Sportico published information that essentially listed MLS clubs as more valuable than several of their Premier League counterparts. This, unsurprisingly, does not apply to the likes of Manchester United and City, Liverpool, Chelsea, Arsenal and Spurs.
However, the seventh most valuable team in the Premier League, Everton, had a valuation similar to that of the New York Red Bulls. RBNY is ranked 18th in the latest MLS team ratings.
At first glance, this is almost absurd. The Premier League is much more popular, much more cash-laden, and simply historic. Half of the 28 MLS teams that competed in 2022 only joined the league as of 2010. Furthermore, the Premier League is a global league, the most popular domestic competition in the world. By comparison, Major League Soccer isn’t even close to being the most popular competition in its own country.
However, the assessments could have some validity, says sports economist and Soccernomics author Stefan Szymanski. The professor of the University of Michigan Szymanski clarifies saying that the evaluations of experts and analysts can be wrong. Also, these are not market values. In other words, Everton are likely to be sold for more than their ‘valuation’ as they may have a higher market value.
Growth and valuation multiples
Before we get into why or why these MLS clubs are not more valuable than EPL teams, first understand valuation. It is based on multiples of income. Mathematically, that’s the total value of the company or team, including all assets, divided by its annual revenue. Based on that, MLS teams operate at a revenue multiple of 10.
Revenue multiples are higher in closed leagues like MLS than in open leagues like the Premier League. This comes from risk. Teams that suffer relegation to the Championship assume an estimated loss of over $250 million due to lack of television deals and other factors. Szymanski says that risk affects a team’s overall valuation.
In addition, the assessments made by Sportico experts assume growth. With the growing popularity of soccer in the United States, there are reasonable beliefs that growth is considerably 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 growth beliefs.
MLS teams are more valuable than EPL clubs
the case for
MLS clubs can be more valuable if the growth is valid. So, Szymanski identified five aspects of American soccer fandom that may see this potential growth, and thus assessment, realized.
The first is that Americans embrace soccer in the same way that they follow Major League Baseball or the NBA. So as a result, MLS becomes the popular soccer league on TV. It usurps both the Premier League and Liga MX, both of which have a larger audience than MLS. Consequently, popularity revenue growth attracts top talent from around the world. Plus, it’s not just the ‘retirement home’ stigma or Lionel Messi joining Inter Miami in the twilight of his career. These are top-tier talents in their prime.
The growth of MLS is also due to the national team. The 2022 World Cup attracted the interest of millions. If America can develop talent as competitive as the women and the NWSL, MLS can recruit them to grow the league. Finally, Szymanski says that the 2026 World Cup may generate interest in the sport.
If these scenarios are true or happen in the near future, the current valuations are credible. Analysts make these assessments 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 a thing will be true in the future, it doesn’t have to be so.
For example, Szymanski mentioned that MLS team revenue hasn’t grown much faster than its counterparts in Europe over the past two decades. Instead, MLS clubs took advantage of the global soccer boom. Also, applicable to many readers here at World Soccer Talk, MLS struggles to make an impact on television. Szymanski points out that that’s where the money is.
The recent MLS deal with Apple is a big risk. Yes, it’s profitable for the league, as Apple paid $2.5 billion for a 10-year deal to stream all MLS games. However, ESPN and Univision withdrew from the linear television agreements with MLS. While cord-cutting is commonplace for American soccer fans, the deal may not be ideal for casual fans.
Szymanski also raised concerns about waves of popularity and talent. Most of the US fan base only follows soccer during major international competitions. It is easy to support the United States in the World Cup, the Gold Cup or the Copa América because we are Americans. It’s more challenging for someone in a more rural part of the country to actively support an MLS team with which they have little connection. Furthermore, without much greater investment in talent, quality and perception will not improve on a scale that accommodates the needs of these growth expectations.
If the case against MLS growth is true, then the pundits overrated these MLS clubs.
PHOTO: IMAGO / Icon Sportswire
