Landon Hemsley (SMBA ’15) looks at David Beckham’s attempt to own an expansion soccer franchise in MLS in this 5 part series. This section is Part 5. Be sure to read through all five parts: Part 1, Part 2, Part 3, Part 4.
David Beckham’s expansion bid in Miami has faced numerous problems regarding the construction of a stadium. Namely, he just can’t seem to find a downtown site to get one built. Certainly, this is enough to derail a stadium construction campaign. But there’s more. What if Beckham were to build his stadium and nobody came to the games? What if a soccer team in Miami was a total flop?
Clearly, no investor enters a market thinking that his team won’t draw some support, but making sure the market will fit the team should be a real concern. Because media rights revenues are so important to professional sports owners, Beckham should be seeking a market with a lot of passionate fans and a lot of television sets. But on the other hand, where there’s many television sets, there are likely to be franchises in other professional sports leagues that can cut into a team’s revenues.
Beckham should be in search of a “sweet spot” of television homes and competing sports options. Larger markets are home to more sports competitors. Smaller markets are not home to as much sports and entertainment competition, and in some cases may hold pent-up demand for a sports franchise, but the ceiling on fan support is lower in a small market than a larger one. With this in mind, each market’s quality can be evaluated by comparing its size in television households to the number of major professional franchises and power-five collegiate athletics programs against which the new franchise will have to compete.
If Beckham is seeking to maximize the amount of televisions to which broadcasts of his team’s matches can be sent, then he should go to Minneapolis. The Minnesota market is the largest in terms of televisions, even edging out the Miami market in size. If Beckham is seeking to maximize a television audience while minimizing competition, Sacramento is clearly the best option. It is a medium-to-large sized television market with few professional sporting alternatives.
What about the fans?
Those of you who have been following this series entry by entry already know that Thirty-four percent of MLS’s fans are Hispanic and 24 percent are aged 18-24. MLS fans also are young, digital, mobile and tech-savvy. (If you haven’t been following along, no big deal. Check out part two.)
Beckham should be targeting a young, Hispanic audience. Therefore, the question is which of these markets best provides a prospective owner a young, Hispanic audience. San Antonio and Miami clearly have an advantage over competing markets in Hispanic population. The percentage of residents that self-identified as Hispanic or Latino in San Antonio and Miami for the 2010 Census was 59.1 percent and 64.3 percent, respectively (United States Census Bureau).
|Metropolitan Area||Population||% Hispanic||Est. Hispanic Population||% < 18||Est. Population < 18|
However, not all people of Hispanic origin are equally passionate about local soccer. More Miamians may have watched the 2010 FIFA World Cup than any other market, but there is still a history of Major League Soccer failure in Miami. The original Miami Fusion franchise folded because of poor attendance. Also, 13 percent of San Antonio’s population was not born in the United States compared to 51.2 percent for Miami’s population. Miami is a much larger, much more international city than San Antonio. If there should be a bias one way or another, it should probably be away from Miami.
But being Latino is not requisite for being a fan. A market in which many Latinos live may simply make the market more likely to support the team, but very non-Latino markets have picked up a very high level of enthusiasm for the team and for the sport. The question, then, is if MLS came to any of these places, would the public come and see the games?
Press reports frequently cite television ratings for World Cup and international club soccer broadcasts in Miami as evidence that a local club would draw wide support. While locals may indeed be very passionate about the World Cup and international soccer events, it is very possible they will be far less passionate about a local MLS club, especially if that local MLS club is perceived as an inferior product.
In the end, probably the best measure of support for soccer is attendance at non-MLS regular season soccer events in the markets being considered.
|Sacramento Republic FC||11,293||2014||Patterson|
|San Antonio Scorpions||6952||2013||Doherty Soccer|
|Minnesota United FC||4467||2013||Doherty Soccer|
|Ft. Lauderdale Strikers||4269||2013||Doherty Soccer|
Sacramento is by far the superior market in this area, outpacing San Antonio, Minneapolis, Austin, and Miami by considerable margins. It’s impossible to know how well a team would draw in Las Vegas simply because there are no professional soccer teams there. Sacramento’s lowest attendance figure during the 2014 season was 8,000, still outpacing the other markets by 2,000 to 3,000 fans.
It should be clear that in terms of actual fan support, Sacramento tops the list. Sacramento has the regular, strong attendance figures and a comparatively small amount of competition that MLS brass like Beckham is seeking. In terms of potential fan support, San Antonio has an edge simply because of its demographic makeup and established infrastructure. In terms of pure market size, Minneapolis takes the cake, but soccer attendance figures at minor league events in Minnesota haven’t been great, and there are a lot more competing professional sports teams in Minneapolis than in other markets.
Sacramento is the best market for Beckham to take his bid for MLS expansion. If he is going to leaving Miami, he should take his talents to the capital city of California. It’s got the stadium plan. It’s got the televisions. It’s got the local fan support. It’s got the ownership group. It’s got an obvious lack of competing sports teams. It’s clearly the best option from a business perspective.
But here’s the kicker: Kevin Nagle may not want Beckham on board. The ownership group of Sacramento Republic FC probably will not welcome an offer to buy a piece of the team, and that’s exactly what Beckham would have to do if he were to be the agent of change in California. The option to purchase an expansion franchise for $25 million is a non-transferable good, and so if Sacramento wanted to take advantage of the clause in Beckham’s contract, it would have to give Beckham a seat on the boat. Could that happen? Yes. And if it does, it’s Beckham’s best chance at a profitable and competitive MLS team.
But if that doesn’t work out, Minneapolis is still there. The biggest city in Minnesota offers the largest amount of available televisions in addition to the second-largest overall population, which in turns means big potential revenue from local media rights deals. It offers a billionaire co-investor with a decent path towards approval for a stadium. While attendance figures at local minor league soccer events are not great, the most important criteria for MLS expansion approval, ownership and a stadium, are best met in Minneapolis. And because there’s not a pre-existing team there now, partnering with Bill McGuire to make it happen would likely be far easier than what Beckham would face in Sacramento.
San Antonio provides a very viable third option. The crowning achievement to San Antonio’s MLS expansion bid is that a stadium has already been built, season tickets are already being sold, and a young, passionate fan base is literally clamoring for a team. The biggest deficiency in the San Antonio market is the lack of wealthy ownership with small market size a secondary concern.
As for the other markets, Austin is also compelling by virtue of its Hispanic population, lack of market competitors, obvious public support, and clear path to a stadium plan. Its disadvantages lie in many unknowns about an ownership group. If these can be resolved, Austin provides another good opportunity for MLS, even if it is in a small market.
The opportunity present in Las Vegas is not particularly compelling by really any metric. The ownership group is largely corporate, the local government and populace are revolting against a stadium plan that will cause a tax increase, there are clearly more appealing television markets, and there’s no way of predicting how solid fan support would be, particularly because, again, the local population doesn’t seem too eager to support a stadium.
The Verdict? Go West.
A final note
If you stuck with this series and read all the way to the end, I, the author, thank you.