Sportico has released information that is essentially stated MLS clubs as more valuable then some of them Premier League counterparts. This, unsurprisingly, does not apply to players like Manchester United and City, Liverpool, Chelsea, Arsenal and Spurs.
However, the seventh most valuable Premier League side, Everton, had a similar valuation to the New York Red Bulls. RBNY is ranked 18th in the latest ratings of MLS sides.
At first glance, this is almost ridiculous. The Premier League is much more popular, much more money-laden and simply historic. Half of the 28 MLS teams entering in 2022 only entered the competition from 2010. The Premier League is also a global league, the most popular domestic league in the world. By comparison, Major League Soccer isn’t even close to being the most popular domestic league.
However, the valuations could have some validity, says sports economist and football science author Stefan Szymanski. Professor Szymanski of the University of Michigan clarifies by saying valuations by experts and analysts can be wrong. These are also not market values. In other words, Everton is likely to be sold for more than its ‘valuation’ as it may have a higher market value.
Growth and multiples of appreciation
Before getting into why or why these MLS clubs are more valuable than EPL teams, first understand the valuation. It is based on multiples of income. Mathematically, that is the total value of the company or team, including all assets, divided by annual revenue. Based on that, MLS teams work with a turnover multiple of 10.
are multiples of income higher in closed leagues like MLS than in open leagues like the Premier League. This comes from risk. Teams relegated to the championship are estimated to suffer more than a loss $250 million due to lack of TV deals and other factors. Szymanski says that risk affects a team’s overall valuation.
The valuations of the experts at Sportico are also based on growth. With football becoming increasingly popular in the United States, there are reasonable beliefs that growth will be significantly faster than in Europe and the Premier League.
On Twitter, the question of whether or not MLS teams are more valuable than Premier League clubs boils down to the validity of those beliefs about growth.
MLS teams are more valuable than EPL clubs
The case for
MLS clubs can be more valuable if growth is valid. So Szymanski identified five aspects of American football fandom that could see this potential growth, and therefore appreciation, realized.
The first is that Americans are adopting football in much the same way as Major League Baseball or the NBA. Then the result is MLS the popular football league on tv. It takes over both the Premier League and Liga MX, both of which have more viewers than MLS. Consequently, the growth in popularity revenue brings in the best talent from around the world. Nor is this just the ‘retirement home’ stigma or Lionel Messi joining Inter Miami in the twilight of his career. These are top talents in their prime.
The growth for MLS also comes from the national team. The 2022 World Cup attracted millions of people. If the United States can develop talent as competitive as the women and NWSL, MLS can hire them to help the league grow. Finally, Szymanski says the 2026 World Cup could boost interest in the sport.
If these scenarios are true or occur in the near future, current valuations are credible. Analysts make these valuations with the hope and belief that MLS can grow.
However, valuations are risky.
The case against
The expectation of growth is, just that, an expectation. Just because some very smart people believe that one thing is true in the future, it doesn’t have to be.
For example, Szymanski said MLS revenue per team has not grown much faster than counterparts in Europe over the past two decades. Instead, MLS clubs benefited from the global rise of football. Also, applicable to many readers here at World Soccer Talk, MLS is struggling to make an impression on TV. Szymanski notes that’s where the money is.
MLS’s recent deal with Apple poses a major risk. Yes, it’s profitable for the league, as Apple paid $2.5 billion for a 10-year deal to broadcast all MLS games on streaming. However, ESPN and Univision both pulled out of linear TV deals with MLS. While cable-cutting is common for American football fans, the deal may not be ideal for the casual fan.
Szymanski also expressed concerns about popularity surges and talent. Most of the American fanbase only follows football during major international competitions. It is easy to support the United States in the World Cup, the Gold Cup or the Copa America because we are Americans. It’s more challenging for someone in a more rural part of the country to actively support an MLS team they have few connections with. Moreover, without much higher investment in talent, quality and perception will not improve on a scale that fits the needs of these growth expectations.
If the argument against MLS growth is true, then the pundits have overvalued these MLS clubs.
PHOTO: IMAGO/Icon Sportswire
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