On August 6, Didier Drogba scored a stunning goal. The former Chelsea star and two-time African Footballer of the Year stood over a free kick nearly 40 yards from goal. He took a run-up of three abbreviated steps, then blasted a twisting shot that easily eluded the goalkeeper on its way into the top-right corner. “An absolute thunderbolt from the Ivorian,” the announcer said. “It’s Drogba at his best. Wow!”
It was a world-class effort, but Drogba, now 39, didn’t score it in front of tens of thousands of Premier League fans. The tally didn’t come in a lesser European first division, like the Turkish Süper Lig, where he played from 2012 to 2014, or even in Major League Soccer, where Drogba scored 22 goals in just 39 games for the Montreal Impact in 2015 and 2016. Instead, this highlight occurred while the man once credited with bringing peace to the Ivory Coast was playing for a second-division team based in Phoenix that, on the day of his goal, had existed for less than a year.
Drogba moved to Phoenix Rising FC to play but also to be an owner. He bought into the vision of majority owner Berke Bakay, becoming a minority partner in April. Bakay and Drogba’s ultimate goal with Phoenix Rising is to gain entry into MLS when the league expands from 24 to 28 teams between now and 2020. (Los Angeles FC and a Miami team have already been awarded franchises.)
They aren’t the only ones with this aim. Over the past year, 12 ownership groups in 14 cities have announced their desire to be a part of the U.S first division. In the coming weeks, league commissioner Don Garber will announce teams 25 and 26, widely expected to be Sacramento and either Nashville or Cincinnati. Phoenix Rising remains in the mix for the 27th or 28th spot. If they secure either, they’ll earn the right to cut MLS a check for at least $150 million to join a league that loses money every year.
On the surface, this might not sound like a good deal. But this isn’t about immediate profit. No, it’s about opportunity. Buying into MLS now — when franchises are relatively cheap and the league is relatively young — presents an opportunity to earn a significant return on investment, capitalizing on the sport’s rise in the U.S. and a growing millennial fan base.
It’s also the easiest and cheapest way into professional sports. NBA, NFL, and MLB teams don’t come on the market often, and they cost billions when they do. Even the Las Vegas Knights, the first NHL expansion franchise since 2000, went for $500 million. That’s why a dozen ownership groups with net worths extending well into the billions are desperate to spend hundreds of millions to make a bet on the future of the world’s most popular sport.
But the success of MLS is far from guaranteed. Some teams, like the Seattle Sounders, the Portland Timbers, and Atlanta United, are thriving. Others, like FC Dallas, aren’t. While the league itself is on an upward trajectory, better in every regard than it was 10 years ago, it faces competition from around the world and a fracturing media landscape that might make it difficult to draw attention and attract television revenue.
Betting on MLS, then, is like betting on a Drogba free kick: The odds are in your favor, but the ball could still miss the net.
Nothing about Drogba in Phoenix and the potential reward he’s seeking makes sense without first understanding the state of soccer in the United States in 2017. Despite its upstart reputation, the sport boasts a long history in America, as the U.S. national team and Canada played the first international friendly outside of the British Isles in 1885. The U.S. joined FIFA in 1914, and the Americans finished third at the debut World Cup in 1930 — still the red, white, and blue’s best result.
The current era, however, dates back to 1994, when the World Cup came to America and a new generation of fans started paying attention to the game. The launch of MLS in 1996, coupled with growing access to television broadcasts of games in Europe and the proliferation of internet access, has made it easier than ever to be a soccer fan in the U.S.
Twenty-one years after MLS’s debut, the infrastructure remains a work in progress. The professional leagues continue to develop, with revenue growing and the quality of play improving slowly but steadily. Whereas England has 40,000 clubs competing in 11 formal divisions and 13 informal ones, the U.S. soccer pyramid has only three official divisions featuring just 59 total teams in 2017. MLS and its 22 squads sit at the top, with Phoenix Rising and 29 other teams making up the division-two United Soccer League (USL). The eight-team North American Soccer League (NASL) was also at the division-two level last season, although it lost that status for the upcoming one and also lost one team. There are currently no division-three leagues, but that will change next year with the launch of the National Independent Soccer Association (NISA) and USL Division III, which will reportedly begin play in 2019. There is also a vibrant amateur and semipro circuit, featuring hundreds of teams around the country that serve out-of-season college athletes, ex-pros looking for one last game, and other talented players who want to compete at a high level but aren’t good enough for the professional ranks.
Finally, unlike everywhere else in the world, there’s no promotion-and-relegation system in the U.S. In England, the bottom-three teams in the Premier League move down to the second-division Championship at the end of the season, while three Championship squads move up to the first division. In MLS, the only penalty for the worst team is ridicule from its fans and the no. 1 pick in the next draft, which isn’t a penalty at all.
This is all complicated and messy, but there are two key takeaways: (1) Pretty much everyone agrees that soccer in America will continue to grow on the field and off it (read: advertising and television revenue) and (2) unlike in Europe, teams that get into MLS will remain there. If you accept those facts, it follows that getting one of the golden tickets into Major League Soccer and its first-division monopoly is the best long-term investment in American soccer, no matter how much you have to pay to do so.
At least, that’s MLS’s argument. The league wants to sell a success story, and in many ways it can. Now in its 22nd season, MLS averages more than 22,000 fans per game, higher than the NBA or NHL and sixth in world soccer. Franchise valuations reached an all-time high this season, with the average team worth $223 million, up 20 percent from 2016, according to Forbes. The league’s new $700 million deal with Adidas is 67 percent more per year than the NHL gets from the apparel company. Soccer United Marketing, the commercial arm that sells rights to MLS along with the United States and Mexican national teams, is valued at $2 billion. While MLS loses money every year because its operating costs exceed its revenue, its value continues to increase. Robert Kraft, an original owner and one of the most powerful men in MLS, recently said that the $5 million investment he made to buy the New England Revolution in 1996 turned a profit within a decade. This, of course, depends on how one defines “turning a profit.” Kraft has probably spent another $100 million supporting the league over the past 20 years, but Forbes estimates his franchise is worth $225 million and that it posted an operating income of $3 million in 2016. That is, if nothing else, an on-paper profit that any businessman would appreciate. An owner buying in now believes that this trend will continue, that even if MLS loses money on the whole, the overall value of each team will continue to increase.
“Other than the NFL, most major American sports leagues have a risk of operational loss,” said Peter Wilt, who runs the third-division NISA. “NBA, MLB, NHL teams lose money on a yearly basis. Maybe MLS is [losing] a higher percentage right now, but it’s an immature property. Owners have faith in demographic trends. [Owning an MLS team is] a short-term risk, but there’s potential for a long-term payoff.”
This potential is why 11 groups in addition to Phoenix — Charlotte, Cincinnati, Detroit, Nashville, Indianapolis, Raleigh-Durham, Sacramento, San Antonio, San Diego, St. Louis, and Tampa–St. Petersburg — submitted expansion bids. They did so despite fees that will increase from the $40 million the Montreal Impact paid in 2012 to $150 million for franchises 25 and 26, and possibly $200 million for 27 and 28. Add another $200 million or so to build a stadium along with various other fees, and whoever wins the right to join the domestic top division will spend nearly half a billion dollars before anyone kicks a ball.
Los Angeles Dodgers pitcher Brandon McCarthy lives in Arizona in the offseason and plans to retire there. He’s also a big soccer fan, having fallen in love with the sport after catching Steven Gerrard’s absurd half volley for Liverpool against Olympiakos during the 2004–05 Champions League. “When he ran over and was celebrating with the fans, it was just one of those moments,” McCarthy said. Last year, his friend and business partner heard about an opportunity for the pair to become part of Bakay’s ownership group, which bought the Phoenix club in the summer of 2016. The pitcher considered the move, then cut a check. “This is my way to be involved in soccer,” McCarthy said. “And then I saw the long-term [economic] potential.”
That Drogba would come to be part of the ownership group, which rebranded the team Phoenix Rising in November 2016, was an exciting surprise. The team already had a few celebrities on the roster — emo icon Pete Wentz and DJ Diplo bought in when the team was called Arizona United SC, and Diplo’s record label, Mad Decent, serves as a jersey sponsor for Phoenix Rising — but the former EPL star was brighter than all of them, at least on the world football stage. At a meeting late last winter, Bakay mentioned that Drogba might be interested in joining as a player-owner. At first, McCarthy didn’t think anything would happen, but “we’ve come to learn with Berke that when he mentions things, he’s serious,” he said. The owner’s uncle served on the board at Turkish club Galatasaray, where Drogba played, and used those connections to gain a meeting with the attacker. A couple of months later, Drogba was in Phoenix, checking out the potential investment. “We all had dinner with him,” McCarthy said. “He wasn’t just taking the temperature. He was truly interested. And we were, too.”
In April, Drogba signed on. “You’ve heard of player-managers, now Chelsea legend Didier Drogba is to be player-OWNER at American third-tier side,” a headline in English newspaper the Daily Mirror blared. (The subhead asked, “as co-owner, will he be undroppable?” He said he would leave the coaching decisions to the manager. Less than a day after Drogba signed, the manager stepped down.) He wanted to finish out his playing career while setting himself up for his post-playing days and, in an interview, he admitted to getting advice from Chelsea owner Roman Abramovich about how to do so. Drogba proved to be a boon for a young club trying to gain national attention. “That’s how we’re known right now,” McCarthy said. “We’re the club of Didier Drogba. It’s a great jumping-off point for us in our rebranding to have a guy with his ability and charisma attached.”
The rebrand included a number of factors, all aimed at one ultimate destination. “Every decision we made was with MLS in mind,” said Bobby Dulle, the team’s chief operating officer, who previously served as an executive with the Harlem Globetrotters. So Bakay and Co. changed the name of the team from Arizona United SC to Phoenix Rising to distance themselves from the previous iteration of the USL team that struggled to gain traction. They partnered with the Salt River–Pima Maricopa Indian community, securing a 16-acre plot at the southwest corner of the tribe’s reservation to build a stadium. They put one up in 52 days, in time for the 2017 season, and the venue, whose capacity is 6,200 seats plus standing room, averaged 6,127 fans per game. So far, so good. “It was an exciting new rebrand led by a strong ownership group,” USL president Jake Edwards said. “They put up a great soccer-specific stadium. It’s a good little atmosphere. For a market the size of Phoenix, it had not drawn national attention. Now it’s doing so.”
The presence of the former EPL superstar drew eyes, with a team-record 7,162 fans showing up to his first game as co-owner. In June, Drogba made his debut, scoring a goal and earning an assist in a 2–1 victory. Phoenix Rising, which also features 36-year-old former England international Shaun Wright-Phillips and 37-year-old Mexican star Omar Bravo, ended the regular season in fifth place out of 15 teams in USL’s Western Conference. Drogba scored 10 goals in 13 starts. In the playoffs, Phoenix played Swope Park Rangers out of Kansas City. Their quarterfinal match was 0–0 after 90 minutes. Drogba tallied nine minutes into extra time, but Swope Park’s Amer Didic equalized in the 109th minute. The game went into penalty kicks, where Phoenix lost 4–2. The Ivorian star, slated in the fifth spot, didn’t get a chance to shoot.
Winning this season, however, wasn’t the point. The point was getting one of the four tickets into MLS. While Phoenix missed out on one of the first two, it is still in the running for the next ones, which should be announced in early 2018.
Mark Abbott, the league’s deputy commissioner and president, told me that MLS considers a variety of factors when looking for expansion teams: the strength of the ownership group, a soccer-specific stadium plan, the size of the media market, fan interest in soccer and in MLS specifically, youth participation rates, the size and depth of the corporate market, depth of corporate market, and support from local government.
“Of the 12 markets currently in the running, we are at the top of the board as far as population, millennials, and Hispanics,” Dulle said. “We’re right at the top from a media-market standpoint. Professional sports and mega events is what Phoenix is about. We have an ownership group that is well connected, driven, and has the means to get the franchise to the highest level. We have the ability to build a stadium and be in a centralized location in our market.”
Phoenix Rising’s management tells a good story. The club has some of the ingredients that could make for a strong MLS team. It clearly wants into the league. But should it? For that matter, should anyone?
MLS is selling the future: a combination of the sport’s growing popularity and favorable demographics will lead to higher interest in the domestic league followed by more of the almighty dollar from advertisers. Profit, however, is far from a given. In a document that leaked earlier this summer, an investment group looking to bring an MLS franchise to San Diego wrote that it expected $40 million in “team losses” and that the team “will never get above break even.”
Many professional teams, of course, lose money on a yearly basis, but this is offset by their increase in value and the potential profit to be made from selling the team. The valuation of Kraft’s New England Patriots, for example, jumped from the $172 million he paid in 1994 to $3.7 billion today. MLS wants to offer the same potential to its owners. But will franchise values keep growing at such a steep rate? It’s one thing to get into the league at $5 million or even $40 million. It’s another to do so at $500 million, especially when the owner of the Columbus Crew purchased the team for a fraction of that cost and now seems intent on moving the club to Austin, Texas.
“Betting on soccer generally speaking being a growing sport in the U.S. — that’s not crazy,” said Stefan Szymanski, a professor of economics and founder of the consultancy Soccernomics. “A lot of the people buying into this are incredibly rich individuals. Billionaires [like San Francisco 49ers owner Jed York and Cleveland Cavaliers owner Dan Gilbert, the money behind potential franchises in Sacramento and Detroit, respectively]. For them, it’s like buying a lottery ticket. At a very low cost, you’re buying a tiny chance to change your life. Maybe that’s not insane, but now it starts to look like a very expensive lottery ticket.”
Going forward, MLS faces two significant hurdles over which they have little control. The first is that unlike other sports, soccer has a worldwide player market. While the best basketball, football, baseball, and hockey players typically want to play for the respective leagues in the U.S., soccer players have many other options. MLS, of course, wants to sell this as a positive thing.
“Because of the international player market and the investments we’ve been making in player development, we’ve actually seen an improvement in the quality of play over the last couple of years,” deputy commissioner Abbott said. “We’re fortunate to be in a sport that has a worldwide market for players.”
The reality is that the global competition will make players more expensive. Brazilian star Kaka got more than $7 million; Michael Bradley makes $6.5 million (nearly six times what he earned while playing in Italy’s Serie A); Clint Dempsey earns $3.9 million; and the median salary of MLS players sits at $135,000 per year, an increase of 15 percent over 2016. In 2015, an “above average” player in USL made $2,000 a month.
“There are dozens of other leagues that are competitive with MLS,” Szymanski said. “And competition is growing with new leagues, in places like China and India, not diminishing.” Shanghai Shenhua, for example, are paying the once-great Argentine Carlos Tevez $41.6 million, which is $8.7 million more than the combined payroll of Toronto FC and the Seattle Sounders, the two teams contesting MLS Cup on Saturday.
The second issue is revenue from television rights. MLS makes $90 million per year from its deals with ESPN, Fox, and Univision. And a significant portion of this money goes to the U.S. Soccer Federation, which packaged its rights with those of MLS. Meanwhile, the EPL is in the middle of a three-year deal worth more than $10 billion. While MLS’s ratings are growing slowly, they still amount to only a couple hundred thousand viewers per game and trail NBC’s EPL package by a factor of three or four. To dramatically increase ratings, which in turn would potentially get MLS a more lucrative television package when the league negotiates a new deal in 2023, MLS teams would need to spend many more millions on players, driving up leaguewide wages that have already jumped from $130 million in 2014 to $188 million this season. And who knows if the sports-media-rights bubble will have burst by then. Television networks might not continue to pay increasing amounts for the same properties. Even if MLS ratings increase by 1,000 percent, there’s no guarantee the money will follow.
This is not ideal, of course, but perhaps it’s also not as bad as it seems. Money will come to soccer. And as a generation of fans raised on MLS grows up, the league hopes that they’ll maintain allegiance to their local teams as well as any European side they’ve adopted. The in-person experience will always be a differentiator for MLS because European teams stay across the pond, with the exception of summer tours, which make for expensive tickets and apathetic soccer.
MLS is paying attention to what’s going on in the Southwest.
“[Phoenix Rising is] focused on the things that they know they need to do, not just to satisfy our requirements but to be successful,” Abbott said. “The requirements that we have for expansion aren’t designed just to be hurdles that you need to overcome to be selected by us, but they are things that we believe you need to put in place to be successful.”
Dulle said that the team has a path to profitability in USL, where expenses are significantly lower than in MLS, although still in the single-digit millions per year range. (USL isn’t missing the expansion fee boom, either, with the price jumping from $250,000 in 2012 to $5 million in 2017, according to league president Edwards. Teams from cities including Cincinnati, Orlando, and Ottawa have joined since 2016.)
MLS could continue to expand, too. During the halftime show at the All-Star Game in July, Commissioner Garber said MLS wouldn’t go beyond 28 on his “watch.” But the end of his tenure might come sooner rather than later; the former NFL executive has been in charge of MLS since 1999. And, frankly, why would MLS stop expanding? From the perspective of the current owners, why not go to 32 or 36 or even 40 teams? Adding teams 29 through 32 could bring in $1 billion in expansion fees alone.
“The incentives for more expansion are clear,” NISA’s Peter Wilt said. “The more teams that are sold and the longer they put the sale, the higher the investor/operator fee they can secure. That helps defray the losses the current owners have experienced over time. It also mitigates competition from other leagues, improves the footprint, helps national sponsorship value, and helps broadcast value. The motivations for it are clear.”
There are arguments against expansion as well. Overexpansion can dilute the quality of play, although the success of Atlanta United, which built a team through smart signings of young international talent and a vibrant youth academy, and averaged a record 48,200 fans per game in their first season, mitigate that concern. A metropolitan area needs to be a certain size to support a professional team, but there are plenty of large enough cities that lack franchises. From a current ownership perspective, the case against expansion is harder to make.
A larger MLS could solve the promotion/relegation problem as well, at least as far as the league’s owners are concerned. Split the league into a first and second division, move the bottom-three teams down and the top-three squads up every season, divide revenues from television and Soccer United Marketing evenly across all the teams, and voilà: a closed system that protects the investment while adding a bit of intrigue to the end of the season.
That’s what the Phoenix folks are banking on: They can’t get in now, but they’ll be able to do so later. “We wanted to make sure that what we started building had a meaning for the short term but also for the long-term goal of earning a Major League Soccer franchise,” Dulle said.
If and when Phoenix Rising make it to MLS, Drogba won’t be playing. He’ll be sitting in the owner’s box of a new stadium, next to Bakay, McCarthy, Diplo, Wentz, and more, one eye on the field and one eye on the value of his franchise.