Canuck Oranje Posted November 30, 2008 Share Posted November 30, 2008 IMHO, there are two ways to look at building a profitable business in soccer. Typically, North American sports only consider one. That is the so called, "sports entertainment business". In soccer, there is a second way that has been used by clubs to make them profitable. That is the player development business. On the sports entertainment business, the approach is straight forward. Put bums in seats and sell them as much as you can. Then add other revenue streams like TV, sponsors, marketing branded items, etc. MLS is attempting to go this route. Depending on your point of view, the succes of this approach so far is still in question. Successful examples of this approach can easily be found in the big five leagues of Europe. In fact, I seem to recall that even while the EPL may be the best league in the world, the most profitable today is the Bundesliga. The player development approach to professional soccer should not be dismissed out of hand because it also can be very lucrative. It also is very viable approach when your team is not part of one of the big-five European leagues. Probably one of the best examples would be Santos FC of Brazil. I'm sure there are other examples in countries like Argentina and Uruguay. Many won't know this but Santos' average attendance is just over 9,000. It might also be shocking to find out that the average ticket price for a Santos game is between $5-$10 depending on the exchange rate used. Yet, since 2000, Santos brought in $56 million (about $88 million Cdn.) euros from net player transfers. While they were fortunate enough to have Robinho, they also had Alex, Elano, and Diego at the same time. Santos continues to follow this approach as it recently sold a 19 year old, Tiago Carleto, to Valencia for probably around $5-8 million euros. Some might think that Santos has a large fan base, but the reality is that it ranks somewhere around 9-11th depending on the year and the survey and would be the fourth most popular team in the State of Sao Paulo. As a result, it does get some TV exposure but not as much as Flamengo, Corinthians, Sao Paulo, and Palmeiras among others. TV revenue is important but the largest revenue source are player transfer fees. It should be noted that Santos has one of the better player development systems in Brazil and probably the world. While some might argue that Santos benefits from being in Brazil, it's also worthy to note that there are over 100 professional clubs in the State of Sao Paulo alone and many are better located than Santos. Santos must compete for youth players and Santos rarely pays transfer fees. Santos is not the wealthiest city nor is it a relatively large city. The City of Santos has a population of just over 400,000 with the broader metropolitan area (mostly beach communities) having a population of about 1.6 million. In the end, Saputo needs to decide (as does Kerfoot) how best to spend $40 million US to make a profit. If you believe the best approach is to go the sports entertainment route, he needs to find the best league to play in. If he decides the best approach is the player development route, then it may lead to a different conclusion. The best league is not always necessary and there are other examples like Pao de Acucar EC and Desportivo Brasil that do not even play at the highest level in Brazil. Link to comment Share on other sites More sharing options...
tmcmurph Posted November 30, 2008 Share Posted November 30, 2008 quote:Originally posted by Canuck Oranje In the end, Saputo needs to decide (as does Kerfoot) how best to spend $40 million US to make a profit. If you believe the best approach is to go the sports entertainment route, he needs to find the best league to play in. If he decides the best approach is the player development route, then it may lead to a different conclusion. The best league is not always necessary and there are other examples like Pao de Acucar EC and Desportivo Brasil that do not even play at the highest level in Brazil. True and your statement makes me wonder how many players the Caps will sell off before they join MLS. Lets face it Ethan Gage is 17, Randy EB is 18. In 2 years what will they be worth in Europe? That would offset a fair chunk of the $40 if both work out. I am wondering if the Caps will try to break out the academy from the rest of the development to keep their talent belonging to themselves. Like you said it is a great revenue stream. MLS is starting to tap into it but the league takes the lions share and the club gets less than half. Link to comment Share on other sites More sharing options...
RS Posted November 30, 2008 Share Posted November 30, 2008 quote:Originally posted by tmcmurph True and your statement makes me wonder how many players the Caps will sell off before they join MLS. Lets face it Ethan Gage is 17, Randy EB is 18. In 2 years what will they be worth in Europe? That would offset a fair chunk of the $40 if both work out. I am wondering if the Caps will try to break out the academy from the rest of the development to keep their talent belonging to themselves. Like you said it is a great revenue stream. MLS is starting to tap into it but the league takes the lions share and the club gets less than half. The league takes 1/3, the club 2/3. In the Mo Edu transfer (worth $5 million USD), TFC received over $3 million of that. Since the clubs are all partial owners of the league, the money that the league takes gets spread around in the end, anyways. A rising tide, and all of that... Link to comment Share on other sites More sharing options...
BearcatSA Posted November 30, 2008 Share Posted November 30, 2008 quote:Originally posted by tmcmurph True and your statement makes me wonder how many players the Caps will sell off before they join MLS. Lets face it Ethan Gage is 17, Randy EB is 18. In 2 years what will they be worth in Europe? That would offset a fair chunk of the $40 if both work out. The best league is not always necessary when you have an established talent pool and reputation for providing quality players, such as the Brazil/Argentina examples, but I truly believe it is when you are talking about a North American league, particularly in light of the fact that the world economic barometer is pointing towards sh*tstorm. A ton of other factors have to come into play before these Caps' Canadian players mentioned here become significant financial generators in the transfer market a couple of years down the road. Link to comment Share on other sites More sharing options...
Tuscan Posted November 30, 2008 Author Share Posted November 30, 2008 And these factors are? Link to comment Share on other sites More sharing options...
BearcatSA Posted November 30, 2008 Share Posted November 30, 2008 quote:Originally posted by Tuscan And these factors are? Well, I would say they would have to be consistent first team starters and be integral to the team's performance, prove that they can avoid the injury bug, and maybe stand out well on other stages (i.e. international level, CONCACAF Cup). Obviously, I haven't given a "ton" of factors (should have used the word "number" instead), but for a European club to be willing to part with a substantial amount of cash in this current and future economic situation, it's going to have to see the potential of a lot of bang for their bucks. Link to comment Share on other sites More sharing options...
Tuscan Posted November 30, 2008 Author Share Posted November 30, 2008 Hopefully some geezer on here (it's great being 23!) can go back a few years... oh wait, let me make this easier to read for you guys... If someone who remembers how players like Stalteri, Friend, Radzinski, Forest, and others managed to break into Europe in the past, I'd be interested in reading just to compare how situations for players like Gage would be. Now where on earth did you put those damned glasses??? Oh wait, they're on your head. Link to comment Share on other sites More sharing options...
BearcatSA Posted November 30, 2008 Share Posted November 30, 2008 ^On trials or brought in at a younger age through a club's youth system (Forrest at Ipswich Town). Bigger money, resource generating transfer fees weren't involved, which is the thrust of my argument. Hey, I'm not saying Gage or Randy EB et. al. won't go on to bigger and better things. I really hope they will. And if they do become big time players then maybe we'll see more demand for other up and coming youngsters from these set ups. And where there's a demand and competition for someone's services the price should go up. However, I just don't see the economic situation playing out in favour of making money off of transfer fees in the next two years. Link to comment Share on other sites More sharing options...
Canuck Oranje Posted November 30, 2008 Share Posted November 30, 2008 The fact is those Canadian players mentioned were not as developed as those that come into Europe from Brazil and Argentina with high transfer fees. Quite frankly, I don't think the high transfer fees are the result of reputation at all. The high transfer fees are paid are the result of evaluations done by professional talent evaluaters and are expected to contribute fairly quickly. Clubs like Pao de Acucar (with no top level pro team) enter European youth tournaments against Europe's best to gain attention and do. If the Whitecaps sent a team to top European youth tournaments and had success, their players would gain the same attention. quote:Originally posted by BearcatSA ^On trials or brought in at a younger age through a club's youth system (Forrest at Ipswich Town). Bigger money, resource generating transfer fees weren't involved, which is the thrust of my argument. Hey, I'm not saying Gage or Randy EB et. al. won't go on to bigger and better things. I really hope they will. And if they do become big time players then maybe we'll see more demand for other up and coming youngsters from these set ups. And where there's a demand and competition for someone's services the price should go up. However, I just don't see the economic situation playing out in favour of making money off of transfer fees in the next two years. Link to comment Share on other sites More sharing options...
deschamp86 Posted November 30, 2008 Share Posted November 30, 2008 quote:Originally posted by Canuck Oranje The fact is those Canadian players mentioned were not as developed as those that come into Europe from Brazil and Argentina with high transfer fees. Quite frankly, I don't think the high transfer fees are the result of reputation at all. The high transfer fees are paid are the result of evaluations done by professional talent evaluaters and are expected to contribute fairly quickly. Clubs like Pao de Acucar (with no top level pro team) enter European youth tournaments against Europe's best to gain attention and do. If the Whitecaps sent a team to top European youth tournaments and had success, their players would gain the same attention. I thought they did that already? Didn't Randy EB get MVP of the tournament for some Island team tournament in Europe last year? Link to comment Share on other sites More sharing options...
Canuck Oranje Posted November 30, 2008 Share Posted November 30, 2008 If that is the case, and the evaluations are positive, the assessments of value are likely being made. Another possible step is to loan the player to a team in Europe for even more exposure. That is also being done more frequently than before. Pao de Acucar has a 19 year old player on loan with Helmond Sport in the Netherlands at the moment. Barueri has three players on loan with Boavista in Portugal and one with Anderlecht. quote:Originally posted by deschamp86 I thought they did that already? Didn't Randy EB get MVP of the tournament for some Island team tournament in Europe last year? Link to comment Share on other sites More sharing options...
BearcatSA Posted December 1, 2008 Share Posted December 1, 2008 quote:Originally posted by Canuck Oranje The fact is those Canadian players mentioned were not as developed as those that come into Europe from Brazil and Argentina with high transfer fees. Quite frankly, I don't think the high transfer fees are the result of reputation at all. The high transfer fees are paid are the result of evaluations done by professional talent evaluaters and are expected to contribute fairly quickly. Clubs like Pao de Acucar (with no top level pro team) enter European youth tournaments against Europe's best to gain attention and do. If the Whitecaps sent a team to top European youth tournaments and had success, their players would gain the same attention. The point that piqued my interest in this thread was that a second division North American soccer league club would be able to generate enough profitable revenue from developing and selling off its talent to European clubs in the same way that the Brazilian clubs you have cited as examples do, and I just don't think that will happen here, especially in the immediate future. There's going to be less cash to spend and I think it's going to hit the MLS and USL pretty hard not too far down the road. I'm curious to see how the European January transfer window plays out for some teams in light of what's going on with the world economy. Link to comment Share on other sites More sharing options...
Grizzly Posted December 1, 2008 Share Posted December 1, 2008 quote:Originally posted by Trillium Lets assume you pay 40 million to MLS and you draw 20,000 people per game... it costs you $2,000 dollars to buy a MLS fan. Now lets assume you want to recoup your money over five years, each fan cost you 400 per season. Now lets assume you have 20 home games .. each fan costs $20.00 per game day seat... so your ticket price are going to be $35.00 bucks. Now in Montreal you dont have a Market that can charge a Parent and son or daughter up to $100.00 to go to game .... or at least that is what Saputo believes about his Market after 15 years of runnng a team there. The Capitol expense of 40 million would have not enhanced the Saputo buisness... especially when he knows he can expend $2.00 per seat or roughly 800,000 more a year in player salarys and purchase better players then MLS can with the right to sell those players on and reap the profits. The purchase of better players will allow him to win the Voyageurs cup and play in the Champions league, if he manages it well and brings in enough young players to sell on, he will get the agents wanting place a player on the Impact rather then MLS cause the salary will be equal or better, and the movement on to a Euro league will be easier as the player develops. Champions League at the Concacaf level has changed the game for clubs with ambition. Imagine a Liverpool game in Montreal in the big O in the summer 40k people at $50.00 each a two million gate, the revenue streams possible drawf MLS. Add in a game against someone like Gremio of Brasil and you can see Saputo and the Impact being cash cow year after year ... Folks .. Joey has it right now he needs to implement. I have to completely disagree with your post Trillium. First a major one time expenditure like an expansion fee would be written off over a much longer time period than 5 years in any normal business plan. Your figures are completely unrealistic. As far as whether we have a market for MLS ticket prices, if you spend 15 years marketing to people who can only afford (or in many cases could afford to but don't want to spend) to come to the games if they are discounted and very cheap, yes you do not have a market for MLS ticket prices. There is a large potential market in Montreal for high level soccer at MLS ticket prices but they have never been marketed to. If you market only for people who can afford minor league ticket prices you will never have the means to enter a major league. As far as the Champions League being a source of club income you were at the games and saw how poor the attendance was. Only the Atlante game was well attended and that was because many Mexicans came. I wouldn't be surprised if the Impact lost money on the CCL. If the Impact invited a big team to play in Olympic stadium maybe they would make money or maybe they would lose a lot of money. It is hard to say because they have never done so in the past even though they had as much opportunity and incentive to do it then as now. It is not like Olympic stadium was just built. I think Joey has it all wrong. At every turn he has always chosen the most safe, most conservative and most cheap option. At some point if you are ambitious to have a team playing at the highest level you have to take some risks and spend some money. Kerfoot and Melnyk seem to understand this but Saputo does not. His MLS decisions might make sense if we had a strong USL to fall back on but with the best teams leaving the league is looking pretty shaky. Joey could have gotten into MLS years ago for 10 million but he thought it was too expensive. Now he thinks $40 million is too expensive but what if USL fails and we are in a bind how much will MLS be asking for in the future? Link to comment Share on other sites More sharing options...
Canuck Oranje Posted December 1, 2008 Share Posted December 1, 2008 Here's an interesting news release on Desportivo Brasil from Grupo Traffic's website. Grupo Traffic is also the owner of Miami FC. It's probably appropriate to post here since there have been some reports that Marcelo Claure has been in discussions with them to develop an alliance for the the Miami Market. Desportivo Brasil is Grupo Traffics player development business. http://www.traffic.com.br/news/news.php?id_not=77 27/11/2008 Manchester Utd. link up with Desportivo Brasil Desportivo Brasil and Manchester United executed this Thursday a cooperation agreement aiming at the exchange of technical expertise and of young players between both clubs. Manchester released the following communication on its website. Manchester United Academy has joined up with the Brazilian youth club, Desportivo Brasil, for an exciting football driven venture that will see players from both clubs visiting each country for the opportunity to experience new training methods and to play friendly matches. The project driven by Brian McClair and Les Kershaw of the Manchester United Academy team and John Calvert Toulmin, South American Recruitment Officer, is seen as an invaluable learning curve for players. While Desportivo have an excellent team of professionals, the Academy will provide technical support to improve Desportivo’s preparation of young players to optimise the chances that players from their club will excel when moving to Europe. Manchester United’s Academy coaches from different age groups will visit Brazil on a regular basis and Desportivo coaches will be welcomed on reciprocal visits. For Manchester United, this will provide invaluable insight into the way the 5 time World champions approach the beautiful game. Brian McClair, Academy Manager, said: “It is exciting to be involved with such an innovative partnership that allows each club to glean knowledge from each other and so develop the future of football” David Gill, Chief Executive of Manchester United, said: “This is a fantastic opportunity for our coaches and Academy players. They will gain invaluable knowledge and experience from Desportivo. Brazilian football has always been consistent and we already have a strong Brazilian contingent at the club but this will forge an even stronger relationship”. Desportivo Brasil is a club located in the City of ITU which is an hour’s drive from Sao Paulo in Brazil. Desportivo in essence is a club focussed on youth football. The club fields teams competing in the Sao Paulo state championship at under 15 under 17 and under 20 level. They are currently putting the finishing touches to a brand new training complex that, when completed, will be without doubt one of the top facilities exclusively for junior football in the World. Desportivo’s head consultant is none other than Brazil’s World Cup Winning coach Carlos Alberto Parreira. quote:Originally posted by BearcatSA The point that piqued my interest in this thread was that a second division North American soccer league club would be able to generate enough profitable revenue from developing and selling off its talent to European clubs in the same way that the Brazilian clubs you have cited as examples do, and I just don't think that will happen here, especially in the immediate future. There's going to be less cash to spend and I think it's going to hit the MLS and USL pretty hard not too far down the road. I'm curious to see how the European January transfer window plays out for some teams in light of what's going on with the world economy. Link to comment Share on other sites More sharing options...
Free kick Posted December 1, 2008 Share Posted December 1, 2008 quote:Originally posted by Canuck Oranje IMHO, there are two ways to look at building a profitable business in soccer. Typically, North American sports only consider one. That is the so called, "sports entertainment business". In soccer, there is a second way that has been used by clubs to make them profitable. That is the player development business. On the sports entertainment business, the approach is straight forward. Put bums in seats and sell them as much as you can. Then add other revenue streams like TV, sponsors, marketing branded items, etc. MLS is attempting to go this route. Depending on your point of view, the succes of this approach so far is still in question. Successful examples of this approach can easily be found in the big five leagues of Europe. In fact, I seem to recall that even while the EPL may be the best league in the world, the most profitable today is the Bundesliga. The player development approach to professional soccer should not be dismissed out of hand because it also can be very lucrative. It also is very viable approach when your team is not part of one of the big-five European leagues. Probably one of the best examples would be Santos FC of Brazil. I'm sure there are other examples in countries like Argentina and Uruguay. Many won't know this but Santos' average attendance is just over 9,000. It might also be shocking to find out that the average ticket price for a Santos game is between $5-$10 depending on the exchange rate used. Yet, since 2000, Santos brought in $56 million (about $88 million Cdn.) euros from net player transfers. While they were fortunate enough to have Robinho, they also had Alex, Elano, and Diego at the same time. Santos continues to follow this approach as it recently sold a 19 year old, Tiago Carleto, to Valencia for probably around $5-8 million euros. Some might think that Santos has a large fan base, but the reality is that it ranks somewhere around 9-11th depending on the year and the survey and would be the fourth most popular team in the State of Sao Paulo. As a result, it does get some TV exposure but not as much as Flamengo, Corinthians, Sao Paulo, and Palmeiras among others. TV revenue is important but the largest revenue source are player transfer fees. It should be noted that Santos has one of the better player development systems in Brazil and probably the world. While some might argue that Santos benefits from being in Brazil, it's also worthy to note that there are over 100 professional clubs in the State of Sao Paulo alone and many are better located than Santos. Santos must compete for youth players and Santos rarely pays transfer fees. Santos is not the wealthiest city nor is it a relatively large city. The City of Santos has a population of just over 400,000 with the broader metropolitan area (mostly beach communities) having a population of about 1.6 million. In the end, Saputo needs to decide (as does Kerfoot) how best to spend $40 million US to make a profit. If you believe the best approach is to go the sports entertainment route, he needs to find the best league to play in. If he decides the best approach is the player development route, then it may lead to a different conclusion. The best league is not always necessary and there are other examples like Pao de Acucar EC and Desportivo Brasil that do not even play at the highest level in Brazil. Correct. This is another justification as why why the 40 Mill is valid and might even be very low. In the past year we have seen transfer fees earned by MLS and MLS clubs for the players such as Altidore, Guzan, Dempsey and Edu. It was 10 Mill for Altidore, $6 mill for Dempsey and 5 Mill for Edu. How much have USL players fetched? the scuttle butt at the Lynx games way back when they were selling player to Norway and sweden was that they were get in neighborhood of 50K. Someone may correct me on this but I believe that someone posted here that the Impact got something like 300K for Grande and that seemed like a lot. The Oooh's and Ahha's for the Sandro Grande transfer pale in comparaison. IMHO the gap between what Grande fetched and what the likes of Edu, dempsey and Guzan fetched is not justified. The Hutchison transfer from the Lynx might be an even better example. So why on earth couldn't the Lynx get something for Hutchinson comparable to what TFC got for EDU? the only logical reason for the discreapancy lies in the approach of both the USL and MLS; how the market and present themselves. So getting back to Saputo, whose to say that he wouldn't have gotten 10 times more for Grande had saputo been owner or the MLS Montreal Impact instead of USL MOntreal IMpact. Maybe Saputo doesn't understand the business side of owning a professonal soccer club as much as we taught he did. Think of a player like Leonardo DiLorenzo, a former Argentinian U20 player who players for th impact. What would be the difference in value that saputo could get for Dilorenzo if he were player for Saputo in MLS versus Saputo in USL? it might be as much as ten times. So by staying in USL, saputo is forgoing a hell of a lot. Link to comment Share on other sites More sharing options...
Canuck Oranje Posted December 1, 2008 Share Posted December 1, 2008 Time will tell whether Saputo made the right decision or not. I don't think the best solution is entirely clear yet. As I said in other posts, there are ways to have your development players seen in Europe. Some of those do not require handing over $40 million US to a league that will then also take a piece of your return. I bring up the case of Miami FC because they are owned by a group that has one of the most respected academy programs in the world. The partnership with Man U is evidence that some of the big players know that too. I also read an article that said that Barca has also done business with them in the past. While they will no doubt end up being involved with the Miami MLS bid, it will be curious to see if MLS will be able to get their hands on any of their young players. My point is that Traffic Group's business model involves grabbing the best young players, developing them and then selling them to the highest bidder. Attendance at Miami FC games would be nice, but it isn't critical. If Miami MLS would like a few players from Desportivo Brasil, I'm sure Traffic Group will gladly oblige in the way of a loan. Which leads to an interesting question. How does MLS handle the situation where American players in the Desportivo Brasil system are loaned to Miami MLS? MLS would not own their rights and thus would not have control over their contracts? And if MLS says no, how would it look if American players were bypassing MLS for big European teams, first on loan and then for sizable transfers? This complexity makes the Miami MLS bid all the more interesting to follow. Link to comment Share on other sites More sharing options...
Tuscan Posted December 1, 2008 Author Share Posted December 1, 2008 The more I hear and read about the Miami bid, the more I hope it fails. MLS doesn't need a European giant coming in to do nothing but develop young players here only to be sold back to Europe. I don't see how Miami will benefit MLS aside from bringing in another expansion fee. An idea I had is to not grant Miami entrance this time, see if they remain interested, then really raise the entrance fee to see if Barca is serious about getting a piece of the MLS pie. Make them pay for it. Link to comment Share on other sites More sharing options...
BearcatSA Posted December 1, 2008 Share Posted December 1, 2008 quote:Originally posted by Canuck Oranje I bring up the case of Miami FC because they are owned by a group that has one of the most respected academy programs in the world. The partnership with Man U is evidence that some of the big players know that too. I also read an article that said that Barca has also done business with them in the past. While they will no doubt end up being involved with the Miami MLS bid, it will be curious to see if MLS will be able to get their hands on any of their young players. My point is that Traffic Group's business model involves grabbing the best young players, developing them and then selling them to the highest bidder. Attendance at Miami FC games would be nice, but it isn't critical. If Miami MLS would like a few players from Desportivo Brasil, I'm sure Traffic Group will gladly oblige in the way of a loan. So this goes back to my point about a program's reputation and pedigree. If the Whitecaps were involved with the Traffic Group conglomerate/farm system, then I would re-evaluate my position. Right now, it seems like they are relying on Neindorf's connections to get youth players in Germany on loan, but you still need to establish that consistent supply line of quality, which the Brazilian example you've cited has done. Free kick's examples are more in line with my train of thought. For how much are USL players going and (equally significant) which clubs are paying for their services? Frankly, I don't think the MLS is going to get the same kind of dough for the next crop of prospects they sell off, primarily because the economics won't allow it. Link to comment Share on other sites More sharing options...
Canuck Oranje Posted December 1, 2008 Share Posted December 1, 2008 My original point was regarding the development of North American kids for Europe. Traffic Group only started to develop their youth academy this year after signing a deal with the Kendall Soccer Coalition in September of 2007. Quite frankly, they would probably not lose any sleep over a Miami bid getting rejected by MLS because they probably have better contacts in Europe than MLS does. It seems to me that this might be a "damned if you do, damned if you don't" kind of scenario. Nevertheless, the big fish in the soccer development business are already in the water. In my view, it's far better to bring them into the fold than let them operate from the outside. Which I think, MLS is trying to do with Claure and Barca. And Claure is trying to do with Traffic Group. FYI, I suspect if the truth were told, it is likely Claure who is paying the freight on this and not Barca. Barca is there for marketing purposes of their brand. As for how this will benefit Miami, think Santos. Santos won two championships from 2002 - 2004. Robinho, Alex, Diego, and Elano were sold during that time to Europe at an enormous profit. Santos would not have a team in the top level of Brazilian soccer if they did not take this approach to the business. quote:Originally posted by Tuscan The more I hear and read about the Miami bid, the more I hope it fails. MLS doesn't need a European giant coming in to do nothing but develop young players here only to be sold back to Europe. I don't see how Miami will benefit MLS aside from bringing in another expansion fee. An idea I had is to not grant Miami entrance this time, see if they remain interested, then really raise the entrance fee to see if Barca is serious about getting a piece of the MLS pie. Make them pay for it. Link to comment Share on other sites More sharing options...
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