Major League Soccer Has Finally Arrived

I contend that Major League Soccer( MLS) has finally arrived in US. Though signing of Beckham is just one indication, the broader signals are much more positive. The reason people like Malcom Glazer( owner of Manchester United and Tampa Bay Buccaneers) and Tom Hicks & George Gillette Jr.( new owners of Liverpool and owners of two NHL teams) are buying up teams in Europe is not only because they are huge soccer fans. Colorado Rapids also concluded a marketing arrangement with Arsenal which would help Arsenal access US fans and market their global brand. Rapids will get access to Arsenal's technical know how and superior training regimens and facilities.

There are clear economics at play here. Liverpool can move out of Anfield, make a new stadium, sell the naming rights and make everything much more professionally managed. Hicks and Gillette can also charge a premium when the existing deals come up for renewal because of the US angle. Liverpool has a decent visibility in the US and specially amongst the soccer loving 40 million Hispanics. Assuming that soccer also gains steam amongst general American public, the sponsors of the team would get visibility amongst US people as well, and that should mean higher tickets for every deal which happens from hereon.

Following is a brief analysis of what different parties can expect out of the coming change:

1) Fans: If you have started worrying about having to watch poker after an action filled hockey, football or basketball game, get ready for some good dose of soccer. MLS season would start in April and in the mean time, expect action from the European Leagues.Chances are that you will get to see a lot of good soccer throughout the year though timings might be a little awkward.

2) Media/Distribution Partners: At least for the coming 2-3 years as MLS gains traction, media houses can expect good ratings with fewer dollars. Beckham is going to be in each of the city where MLS team is and that should be mean reasonable sound bites. Also expect tours from Manchester United, Aston Villa, Liverpool for sure and tons of other teams and that should augur well for the overall ratings for soccer.

3) Advertisers: Big money players like Nike, Adidas, Coke, Pepsi, Anheuser Busch all would want to have a presence both in clubs in Europe which want to build a bigger profile in US as well as MLS teams which would gain traction within US and which might, teams like Galaxy, decide to go on tours of APAC regions to market Beckham and get fans in those regions.

4) Sports Governing bodies: Emergence of MLS and soccer in general should be of some concern to the existing leagues considering that both media houses as well as advertisers have long complained about the rising costs of association with football, basketball and baseball. Most production houses are losing money on their deals with NFL but have been able to cough up the big bills because of the ability to capture the tail of fading traffic in follow up programs. NBC has a 3.6 billion dollar 6 year deal with NFL for Sunday Night Football. This deal is definitely losing money but it has perked up the Sunday Night for NBC which has shows like Heroes. But these bigger deals might get an indirect challenge moving forward. Advertisers who have to pay as much as $400,000 for a 30 second spot on SNF might decide to divert some of that dollar to cheaper options like MLS or even games of touring European teams. This might create a push back from networks and broadcasters to get better deals from negotiating bodies and teams for television rights.

5) Local Communities: Soccer has definitely gained popularity amongst the communities in which MLS teams have come up. In general, a lot of kids are also picking up on the game. It is also clear of the steroid controversies and other things which keep happening with players in NFl, MLB & NBA so as such parents are encouraging more kids to play soccer.

6) Existing Team Owners: Some of the existing owners like Glazer, Hicks and Gillette have started diversifying their assets by jumping on the soccer bandwagon. A lot of existing owners of football, basketball and baseball teams also own soccer teams but the flight of private capital to foreign shores might also mean that that capital is not finding good avenues within US. For a long time, sports within US has been managed professionally but also in an oligopolistic fashion. For new players who want to take part in the action, the existing owners have pretty much acted as a cartel. A more open system would have meant more teams in the US market but there are huge upfront costs which any new investor would have to incur to do that. The alternate adopted has been very simple. Go to Europe, buy up a team there, build up synergies over existing revenue streams and then come back and gobble up the other part of the action. Existing owners have killed the liquidity in their own business and that is never a good idea.

7) Players: Players obviously would benefit with more money in this sport. They will also get better exposure to training regimens, facilities in general. Existing players have been due for some good pay increases and it might be finally on its way.