Illustration by Angelica Alzona/Deadspin/GMG

If like any red-blooded American capitalist you measure success by growth, these are boom times for Major League Soccer. North America’s top soccer league has gone from just 10 teams in 2004 to a whopping 22, with two more clubs in Los Angeles and Miami set to come online in the couple of seasons. And it’s readying itself to announce two more expansion franchises this fall, then another two next year, with ownership groups in Charlotte, Cincinnati, Detroit, Indianapolis, Nashville, Phoenix, Raleigh-Durham, Sacramento, San Antonio, San Diego, St. Louis, and Tampa-St. Petersburg lining up to throw $150 million at the chance to own a piece of the soccer pie.

It’s a bit of a strange course for a sports league that isn’t exactly lighting it up in terms of attendance, viewership, or revenue. MLS may be allegedly growing in popularity—you can’t swing a dead cat without hitting a claim of its popularity with urban millennials—but it’s still miles behind the England’s Premier League and Spain’s La Liga and Germany’s Bundesliga and probably another half-dozen leagues around the world in terms of both talent and viewership. And as far as North American sports leagues go, it’s a distant fifth behind the NFL, MLB, NBA, and NHL. When Forbes last looked at MLS finances, it had to perform mathematical contortions to explain why franchise values are rising even as annual losses continue to mount.

That business model and this financial trajectory suggests that MLS’s sea of red ink is either a loss leader or a Ponzi scheme, and it’s not always easy to tell the difference between the two until it’s too late. Several sports economists, though, aren’t optimistic.

“The best indicator of expansion franchise worth is success at the bottom of the league” in revenues, says Stanford economist Roger Noll. For MLS, “that still looks more like AAA baseball except for a few million per year more in TV revenue.”

The University of Michigan’s Stefan Szymanski, co-author of Soccernomics, is even more blunt about MLS’s shortcomings. “Any modern professional sports league, to be profitable, needs to generate a large revenue from broadcasting, and that means you have to have large TV audiences,” he says.

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MLS TV ratings, Szymanski notes, are typically smaller than those in the U.S. for Mexican Liga MX games; MLS games in primetime routinely get lower U.S. ratings than English Premier League games aired on Saturday mornings. “One estimate is that something like 80 percent of the revenue generated by the league is generated from selling tickets,” he says, “and MLS is one of the cheapest tickets in major-league sports.” That’s even when fans pay full price, which seems to be more the exception than the rule.

It all makes the long line of candidates eager to pay MLS’s ever-growing expansion fees—in 2005, you could land a franchise for a mere $10 million—a bit puzzling, says Szymanski: “Why would you buy something for $150 million which is basically giving you a share of losing $100 million a year?”

More importantly, if you’re an MLS fan or a city considering dropping big bucks on a soccer stadium to lure one of the umpteen new teams: What is the end game here? Can MLS continue to expand indefinitely, or is it a bubble destined to burst?

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One likely reason for the league’s furious expansion is the same dynamic that led to Steve Ballmer spending $2 billion to own the Los Angeles goddamn Clippers: There are suddenly a hell of a lot of people with ungodly amounts of money in the U.S., and only so many sports franchises: America now has 540 billionaires and only 123 Big Four teams. If you’re a rich dude with a jones to sit in an owner’s box and hire and fire GMs, MLS may be your best option.

And among the buyers, you’ll find that common sentiment that typifies both successful speculative investments and pyramid schemes alike: hope, shading to wish-fulfillment.

“It’s like buying into in a dot-com in the late ’90s,” says Szymanski. “Although most of the dot-coms went belly-up, if you bought Amazon shares when they were losing a ton of money, you’ve done extraordinarily well.” If soccer continues to grow in popularity, the reasoning goes, that $150 million could turn into a windfall when you suddenly find yourself owner of a franchise in a world-class league.

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And here’s where Szymanski—and, really, anyone who’s not an irredeemable MLS cheerleader—throws up their hands in disbelief. The only way to become a world-class league is to get more soccer fans watching, and the way to do that is to put a product on the pitch that will make Americans tune into their local club. But to do so, MLS owners would need to spend even more money, and incur even greater losses.

It’s the sort of thing that U.S. sports fans are used to having resolved with ungodly amounts of American cash. But MLS is in a uniquely weird position as American leagues go, with its teams competing for players against far better and richer leagues in an international market.

(Technically, it’s MLS as a whole competing for those players, since it’s a “single entity” construct where franchise owners hold shares in the league, which pays player salaries out of its New York office. This helps keep expenses down—no teams engaging in bidding wars for free agents—but also prevents a Guggenheim Management or a Qatar from showing up to spend big on international stars just because. There’s no rising tide to lift all boats.)

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The only way to lure better talent, then, is to find players willing to step down in competition and in fame. So far that’s mostly manifested as spending heavily by MLS standards, but not by international ones, for a handful of old guys with big names who might lure curiosity-seekers through the turnstiles.

As Szymanski and Simon Kuper note in Soccernomics, signing big-money players as loss leaders and punting profits is not uncommon in European soccer. But there, owners in those leagues have incentives that MLS moguls don’t. Many are controlled by fan shareholders who value wins over profits; the Champions and Europa Leagues offers revenue windfalls for teams that finish near the tops of their domestic tables; the fear of having your investment turn to dust—thanks to promotion-and-relegation that exists just about everywhere but here—are all enough to keep spending, even when it can eat up the profits.

MLS has none of this—it’s been especially resistant to promotion and relegation, despite clamor for it from advocates of traditional soccer, and even a recent offer of big media money if it adopted the format. (It doesn’t help that if MLS stuck to a traditional 20-team first division like European leagues, many of the new owners plunking down $150 million for franchises would find themselves suddenly stuck with minor-league teams.) And so we’re left with a league of owners trying to pull off a typical American sports racket—try to turn a profit by chintzing on salaries while still raking in TV money—in an international soccer market that is playing a very different game.

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“MLS would have to go out and throw an absolute fortune at players,” says Szymanski. He was guessing when he said that the average Premier League team spends more on player salaries than all 22 MLS clubs combined, but he’s right: £91.68 million per Premier League team last year, or about $121 million at the current exchange rate, vs. $99 million for all of MLS.) “MLS spending is somewhere between Belgium and Romania,” Szymanski notes, and neither of those leagues is anywhere near being a threat to break into the upper echelons of club soccer.

The potentially worrying part is, this is all no secret. “[MLS commissioner] Don Garber’s not an idiot,” Szymanski says, “and most of these owners are very successful businessmen in their own right.”

So what’s their end game, then?

“I do struggle as to how to explain this.”

If Garber’s long-term strategy for the league doesn’t exactly make sense, the endless cycle of expansion does: If you can’t make money either of the old-fashioned or sustainable ways, you might as well recruit a new batch of suckers to boost your bottom line in the short run. It’s a marginally more respectable version of the same business model that the owners of the American Basketball Association—not the original one, but the 1999 minor league that inherited the red-white-and-blue ball and little else—happened upon when it decided to start issuing franchises to anyone with a $10,000 check, with predictably chaotic results. Here’s a long, long list of franchises that have gone under.

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It also helps to explain MLS’s otherwise puzzling insistence on making a brand-new, soccer-only stadium a primary condition for anointing new franchises. This would be madness in Europe, where teams, especially newly promoted ones, often end up playing in grounds that look like they were pieced together out of spare parts. If you’re running a normal sports league, Cincinnati’s 20,000-a-game attendance for its USL team would be a tasty lure; if you’re running a pyramid scam, maybe it’s better to take El Paso if they’re willing to throw public money at a stadium deal and Cincinnati won’t.

(This demand is useful as leverage, but flexible if you’re bringing enough money into the league. After all, MLS backed down on its “soccer-only” requirement when the owners of the Atlanta Falcons and New York Yankees decided to apply for teams to play in their new football and baseball stadiums, respectively.)

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Crunch time for MLS, in Szymanski’s view, will come with the league’s next broadcast contract, when the league’s current $90 million-a-year deal expires in 2024. If what remains of the cable TV industry then doesn’t come up with a relatively staggering figure—something in the $300-400 million range would be required, he estimates, which doesn’t seem likely—“I think owners will start to think about an alternative.”

At that point, he says, promotion-and-relegation advocates may get their wish, albeit not the way they might prefer. Contracting a good chunk of the league, leaving only around 20 teams and entering into a pro/rel agreement with the NASL or USL, he says, could be “an honorable way for those who want to get out to get out”—similar to what Japan’s J-League did in the 1990s.

Whether current MLS honchos actually have this in mind now, or are still guzzling their own Kool-Aid, is tough to say. But for most big-market teams and early adopters, even if the expand-o-ganza goes south, it’s a fair bet they’ll be left with a chair when the music stops—franchises like New York and Los Angeles should be safe and potentially profitable, even if the likes of Raleigh or Nashville might be screwed.

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That might end up being good for soccer in the U.S. overall, and would at the very least provide American fans with a sports league where franchises can no longer levy relocation threats to get their way. (In a pro/rel system, if a team leaves town, you can just find a new owner to start a lower-level team to put in its place and then have them work their way back up via winning seasons.) But it would be a disaster for cities that are counting on at investing money in soccer stadiums in hopes of an economic windfall from getting into the “big leagues.” If that’s the game you’re playing, it might be better just for your city just to buy an ABA franchise instead. It’s far more certain to crash and burn, but at least you’d only be out 10 grand.


Neil deMause has covered sports economics for more publications than even he can shake a stick at. He’s co-author of the book Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Profit, and runs the website of the same name.