Forbes List Justifies High MLS Franchise Fees and Path of Lower Division Clubs to MLS

Forbes Magazine’s valuation of MLS teams justifies the large price tag Orlando City and Manchester City/New York Yankees have paid for admission to what is rapidly becoming one of the world’s most exclusive footballing leagues from an ownership perspective.

The recent surge in values of MLS clubs is good news for the long-term health of the sport in North America and gives the league a potential position of strength in what are sure to be difficult negotiations regarding the next TV deal(s).

The perception of MLS among elite soccer fans aside, the business is growing at a healthy pace and as franchise and stadium values increase, the stature of the league will grow. Competition from foreign football can help the league along if the Commissioner and leadership use it to build the business rather than make flippant remarks like this one about too much soccer being on television in the US.

Major League Soccer does have an advantage over the foreign leagues. With a growing footprint throughout the continent, the league offers live, meaningful matches for crazed supporters. Domestic competition is minimal if you are a soccer fan.

The minor league NASL has made a point in recent months of implying they can challenge MLS with a different business model. With franchise fees ranging between $1 million – $2 million, the league is attracting better owners to the minor league circuit than ever before, but talk of competing with MLS’ franchises whose values are in the $100-$175 million number is foolish. But NASL and other USL PRO (the other sanctioned minor professional leagues) can help hone and develop markets for MLS.

Orlando City, which will move to MLS in 2015 will be the fifth team to move from the lower divisions to MLS since 2009. The previous two American based teams to make this move, Seattle and Portland placed 1st and 3rd on the Forbes list.

The model today seems to be to start a successful lower division club and then develop the market, front office and supporters culture in second division before paying a large franchise fee to be “promoted” to MLS. It may be peculiar as far as world soccer goes, but it appears to be working from an investment standpoint.

Editor’s note: Read the latest news, opinion and analysis about MLS on our Major League Soccer page.

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