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MLS' goals: Stadium and credibility
Wednesday, February 23, 2005
BY MATTHEW FUTTERMAN
Star-Ledger Staff
After four years of on-again, off-again talks and unconsummated deals proposals, negotiations last fall for a soccer stadium in Harrison moved faster than a David Beckham free kick.
Then this month, state officials told the MetroStars and Major League Soccer they wanted a written guarantee that the league and the team's owner would pay for the $84 million stadium if either entity folded. Just like that, the talks stopped, leaving MLS and soccer boosters to wonder why they still had to explain why professional soccer can make it in this country.
"In a short period of time, we have made a lot of progress," MLS commissioner Don Garber said last week. "Looking at everything we've done, I can't see why anyone would question our viability and stability."
Garber said the league and the MetroStars could offer the guarantee and sleep comfortably, but it shouldn't be required. No other team or league has had to give such a guarantee, and MLS teams in other cities have received stadium deals without them.
The usual question of how much the public should invest in a sports facility is still key. But these negotiations have brought into focus the nagging three-decade discussion about the uncertain future of pro soccer in the United States and the more recent question of how strong a niche MLS has in the American sports psyche.
Is MLS the first U.S. professional soccer league to build publicly funded soccer-specific stadiums, or the league that struggles to attract 6,000 fans to a game in the country's largest market?
Is it a league whose television audience has shown signs of growth, or one that can't get more than 1 million viewers for its version of the Super Bowl?
Is it the league that just coaxed three top figures in sports to buy franchises, or the league in which one billionaire still owns half the teams?
The answer in every case is both. That, state officials say, has forced them to ask the MetroStars and MLS for a unique guarantee that the state has not asked of teams in the NBA, NHL or NFL during recent negotiations.
"We feel good about the future of Major League Soccer and the MetroStars, otherwise we wouldn't be having these discussions with them," said Carl Goldberg, chairman of the New Jersey Sports and Exposition Authority and acting Gov. Richard Codey's point man in the negotiations. "But that doesn't mean we don't have a fiduciary responsibility to make sure we come up with a conservative, prudent transaction."
Under the current proposal, the city of Harrison would donate the land for the stadium next to the Passaic River, and the state and MetroStars would share construction costs and revenues the stadium generates from ticket sales, concessions and advertising. That includes the naming rights to the stadium, roughly $3 million a year. There also would be a surcharge on tickets to help cover construction costs.
However, the talks have stalled over the state's request for the MetroStars to set aside their share of the profits in a separate fund until the state pays off its share of the debt on the stadium. The fund would serve as a safety net for the state in case the league or the team folded.
Rob Tillis -- whose company, Inner Circle Sports, is a leading financial consulting firm in the sports industry -- said state officials are right to try to limit the public's risk.
"Those are legitimate questions for the state to ask, especially because one owner controls so many of the teams in MLS," Tillis said.
But the implied skepticism about the league's future has frustrated Garber, who says MLS is coming off its best year.
"We've doubled the number of investors and there is still lots more interest in expansion," said Garber, a former NFL executive and Montclair resident who took over MLS five years ago. "That teams have a market value speaks to the viability of the league."
Randy Vataha, a top sports investment banker, said MLS is here to stay.
"They've got significant ownership that is committed to the sport," said Vataha, a former NFL wide receiver. "It's not going anywhere."
Developer Stan Kroenke, who owns the NBA and NHL franchises in Denver, last year bought the Colorado Rapids, then quickly reached a deal to build a soccer stadium just outside the city. Mexican businessman and soccer team owner Jose Vergara paid $25 million to convince Garber to allow him to create a second team in the Los Angeles area.
Finally, former Madison Square Garden chief executive Dave Checketts bought an expansion team for Salt Lake City. Checketts said last week that the credibility of the league's investors and the sports popularity among children made him want to buy the team he has named Real Salt Lake.
"Baseball is old school, and unless you're 7 feet tall, you can't play in the NBA, and if you're not 300 pounds you can't play in the NFL," Checketts said. "Kids are looking for something a normal, good athlete can play."
Checketts is closing in on a deal for a stadium in the Salt Lake City area. The league's Dallas franchise will open a soccer-only stadium in Frisco, Texas, this spring. Chicago will open its stadium next year. The Colorado facility will open shortly after that.
Also, Adidas signed a 10-year, $150 million sponsorship agreement with the league, and blue-chip companies such as Kraft and Pepsi remain top sponsors.
Günter Weigl, global director of soccer for Adidas-Salomon, said the company needed to invest in MLS to retain its position as the world leader for soccer apparel.
"Other sports are more in the DNA of the American consumer for the time being," Weigl said. "But the foundation we have is there is a huge amount of people interested in the sport and we think MLS can be huge thing at the end of the day."
The league is closing in on its first collective bargaining agreement with its players. All this, Garber says, points to a league on the rise. Still, critical questions linger, and while Garber can deflect many of them, enough remain to lead state officials to request the financial guarantee.
Among the concerns: Why do the MetroStars usually announce attendances of 16,000 when turnstile figures from the New Jersey Sports and Exposition Authority reveal the games attract 6,000 to 8,000 fans?
"Every sport reports attendance as tickets distributed through sales and comps," Garber says. "If people aren't showing up that is another indication of how badly we need a new stadium to improve the fan experience."
Another concern: Why, if the game is so popular here, is the television audience for MLS too small for a sports network to pay the league? Under the team's broadcast agreement with ABC and ESPN, MLS pays for production and keeps most of the money it makes from advertising.
Garber replies that at least MLS does not have to pay for its television time.
"The networks take a huge risk in putting our games on rather than something else," he says. "The ratings have room to grow and they will, but our sponsors are long on the sport. As long as we continue to show increases, we'll be okay."
He says the league is no longer losing $50 million a year, as it did during the first five years of its existence. He declined to put a dollar figure on overall losses, saying only that some markets were healthier than others.
Goldberg said he has no plans on cutting off negotiations for the Harrison stadium, so for now Garber and the MetroStars have convinced state officials MLS is a worthwhile investment. But while Garber says the league might be "okay," Goldberg wants to make sure taxpayers are okay, too.
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