The business of football in North America is not cheap.
Last week, there was an announcement of San Diego as the 30th team of Major League Soccer (MLS). The club owners paid a reported $500 million expansion fee which is much higher than previous expansion fees paid by other clubs. Analysts are arguing that owning an MLS club in North America is getting more expensive than owning an English Premier League club in England.
Let's first talk about this new MLS club.
This new club is co-owned by an Egyptian billionaire Mohammad Mansour and the Sycuan band of the Kumeyaay Nation. This club will either be called San Diego football club or football club of San Diego and will play at Snapdragon stadium.
The club is expected to start playing in 2025 and this will be the seventh straight year of MLS expansion. The team's name and crest will be revealed in the future. This will be the 4th MLS team in California along with the San Jose Earthquakes, LA Galaxy and LA football club.
Franchise Fees paid over the years
The Major League Soccer has now 30 teams and 15 teams each for the eastern and western conferences.
The previous record fee paid for entering MLS was $325 million by Charlotte FC in 2019. The cost to enter the league was $5 million for its first season in 1996.
The price to enter the league had seen a meteoritic rise as Orlando city paid 70 million in 2015 while Los Angeles FC paid 110 million in 2018.
The MLS league economy is growing every year even though the quality of football played in the league cannot be compared to that of Europe. Although not a number one sport football is enjoying a fair share of viewership and a strong fan base across cities in the United States and Canada.
Why is it so?
Why is it getting expensive in North America even though football is not the number one sport in the continent?
The increasing cost of owning an MLS club in North America, compared to owning an English Premier League club in England, can be attributed to several factors:
Market Potential:
North America is a large and lucrative market, with a growing fan base and increasing interest in soccer. The popularity of the sport is on the rise, and the potential for future growth is significant. This attracts investors who see the opportunity to capitalize on the market potential.
Limited Number of Teams:
The MLS operates as a closed system, meaning there is a fixed number of clubs in the league. Unlike European leagues with promotion and relegation, MLS franchises have a guaranteed place in the league. This limited supply of teams creates a high demand for ownership opportunities, driving up the expansion fees and valuations.
Growth and Investment:
The MLS has been experiencing consistent growth in recent years, both in terms of viewership and revenue. This growth has attracted attention from investors, including billionaires and celebrity owners, who are willing to pay a premium to be part of the league. As the league expands and gains more visibility, the cost of ownership increases.
Global Broadcasting Deals:
Securing lucrative broadcasting deals, such as the $2.5 billion deal with Apple TV, demonstrates the increasing interest in MLS from media companies. These deals not only bring in significant revenue but also raise the profile and value of the league and its clubs.
Hosting Major Events: The upcoming 2026 FIFA World Cup, which will be co-hosted by the United States, Canada, and Mexico, further boosts the value and exposure of soccer in North America. The anticipation and preparation for such a major event attract more investment and interest in the sport, leading to higher valuations for MLS clubs.
How valuable are MLS clubs?
According to Forbes, Los Angeles football club is the first MLS club to receive a valuation of $1 billion. The LA Galaxy is valued at $925 million dollars, Atlanta and 850 million, New York FC $800 million and DC united are valued $700 million. Even though the numbers are high they are not comparable to European clubs.
Real Madrid is the most expensive football club in the world with $5.1 billion valuation.
While the valuations of MLS clubs are not yet comparable to those of top European clubs like Real Madrid or Manchester United, the trend shows a positive trajectory. As the league continues to grow, attract investment, and expand its fan base, the cost of owning an MLS franchise will likely continue to rise.