Developing Sustainability Models for Emerging Soccer Markets

 

The game of soccer is continually growing around the world and this growth is being fueled by an increasingly connected world. The 2014 World Cup could be seen as the first "social media World Cup", where billions were able to follow the game via the internet in addition to tradition satellite, cable and over-the-air broadcasts.

Despite the massive growth the game, across a wide spectrum of global socio-economic settings, teams still continue to struggle at being commercial viable. In many other countries, the leagues remain under-developed, with little visibility on television or the Internet media and teams within these leagues struggle to function from year to year. The lack of visibility of leagues worldwide is in stark contrast to the wealth of enabling technology available to help teams gain more exposure.

The World Bank classifies world economies as low-income, lower-middle-income, upper-middle-income, and high-income economies. What is interesting is that similar problems exist in the game of soccer across these classifications and these problems constrain the commercial viability of the game of soccer. The end result is that soccer is seen as a bad investment. This need not be the case, and the scenarios of teams going bankrupt can be reversed.

The common problems that exist are:

- Poorly marketed teams.
- Low attendance numbers.
- Lack of a live-broadcast strategy.
- Lack of an Internet presence.
- Lack of branding of the team and league.
- High debt to income ratio.

These problems lead to an inability to pay wages, poor talent recruiting, corruption and eventually bankruptcy. Poor national leagues, ultimately lead to poor national team performances in FIFA tournaments.

As a players' agency, Concorde Sports Agency is active in the United States, Europe and Africa. Our agency has observed the same problems across all of these regions. This initially was surprising, but upon closer observation it became clear that it is very easy for teams and leagues to not have a top to bottom model for sustainability, and this is independent of the country you are in.

A solution to these problems is to implement a sustainable business model that promotes the league brand and exports it beyond it domestic borders at the top, and builds strong community involvement at the local level. The ultimate goal is to build commercially viable teams within a league structure, that provides entertainment value and can pay the wages of the players.

Here are some observations from around the world:

In the United States, the upper tier is dominated by the MLS. The MLS stands out above many leagues in the world in its well-organized business structure. In the MLS, wealthy ownership groups who are keen to protect their investment ‘own’ the individual teams. These owners have learned the lessons of the predecessor to the MLS, the original NASL, as well as the debacle of two National Hockey League (NHL) lockouts.

The two NHL lockouts were triggered by among other things salary disputes and free agency. They ultimately resulted in a migration of wealth from Canadian Teams and the eventual demise of some traditional Canadian Ice Hockey teams. Since the last lockout occurred in the mid 1990s, no Canadian team has won the Stanley Cup.

The MLS has apparently learned from this, and has teams in strategic markets and imposes a strict salary cap model, which it has slowly loosened over time. The MLS salary model now has an allowance for extra expenditures on special players. The salary cap allows for a full team to be fielded within a budget structure, anything beyond that is a "designated player". This model is tinkered with every season. These constraints that the MLS has imposed on itself, and the lack of a promotion and relegation structure in the United States, have drawn much criticism. However the salary cap concept does have a valid reason for existing, as sports leagues are a high failure enterprise.

The U.S. soccer landscape below the MLS consists of the NASL, the USL, the PDL, the NPSL and a myriad of city leagues (like the UPSL and the APSL). The vast majority of these teams do not have the benefit of wealthy ownership groups, and week-to-week expenses (salaries, infrastructure, logistics, etc.) weigh heavily on the team ownership. These teams very often must devise ways to increase attendance, gain sponsorship and hope for some media broadcasts of their games.

Due to these challenges, a few teams at the lower tiers of U.S. soccer have folded and ceased to exist. A key area for teams in the United States is to increase local attendance. Some teams such as the Sacramento Republic of the USL have had up to 20,000 fans at a game. These numbers are comparable to the average attendance of fans at a Miami Heat game (typically about 19,000). Other NASL, USL and PDL teams have had low attendance, which cause them to operate in the red.

Amateur soccer in the United States is also hampered by overlapping regulatory bodies (AYSO, NAIA, NCAA, USSF) with conflicting rules. This has drawn criticism from the U.S. National Team Coach Jurgen Klinnsmann among others.

A few proposed solutions to this are:

1) Increase local attendance.
2) Improved marketing the US Open Cup, locally and nationally.
3) Harmonize amateurism, by lengthening the soccer season, and removing rules restrictions.
4) Having PDL, USL games reported on the local Sports News (they are mostly ignored).
5) Encourage local city leagues like the UPSL with city Cup tournaments that include the local professional teams. These could serve as preseason tournaments for these teams.
6) More billboards and advertisements.

As teams grow, so do the employment opportunities for players. Players and Players' Agents are limited by the availability of viable employment markets for their players. Improving the commercialization of the game helps players get jobs and creates ancillary jobs in the local community.

In Scandinavia, the same problems exist. It is not uncommon for a team in a Nordic country to tell you that they do not have "the economy" or their (team) "economy is bad". At the highest level one of the biggest problems are high debt loads. Teams take on debt, and become financially unstable. From time to time, the national federation has to intervene and threaten to withdraw the operating license of teams. Sometimes an angel investor appears at the 11th hour to save their childhood club. The concern though, is whether these clubs are operating as commercially viable businesses in the first place. Nordic clubs struggle in this area, as they try to grow from community associations to clubs that compete with the European elite. Very often, these clubs become a money pit for investors and are eventually sold, merged with other teams or liquidated.

A few proposed solutions - A major problem is clubs overspending on players. Where the salary cap is criticized in America, there may be a place for salary caps in Scandinavia, which would force teams to scout harder and find good talent at a cost they can afford. In extreme situations where teams cannot afford to pay wages, cooperative agreements can be reached with young talented players, such as housing and a stipend, or individual player sponsorship. At the end of the day bankruptcy has a negative effect on the community.

In Africa, there is an abundance of talent and very often adequate infrastructure, but very poor marketing and branding of the local leagues. Several African Leagues pay better wages than can be found in European Leagues. For instance Sudan is listed as one of the top countries in terms of player wages and holds the record for the highest transfer fee paid for another African player.

The problem in Africa is that many African countries often prefer to watch EPL games in a local bar as opposed to watching their local clubside in a stadium. There has been a marked declined in attendance for many local clubsides since the 1970s, and these clubs bare the blame, as they have been slow to adapt at marketing the domestic product in an attractive way. The notable exception is South Africa, but even in South Africa, the local broadcasters implement overly strict regional content blocking, which prevents international audiences from even viewing highlights of the local league. These insular practices, though well intentioned from a media-rights perspective make no sense. The ultimate goal is to promote viewership and not restrict it. In contrast, the MLS publishes highlights often across all media (Facebook, YouTube).

These problems have been recognized by some, most notably in Zambia and Zimbabwe where efforts are being made across to increase exposure. For instance the Zambian Federation (FAZ) is very active on social media, and the Zimbabwe League keeps up to date schedules of league matches. However, on a whole the game of soccer in many African soccer leagues is still poorly packaged, and is not well marketed as a weekend entertainment event.

The solutions here are:
1) Advertise the games locally
2) Have league schedules released early
3) Broadcast games over-the-air, via the internet or via satellite.
4) Make heavy use of social media - Release highlights of the game and make them available via YouTube or Facebook.
5) Try to attract some foreign talent.

Our work:

Concorde Sports Agency has been involved in developing the game of football in emerging 'football markets' to help expand the employment market for professional footballers. These markets are the American soccer pyramid below the MLS, and football (soccer) leagues in Sub-Saharan African and across the Caribbean, where we are advocating for a Pan-Caribbean Professional Football League.

This work has resulted in the recovery of significant transfer fees due to small clubs, developing league concepts for the Caribbean region and developing a media presence for teams in Africa.

For Concorde Sports Agency, a key part of our philosophy is creating sustainable teams and league models, i.e. helping teams win in the talent/scouting side and in the financial/economic side of the game. Finding a balance, especially in leagues with a promotion and relegation structure is critical. In the end a team should be a successful commercial entity, operating in a profitable manner.

The commercial viability of soccer teams is a necessary requirement for players to be employed. Our works in these regions have uncovered surprising commonalities that restrict team growth and player employment. With a proper focus, and the implementation of sound strategies these problems can be resolved.