With the botched and stalled A-League expansion process currently going nowhere and with a lot of expansion bids seemingly in limbo watching potential capital investment into the game fly elsewhere; it is worth looking at the MLS Expansion Process for some blue Sky potential.
Undoubtedly, the A-League could learn from the American process as could the local bids (and potential bids) learn from the expansion entries in the MLS.
For the A-League bids that don't currently have identified capital partners (eg. those bids that aren't the Sunshine Coast, Southern NSW, Canberra, Tasmania and Brisbane City); it's more than clear that certain disclosures around capital would have to be met in order to be considered real by any serious football board.
However, without the FFA willing to get their house in order, this is difficult. We know as advisory consultants in this space that potential investors will not invest without a clear pathway and some confidence set by the governing officials.
We have seen from the MLS the benefits of a clear expansion platform to attract new investment into the league. There have seen a number of expansions with the MLS over the years.
Yet, in this round the MLS Commissioner has confirmed that teams 25 and 26 will be announced during the second or third quarter of 2017, at an expansion fee of $150 million each, and will begin MLS play by 2020. Teams 27 and 28 will be announced at a later date, at a price delivered in conjunction with the timeline.
The league acknowledged ownership groups from 10 markets that have publicly expressed interest in securing an MLS expansion team: Charlotte, Cincinnati, Detroit, Nashville, Raleigh/Durham, Sacramento, St. Louis, San Antonio, San Diego and Tampa/St. Petersburg.
Three key aspects are considered top priorities when reviewing candidates:
- A committed local ownership group that has a passion for the sport, a deep belief in Major League Soccer and the resources to invest in the infrastructure to build the sport in their respective market.
- A market that has a history of strong fan support for soccer matches and other sporting events, is located in a desirable geographic location and is attractive to corporate sponsors and television partners.
- A comprehensive stadium plan that ensures the club will have a proper home for their fans and players while also serving as a destination for the sport in the community
The Stadium proposition has already been passed with the bid from the Tampa Bay Rowdies via a public referendum. On the other hand, St. Louis will remain a two-sport town after voters defeated a measure that would have helped pay for a stadium as part of an effort to lure a Major League Soccer franchise. City voters turned down Proposition 2 on Tuesday by a 53 percent to 47 percent vote. It would have provided $60 million from a business use tax to help fund a soccer stadium.
The MLS effort in Charlotte, which was among the favourite thanks to the city’s size and importance in a growing area of the country, is on life support after the city declined to approve the funneling of tax revenue earmarked for tourism toward a portion of a stadium.
In Indianapolis, an effort to get the state legislature to pass a bill allowing taxes generated at and adjacent to a new soccer stadium to be spent on its construction has gone nowhere.
The first teams to enter the MLS in the 21st Century were Real Salt Lake and Chivas USA for which they paid $7.5 Million to enter. These bids will be paying $150 Million entry fee.
In the A-League, there are no local ownership requirements. This means that any serious capital investor and those seeking to bring a bid together really need to be a homogenous working unit. This is required in terms of PR, engaging with the three tiers of government and with the FFA authorities.
The importance of a quality investor group has already been shown in the MLS expansion bid process. On the one hand, we see the Nashville bid bringing in the owners of the Minnesota Vikings into their bid consortium. Mark Wilf, his brother Zygi, and cousin Leonard, in their 13th season as majority owners and of the Minnesota Vikings, has signed on as a minority owner of Nashville Soccer Holdings, the business enterprise led by billionaire Nashville businessman John Ingram.
This is not to say any expansion process is smooth sailing.
The Sacramento bid, which had been considered a slam dunk for entry, have fallen into disarray with the addition of Meg Whitman (Former Hewlett-Packard CEO and Mitt Romney Presidential Backer) into the ownership group.
One would have thought a press release would have been forthcoming from the club, but one never appeared, even on the club's website. A press release instead emerged from an entity calling itself Sac Soccer & Entertainment Holdings. Now there are disputes about whether or not the bid will be the Sacramento Republic or not.
We would also note that the right ownership group should not be a substitute for a corporate partner structure that works. Any bid that can show good governmental and corporate buy-in to the bid, will have a leg up in this process. The A-League simply can not afford another team that has a revenue base that is too narrow without local corporate buy-in to the brand.
If we look at the FC Cinncinati bid for the MLS expansion, a year before they played their first game in the USL (the American 2nd tier), the club had 17 corporate sponsors signed up. Toyota is the USL jersey sponsor.
The fact is, the expansion process in the A-League will need some components which the FFA will have to include when they finally get the house in order. These are:
- Catchment Area
- Capital Requirement
- Local Talent Depth
- Support History
Therefore, there are a lot that bids, or potential bids, can do to prepare to enter the FFA process in a serious way.
Firstly, there is the private sector capital backer. The backers will need to be somewhat flexible with the components they will need to invest in, the total sum of the capital investment and be prepared to invest long term in the bid as there is no 'end date' for this process as such. Sports investment exit strategies are not comparable to almost any other investment.
This is shown by the divisions with the Sacramento MLS bid intrigue around their ownership structure and whether or not the Republic name will be used if granted one of the spots in the MLS when the MLS goes to 28 franchises. For more information about this, click here
- Stadium: There are many bid proposals that have been declared/are being contemplated that will need an agreement on a stadium. This could require receiving funding commitments from a local council, state or territory government or getting an agreement with the owning level of government to receive private sector investment.
- Catchment Area: If you don't have a catchment area of around 500,000 the bid won't be commercially viable. Now, there are some bids that are pushing the limits to make their bid catchment areas appear bigger. The catchment area also needs to be around the 500,000 mark to ensure that the bid can prove localised support for the game.
- Local Talent Depth: This is a subjective criterium. However, the bid needs to have a real and in deep pitch in this space. This also needs to be about ensuring that the bid is backed by the State FA and the junior clubs in the region.
- Support History: This all comes back to community engagement. If the bid is based off an existing team, the figures from that team come into figuring. However, as a bid, you need to engage in a solid community engagement campaign to engage your catchment in the bid and bring a level of 'hype' behind your bid.
Don't underestimate the value of bringing a derby to the table as well. If we look at what makes the A-League sizzle, look at the Sydney derbies, Melbourne derbies and Central Coast-Newcastle rivalries. Even the rivalries that Brisbane Roar have had with the now defunct Gold Coast and Northern Fury sides were commercial gold for the league. This immediately brings into focus the prospects from Southern Syndey, Woollongong, South Melbourne, Brisbane City, Sunshine Coast and Ipswich.
This is actually one of the big drawcards for bringing St. Louis into the MLS. St. Louis also helps MLS fill out the midwest U.S.—the league cares about geographic coverage—and instantly creates a couple of promising potential rivalries. An I-70 derby with Sporting Kansas City could become one of the league’s premier showdowns, while the enmity Blues and Cardinals fans traditionally have for their rivals in Chicago could form the basis of another run rivalry.
The geographic coverage argument from St. Louis also provides the basis for arguments for bids from places such as Tasmania and Canberra.
However, for any prospective bid, the best thing we could do is show a living exemplar of a side to model a bid on: Atlanta United FC.
Before they started, they had 24,000 season tickets sold; outdoing the top attendance rates of the MLS.
Atlanta United's inaugural season may still be far from over, but already the club is on the road to becoming MLS's most successful expansion team.
The team is performing well in their first season, reaching for the playoff stages. The average attendance for the team is around 44.000 spectators, which are more than good numbers. If we look at how the first squad was built, we won’t find stellar European signings, like most of the franchises, do as a marketing tool in their first years. The squad is built around young players with some experienced ones from the MLS and some interesting young foreigners.
They hired Gerardo Martino as their first manager (originally from Barcelona) and are also heavily invested in the youth development in their catchment area.
All of this is part of a long-term project, and it’s exactly what the A-League should be seeking for the new teams. For a franchise to be successful (and in the end, the league depends on the success of the franchises), it needs to be self-sustainable for the most part.
The main difference between traditional clubs and franchises is that sentiment of 'belongingness' that a club has: people will always belong to their club, no matter who’s the newest signing or in which position or division they’re in.
The A-League are still a long way off creating any environment of belongingness for new entrants. The wait continues.