MLS Is Jacking Up The Entry Fee For New Franchises

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If you want to get behind the velvet rope at Club MLS, you’re going to have to pony up more for the cover charge.

MLS Deputy Commissioner Mark Abbott told reporters that expansion fees for prospective franchises could be increased to $200 million.

Abbott said the increases are still being worked out and that discussions have taken on a renewed sense of urgency thanks to growing interest in the league.

”There has been incredible interest from cities across the country in acquiring a Major League Soccer expansion club and we continue to have productive discussions with a number of prospective ownership groups. Following the Board of Governors meeting, the league is continuing to work on the timetable and the details, including pricing, for future expansion and no decisions have been made. Based on the increasing value of MLS clubs, expansion fees could be as high as $200 million.”

The new expansion fees represent a sharp increase from just a few years ago. NYCFC’s expansion fee was about $100 million in 2013, while LAFC secured their spot for $110 million in 2014.

MLS is expanding to 24 teams in the next few years. Atlanta United’s inaugural season is next year while LAFC is jumping in for the 2018 campaign. Minnesota is slated to join in the near future, although the timing is still being worked out. The league is also still at the negotiating table with the Miami investment group led by David Beckham.

In the medium term, MLS is eyeing a 28-team structure. Several cities are being considered for that class of expansion, including St. Louis, Cincinnati, Sacramento, and Detroit. It’s this crop of potential new teams that would be affected by the new expansion fees the league looks set to roll out.

According to Forbes, the average valuation for MLS teams is $157 million, with only three clubs— Seattle, LA, and Houston— rising above the $200 million mark.

How the new expansion fees will affect investment remains to be seen. MLS has demonstrated that certain “minimum requirements,” such as having a soccer-specific stadium in the works, can be worked around if the league (and specifically Don Garber) sees value in the proposal. And since the league functions as a single entity, they can pretty much write their own rules and then bend or break them as they see fit. So it’s entirely possible that the $200 million figure can be brought down if the league really wants to work with a particular city or investment group.

That said, the new price is sure to induce some sticker shock. Compared to the other major professional sports leagues in North America, MLS’ value proposition as a smart investment has largely been down to its relatively low buy-in. (Some might say that’s a necessity, given that TV ratings, while improving, still have a long way to go.) It’s not inconceivable that the doubled expansion fees change the calculus enough that MLS isn’t quite value for money for some of the investment groups looking at the league right now.

It seems like MLS is throwing that number out there to see if the market will bear it. We’ll find out in the not-too-distant future if they made a good bet.

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