Soccernomics: Mls’s Growth Strategy

Lynne Kiesling

I don’t share Mike’s interest in basketball, so the NCAA tournament frenzy doesn’t do a whole lot for me. However, he and I both love soccer, and I’ve commented on the upcoming Beckham infestation of SoCal here and here.

Today’s Wall Street Journal has an article that discusses the MLS growth strategy to build on the existing base and this new global visibility (subscription required). What I find most economically interesting is the pursuit of what amounts to development joint ventures with other leagues:

But in the wake of Mr. Beckham’s signing, a number of developments point up U.S. soccer’s rising profile at home and overseas. Earlier this month, MLS announced a partnership with the Bundesliga, Germany’s top circuit, that calls for the leagues to establish closer promotional links and share expertise in areas like stadium construction, TV production and youth marketing. The German league has the highest average attendance in Europe, but its foreign TV revenue lags behind that of England’s Premier League and Spain’s La Liga.

In a statement, Bundesliga CEO Christian Seifert said the league has spent the past 18 months studying the American soccer market and was impressed with U.S. TV ratings for last year’s World Cup, which attracted an average of three million total American viewers on English and Spanish channels. (The final between France and Italy was watched by about 17 million U.S. viewers, outdrawing the final game of the 2006 World Series.) …

Arsenal, the 121-year-old London soccer franchise that inspired the best-selling book “Fever Pitch,” is also angling for a toehold in the U.S. Last month, the club announced an alliance with MLS’s Colorado Rapids, which is operated by Stan Kroenke, owner of the NBA’s Denver Nuggets and the NHL’s Colorado Avalanche. As part of the “strategic relationship,” the British team will establish a youth training center at the Rapids’ new facility in suburban Denver, send coaches to the U.S. to supervise clinics, and develop an Arsenal-branded youth tournament.

Up to now, attempts to expand the domestic market through foreign collaborations have been, well, lame:

The Arsenal and Bundesliga deals are in sharp contrast to past U.S. efforts by foreign teams, which often tried to drum up interest with haphazard summer tours, says Paul Swangard, executive director of the University of Oregon’s Warsaw Sports Marketing Center. Now, “there’s a recognition that MLS is a viable piece of the global soccer business,” he says. “It’s a credibility statement for American soccer.”

Thinking about these transactions as development joint ventures provides some insights into profit-maximizing strategies for these leagues. At one level, they compete for labor inputs (players) and for consumers. So why would they want to collaborate through such development joint ventures? Because they realize that they will be competing for a larger pie if they can increase global demand for soccer. They also realize that if they all have more quality players from whom to choose, the quality of the game will go up in general, and they will all benefit.