The world of professional soccer, or football as it’s commonly known globally, has captivated audiences for decades. The thrill of watching top-notch players showcase their skills on the pitch, the excitement of witnessing nail-biting finishes, and the pride of cheering on your favorite team are just a few reasons why millions of fans around the world can’t get enough of the beautiful game. But did you know that you can take your passion to the next level by investing in Major League Soccer (MLS)?
In this comprehensive guide, we’ll delve into the world of MLS investing, exploring the opportunities, challenges, and everything in between. Whether you’re a seasoned investor or a soccer enthusiast looking to diversify your portfolio, this article will provide you with a thorough understanding of the MLS investment landscape.
Understanding the MLS Business Model
Before diving into the investment aspect, it’s essential to understand the MLS business model. Founded in 1993, MLS is the top professional soccer league in the United States and Canada, comprising 26 teams divided into two conferences: Eastern and Western. The league operates on a single-entity system, where the league owns and controls the rights to all teams, with investors holding shares in the league rather than individual teams.
This unique model allows for revenue sharing, which promotes competitive balance and encourages investment in the growth of the league as a whole. It also enables the league to negotiate lucrative television contracts, sponsorships, and licensing agreements, providing a stable revenue stream for teams and the league.
The Rise of MLS Popularity and Valuation
MLS has experienced tremendous growth in recent years, driven by increasing popularity, improved on-field performance, and savvy business decisions. The league’s popularity is evident in its:
- Steady rise in attendance, with an average of over 21,000 fans per game in 2020
- Growing social media presence, with millions of followers across various platforms
- Increased exposure through televised broadcasts, with ESPN, Fox Sports, and Univision holding rights to MLS matches
- Attractive sponsorship deals with prominent brands like Adidas, Audi, and Heineken
As a result, MLS team valuations have skyrocketed. According to Forbes, the average MLS team value has risen from $103 million in 2015 to $313 million in 2020, with top teams like Los Angeles FC, New York City FC, and Atlanta United valued at over $500 million.
Investment Opportunities in MLS
With the league’s growing popularity and valuation, investors are taking notice. Here are some ways to invest in MLS:
Team Ownership
The most direct way to invest in MLS is by purchasing a team or a stake in a team. This option is typically reserved for high-net-worth individuals or groups, as the cost of owning an MLS team can range from $100 million to over $500 million.
Current Investors and Owners
- Celebrities like David Beckham, Will Ferrell, and Magic Johnson
- Private investors like Arthur Blank, owner of Atlanta United
- Corporate entities like the Kraft Group, owners of the New England Revolution
Publicly Traded Teams
While there are no MLS teams listed on major stock exchanges, a few teams have gone public through alternative routes:
- Atlanta United: In 2019, Atlanta United became the first MLS team to issue a public bond offering, raising $170 million to fund stadium renovations and other projects.
- DC United: In 2019, DC United partnered with a special purpose acquisition company (SPAC) to raise capital, providing a path to public ownership.
Private Equity and Investment Firms
Private equity and investment firms are increasingly active in MLS, providing capital for team ownership, stadium development, and other projects:
- KKR (Kohlberg Kravis Roberts): Invested in the Los Angeles Galaxy in 2015, acquiring a minority stake in the team.
- Arctos Sports Partners: A private equity firm focused on sports investments, with stakes in teams like the Golden State Warriors (NBA) and the New Jersey Devils (NHL).
Real Estate and Stadium Development
MLS teams and investors are investing heavily in stadium development, which can provide additional revenue streams through events, sponsorships, and naming rights:
- Audi Field: Home of D.C. United, this stadium features a unique design and state-of-the-art amenities, hosting concerts, events, and other sports.
- Banc of California Stadium: The new home of the Los Angeles Galaxy, featuring a 22,000-seat capacity and hosting various events, including concerts and international soccer matches.
Stadium Development Opportunities
- MLS Next: A stadium development project aimed at building state-of-the-art facilities for several MLS teams, with private investors and the league providing funding.
- Urban Development: MLS teams are increasingly investing in urban development projects, incorporating mixed-use spaces, retail, and residential components around stadiums.
Challenges and Considerations for MLS Investors
While the growth and popularity of MLS are undeniable, investors should be aware of the challenges and considerations associated with investing in the league:
Competition from European Leagues
MLS faces stiff competition from European leagues like the English Premier League, La Liga, and the Bundesliga, which have a stronger global following and attract top talent:
- Talent Drain: Top American players often opt to play in European leagues, reducing the league’s competitiveness and appeal.
Financial Sustainability
MLS teams still face financial challenges, including:
- Revenue Streams: MLS teams rely heavily on sponsorship deals, ticket sales, and broadcasting rights, which can be volatile.
- Salary Caps: The league’s salary cap structure can limit teams’ ability to attract and retain top talent.
Regulatory and Governance Issues
Investors should be aware of the unique single-entity system and the league’s governance structure:
- League Ownership: The league owns and controls the rights to all teams, which can impact decision-making and profitability.
- Governance Structure: The league’s governance structure, featuring a board of governors and commissioners, can lead to conflicts of interest and slow decision-making.
Conclusion
Investing in MLS can be a lucrative opportunity for those who understand the league’s business model, growth potential, and challenges. With the league’s popularity and valuation on the rise, investors are taking notice, and the investment landscape is evolving rapidly. Whether through team ownership, public offerings, private equity, or real estate development, there are various ways to invest in MLS.
As the league continues to grow and mature, it’s essential for investors to stay informed, adapt to changing market conditions, and focus on long-term sustainability. With careful consideration and due diligence, investing in MLS can be a winning strategy for those who share a passion for the beautiful game.
By now, you should have a comprehensive understanding of the MLS investment landscape, including the league’s business model, growth, and challenges. Whether you’re a seasoned investor or a soccer enthusiast, this knowledge will help you make informed decisions about investing in MLS.
Remember, investing in MLS requires careful consideration of the league’s unique structure, growth potential, and challenges. Stay informed, stay up-to-date, and always prioritize thorough research and due diligence.
What is MLS and how does it work?
Major League Soccer (MLS) is a professional soccer league in the United States and Canada, comprising 28 teams. The league operates under a single-entity model, where the league owns and operates all teams, and team owners are actually investors in the league. This model allows for revenue sharing and collective bargaining agreements, which creates a more stable financial environment for teams and investors.
Investing in MLS is not like investing in a traditional stock, where you buy shares of a company. Instead, you’re buying into the league as a whole, and becoming a part-owner of the league and its teams. This investment gives you a stake in the league’s revenue and profit, as well as a say in its decision-making process.
What are the benefits of investing in MLS?
Investing in MLS can provide a unique combination of financial returns and personal benefits. From a financial perspective, the league has experienced rapid growth in recent years, driven by increasing popularity, TV deals, and sponsorship revenue. As an investor, you’ll have the potential to share in this growth and earn returns on your investment.
Additionally, investing in MLS can provide a sense of pride and ownership in a growing and exciting sports league. You’ll have the opportunity to attend exclusive events, meet players and coaches, and be part of the decision-making process that shapes the league’s future. Whether you’re a soccer fan or a savvy investor, investing in MLS can be a compelling opportunity.
Who can invest in MLS?
Investing in MLS is typically reserved for accredited investors, such as high-net-worth individuals, families, or institutional investors. Accredited investors must meet certain financial criteria, such as having a net worth of at least $1 million or annual income of $200,000 or more.
Additionally, investors must also meet the league’s own eligibility criteria, which may include a review of their financial situation, business experience, and personal character. The league may also require investors to sign non-disclosure agreements and other legal documents before sharing confidential information about the investment opportunity.
How much does it cost to invest in MLS?
The cost of investing in MLS varies depending on the specific investment opportunity and the team or stake being acquired. Generally, the minimum investment required is around $5 million to $10 million, although this can be higher or lower depending on the circumstances.
It’s also worth noting that investing in MLS often requires a long-term commitment, with investors typically expected to hold their investment for at least 5-7 years. This allows the league and its teams to benefit from the investment and provides investors with the potential for long-term returns.
What are the risks of investing in MLS?
Like any investment, investing in MLS carries risks. One of the main risks is that the league’s revenue and profitability may not grow as expected, which could impact the returns on your investment. Additionally, the sports industry is inherently unpredictable, with factors like team performance, player injuries, and changes in viewer habits all potentially affecting the league’s financial performance.
There are also risks related to the regulatory environment, as the sports industry is subject to various laws and regulations. Investors must carefully consider these risks and ensure they have a thorough understanding of the investment opportunity before committing to invest in MLS.
Can I invest in a specific MLS team?
In most cases, investing in a specific MLS team is not possible. The league operates under a single-entity model, where the league owns and operates all teams. This means that investors are buying into the league as a whole, rather than individual teams.
However, it may be possible to invest in a team through a partnership or joint venture with the team’s ownership group. This would typically require negotiating a separate agreement with the team owners and may involve a more complex investment structure.
How can I get started with investing in MLS?
If you’re interested in investing in MLS, the first step is to ensure you meet the eligibility criteria. This typically includes demonstrating your financial credentials, such as net worth and annual income, and providing documentation to support your application.
Once you’ve confirmed your eligibility, you can reach out to the league or its authorized representatives to express your interest in investing. They will guide you through the process, provide more information about the investment opportunity, and answer any questions you may have.