As I look back at the stories covered in Total Footblog, few have received as much interest and attention as the saga of the New York Cosmos and Major League Soccer’s quest for a 20th franchise in New York City. I have covered these intertwined stories from every angle and, given the latest developments, I thought it was worth one last look before I go.
A Little Background
When I returned from South Africa and officially launched Total Footblog in 2010, a group of investors had just announced their intent to bring the New York Cosmos to Major League Soccer (MLS). Just over a year later, having spent a lot of money on nearly everything but fulfilling that promise, many of those investors were forced out by Sela Sport, a Saudi Arabian sports marketing firm believed to have been among those original investors.
As part of the reorganization, Sela Sport had also fired all but three of the Cosmos staff by the fall of 2011. And then announced that they still were unequivocally committed to getting the Cosmos into MLS:
“It is unequivocally the goal of the current ownership to become an MLS team in the most expedient manner possible, and decisions for the club will be made with this in mind.” – New York Cosmos, Nov. 2, 2011
Nine months later, in the summer of 2012, Sela Sport brought in a new investor, Seamus O’Brien. He is the chairman & CEO of World Sport Group, a Singapore-based sports marketing and event management firm. Despite having no experience running a soccer club and living 13 times zones away from New York City, O’Brien was appointed chairman of the New York Cosmos, who announced that they would be playing the 2013 season in the North American Soccer League (NASL)…and out on Long Island instead of in New York City.
Meanwhile, MLS started getting serious about building a soccer-specific stadium in New York City. First they looked at Pier 40 in Manhattan but then set their sights on Flushing Meadows Corona Park in Queens. Lobbyists were hired and an architect named. Things were starting to get very real.
In November, the Cosmos announced the appoint of Erik Stover as COO and then named Gio Savarese as the team’s coach. Both moves seemed spot on, and were well-received by fans and the media. Things were starting to look very promising for the Cosmos.
Then, at the beginning of this month, Stover held a Q&A with supporters and dropped two bombshells. First, the Cosmos were unable to field a team in time to start the 2013 NASL season. Instead, they are now aiming to join the league for the clausura, the second half of the season. Second, and arguably far more troubling, Stover admitted that the Cosmos are no longer unequivocally committed to joining MLS. He went on to claim that they remain intent on playing at the top of the US soccer pyramid, with the implication being that the club might try to elevate the NASL to first-tier status or even form an entirely new league.
And as MLS moves forward with its plans to build a stadium in Queens, rumors have begun to surface that the Cosmos are looking to build their own out on Long Island. Suddenly the widely held belief that the New York Cosmos would become MLS’ 20th franchise in New York City now looks about as likely as the Mayan apocalypse.
Some insist that this is all bluster, bargaining tactics by both the league and the Cosmos in an effort to negotiate a better deal for themselves. Of course the Cosmos severely weakened their bargaining position when they admitted they couldn’t field a team in time for the start of the 2013 NASL season.
Others actually prefer to see the Cosmos try to elevate another league to compete with MLS, assuming that – like the Cosmos – the other NASL clubs have the interest and financial resources needed to make that league competitive with MLS. And given Traffic’s recent moves against Soccer United Marketing in North America, anything is possible, isn’t it?
It’s All About The Money
With the exception of seeing the Cosmos become a modest NASL franchise on Long Island, patiently waiting for MLS to adopt promotion/relegation, all of the scenarios are based on the assumption that the current Cosmos owners have buckets of money to spend. In fact, every Cosmos ownership group has always insisted that they have deep pockets, deep enough to buy into MLS. And because Sela Sport is based in Saudi Arabia, everyone has assumed this to be true because most companies from that region that have branched out into club ownership – like the Abu Dhabi United Group and the Qatar Investment Authority – have had very deep pockets.
But Sela Sport has always relied on additional investors for the Cosmos, from Paul Kemsley, Rick Parry, Terry Byrne, and Carl Johnson (three of who at least had EPL management experience) to Seamus O’Brien. And now the question must be asked: does the current Cosmos ownership team have the kind of money needed to buy into MLS, or elevate the NASL to that level?
I can’t imagine the actual cost of turning the NASL into a first-tier league that gives MLS a run for its money. While the Cosmos wouldn’t need to pay the $100 million MLS franchise fee, they still would need to build a stadium, and the one MLS has proposed building will cost more than $300 million. But the whole elevation angle is based on the assumption that the rest of the teams in the NASL are interested in doing this as well, and have the same sort of financial resources as the Cosmos claim to – which is clearly not the case.
Assessing The Assets
So the real question is whether or not the Cosmos have the resources to become the 20th MLS franchise in New York City. And keep in mind that the cost of entry – expected to be more than $400 million (at least $300 million for the stadium plus $100 million for the franchise) - is just the cost of entry. As we’ve seen from other franchise owners, you need extremely deep pockets to continually operate in the league, with only a handful of franchises ever turning a profit (and never consistently) after years of losses.
Perhaps the best indication of what it takes to operate an MLS franchise in a market like New York would be the New York Red Bulls. Austrian-based Red Bull GmbH purchased the franchise in 2006 and built a stadium just outside of Newark, New Jersey in 2010. What kind of pockets do they have? The company’s 2011 revenue is listed as $4.25 billion.
How does the Cosmos ownership group compare? Frankly, it’s hard to say since Sela Sport is privately owned. According to the company’s Web site (which, incidentally, has no mention of their ownership stake in the Cosmos), Sela Sport has generated “more than $40 million worth of business” annually. And on LinkedIn, the company states that it has less than 200 employees. Ten years ago I worked for a US-based marketing firm of a similar size, and our $26.6 million revenue put us among the Top 25 marketing firms in the world. That’s nowhere near the kind of pockets needed for MLS.
According to a 2008 Financial Times story, Sela Sport’s 2007 income was only $20 million. Even if it has somehow increased its income tenfold in the past five years, which is the kind of growth that would generate a lot more stories about the company, that still wouldn’t be enough to even buy their way into MLS, let alone sustain a franchise.
As for O’Brien, I suppose I could have tried to dig up his tax records, but my budget for overseas investigative journalism is somewhat limited these days. However, I can tell you that he didn’t make the 2012 Forbes list of 40 richest people in Singapore, which means his net worth is most likely less than $280 million.
Consider the net worth of other individual club owners and investors from around the world: Robert Kraft: $1.7 billion, Malcolm Glazer: $2.7 billion, Stan Kroenke: $3.2 billion, Joey Saputo: $4.3 billion, Silvio Berlusconi: $6.2 billion, Philip Anschutz: $7.0 billion, Suleiman Kerimov: $7.8 billion, Roman Abramovich: $13.4 billion, Paul Allen: $14.2 billion, and Sheikh Mansour Bin Zayed Al Nahyan: $31.5 billion. It’s unlikely that – even between Sela Sport and Seamus O’Brien – the current Cosmos ownership group have the resources needed to become the 20th MLS franchise in New York City.
So who will purchase that franchise? Bloomberg News, a well-respected and usually reliable media outlet, claimed that Manchester City FC were the most likely contenders for the 20th MLS franchise, citing no fewer than three anonymous sources. Of course Man City denied it, just as PSG denied interest in Mourinho and Ronaldo – until they eventually admitted it.
But it won’t likely be Man City making the investment, which should put to rest the sophomoric panic that it would somehow become a satellite brand of the club like Chivas USA. Struggling to bring its own finances in order, Man City simply doesn’t have the resources. However, the owners of Man City, the Abu Dhabi United Group led by Sheikh Mansour, have resources that can best be described as ridiculously abundant. And who knows, maybe the even wealthier Qatar Investment Authority, the $60 billion in assets behind PSG and beIN Sport, might be interested as well?
Why would these organizations invest in an MLS franchise in New York City? First of all, it’s New York City, a long-standing and long-favored target for foreign investors. Property and possessions in this city have not only proven to be a sound investment over the years, but there’s also considerable worldwide prestige attached to it.
On top of that, from a purely soccer standpoint, if you are looking for a reasonable investment opportunity with tremendous potential growth, you’d be hard-pressed to find anything more attractive than MLS right now. And the New York City franchise will likely be the league’s crown jewel, situated in the America’s largest city, which also happens to be the world’s media capital.
As Europe’s top leagues are unbalanced, with a handful of top clubs consistently dominating most leagues. Therefore, unless you can buy into one of those top clubs, your investment growth is limited. So the current parity of MLS combined with the promise of greater competitiveness, along with the league’s growth potential and the likelihood of new TV deal, makes it an attractive investment in the world of soccer.
Soccer has finally blossomed in the United States. And that passion is translating to income, as was evident at the 2010 World Cup in South Africa, where Americans purchased more tickets than any other nation. And our national habit of striving to become the world’s best at everything we do makes an investment in MLS at this stage in its evolution seem all the more attractive.
The Fate Of The Cosmos
Without the financial resources needed for MLS, what will become of the Cosmos? It looks like they will be playing in the NASL and on Long Island for the foreseeable future. Whether or not the New York City fans who currently refer to the Red Bulls as the “New Jersey” Red Bulls will eventually refer to the Cosmos as the “Long Island Cosmos” remains to be seen, as does how much support the Cosmos will receive once MLS has a franchise playing in Queens.
Could the Cosmos have a silent investor with the wealth needed for MLS? If they did, it’s unlikely they would have sought out O’Brien, for there would have been no need to. Could they merge with or sell the brand to another ownership group to ensure that the 20th MLS franchise carries the Cosmos name? It certainly is possible, and something I think all New York City fans would support. I imagine MLS would like to see that as well, since the brand has such a massive following in New York City – and around the world.
But that’s really up to the owners of the Cosmos, not MLS. They purchased the brand with the promise of bringing it to MLS, and now they seem to have abandoned that promise. It’ll be interesting to see if fans continue to support them despite that broken promise, or if they will stand by MLS and its far more realistic effort to bring top-level soccer to New York City.
“Well, I don’t know what will happen now. We’ve got some difficult days ahead. But it really doesn’t matter with me now. Because I’ve been to the mountaintop. And I don’t mind. Like anybody, I would like to live a long life. Longevity has its place. But I’m not concerned about that now. I just want to do soccer’s will. And soccer has allowed me to go up to the mountain. And I’ve looked over. And I’ve seen the promised land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the promised land!” - Mario Luther Kingzinho, Jr.