Charlotte sports exec kicking around Major League Soccer bid

By Erik Spanberg
Charlotte Business Journal
Published: January 24, 2014

The managing partner of Charlotte’s professional lacrosse team wants to add Major League Soccer to the city’s sports portfolio. All he needs is about $75 million or so and a major facelift for Memorial Stadium.

Then again, for 40 years or so, no one ever thought professional soccer would work in the U.S., and look at it now.

Two MLS teams awarded in recent months sold for $70 million and $100 million, respectively, the most tangible sign yet that soccer has realized a sustainable American audience after decades of false starts.

In Charlotte, many questions remain when it comes to the possibility of landing an MLS team.
For starters, who picks up the check? Jim McPhilliamy, managing partner of the Charlotte Hounds, the three-year-old lacrosse team, told me this week his group’s option to purchase the rights held by the Charlotte Eagles in the top tier of the United Soccer Leagues is viewed as a springboard to landing an MLS club. McPhilliamy said the goal is to attract 8,000 fans per game once his group runs the Eagles in 2015 and, at the same time, seek major investors for an MLS expansion team within a few years.

The fate of the Eagles involves McPhilliamy buying the rights to field a franchise in the United Soccer Leagues, a team that will have a new name. (Did someone say Bobcats? Only if that someone has been drinking. A lot.) As for the Eagles, that name and team will stay but move to a lower-level league. McPhilliamy noted he is just buying franchise rights in the USL from the Eagles owners, who will maintain their focus on faith-based programs through sports.
There are 19 MLS teams now, with a second New York club and one in Orlando, Fla., joining in 2015. Last summer, league executives said they hope to have 24 teams by 2020. With additions likely in Miami and Atlanta in the near future, the MLS would be at 23 teams and, based on its growth plans, have one more expansion city to choose. San Antonio and Charlotte are among the interested cities.

Dan Courtemanche, an MLS spokesman, told me Friday the league is aware of McPhilliamy’s interest and the imminent purchase of the United Soccer Leagues’ Eagles franchise. Ownership, sports interest and, more specifically, the appetite for soccer at all levels are among the most important factors for an expansion city, he said.

Team operators in the MLS own a stake in the entire league, not just their local team. That structure differs from the NFL, Major League Baseball and NBA, among others. In those older, more lucrative sports leagues, team operators buy an individual franchise. Thus, Jerry Richardson and his investors invested $200 million to acquire the NFL Carolina Panthers in 1993. Because of pro football’s dominance on TV and in ticket sales, the Panthers are now worth $1.1 billion, according to Forbes. The same magazine ranked the MLS clubs in November 2013 and valued the most successful team, the Seattle Sounders, at $175 million.

Despite the disparity, sports business executives applaud the MLS for a decade of impressive growth. In 2004, the league consisted of 10 teams after contracting by two clubs two years earlier. The MLS started in 1996. Its investors now include major backers from the NFL (the Kraft family, which also owns the New England Patriots; Paul Allen, owner of the Seattle Seahawks; and the Hunt family, owners of the Kansas City Chiefs), Major League Baseball (John Frisher and Lew Wolff, principal owners of the Oakland A’s) and the NBA (Stan Kroenke, whose sports holdings include the Denver Nuggets and NHL Colorado Avalanche). Boxer Oscar de la Hoya, NBA player Steve Nash, Hollywood producer Joe Roth, comedian-actor Drew Carey and former U.S. Treasury Secretary Hank Paulson are also MLS investors.

ESPN, NBA and Univision show MLS games nationally. Later this year, a new TV deal is expected and, thanks to the combination of MLS growth and relentless competition among cable networks to snatch up sports rights to bring in more viewers and advertisers, it should come with a healthy jump in TV revenue. The jump could be even higher if TV ratings were better. MLS audiences on ESPN and ESPN2 declined by 20 percent in 2013 from the previous year, according to the SportsBusiness Journal, a sister publication of the Charlotte Business Journal.

Sponsors leaguewide include adidas, Anheuser-Busch, AT&T, EA Sports, Gatorade, The Home Depot, Microsoft, Pepsi, Visa and Wells Fargo. With all of the gains, the MLS still has much work remaining. Starting with profitability. MLS Commissioner Don Garber said this month his league still loses $75 million to $100 million annually.

“MLS is extremely viable, especially in Seattle and the Northwest and parts of the Northeast,” Sports Value Consulting president Michael Rapkoch told me. “In other areas, it’s taken longer. When you look at a league expanding, you have to look at the viability of each market.”

McPhilliamy, the Charlotte lacrosse managing partner, said the Carolinas will be a natural expansion area for the MLS. Considered in that context, Charlotte really just needs to beat out the Triangle, he said.

Stealing a page from Portland, Ore., one of the most successful MLS cities, McPhilliamy said Mecklenburg County-owned Memorial Stadium could be updated much the way Portland overhauled a minor-league baseball stadium opened in 1926. The biggest changes came as part of a $40 million makeover finished in 2011.

Nothing that ambitious has been discussed in Charlotte. At least not yet. McPhilliamy and the county park and recreation department want to widen Memorial Stadium’s field in time for the 2015 season and install a turf field. The lacrosse and soccer seasons overlap in the spring and summer. With a grass field, the constant use would mar the playing surface, McPhilliamy said.

Memorial Stadium opened in 1936.

The cost for the widening of the field and turf will likely range from $1.5 million to $2 million, the Hounds partner estimated. He also said the Memorial Stadium changes would be paid for with private money.

“We are close to having a proposal on what we would do to the stadium, what it would cost and how long it would take,” said Jim Garges, park and recreation director. “If we move ahead with expanding the stadium (by widening the field), then the hope is to identify the money (and ownership group for a franchise) and entice the MLS.”

MLS teams combined for an average of 18,000 fans per game in 2013. Capacity at Memorial Stadium would be reduced from 17,500 to 15,000 with the changes to the field dimensions. Since the Hounds draw 5,500 fans per home game, McPhilliamy said the popularity of soccer makes it realistic to target an average of 8,000 fans for the renamed Eagles.

The Hounds have five employees and would add three more if and when the purchase of the soccer club is completed in September. The option to buy must be exercised in June. Combined, the lacross team and soccer franchise would generate $2 million annually. McPhilliamy said profitability would also be accelerated, but he declined to disclose specific figures. Sponsors added for the Hounds season, which begins in April, include Harris Teeter, East Charlotte Nissan and Adams Beverages. Sponsorship revenue has increased by 33 percent, said Wade Leaphart, Hounds general manager.

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