Monday, May 22, 2006

Smoke, Mirrors, Butts and Numbers

Sorry for the absence... I've been busy planning my month long World Cup party.

What has gotten me off my duff is an article I came across from the San Diego Tribune.

Go ahead and read that first and come back here... I'll wait...

Interesting, right?

This article has to have blown a cold wind thru the MLS HQ in New York. There is a lot there to think about, and after some investigation and talking to people within the league this is a summary of what I found.

It is true that some MLS teams are more "creative" in reporting attendance figures than others. New York and the LA Galaxy are noted as the worst culprits of number fudging, and before the sale to their current owner, Colorado was notorious in claiming crowds much bigger than reality. When they were in the Rose Bowl, LA would actually take a respectable turnout and jump that number into something humorously bigger. But it is agreed that New York has been the champ at reporting laughably large numbers from matches where it appeared you might be able to actually count those who showed up.

Giving credit where it is due, most league people agree that Columbus is the most accurate in reporting their attendance. Oddly enough while HSG teams are generally thought to be more accurate in their reporting, FC Dallas has been an exception so far this year.

A topic brought up by one of my sources was "revenue/average ticket price". Some teams have higher priced tickets - LA, DC, Chicago and Dallas - while others like KC have practically given away tickets to boost their numbers. On the surface it is interesting that when a team sells 12,000 tickets at a $20 average they are better off than a team that sells 20,000 at $10. In this scenario, despite 8,000 less people in the stands, there is $40,000 more in revenue.

Yet for teams with a Soccer Specific Stadium that's only the obvious surface story. Survival of the league depends so much on Soccer Specific Stadiums, and the number of butts in seats (BIS) is a key factor. All the revenue streams in a SSS are based on those BIS. If only half the people that get MLS tickets go the stadium, the forecasts and budgets all take a beating because parking, concessions, merchandising all go down.

The BIS issue poses additional problems for teams since sponsorship revenue could also decrease because less people attend games than is actually announced. If "Corporation X," which is thinking of signing a naming rights or signature partner agreement, comes to find out the number of stadium impressions they have been getting is in reality far less than they are told they may reconsider the extent of their investment. MLS can build a soccer stadium in every market but they will be much more difficult to sustain without naming rights and signature partners that pay adequate fees. That revenue is obviously vital.

This is a key issue in the MLS model and I bet HQ right now is following this story very closely. This matters far less in baseball and football – television revenue in those leagues is higher than ticket revenue, and sponsorship revenues are based more on TV ratings than attendances; MLS revenue from TV in the current deal is small compared to ticket and sponsorship revenue - which is probably the reason they are so forthright about what they do with attendance numbers. MLB has no issues saying they announce tickets sold no matter who is in the stadium, and the NFL is so successful it actually can afford to announce strictly turnstile counts.

But for MLS, this is a tricky situation. On the one hand, its good news that the average overall ticket distributed number (what teams use for attendance reporting) keeps going up; but on the other hand, MLS needs to figure out how to get more of those people to actually go to the games or it will face a very difficult future.


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