many more costs of the higher league being factored in, you have to think there's some capital writedown for the stadium going on there.
    Like all MLS teams, there seems to be some (legal) fudging of the books. Keeps taxes low and players from asking for too much money. That's why one should take the idea that only a couple of MLS teams make money with a huge grain of salt.
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    Still, considering how much money MLS teams lost in the early days, for IMFC to be on track for profitability in 2 years is an eyeopener.
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    Quote Originally Posted by Detroit_TFC View Post
    Still, considering how much money MLS teams lost in the early days, for IMFC to be on track for profitability in 2 years is an eyeopener.
    It's all in the higher attendance + owning one's own stadiums + new TV deals that is a hallmark of MLS 2.0.
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    Quote Originally Posted by Oldtimer View Post
    Like all MLS teams, there seems to be some (legal) fudging of the books. Keeps taxes low and players from asking for too much money. That's why one should take the idea that only a couple of MLS teams make money with a huge grain of salt.
    Not to get this too derailed, but your accounting statements and your tax records are separate. What's acceptable under GAAP and what's acceptable to the CRA are two separate things. That being said MLS is a privately owned, and they don't even have to follow GAAP if they don't want to. Nor do they have to disclose their financial statements to anyone or feel obligated to tell the truth to the public.

    But Jloome nailed this one. You have payroll that's less than 20% of your revenue in a people focused business and you're not breaking even? tell me another.

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    Quote Originally Posted by jloome View Post
    $19 million in revenue, a 2.7 million team payroll and they're only just breaking even? Even with travel and many more costs of the higher league being factored in, you have to think there's some capital writedown for the stadium going on there.
    factor in stadium improvements and $40 million expansion fee; also Di Vaio is on DP money; wouldn't be surprised if Rivas got a big fat cheque b4 joining MLS

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    Montreal payroll is about 5 mil, considering Don Garber said with allocation money used, and Marco di Vaio makes 1.9 mil per year. Having said that, I thought the salary under the cap is paid by the league...?

    Also wondering if the cost of upgrading Saputo stadium is included. What about MLS's cut in sale and such?

    Interesting article, but without having a detailed look into what gets counted or not, this article could be better.

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    Quote Originally Posted by ag futbol View Post
    Not to get this too derailed, but your accounting statements and your tax records are separate. What's acceptable under GAAP and what's acceptable to the CRA are two separate things. That being said MLS is a privately owned, and they don't even have to follow GAAP if they don't want to. Nor do they have to disclose their financial statements to anyone or feel obligated to tell the truth to the public.

    But Jloome nailed this one. You have payroll that's less than 20% of your revenue in a people focused business and you're not breaking even? tell me another.
    I realize your point. Not to get too technical, however, MLS is a US corporation, and US tax rules base depreciation on accounting profit. Remember that legally Impact, TFC and the Whitecaps are foreign divisions of an American corporation. How Canadian taxation affects their Impact division is unclear, as Canadian taxes would be affected by the Canadian-US tax treaty, and we just don't have enough details. Certainly when you are dealing trans-nationally there are tax-saving options available.
    Last edited by Oldtimer; 02-14-2013 at 12:45 PM.
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    Quote Originally Posted by Yohan View Post
    Also wondering if the cost of upgrading Saputo stadium is included. What about MLS's cut in sale and such?
    I though that was all covered by the Quebec government. Well at least $23-million of it was covered.

    Just wondering: how does the $40Million franchise fee factor in here?
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    Quote Originally Posted by Oldtimer View Post
    I realize your point. Not to get too technical, however, MLS is a US corporation, and US tax rules base depreciation on accounting profit. Remember that legally Impact, TFC and the Whitecaps are foreign divisions of an American corporation. How Canadian taxation affects their Impact division is unclear, as Canadian taxes would be affected by the Canadian-US tax treaty, and we just don't have enough details. Certainly when you are dealing trans-nationally there are tax-saving options available.
    its like opening a business in canada; you'd have to follow Canadian tax laws i believe. Doesn't MLS take a cut in gate receipts and sponsorship etc?

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    Quote Originally Posted by Oldtimer View Post
    I realize your point. Not to get too technical, however, MLS is a US corporation, and US tax rules base depreciation on accounting profit
    Not necessarily true. There are standards that can overlap but it's not a one-for-one.

    http://taxfoundation.org/article/thr...tors-need-know

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    Quote Originally Posted by ag futbol View Post
    Not necessarily true. There are standards that can overlap but it's not a one-for-one.

    http://taxfoundation.org/article/thr...tors-need-know
    True... but let's not let this get into a tax discussion
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    Quote Originally Posted by prizby View Post
    its like opening a business in canada; you'd have to follow Canadian tax laws i believe. Doesn't MLS take a cut in gate receipts and sponsorship etc?
    It's not separately incorporated AFAIK.
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    Quote Originally Posted by Commie Red View Post

    Just wondering: how does the $40Million franchise fee factor in here?
    The $40 million question. It would be good to know. Are they writing it off over 20 years? Over 2 years? Treating it as a non-depreciable asset? Would make a huge difference.
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    Quote Originally Posted by Oldtimer View Post
    True... but let's not let this get into a tax discussion
    Agreed, I might revisit this thread as a sleep-aid, lol

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    Just briefly and also not to get too technical, this is my understanding of the basic MLS structure.

    MLS is indeed a US corporation but, for example, MLSE bought its franchise which allows it shares in MLS and a seat on the MLS board. MLS owns directly the team names and other intellectual property. And certainly MLS dictates terms as to how the teams are run as we all know.

    But MLSE is a Canadian corporation and files a Canadian corporate tax return. I would suspect they would file US and state returns also given the teams operation in the US.

    If you want more detail of the structure, Google "major league soccer legal structure" which will take you to details of legal suits fought in the past showing a good deal of disclosure that only a legal procedure would provide.

    With respect to the difference between GAAP and tax accounting, Canada Revenue Agency through the Income Tax Act requires the use of GAAP for tax purposes subject to some specific rules on some items. This is true for public and private corporations.

    I doubt we will ever get a complete knowledge of how all of this works.

    I would be happy to be corrected in any of the above.

    Des




    Quote Originally Posted by Oldtimer View Post
    I realize your point. Not to get too technical, however, MLS is a US corporation, and US tax rules base depreciation on accounting profit. Remember that legally Impact, TFC and the Whitecaps are foreign divisions of an American corporation. How Canadian taxation affects their Impact division is unclear, as Canadian taxes would be affected by the Canadian-US tax treaty, and we just don't have enough details. Certainly when you are dealing trans-nationally there are tax-saving options available.

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    Quote Originally Posted by Oldtimer View Post
    The $40 million question. It would be good to know. Are they writing it off over 20 years? Over 2 years? Treating it as a non-depreciable asset? Would make a huge difference.
    Start up franchise fees are amortized over 15 years under US tax regs.

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    What? No ensco input in this thread?

    Calling ensco.........
    "Failure simply isn't an option at this stage. TFC pushed its chips to the middle of the table when it splurged on Bradley and Defoe and reinforced its bet by making savvy acquisitions elsewhere. This collection of players is capable of delivering on the promises made during the close season. There are no more excuses available for TFC. Only success will continue the process of atoning for the past and establishing a higher standard for the future." FOX Sports

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    Quote Originally Posted by Oldtimer View Post
    The $40 million question. It would be good to know. Are they writing it off over 20 years? Over 2 years? Treating it as a non-depreciable asset? Would make a huge difference.
    Depends; did Saputo put $40 mil up front or is he making yearly payments?

 

 

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