Who would want to buy the Fire?
By: Tom | July 13th, 2007Why did a private equity firm buy the Fire? When I first heard it was a nonlocal, private equity firm, I must say I was far from overjoyed. Over at ussoccerplayers.com, though, Kevin McGeehan makes a strong counter-argument. Well worth reading, and here’s a choice cut:
Andell may bring a novel change to the business of MLS ownership: it appears that they simply want to make money from the game of soccer. There aren’t any hopes of a real estate payday in the future. There’s no entertainment business happening on the side. There are no other distractions. Given the way that the Fire and its AEG front office have run the club over the past few years, this is potentially tremendous news.
What do you think? Is a private equity firm buying the Fire actually good news in itself, besides the end of AEG’s increasingly neglectful management?
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The two money quotes from this article:
“The goal of private equity firms is to take firms that have been underperforming, keep the high-value parts of the business, and jettison the parts that have dragged the company down. They will then take a return on their investment by issuing an IPO, selling the firm to another buyer at a higher price, or recapitalizing the company.”
Which is somewhat at odds with this statement:
“Andell wouldn’t get involved with the Fire unless it believed it could make money. You can’t make money in this league unless you spend money, but without a stadium or concerts to lean on, the Fire’s new owners will have to do exactly what the Galaxy has done, and buy players that fans want to see. They’ll have to bring sponsors on-board, sell jerseys, play friendlies, and above all, put an exciting team on the field. Anything short of that means that a bid isn’t worthwhile.”
The problem I’m having with all of MLS is that I just can’t wrap my brain around the MLS single-entity structure and how it relates to individual ownership. What belongs to who, exactly? The players belong to the league, so what do the team and the owners make from their sale? (Player sales being a major source of revenue for some teams, such as French Ligue 1 team Olympique Lyonnais.) And how are TV rights structured? By the league, or by team? And if it’s by the league, how is the money distributed? I’m really confused by the finances of MLS in general.
Have you seen anything with a good explanation of the financial structure of MLS? Because until I see that, I can’t form an opinion on a purchase like this one.
One thing I will say, though, is that outside financial entities have to be looking at the fact that Beckham has sold 250,000 jerseys in the past week alone, and they’ll be looking for a piece of that revenue stream. And yes, if it causes owners to spend the money to bring in the next Beckham or next Zidane, whoever that might be, then this could be an excellent thing for MLS. But I really hope that whoever comes online understands soccer, because in my mind it’s not just another revenue stream.
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