Mark Ingram Acquires Equity Stake In D.C. United
Mark Ingram Acquires Equity Stake In D.C. United
Houston Texans running back acquired a 1% ownership stake in D.C. United last week, vaulting the MLS club at $710 million.
Friends,
Mark Ingram played soccer throughout his childhood. He plays FIFA religiously and even attended an Arsenal game in England & the 2014 World Cup in Brazil. Simply put, he loves the sport.
But now, the Houston Texans running back has decided to take his passion for soccer to the next level, officially acquiring a 1% stake in D.C. United last week. The deal values the MLS club at $710 million, up from a $60 million valuation in 2012 — then a league record (source).
Ingram now joins a growing list of professional athletes — both active and retired — to invest in MLS clubs:
Seattle Sounders: Ken Griffey Jr. & Russell Westbrook
Los Angeles FC: Magic Johnson, Mia Hamm & Nomar Garciaparra
Houston Dynamo: James Harden
Philadelphia Union: Kevin Durant
Vancouver Whitecaps: Steve Nash
In addition to Ingram, other recent MLS transactions include Ted Segal purchasing the Houston Dynamo and NWSL’s Dash for around $400 million and the Wilf family purchasing Orlando City SC and its stadium for $400-450 million.
Here’s a wild stat: Atlanta United FC had more than 52,000 fans attend home games in 2019 on average, while the NFL’s Cincinnati Bengals only averaged 47,000 fans per game during the same year.
My point? As the often forgotten major US professional sports league, Major League Soccer has quietly seen average franchise valuations skyrocket, with multiple teams now worth close to $1 billion.
For context, the average NHL franchise is only worth $653 million.
Most of the increase in club valuations has been driven by expansion. Over the last 5 years alone, Cincinnati and Nashville paid $150 million in expansion fees, while St. Louis & Sacramento paid $200 million each, and Charlotte is paying an MLS record $350 million to join the growing league.
Remember, Toronto FC paid just $10 million to join the league in 2007.
The interesting part: In addition to expansion fees, league-wide attendance is up, TV viewership has increased, and so has the overall level of play. However, Major League Soccer continues to lose money.
Public data is sparse, especially due to COVID-19, but here are some numbers from 2018:
MLS teams combined for a $100 million loss.
Only 7 of the 23 (30%) turned a profit.
Atlanta United made the highest profit at just $7 million.
In simple terms, MLS profits don’t measure up to current valuations.
Here’s my take: Expansion fees are driving club valuations higher, but the league can’t expand forever. With a publicly-announced plan to stop at 30 teams by 2023, MLS Commissioner Don Garber knows that. But it’s a double-edged sword.
MLS is a local product right now, and if you want to reach the size and scale that the NFL, NBA, and others have through large TV broadcast deals, you need to develop a national audience.
Major League Soccer’s current rights package with ESPN and FOX, valued at $600 million for eight years, and Univision, $120 million, generates roughly $90 million per season for the league and runs through 2022.
At $90 million per year, that’s minuscule compared to other leagues. For example, the NFL will generate more than $10 billion annually from its new deal, while the NBA makes about $2.6 billion per year from theirs.
The lack of diversified & unique IP in sports will help, especially as demand increases with streaming platforms like ESPN+, Amazon Prime Video, and Hulu spending billions of dollars on sports content each year.
Bottom line: Most estimates suggest the MLS will need to secure a broadcasting deal in the range of $525 million annually, or 6x what they currently earn, to gain long-term profitability.
Is that possible? Sure, but in my opinion, it’s more important to keep the fundamentals of the business strong rather than seeking out NFL-like revenues overnight.
Major League Soccer should finish its expansion plan, invest in technology, data, and analytics, and continue to build more soccer-specific stadiums. As more homegrown talent is developed and introduced into the league, it starts to have a compounding effect.
The quality of play improves, which drives an increase in fan engagement through league-wide promotion and marketing, and eventually makes the league’s best players superstars that become can’t miss TV — think LeBron James, Tom Brady, and Conor McGregor.
In the end, that’s what will make media money start to grow.
Have a great day, and I’ll talk to everyone tomorrow.
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