Pro/rel component made $4B bid for MLS media rights a non-starter
July 24, 2017 4:35:18 PM PDT
By Jeff Carlisle

Four billion dollars. No matter the context in which you look at that figure, it is a significant amount of money. And, apparently it could have been put in MLS' pocket in exchange for its worldwide media rights over a 10-year period.

But for MLS, the proposal contained the ultimate poison pill, that being the implementation of a system of promotion/relegation. And the proposal was made by MP & Silva founder Riccardo Silva. Silva just happens to be co-owner of NASL side Miami FC, and he's been pushing for a pro/rel system to be implemented in North American soccer for some time. Last year he funded a study by Deloitte that looked at the potential benefits of a pro/rel system, but one that MLS president and deputy commissioner Mark Abbott dismissed as having "serious credibility questions".

Then there is the fact that the league's current deal with ESPN, Fox and Univision prohibits MLS from even discussing a new media rights deal for several years. All of this led MLS to rebuff Silva's offer.

"We're very fortunate that we have long-term, successful partnerships with some of the world's leading media companies in ESPN, Fox and Univision," MLS said in a statement to ESPN FC. "These agreements run through 2022 and provide each broadcaster with exclusive negotiating windows and renewal rights. As was stated to Mr. Silva both in person and in a subsequent letter, Major League Soccer is prohibited contractually from engaging in discussions about our media rights with other distributors. Accordingly, we are not in a position, nor are we interested, in engaging with Mr. Silva on his proposal."

Privately, more than one MLS source referred to what Silva is doing as "grandstanding". It's easy to make such an offer when you know the intended recipient is in no position to accept. One source indicated that Silva asked to meet with Garber, and Garber accepted without knowing that media rights were specifically on Silva's agenda. When asked what exactly was on the agenda, and whether it was related to the league's attempted expansion foray into Miami with David Beckham, MLS didn't provide an answer.

Silva declined an interview request through a spokesperson.

So was Silva grandstanding? In some ways yes, though there are reasons why he might not have been. MP & Silva is an established player in the media rights business with existing deals in soccer, motor racing, tennis and the NFL, just to name a few.

"I definitely think the bid was something that was done in earnest," said Michael Colangelo, the assistant director of USC's Sports Business Institute. "You want to table-set this because you want to get ahead of it. It sort of allows him to show that he's serious. You don't make an offer like this unless you have some sort of consistent plan that you can execute on. So by setting things up and having it so in 2023, once you have the rights in hand, you can start to figure out the more difficult things like cord-cutting, and getting viewership on a digital platform instead of a traditional platform if that's where the market is trending."

And what about Miami FC, Silva's NASL team? While instituting a pro/rel system would be one way to get around having to pay an expansion fee, it seems unlikely that's the only thing that's driving Silva.

"I think when you talk about someone like Riccardo, I think he sees a business opportunity, he sees a chance to grow MP & Silva on its own, more than a chance to get his team in," said Colangelo.

But the pro/rel component remains a non-starter. Would it make the end of the MLS regular season more compelling? Without question. Such a system would also add a layer of accountability to teams as well. There are also host of negatives on the business side, however. What the game needs right now is investment in terms of stadiums, players and youth academies, just to name a few. The willingness on the part of owners to build that kind of infrastructure would lessen considerably if there were a risk of relegation.

MLS is also in the midst of an expansion-bidding process with entry fees starting at $150 million. In all likelihood, the introduction of a pro/rel system would give prospective ownership groups and communities -- some of whom are contemplating providing public land for stadiums -- reason to have second thoughts.

"No owner with deep pockets is going to say, 'I'm going to line up all my sponsorships, and then get relegated,'" said Colangelo. "No sponsor is going to come in and be the kit sponsor if you can relegated in a year or two. Right now the system just isn't built for the risk.

"A system like England is so established. In the U.S. is there the right amount of teams to start this? Are the markets the right fit? Are the venues the right fit? Right now it's not in the cards. Now, if we're talking 10 to 15 to 20 years down the line, maybe it is. But right now, it just doesn't make sense for MLS with the business structure and trying to expand the league and these franchise fees and making sure that the product is up to par. It doesn't make much sense for the league as currently constructed."

Then there is the issue of control as it relates to media rights. MLS has historically negotiated rights deals on its own, and isn't going to give away that kind of power any time soon.

"This ensures that [MLS] and its partners can structure an agreement that addresses all elements, such as scheduling, marketing and digital distribution, that are required for a successful partnership," the MLS statement read.

Exactly how the media landscape will look in six years is another giant unknown, especially as it relates to cord-cutting, and the move to digital platforms. The advent of streaming companies wanting to get more into sports is another changing aspect. Then you have entertainment entities like UFC and WWE who own or control their own streaming rights.

"MLS has time on its side," said Colangelo. "In a few years they may know the landscape a little bit better, and how to monetize things like cord-cutters. So why rush into something right now when they may get five or six more bidders down the line? They may figure out a business model where it's league owned and they can benefit from their own distribution model.

"The number is astounding, it's jaw-dropping. How can you turn down $4 billion? But the way the business is moving, you could have left millions and millions on the table just because of that."

Will Silva jump into the bidding fray when negotiations open up? It's possible, though as long as pro/rel is part of the equation, MLS is almost certain to look elsewhere.

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