Game changer or disappointment? – Sportico.com

For months, Major League Soccer has deliberated on what it wanted for its next TV deal: games in every home in America or a bigger check and a product behind a paywall. The answer arrived Tuesday when the league announced a 10-year deal for every match to be streamed on a new subscription service from tech giant Apple. The deal is worth a minimum of $2.5 billion, according to multiple people familiar with the agreement.

“MLS couldn’t keep everything. The only property that gets to keep everything anymore is the NFL and maybe a handful of others,” Patrick Crakes, a media rights consultant, said in a phone interview. “They had to give up reach, at least in an established sense, and any way you slice this, that kind of reach is going down.”

Commissioner Don Garber had floated a deal worth $400 million annually in the years leading up to this negotiation, but the current pact won’t touch those lofty heights, even after additional linear deals are inked. Multiple MLS insiders expressed frustration that this was not the deal Garber promised.

But it still represents at least a 400% jump versus the previous pact after you strip out the value of the US Soccer component, which represented almost half of the current $90 million a year deal and was sold separately in March. Many in the MLS universe see significant upside in partnering with the world’s most valuable company in its biggest sports deal to date, after the brand dipped its toes into sports with Friday night baseball this season.

“It comes down to picking the right partner,” Jason Levien, DC United CEO co-owner, said in a phone interview. “This is a very long-term decision about how we are distributing our product. And if you are taking a long-term view, it is hard to beat having the power of Apple on your side as your distribution and product partner.”

Levien also highlights the impact of a more standardized schedule and start times, with games almost entirely on Wednesday and Saturday nights, instead of the current hodgepodge format.

“I think it’s a game-changer for the league to collaborate with Apple and add a partner of their global stature and influence,” Jared Shawlee, San Jose Earthquakes president, said in an email. “This partnership continues to signal that MLS is at the forefront of innovation in the industry and will drive further change in sports around the world.”

MLS is following the trend in recent years where rights to soccer broadcasts have moved behind a paywall to cater to a young, digital-savvy audience. La Liga and Bundesliga are both on ESPN+, while UEFA Champions League, NWSL and Serie A games are housed on Paramount+. The Premier League and Liga MX are the exceptions. MLS will have a profit-sharing agreement with Apple, after certain subscription thresholds.

“If we’re growing our audience and we’re thriving, we’re going to have an opportunity to make more money,” Levien said. “And while the money is important, I think much more important is how this deal sets us up for the future.”

MLS is on the hook for production costs under the Apple deal, cutting into net revenue for teams. Those could run as high as 25% of the annual guarantee. Teams also relinquished their local broadcast rights as part of the agreement, although those rights, outside of a few clubs like the LA Galaxy, were worth little. Most teams receive no annual rights fee and sell ads to cover production costs, with broadcasting away games usually resulting in a net loss overall on local media.

MLS team values ​​have soared in recent years, to an average of $550 million per franchise last year. The next TV deal played a role in the escalation, but the rising tide is more a bet that US fans over the next two decades will start to view the world’s most popular sport more like the rest of the planet does. The ultimate impact of this likely won’t be known for five years or more.

“When I’m raising capital, I’m selling the vision and the path,” Levien said. “This Apple deal enhances that and even turbo-boosts it in many ways. I’m not sure going back to a traditional linear carrier is as exciting for investors.”

National TV money is a small component of the revenue pie for most MLS teams. The current deal is worth less than $3 million per team, after the US Soccer payout, while overall revenue for the typical team should top $50 million this year for the gate-driven league. This new TV deal was never going to carry NFL, or even NHL level, financial muscle on the income statement.

“I think MLS is in a massive upward trajectory for people who are taking a long-term view,” Levien said. “I don’t think it’s a league where you want to start flipping teams.”

“MLS did something different because it anticipates where they fit into the media ecosystem,” Crakes said. “It’s betting on yourself, and while some other sports leagues don’t have to do that, MLS did in order to drive its value higher.”

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