The Equalizer: MLS posts losses, investors buy more?

It’s on its last legs, but I’ll always remember a scene from the satirical comedy “Silicon Valley” (2014–).

“Sesame seeds rely on particular microclimates ... predominantly in Myanmar, Brazil and Indonesia,” a Peter Thiel-inspired character pretentiously tells a group of desperate entrepreneurs.

“Next year, for the first time in 221 years,” he continues, “the cicada populations in Myanmar and Brazil will hatch at the same time, decimating their sesame seed crops.” 

Surprised at the low price for sesame seed futures in Indonesia, Peter made a purchase. A conservative estimate in the price change would return $68 million. The room went silent.

Today, investors in the American professional soccer market see an opportunity to do the same — that is, bet on the market’s promising future by buying a stake now. 

This September, real estate tycoon Joe Mansueto paid $204 million to complete his 51% purchase of the MLS’ Chicago Fire, valuing the team at $400 million. Last year, the entire Fire franchise was valued at $245 million — that’s a 38.75% one-year increase, even though Chicago has the worst average home game attendance in the league and consistently loses money every season.

In fact, as reported by Forbes, only an estimated six teams in the MLS reached the black in 2018. Meanwhile, the average MLS team is worth $313 million, a 30% rise from 2018. The value of the MLS is rising, but almost none of its teams are making any money.

Buyers are bullish because their investment in their franchise is also an investment into the league’s marketing arm, or Soccer United Marketing (SUM). SUM holds the commercial rights for almost all of the soccer properties in the U.S. And next on SUM’s to-do list? A remunerative TV deal in 2023, and even more lucrative, the 2026 World Cup, hosted by Uncle Sam himself. Returning to “Silicon Valley,” this is the confluence of events that creates a once in a lifetime bet. 

The media deal with Univision and ESPN is expected to balloon to reflect higher TV ratings since the MLS last negotiated one in 2015. A highlight of the new content is “El Trafico,” the derby between LA Galaxy and LAFC. The most recent game garnered 900,000 TV viewers, reportedly the most-watched non-championship MLS game on ESPN ever.

But the TV deal is a drop in the bucket compared to the 2026 World Cup. The 1994 World Cup hosted by the U.S. was the best attended in the tournament’s history, when the MLS didn’t even exist. The hope is that a World Cup stateside will help the MLS compete with traditional American sports in the future.

In a way, the U.S.’s immigrant-heavy populace and unparalleled sports infrastructure make it a perfect host for the most lucrative sporting event in the world. The 2018 edition in Russia garnered $6.1 billion in revenue. When the U.S. hosts, there will be 50% more teams. That’s 80 games spread out across the country — and SUM holds the commercial rights for every single one. Peter Thiel should get in on the action.