Major League Soccer, Who Are You?

usa_soccer_world_cupThis ends only in speculation and is an attempt to catalog my thoughts and actions since Thursday. This is long, starts one way, ends another and has no resolution. I warned you.

A few months ago, we started this rambling site to flush out thoughts stuck in our heads and somewhat go on record with our opinions.

The first thing posted was “The Effects of Promotion and Relegation on American Sports”. Just always seemed like such a no brainer. Shortly after joining the site, I dared to venture out to Twitter to see what others think and engage in various discussions. Being new to twitter, I did not know what to expect. I am stunned at the amount of political cartoons (I know how to define hypocrite, thank you) and simple-minded bickering from all sides and every interest group.

However, if you think the political arguments have lost all sense of reason on twitter, I suggest you survey some of the back and forth between those who desire promotion and relegation and those who do not. It is pretty vicious. By example, just take a look at how much Ted Westervelt, @soccerreform, pisses these people off. He may be MLS’ public enemy numero uno. Either him or Jurgen Klinsmann. All because of their support for promotion and relegation: Mr. Westervelt consistently and Mr. Klinsmann occasionally but from an international media platform.

Personally, I do not like spinning my wheels in slow-moving endeavors. The very diligent Mr. Westervelt and the knows-something-about-soccer Mr. Klinsmann hope to change the game by creating public support and therefore putting pressure on MLS from its fans. A fine strategy but not the shortest path between two points in my humble opinion. Especially when confronted with an army of blindly-loyal MLS team fans, MLS employees and access-reliant media members. All of who are willing to waste hours of time with you arguing over of the pros and cons of changing the system.

I have always viewed promotion and relegation as an incredibly undervalued money-maker for all parties: the owners of the league, private team owners, American workers and our government while not even addressing the undeniably positive effect on the quality of play and development.

To me, the best and quickest option to get this done is to show rich people why it makes sense financially for them. And these kinds of people like boring reports with charts and projections and data for them to consider.

So I was going to create a mock business plan. Essentially, I was going to construct a report showing the benefits of:

  • Announcing the creation of open system hierarchy, dictating entry/membership fees, merchandising and TV rights allocations all controlled by MLS;
  • Selling off the teams at current values (as listed by Forbes) with a premium for the large-market established teams and smaller premium for all teams which would be included in the top division in the first year.
  • Using European or East Asian examples, show a representation or template of the fee structure for established teams as well as new entrants.
  • Using European or East Asian examples, provide some kind of real world example to highlight the positive earnings of the league hierarchy year over year.
  • Using NASL/Whomever attendance figures, point out there clearly exists 40 teams ready for a two division national structure in the USA. (Brazil had only two twenty team national divisions until 2009, when they rearranged after too many smaller teams had grown large enough to support increasing the national hierarchy)
  • Propose a regional structure to accommodate new and small teams since the United States is gigantic
  • Using the US Census, project the number of cities able to accommodate a team in such a hierarchy, also projecting the potential number of employees/players/team workers at a rate of 1 team per city.
  • Reflecting that under modest rate of 1 team per eligible city, MLS’ scope would surpass all sports organizations except perhaps NCAA initially.
  • Using plentiful European examples, note the humble facility and player salary requirements necessary to start a successful small club. – America’s high schools would suffice as stadiums for many new teams and they would still have larger capacity than many lower division European counterparts.
  • Noting the benefits of Billionaire Toy Men throughout the open systems of the world. Many individual teams like Real Madrid and Chelsea operate at massive losses because their billionaire owners do not care and are always willing to put more money into their toy. This cash influx strengthens the league and heightens interests by bringing players who would otherwise never come a la HAVE YOU SEEN REAL’S LINEUP AND BENCH!?! IT’S INSANE!!!
  • Reminding that leagues don’t actually care if the teams lose money or dissolve…i.e. no financial risks or worries regarding failing teams. Replacements are ready to fill the gap from the league below if an adjustment is needed. The league still gets paid and controls everything.
  • Finally, doing a lot of math and charts and providing some kind of revenue projection to a company operating the hierarchy alone in America, using whichever modern example I could locate and adjusting as best as I could justify.
  • Showing that while 20 or 25 MLS teams will never compete with aggregate economic market share of any of the big leagues individually (MLB/NHL/NBA/NFL/Liga/EPL/Bundesliga), a hierarchy of hundreds of teams in the USA (1st ever system here) would eventually match their market share and perhaps surpass many of those mentioned, with a rising tide rapidly increasing the value of the larger market or long-established teams. (My plan was to figure this math projection out later or fudge it completely – when you go this far, you do not turn back)
  • Noting the current single-entity structure means only MLS is reasonably capable of implementing such a system in the United States, thus the competitive advantage obtained against MLB/NHL/NBA/NFL would remain for the foreseeable future. The current structure of those leagues as independent corporations and not a single entity makes a conversion to such a system incredibly unlikely. Only when MLS’ wealth surpasses them would any consider changing and the multiple ownership structure would render it difficult even if a portion of their league wanted a switch to match MLS’ competitive advantage. MLS would likely be the sole promotion and relegation system in America for a very, very, long time.
  • EDITED UPDATE – Discussing the political and social benefits as well as the corporate goodwill having America’s first open system would create because of the positive effect on minority ownership in professional sports.

This was the audacious and somewhat crazy plan I hoped would get promotion and relegation going in this country. So as I started thinking about what it would take to write it, I wondered to whom it would be sent.

I decided I would locate the actual majority owner(s) of MLS since nothing is happening without them taking action, either directly or by allowing a sale of the corporation. It’s better to be denied by the real decision maker, even emphatically with them laughing at you, than to never get to ask the question. And I’d prefer an emphatic denial than arguing on twitter forever. Plus, it can be reproduced quickly if someone with sufficient capital power and balls is ever identified and within my meager electronic grasp.

As it is, another unfinished odyssey began.

So who matters in MLS and who doesn’t? And who are the majority owners?

When looking for info on any corporation, start with the best in the business: Bloomberg. MLS LLC is a private corporation so Bloomberg won’t have the data or info comparable to what is displayed for Apple or a public company but they should have something.

While most think Commissioner Garber runs MLS similar to the way Roger Goodoofus runs the NFL, they are very wrong. The NFL is comprised of individual corporations who essentially vote Goodell to be their King. While he can be removed by the actions of the owners together, there is no one above him. And while he is not an owner, he is the one person who is guaranteed to have direct access to and even leverage with every owner.

Commissioner Garber is not that man. He is an employee who may have no access to owners. Though I’m sure he’s aware of the obvious influence of people like Mr. Kraft, he may not even know the exact ownership structure himself. Unlike the NFL or any well-known sports league, MLS LLC is one corporation and its C.E.O is Richard A. Peddie, the former C.E.O. of Maple Leaf Sports Entertainment. At least this is what Bloomberg surprisingly told me.

http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=4312581

Surprising because there is no mention of this esteemed position on his profiles online or on twitter, where it does list his former work for the Maple Leafs, Raptors, and so forth. (as of date of writing, 3/8)

Searching online was also made more difficult because of the similarity of MLSE (Maple Leaf Sports Entertainment, also an MLS team owner) and MLS itself but it is clear Mr. Peddie’s rule atop the league is obfuscated.

While @thesoccerdon (Commisioner Garber) has 150K twitter followers, the actual don of soccer has only 3K (as of Friday 3/6) and seemingly no one knows how powerful he is within American soccer. I have cousins with more followers. Imagine if Mr. Goodell’s or Mr. Stern’s powerless underlings had 50x the Twitter followers than them.

Nevertheless, someone was located for whom I could plausibly locate a business address and deliver a letter and dupe/convince them to read it. And by some small slither of a World-Cup-hoping chance, maybe the report would go up the ladder rung, only one step now, to the real owners of MLS LLC.

But I still had two questions scratching my curiosity.

  • If Mr. Peddie never gives it the time day (99.X% probable), who are the real owners so I can email bomb/somehow get it to whatever capital corporation they use as vehicle for their bidding (i.e. if it were Warren Buffet, I’d email bomb/certified mail the Board of Directors and various analysts/idea-needy-employees-looking-to-impress at Berkshire Hathaway – not Warren or his family themselves even if I could locate such contact info.) In fact, why not just do my best to go over Peddie’s head straight to the majority owner(s)?

And

  • Why has Mr. Peddie been hiding from what appears to me to be a pretty freaking awesome job? Since I planned to go over his head anyways, I decided to ask him directly. And about a lot of questions about promotion and relegation and MLS LLC.

While he maintains an active twitter account, he ignored me so I checked another favorite corporate site called Corporate Wiki looking for any data or leads.

http://www.corporationwiki.com/New-York/New-York/major-league-soccer-llc/34579837.aspx

You’ll notice MLS LLC is linked to an alternative/sister corp called MLS Partners LLC, which I didn’t think much about at first glance. I did ask Mr. Peddie but he ignored me.

As corporations file reports in many states, a site like Corporate Wiki will pull many duplicates from the public records. Here is the one from Florida:

http://www.corporationwiki.com/New-York/New-York/major-league-soccer-llc-6340548.aspx

Following the information provided, I checked Sunbiz.org, Florida’s Department of State site and located a list of twenty-one corporate directors I refuse to type:

Directors One

Directors Two

It should be intuitively obvious who owns a couple of these corporations but no information on ownership percentages or voting rights is provided.

Since MLS LLC is a large corporation, they get sued and sue people. If you have never been sued, there is this nasty thing called discovery where parties often have to file revealing information into the court system. But guess what, MLS has good lawyers and solid strategy. In every federal case in which they were a defendant (since 2005), they either won on Motion to Dismiss or settled before discovery was due. At least a couple of times with a discovery deadline looming large. There is no recent data on MLS LLC’s structure in the federal court system which I could see.

So next came logic. The voting power within MLS LLC has likely never changed since its inception or rather not significantly. Why would it ever? If you controlled a corporation, the only way you would ever yield voting power to a new investor or another party is if the corporation was struggling and desperately needed a capital infusion or you wanted to spread the risk of failure to others because you are worried. After its initial survival, the default risk of MLS was too low for an owner to consider selling voting stock to avoid financial loss in the event of failure. There is no need to worry about this. If MLS itself were struggling financially at any point, rest assured the billionaires behind the scenes are not. They would merely infuse cash and keep their stake since they themselves, or the parent corporations they control, are not struggling. And even if MLS LLC needed cash to grow or for a capital project, the parent corporations would likely infuse cash rather than yield control to a new investor.

It is a presumption but more than likely, new investors or these “entrepreneur groups” that manage individual teams are only offered restricted/non-voting stock or minor voting interests. There is absolutely no logical reason to ever sell a significant voting interest within MLS. If a potential investor doesn’t like it, tough shit. MLS doesn’t financially need the new investor so much that it would agree to yield power. They’d just wait for another sports-enthused rich guy to come along who’ll happily get paid from a non-voting position and toy around with a team. The World Cup rejuvenates interest in MLS every four years, anyways.

So in searching for the original owners and limiting Google to hits before 1997, the best thing I could find was this Fifa news report about the new MLS league.

http://www.fifa.com/world-match-centre/news/newsid/714/11/index.html

Investors:

Boston: Robert and Jonathan Kraft; Columbus: Hunt family and a group of Columbus investors; Denver: Philip Anschutz; Kansas City: Hunt family and a group of Kansas City investors; Los Angeles: LA Soccer Partners, presided over by Marc Rapaport; New York/New Jersey: John Kluhe and Stuart Subotnick; Washington D.C.: Washington Soccer, L.P., led by API and presided over by Kevin Payne.Dallas, San Jose and Tampa as yet have no investors and may have to be financially supported by the league itself.

Going through the names, the biggest hitters I can tell are:

  • The Anschutz Family and therefore The Anschutz Corporation (mega-big, private), led by Chairman of the Board and owner Philip Anschutz. (TAC is in Denver but Los Angeles is Mr. Anschutz home/sports focus)
  • The Kraft Family and therefore The Kraft Group (mega-big, private), led by Chairman of the Board and owner Robert Kraft. (Boston)
  • The Hunt Family and therefore the Hunt Sports Group, LLC (mega-big, private) led by family patriarch Clark Hunt, son of departed Lamar Hunt and grandson of oil tycoon H.L Hunt (Columbus, Kansas City, Dallas)

The other guys are rich too but there is no way the three above handed over any amount of money without significant control from inception. Also, The Hunt Family and Anschutz Family are related together through a marriage so while I don’t know how independent/connected their interests are, we can assume at least some kind of close or amicable relationship regarding MLS. With Mr. Kraft as well but he does not appear to be as closely connected as Mr. Anschutz and Mr. Hunt are to each other.

It is clear promotion and relegation will not happen in America unless it is done by one of the three parent corporations controlled by these men or them in unison. There is no point in arguing with Alexi Lalas, whose brother is MLS editor-in-chief, or any media member connected to or paid by MLS. It is not their fault either: employees do not get to rock the boat of their own company. Go try it yourself and see how well it goes.

At this point, I was relatively certain I had located the entities who were more than mere minority holders with voting rights but rather the exact majority owners. Granted, the whole thing may also be owned by Lord Rothschild, the Ayatollah and Kim Jong-Un but it appears there is no way anything happens in MLS without the three above letting it happen.

There is also slight empirical evidence supporting this on the pitch. Is it a marvelous coincidence the hometown teams of these power brokers over-perform in MLS? Admittedly, twenty years is a not a large sample but MLS is a single-entity structure with player allocation rules and restrictions designed to provide parity. It is portrayed as pure competition but it is a toy they own and if they so desire they can subtly do as they please. While no one can control who scores a goal, it is essentially the WWF version of soccer. Go Wizards! Go Revolution! Go Galaxy!

I should have stopped here and started the report.

But what the heck is MLS Partners, LLC?

http://www.corporationwiki.com/p/2espfd/mls-partners-llc

(originally created in Delaware on 2/19/2014 but also recorded in California)

Corporations start other corporations all the time for various reasons. They are easy to start. So since first seeing it, I just presumed it does something ordinary and trite.

But I could not stop wondering. I could not find any news about it either and corporate wiki says it was only created last year. If the NFL started a joint corporation or venture, or does anything anywhere, there is always at minimum an online press release followed by an army of click-needy sports sites. Yet I could find nothing and the cross-references with other entities drowned out every search.

It does not appear to be an owner or part of MLS LLC but rather MLS LLC appears it may be an owner of it. So I tweeted Mr. Peddie, who I had been peppering with tweets and questions as well as Commissioner Garber hoping they’d respond if even a no comment. I would have pinned your ‘no comment’, Mr. Peddie.

After being sufficiently annoyed by my repeated questions and tweets, Mr. Peddie simply blocked me. They could have just said it was a marketing vehicle or anything bland and I’d probably left it alone. I pondered starting a new handle just to ask him more questions but thought he may at this point wrongfully construe me to be some kind of stalker.

When you are in a rabbit hole, sometime you fail to see what is going on overtly at the surface. I had completely forgotten MLS is negotiating a collective bargaining agreement, which will dictate exactly how everyone gets paid going forward.

Early in my career, I was at an organization under going such a negotiation and I wanted to be on the union team even if just to learn. This was a good-guy, for-the-people type of organization too. To bystanders and myself going in, you would have thought they’d behave appropriately.

Immediately, management said they are struggling financially and we’d all have to accept no raises rather than what was provided in the past plan. They bellowed and whined in a self-righteous manner about how all of our jobs are so valuable and we should be so happy to not be searching like all the other unfortunate souls out there.

We asked politely to see a current account statement of all accounts and tax returns for two years so that we could be sure the corporation was struggling to a point where we would need to accept their horrible first offer. Let’s just say we did not get good looks from across the table that day. They did not expect this request and because they had brought nothing, we had to adjourn. The next day, they brought a budget from an excel spreadsheet and said this is “the situation”. We advised a budget is useless in determining health unless we can see the actual results and pre-projections of last year’s budget to compare as well as the documents demanded yesterday. We adjourned again but without rescheduling a date to continue. Annoyed, we searched ourselves and obtained five years of tax records because they had a hidden reporting requirement with a particular agency that maintained an active website we could access publicly.

Guess what? The mofos were lying through their teeth. The organization was in awesome financial health and negotiations ended with a properly increased raise plan rather than what they wanted.

This is how bargaining negotiations go. One side hides the ball to project a worse financial situation to get a better deal. Imagine yourself as a tourist in a market overseas: You do not let the merchant know how much money is in your pocket when negotiating the price of whatever you want to buy. Same principle applies.

MLS LLC was the stand-alone umbrella corporation for all of Major League Soccer since 1995. In 2014, they founded/became involved with a sister corporation, MLS Partners, whose purpose is totally unknown. In 2015, they undertook extremely valuable collective bargaining negotiations with the players union. I still believe in the high probability MLS Partners is completely innocuous. I would not be able to conceive the size of the balls of these guys otherwise. Enron-ish. But the timing is definitely curious and modestly suspicious.

So after all this and getting distracted from my original purpose of doing a report to convince rich men to see an obvious light, I am left wondering if MLS would dare commit large-scale commercial manipulation (fraud?). Doing it so they would be able to present the Players Union with financial statements from MLS LLC which would be stamped, signed and audited appropriately but not showing the full picture of the organization.

All of this can be resolved with one question to the Players Union: Do you know of MLS Partners, its purpose or its financials and did you know prior to getting strong-armed?

EDITED 4/8(((: Of course, no one in MLS is going to answer me no matter how many times I ask. And the Players Union has not responded either despite my emails, phone calls, tweets and various attempts. Deadspin and Gawker media advised they would seek an answer, along with others, but no response from either MLS or MLSPU has been made known. )))

Depending on what the answer is (and if it is ever received), this could go several different ways. Some of them would not be good for many people. I hope it was disclosed and not another casually ignored secret like Mr. Peddie’s role as C.E.O. of MLS LLC, as indicated by Bloomberg News as of 3/8/15. Or the other secret regarding the exact ownership structure of MLS LLC.

But maybe, just maybe we will find what is going on within MLS and why the organization sanctioned as division one in America operates so shadily.

_________

As for the business plan, it will have to sit for a while. If some college finance major or graduate student would like to do it as a project, you’d get an A from me. Also, please let me borrow it if you don’t mind.

Finally, if you desire to make an attempt to change the system here in America, I suggest you speak in terms of $$$ rather than sense. That is all these people care about. Do not hate. It is normal.

___________

Edit: Fraser vs MLS discussed the structure in 2002. There is no reason to think this has changed. And as MLS became profitable, it is even less likely to change.   Fraser - MLS structure 1Fraser - MLS structure 2

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