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Ownership Structure Of Clubs In The MLS And Abroad

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Article republished on businessofsoccer.com

Throughout the history of the sport, there has yet to be just one ownership structure, which is proven to provide success. In modern days of the sport, several forms of ownership in the many leagues across the world exist - from our own MLS to the Premier League. The ability to transform a club into a brand and create a passionate environment amongst supporters undoubtedly are essential to success of the business and the potential for generating revenues, but more important is the foundation from which the clubs are developed.

As witnesses to various ownership structures abroad, American clubs are inspired by the success of the world's most storied clubs - the Real Madrids, Manchester Uniteds and Chelseas of the world (to name a few). Conversely, with success and public disclosure comes the criticism of supporters, as evidenced by Manchester United. The acquisition of the English club by the Glazer family, who gradually increased their share beginning in 2003, was greeted with much displeasure of the supporters. To make matters worse, the Glazers' strategy for refinancing debt angered supporters and sparked plans for supporters to regain their club.

South of England, La Liga club, Real Madrid have proven success with ownership by the fans. During the 2009-2010 season, Real Madrid generated revenue of US $608.8 million. The club is organized as a supporter-based organization and has been since its inception. Similarly, Barcelona and other clubs operate under a supporter ownership model among other clubs, as well.

Much of the decision to operate under one ownership model or another is related to the history, culture and environment that the club develops - not to mention the economic benefit and situation of a given club. Fans of Major League Soccer are not yet privy to the information that fans abroad are provided about their clubs, as are the fans of other major American sports (e.g. National Football League). It is not as simple as viewing ESPN to learn the details of player transfers within the MLS. Details of transactions are either speculation or estimates provided by analysts. The only details that can be guaranteed is the fact the transfer did occur.

In the United States, we are treated to a different, yet unique model, under which all clubs are part of the single-entity that is Major League Soccer. Clubs are essentially are owned and operated by the league, itself. The clubs, however, are organized independent of the MLS; the front office and board of directors are the responsibility of the club. Owners and ownership groups are instead shareholders of Major League Soccer.

Revenue sharing is a requirement among MLS clubs. Player contracts are negotiated directly by Major League Soccer and are actually contracted with the league, not individual clubs. The introduction of front jersey sponsorships in 2007 increased opportunities for profitability. The league, to date, has 17 owners among its now 19 clubs (including Montreal) for 2011.

MLS clubs are subject to a franchise fee, which has exceeded an estimated $50 million - some forecasts predict up to an $85 million price tag in the near future. It was reported that Portland agreed to a $40 million franchising fee in order to make its debut in 2011.

Philadelphia Union is owned and operated by the Keystone Sports & Entertainment group. The club has been able to secure its own stadium and jersey sponsor in its short history as other MLS clubs have yet to build their own soccer-specific stadiums and obtain a kit sponsor.

Major League Soccer continues to seek options to monetize the league, its clubs and players. Commissioner Garber at the helm has been looking abroad to established clubs in other leagues, who have expressed interest in starting a MLS franchise - similar to Chivas USA. While Major League Soccer begins to find success among corporate sponsors and interest overseas grows, the optimism for the league's distant future increases.