Sportico released information that essentially listed MLS clubs as more valuable than a number of their Premier League counterparts. This, unsurprisingly, does not apply to those such as Manchester United and City, Liverpool, Chelsea, Arsenal and Spurs.
However, the seventh-most valuable Premier League side, Everton, had a similar valuation to the New York Red Bulls. RBNY ranks 18th in the latest valuations of MLS sides.
At face value, this is almost preposterous. The Premier League is far more popular, far more cash-laden and simply historic. Half of the 28 MLS teams that competed in 2022 only joined the league from 2010 on. Also, the Premier League is a global league, the most popular domestic competition in the world. In comparison, Major League Soccer is not even close to being the most popular competition in its own country.
However, the valuations could hold some validity, says sports economist and Soccernomics author Stefan Szymanski. The University of Michigan professor Szymanski clarifies by saying valuations by experts and analysts can be wrong. Also, these are not market values. In other words, Everton likely sells for more than its ‘valuation,’ as it may have a higher market value.
Growth and multiples of valuation
Before getting into why or why not these MLS clubs are more valuable than EPL teams, first understand valuation. It is based on multiples of revenue. Mathematically, that is the firm or team’s total value, all assets included, divided by its annual revenue. Based on that, MLS teams operate at a multiple of revenue of 10.
Multiples of revenue are higher in closed leagues like MLS than they are in open leagues, such as the Premier League. This comes from risk. Teams suffering relegation to the Championship take on an estimated loss of over $250 million due to a lack of TV deals and other factors. Szymanski says that risk affects a teams total valuation.
Also, the valuations made by the experts at Sportico assume growth. With soccer growing in popularity in the United States, there are reasonable beliefs about growth being considerably faster than in Europe and the Premier League.
On Twitter, Szymanski says the issue on whether or not MLS teams are more valuable than Premier League clubs comes down to the validity of those beliefs on growth.
MLS teams being more valuable than EPL clubs
The case for
MLS clubs can be more valuable if growth is valid. So, Szymanski identified five aspects of American fandom in soccer that can see this potential growth, and thus valuation, realized.
The first is that Americans adopt soccer in the same fashion it follows Major League Baseball or the NBA. Then, as a result, MLS becomes the popular soccer league on TV. It usurps both the Premier League and Liga MX, both of which have higher viewership than MLS. Consequently, the growth in revenues from popularity bring in the best talent from around the world. Also, this is not just the ‘retirement home’ stigma or Lionel Messi joining Inter Miami in the twilight of his career. These are top-tier talents in their prime.
The growth for MLS also stems around the national team. The 2022 World Cup attracted interest from millions. If the United States can develop talent as competitive as the women and NWSL, MLS can hire them to make the league grow. Finally, Szymanski says the 2026 World Cup can drive interest into the sport.
If these scenarios are true or happen in the near future, the current valuations are credible. Analysts make these valuations with the hope and belief MLS can grow.
However, the valuations are risky.
The case against
The expectation of growth is, just that, an expectation. Just because some very smart people believe one thing to be true in the future, it does not have to be the case.
For example, Szymanski mentioned that MLS revenues per team have not grown much faster than counterparts in Europe over the last two decades. Instead, MLS clubs rode the global boom of soccer. Also, applicable to many readers here at World Soccer Talk, MLS struggles to make an impact on TV. Szymanski notes that is where the money is.
MLS’s recent deal with Apple is a major risk. Yes, it is profitable for the league as Apple paid $2.5 billion for a 10-year deal to air all MLS games on streaming. However, ESPN and Univision both backed out of linear TV deals with MLS. While cord-cutting is commonplace for American soccer fans, the deal may not serve the casual fans ideally.
Szymanski also brought up concerns over popularity waves and talent. Most of the United States fan base only follows soccer during major international competitions. It is easy to support the United States in the World Cup, Gold Cup or Copa America because we are Americans. It is more challenging from someone in a more rural part of the country to actively support an MLS team they have little connection to. Also, without much higher investment in talent, quality and perception will not improve on a scale to fit the needs of these growth expectations.
If the case against MLS’s growth is true, then the experts overvalued these MLS clubs.
PHOTO: IMAGO / Icon Sportswire
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