Every so often we check in on the status of MLS. MLS is a relatively young league and all soccer fans have a stake in it succeeding. And from repetition we know the basics: Attendance is strong for many teams, higher-profile players are coming, and although TV ratings and TV deals remain uninspiring, some investors are looking at expansion opportunities with a lustful eye. But these are indirect measures of what we really want to know: the financial strength of the league. A financially strong league survives. A financially strong league attracts the best players and provides the highest quality of play. A financially strong league has a good chance of putting an expansion team in Minnesota. So where does the league stand in terms of dollars and cents?
Thankfully, our friends at Forbes recently measured the value of the MLS teams. Much like the lists of wealthiest moguls, this update in the murky areas of sports finances – last evaluated five years ago – is widely anticipated. And the financial reporters have good news to share.
In the last review of MLS team values in 2008, the average team value was $37 Million. Now worth $103 Million, the average MLS team value reports a 175% increase over the last five years. Thus, the average annual increase is 29.1%. Greater than the Dow Jones Industrial Index which gained 84% over the same period, or an average of 16.4% growth year over year. The average MLS team outperformed the NASDAQ composite index as well, which had a mere 164% increase over that period. Perhaps investors should shy away from the sexy tech stocks and instead invest in a sexy MLS Team (in Minnesota perhaps).
Further, Forbes’s Chris Smith reports that over half of MLS teams are operating in the black. Did anyone in soccer think that was possible 5 years ago (when every team was in the red)? And this factoid raises other questions. How does making an operating profit square with the image of money-losing vanity projects common among international soccer teams? Does making money mean MLS loses some street cred? Do we care when we buy players from bankrupt Euro teams holding their annual fire sale?
Of course, the values of individual teams are important. But the league is a single entity (or company) with 19 business units. It is the league itself that best determines the financial strength of MLS soccer in the America. And the cumulative value of the league (i.e., the estimated value of all teams added together) now stands at $1.9 Billion. In 2008, the cumulative league value was $518 Million. Since 2008, Major League Soccer as an entity has increased its value by 277%, or a 39.4% annual return. Not too shabby. And it makes sense to turn some of that equity towards future revenue streams (i.e., investing in expansion efforts).
All in all, MLS is an attractive investment. It is a sports entity on the rise, demonstrated by Forbes. And consider that MLS does not even have a TV deal worthy of a top 5 US sports league. What will happen when it gets there (if not the 2014 TV deal, then the one after)? The time to invest in soccer is now, as the league is poised for continued growth. With any luck, Minnesota can serve as a solid location for MLS investment.