Bloomberg News

Merritt Paulson Forecasts Increase in MLS Soccer Franchise Fees

October 16, 2012

Major League Soccer franchise fees will continue to rise as interest in the sport grows in North America, according to Merritt Paulson, the president of the Portland Timbers.

Paulson, son of former U.S. Treasury Secretary Hank Paulson, is the majority owner of Peregrine Sports LLC, which he says paid between $32 million and $34 million for the Portland, Oregon, team to become 18th franchise to join the MLS, in 2009.

“The last team, in Montreal, went for $40 million,” Paulson 39, said in an interview this month in London. “You’re going to see a really big increase on the next team coming in. That’s just a product of the league coming in and growing. The people who got in on much lower valuations paved the way and did a lot of the heavy lifting in terms of getting the league to where the franchise valuations could be where they are.”

The rise in entrance fees from Portland to Montreal in one year continued a trend for MLS expansion teams. Chivas USA, Real Salt Lake and Toronto FC each paid $10 million to join in 2004 and 2005. The fee jumped to $30 million for the Seattle Sounders in 2007.

The MLS started in 1993, a year before the U.S. hosted the World Cup. It has grown as clubs built soccer-specific stadiums and signed marquee players including former Manchester United midfielder David Beckham and Arsenal forward Thierry Henry. Average attendance in 2011 was higher than for games in the National Hockey League and National Basketball Association.

Queens Next?

Montreal was approved as the 19th MLS member in 2010. The 20th franchise may be in the New York area, which already boasts the Red Bulls, where Henry plays. League President Mark Abbott discussed plans this week for a stadium in Flushing Meadows in the New York borough of Queens, saying a new owner is likely to be chosen in 2013. Buying into the MLS is a business decision as much as a sporting one, Paulson said.

“The league’s done a very good job in managing costs,” he said. “There are multiple teams in the league that are cash flow positive including us.”

Paulson didn’t give financial details.

As well as paying the franchise fee, the Timbers’ owners raised half the $50 million to $60 million needed to bring its Jeld-Wen Field “up to snuff,” said Paulson. The other half came from public funds.

The 20,348-seat facility has been sold out every game, and there are 10,000 people on the season-ticket waiting list, according to Paulson. One of the attractions is the downtown Portland location.

“I wouldn’t trade that for anything,” Paulson said. “If you could build me a brand new facility for free in the suburbs I wouldn’t trade it.”

Field Results

While the team has prospered off the field, results on it have failed to match expectations. For Hank Paulson, who holds a major stake in the team, games haven’t made for pleasant viewing.

The team didn’t make the playoffs in its opening season and has lost 16 of 32 games this year, two more than as it did in the 34 matches played in 2011.

“He follows every game on TV,” Merritt Paulson said of his father. “I think he’s attended four, five games this year. He’s very engaged in terms of being a fan. He obviously made everything possible in terms of our family coming in.”

To contact the reporter on this story: Tariq Panja in London at tpanja@bloomberg.net

To contact the editor responsible for this story: Christopher Elser in London at celser@bloomberg.net


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