Thanks for the great feedback on last week’s edition! Please keep it coming by responding to this email or on social media (LinkedIn, Twitter).

Forwarded this newsletter by someone in your network and want to receive it yourself? Subscribe here 

Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: In addition to Messi Mania, the MLS’ growth is being fueled by its newest clubs

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”: ESPN showing positive growth amid a challenging year

• 💪 Weekly Reminders that Sports are Awesome: Three excellent, wildly different ads

Hey team,

The MLS wrapped up its 2023 regular season this past weekend with an action-packed “Decision Day,” the final matchday of the season that saw 21 of the 29 clubs competing for potential playoff spots.

As it now begins the playoffs, the MLS is closing the books on what was a banner year for the league.

Season ticket sales were up 9%, and the first year of the Apple media rights deal was light on public metrics but all parties stated they were pleased with the initial results.

Plus, 2023 marked the 8th consecutive year — not including COVID-impacted years in 2020 and 2021 — that the MLS broke its single-season attendance record, coming in at just below 11 million total this year. This is up from 10 million in 2022 and 8.6 million in 2019.

I can already hear the gears turning in your brains as you read this: “Obviously they broke the attendance record, Alex. They keep adding teams so it increases the volume, and Messi came to the league this year.”

You would be right on all counts with that logic. Another team — St. Louis City SC — was added this year, Messi-mania did take over the States during the summer, and his impact is expected to have far-reaching positive implications for the league.

But, his arrival and initial success doesn’t tell the full story of the league’s trajectory.

Let me tell you why.

Land and Expand

The MLS has added 9 teams since 2017, and it’s adding a 10th in 2025 — San Diego FC — to bring the league total to 30.

This furious expansion over the last 6 years, and the resulting club valuations, has been met with both curiosity and skeptical amusement.

On the positive side, the MLS is in arguably the best consumer market in the world (a country that is also becoming increasingly more diverse and soccer-crazed), it’s one of the few soccer leagues in the world that has a salary cap so expenses are somewhat fixed, and there is no fear of relegation given it is a closed league.

In the not-so-great category, the league is firmly in fifth in terms of American’s level of interest in professional sports leagues, it is considered to be somewhere between the 10th to 20th best soccer league in the world, and it is estimated that more than half of the teams lose money every year.

Yet, the interest from investors remains, and the club expansion fees, which are split amongst the existing clubs, have continued to skyrocket. As an example, St. Louis paid $200 million in 2019, Charlotte paid $350 million that same year, and the most recent fee with San Diego this year was $500 million.

This leaves a lot of questions for the future, as I highlighted in my initial article about Messi’s arrival in the MLS.

The cynic would see this approach as an unsustainable business model. The league will be at 30 clubs in 2025, and there is really not much further expansion that can be done without oversaturating the product. What do the clubs do when they actually have to generate revenue on their own? As one friend in the industry said to me: “the MLS may be running a multi-level marketing scheme.”

The optimist would suggest that it seems that the MLS has been implementing a venture capital-type model. The expansion fees from these clubs are subsidizing the growth of the other clubs, and the hope is that they can eventually become resilient enough to turn a profit and stand on their own, which in turn benefits the league overall.

What’s interesting when looking at the individual club numbers from this year, though, is that in addition to Messi-mania, the expansion franchises that were considered the league’s “sugar daddies” are actually the ones creating the most buzz.

New Kids on the Block

I broke down the 2023 MLS attendance numbers by club in the chart below by % capacity — meaning, over the course of the season, what was the average attendance divided by the stadium capacity.

This helps to account for the the large variance in stadium sizes — i.e., Atlanta United (47,526) compared to San Jose Earthquakes (18,412) — and give a clearer picture of more impactful attendance metrics than just purely how many fans showed up. Also, note that you can have a 100%+ capacity due to standing room only tickets.

The main thing that jumps out here is that 8 of the last 9 expansion clubs rank in the top half of the league in % capacity and sit well above 90%.

There are ways to influence attendance metrics (giving away tickets, counting paid tickets vs. who actually shows up, etc.), but this data has enough heft to it for me to believe that the league’s newest clubs are the ones predominantly carrying the water right now.

To further this point, there were four clubs who sold out every regular season match in 2023: the Philadelphia Union and then three recent expansion clubs — LAFC (2018), Austin FC (2021), St. Louis City (2023).

Building from the Ground Up

So, how are these fledgling clubs having so much success?

Each team and city has its own nuances, but it can generally be boiled down to the fact that the most successful clubs provide the most comprehensive fan experience.

To earn an expansion franchise bid, the prospective clubs need to not only put up the money, but they also need to show a path to viability and that the city can support the team. The worst possible outcome for the MLS would be an expansion team that draws no interest and flops, so they put the ownership groups through the ringer on this.

To build this business case, the club’s leaders spend an inordinate amount of time conducting surveys, engaging in community outreach — there are usually lower level professional clubs in-market that can be tapped into, and building prospective fanbases via ticket waitlists. The club often embraces the identity of the city in order to drive greater interest and create more meaning for why this club matters to its residents.

Plus, they have the benefit of starting with a blank slate and building out their operations and brand identity in an era that is much more technology-focused and attuned to what gets fan to move.

This whole exercise is easier said than done, of course, but if executed correctly, it reaps huge benefits that not only rewards the club during the bidding process but also long after. This is because the work done during the build-up creates a bond between the club and the city, which leads to a stronger relationship with the supporters and a more fan engagement-minded approach once the team actually begins play.

Along these same lines, the clubs’ stadiums are usually newer, have local influences (i.e., city-specific concession options), and are almost all soccer-specific (exceptions are Charlotte and Atlanta, who play in NFL stadiums), which leads to better sightlines and an overall better matchday experience for the fans.

When combining these factors, one can start to understand why these clubs have been successful. Plus, the teams all share best practices on the business side, so there is some form of a playbook that has been established by these clubs. Lastly, the hope would be that this success from the expansion clubs reaches some of the older clubs that have been struggling and boosts their performance both directly and indirectly.

Messi + Real Growth = Success

The outlier on all of the stats above, of course, is Inter Miami, which struggled to get off the ground for years and has had prolonged stadium issues. But, we all know what happened over the summer when a certain diminutive Argentine came to town. That impact can be seen in the club’s year-over-year average attendance numbers in the chart (up 39% this year), and there have been countless articles published on the impact Messi has had.

But, while Messi-mania caught fire during the summer, he has not played much recently, Inter Miami missed the playoffs, and the story has somewhat faded to the background as football and the MLB playoffs have started up.

In a way, this is a good thing for the MLS. The positive end-of-season metrics show that they are not fully beholden (at least domestically) to a deus ex machina type player that has to be playing at top levels to drive interest in the league.

Messi has had, and will continue to have, a major impact on the league. But, he is going to be 37 next year and has dealt with injuries, so it’s unlikely he has a career in the MLS lasting longer than a few years. Building a strong foundation locally with these expansion clubs while generating additional revenue and interest both domestically and internationally via Messi while they can is a great situation to be in.

A couple of other interesting data points about the MLS’ performance this year, adjusted for the Messi factor, per Forbes:

• In the early months of the season (February and March), the official MLS store was up 10+% in units sold and revenue, setting records for both.

• Pre-Messi, the MLS had seen a 26% increase in TikTok followers and 50% increase in Instagram engagement.

• The MLS has some of the most attractive fan demographics, with the average fan age being 37.4 years, 67% Gen Z and Millennial, 77% digitally native, and 31% Hispanic.

Time to Convert

In closing, the MLS definitely still has a lot of obstacles to overcome to make this league both successful and sustainable. At the present moment, the valuations for the clubs are incredibly frothy, and there are questions of how much incremental revenue each club can generate once the expansion fees run out.

But, the business blueprint that these expansion clubs have laid out is a strong one, and there are a series of macro tailwinds in the States — the US hosts the 2025 FIFA Club World Cup, 2025 Concacaf Gold Cup, 2026 FIFA World Cup, and the 2028 Olympics — that can drive the exponential interest and potentially set the league up for long term success.

They do not need to become the next NFL or NBA in the next decade. That is an unrealistic goal and frankly an unfair comparison at this point given the differing maturity levels of each league.

That being said, continued improvements that convert some of that VC-type potential into true growth and defensible business metrics will go a long way in quieting the doubters.

It is now up to them to capitalize.

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? This section is the CliffsNotes of this week’s topic

• Opener: The MLS attendance is up from 10 million last year to nearly 11 million in 2023

• Shot: While some of this can be attributed to Lionel Messi coming to the MLS, the club has recently had a series of expansion teams deliver great initial results that are helping to bolster the league’s long-term prospects. The league has added 9 teams since 2017, with a 10th coming in 2025.

• Chaser: While some believe the MLS is artificially propping up the other clubs with increasing expansion fees for new teams (this revenue is then distributed amongst the current clubs), others believe it is a VC-style growth strategy that allows the league to subsidize its operational buildout.

• Chaser: Regardless, the newest teams have been resounding successes. 8 of the 9 recent expansion teams are in the top half of the league in terms of attendance, and the 9th — Inter Miami — is expected to see major improvement due to Messi.

• Chaser: The expansion teams have built a success playbook centered on fan experience and connecting with the local community. The hope would be that this success, coupled with the US’ hosting several major tournaments in the next few years — 2025 FIFA Club World Cup, 2026 Men’s World Cup, and 2028 Olympics — raises the game of the lower performing clubs and the overall league performance. They do not need to be the NFL or the NBA, but they need to convert that VC potential into true business fundamentals.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. Guess it’s not all so bad at ESPN right now.

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. This is one of the best “This is SportsCenter” ads in a long time

2. Portland State’s President for the win!

3. The NBA’s In-Season Tournament is polarizing, but this Ocean’s 11-style ad receives top marks

Thanks for reading! Let me know what feedback you have.

Also, if you enjoyed this breakdown, please consider sharing it with your friends and network by clicking the social media icons at the top of the newsletter.

Until next time, sports fans!

-Alex