MLS 2020 Expansion: Is The League’s Rapid Growth Plan Too Much Too Soon?

Ready or not, here comes Major League Soccer. If it’s not in your hometown already, the 20-team pro soccer U.S. league is most likely planning on heading soon to a city near you.

MLS officially announced Thursday the league would add four franchises to become a 28-team league by about 2020. Amid growing popularity of soccer in the U.S. and on the heels of signing a landmark TV deal, MLS — which is slated to add an Atlanta franchise in 2017 and more in 2018 — is betting that now is the time for rapid growth, which could boost revenues and increase its audience. But the move also runs the risk of moving too quickly and creating franchises that could be set up to fail in a league that could become stretched too thin.

“One of the important things that MLS is trying to do is make sure they have a national footprint,” said Victor Matheson, an economics professor who focuses on sports at the College of the Holy Cross in Worcester, Massachusetts. “When you only have franchises in eight to 10 cities it’s very hard to get a reasonable national TV contract. ... You can understand why all the big leagues look to have 30ish leagues or so, because 30 teams allows them to cover a good portion of the population.”

Soccer is growing in the U.S. — that much we know. And the data increasingly show young people are flocking to the sport. More than 3 million kids and young adults registered to play soccer with U.S. Youth Soccer in 2014, the most recent year statistics were available. That same year, an ESPN poll found MLS had the same number of “avid” fans among 12- to 17-year-olds — a key demographic — as Major League Baseball, trailing just the NBA, NCAA football and NCAA basketball in popularity for the age bracket. U.S. adults age 18 to 34 — the prized “millennial” consumers — are nearly twice as likely to have played soccer in the past 12 months as the average American, according to Nielsen Scarborough. Meanwhile, average per-game attendance in MLS has increased by 40 percent in the last decade.

Likewise, the U.S. audience has begun to show an affinity for watching soccer on TV, with, for instance, some 23.6 million people tuning into the 2015 FIFA Women’s World Cup Final. It was the third-most watched sporting event of the year, trailing only the NFL's Super Bowl and NCAA Men's Basketball Championship, according to Nielsen.

The idea is, with growing interest in soccer, capitalize now. Speaking with reporters Thursday in Sacramento, California — which is expected to get an MLS franchise in the second round of expansion — MLS Commissioner Don Garber said the league’s expansion strategy was aimed at filling the gaps on the U.S. map where there were sizeable markets without teams. There was a particular focus on the Midwest and Southeast for the planned 2020 expansion, Garber said, specifically naming Detroit, St. Louis, San Antonio and Austin in Texas, and San Diego. Potentially, those cities would follow planned 2018 franchise additions in Miami, Los Angeles and a team in Minnesota.

“We will be at 24 teams by 2018. And we will go to 28 teams with a timetable that has not yet been laid out. We believe and hope and expect that Sacramento will part of that next round of expansion,” Garber said, before later relenting and putting a timetable on the expansion. “What I would say is the next round of expansion is likely happening in 2020.”

MLS’ ratings have slowly improved. Five years ago, the championship game, which featured the David Beckham-led Los Angeles Galaxy, earned a rating of just 0.8 and was outpaced by a Chelsea-Liverpool English Premier League replay, which earned a 1.5 rating earlier that same day. In 2012, fewer than 800,000 people tuned in to the MLS championship. But by 2015 that was up to about 1.2 million people in a game featuring two small-market teams, according to Nielsen. Still, the 2015 English Premier League matchup of Liverpool vs. Manchester United registered about 300,000 more viewers than the MLS’ top-rated game. In 2014, MLS had 98 night games televised while in 2015 the league had all 340 games on air, Forbes reported.

Showing that television is where the real money lies, the league’s TV contract with ESPN, Fox Sports and Univision signed last year and running through 2022 is worth about $90 million annually and tripled the rights’ revenue from the prior contract. After signing the contract, Garber hinted at its ambition.

“It’s a partnership that’s going to elevate the domestic game to unprecedented heights, something that all of us have been working so hard to achieve,” he said. “All these networks share our vision that MLS can become one of the top soccer leagues in the world, and that our men’s national team can join the women’s national team to regularly compete for World Cup championships.”

The league has regularly expanded. It had just 10 franchises when play began in 1996 but teams kept getting added. And with the success of recent additions , the league has kicked it up a gear.

“You get some kind of established base and you expand based on your previous experiences,” Matheson said. “Seattle, Portland, these teams have done well. Orlando City has been wildly successful just in its first season. … When you’re getting those sorts of draws from those new teams, that’s something they’re certainly looking at as well.”

If you keep adding fans in major cities across the U.S., you’re forcing yourself into the national conversation. If most Americans live within driving distance of an MLS stadium, “if you’re SportsCenter, then it’s hard not to broadcast [MLS],” Matheson said.

But expansion has proved tricky for soccer leagues in the past. Buoyed by the star-studded New York Cosmos featuring an aging Pelé, the North American Soccer League, which began in the ’60s, expanded until its eventual collapse in 1984.

“You had a handful of financially successful teams and it’s hard to run a league when only a few teams are making money,” Matheson said of the original NASL’s downfall. (A new league has since started, reviving the NASL name.)

While league executives are looking to grow soccer in the states, not everything has been rosy for MLS. At the end of 2014, Garber said the league was losing more than $100 million per year. Expansion fees, meanwhile, for a new franchise are expected to cost about $110 million.

And although soccer fans have shown they’re willing to tune-in to watch the sport on TV, they haven’t necessarily been chomping at the bit to tune-in to MLS contests. The quality of play has improved but lags well behind the world’s top tier leagues. The stars in MLS are typically either American or aging world stars past their prime.

The biggest ratings draws for U.S. audiences last year were international competitions like the CONCACAF Gold Cup, the Mexican Liga, the English Premier League and the Champions League, which features the best squads in Europe. If MLS wants a bigger TV contract in its 2022 negotiations — which, again, is where the real money lies — it might need a larger audience. But to gain a larger audience (and more money), it might need world-class players — like those in the Champions League or English Premier League — which requires more money.

“This is chicken or the egg: You need the high quality soccer league to generate the audience,” said Stefan Szymanski, a professor of sports management and economics at the University of Michigan in Ann Arbor and the co-author of the blog Soccernomics. “Even if a miracle happened in 2022 and they multiplied the revenue from their broadcasting contract by five, they’d still be miles behind the Premier League.”

Szymanski said he thinks soccer will continue to grow in the states and the country could become a world power in the sport. But the MLS could eventually fall out of the picture if it expands but doesn’t begin pulling in serious money, he admitted. If owners lose money, they’ll eventually sour to the idea of expansion, which could run the risk of creating too many teams with too little interest.

“People who become billionaires, who build huge commercial enterprises, don’t lose $5 million per year without some long-term payoff,” Szymanski said. “If they see the logic I’m seeing, eventually they cut their losses.”