MLS’ rejection of $4 billion TV offer from MP & Silva could be beginning of saga

MLS has quietly rebuffed a $4 billion offer from MP & Silva that would have quadrupled the broadcast rights fee the league currently receives from its deals with FOX Sports, Univision and ESPN, according to a story in Sports Business Journal. The deal came with one catch, which was too much for MLS to absorb — the institution of a promotion/relegation system within the top two divisions of American soccer. The proposed deal would cover the time period from 2023 to 2032.

MP & Silva presented its proposal to MLS on June 26, which was quickly rejected. However the article also stated several MLS owners have been recipients of correspondence from Riccardo Silva, the founding partner of MP & Silva, since the late June meeting.

MLS’ decision to reject the proposal from MP & Silva represents a calculated risk for the league. It appears that media rights fees from networks might have hit a point of diminishing returns as cable subscriptions continue to decline and the rights fees paid long-term by the likes of ESPN and FOX Sports for non-soccer properties necessitate tighter spending at the networks. It is not a massive leap of faith to assume MLS will never obtain a rights fee anywhere near that of the $4 billion over 10 years MP & Silva was proposing. Moreover, the TV ratings for MLS don’t justify the rights fees being paid by FOX Sports, Univision or ESPN. As a television property, MLS continues to struggle due to a number of factors. But for the terms of this discussion, the relevance or lack thereof of many regular season league games, is a big part of these struggles.

However, on the flip side, MLS is a league that has never been completely about sporting merit. Promotion and relegation would open the league’s weaker teams up to the possibility of losing millions in revenue and fan support. The league has for years maintained mechanisms to prop up weaker clubs in a traditional American sporting way, and contrary to the promotion and relegation model used around the rest of the world.

In conjunction with US Soccer, MLS currently is focused on spending whatever surplus monies it earns on developing youth academies and a pyramid similar to that of Major League Baseball, using its affiliate league USL as a stalking horse in this regard.

The United States Soccer Federation (USSF) has taken a largely hands off role in forcing leagues and clubs to work together, allowing MLS and USL to isolate leagues outside the pyramid they are trying to create. The USSF has also in the past appeared hostile to the facilitation of promotion and relegation and has published arbitrary standards about what constitutes clubs from the first division to the fourth division. This includes among other things market size, something which does drive TV and sponsorship deals.

It is worth noting that Silva owns Miami FC, an ambitious second division club currently playing in the NASL, a league without any formal affiliation to MLS. Silva last year commissioned a study by Deloitte regarding the potential benefits of promotion and relegation within the US system.

Miami FC has spent liberally assembling a squad full of journeymen who can win the second division NASL with ease but without spending the same sort of resources on long-term player development, an MLS priority. Miami FC’s disproportionate spending on players versus other aspects of the organization with winning a title in mind is the sort of thing MLS has rejected in its approach.

Silva’s proposal is intriguing. But concerning is what would happens to the large number of independent clubs at the D4 level or below in this country if the pyramid was effectively sealed off from them. Nonetheless, for those who would be part of the proposed league structure it would provide a boon in terms revenue, sponsorship and relevance.

While Silva’s proposal probably would need be fleshed out some more, it represents an important starting point for discussing how MLS can improve its television profile and create more context and relevance for fans and potential sponsors. The quick rejection of the offer by MLS is a sign that the league continues to be inflexible in its approach. And while for now they have a cue of potential clubs who want to join the closed league structure at the cost of a $150 million, eventually MLS will reach a point where expansion is no longer possible.

It is entirely within the realm of possibility MLS expands to 28 teams and then returns to the table with MP & Silva to discuss some aspect of this proposal. MLS might not want promotion and relegation, but its TV ratings show no sign of significant improvement and eventually a new broadcast deal will have to be negotiated. After expansion, MLS may be in a stronger and more flexible position to have discussions about restructuring for the future while Silva might have exhausted other options. Or perhaps the offer will be off the table for good because Silva would have pursued other options.

NASL did not return a request for comment.

Later this week on WorldSoccerTalk.com, we’ll discuss how Silva’s money and clout could help to build an open system that is attractive for broadcasters outside MLS using current lower leagues. Plus, we’ll discuss the topic in greater length and the ramifications of the news on the latest World Soccer Talk Podcast.

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