F i n a n c i a l M a n a g e m e n t – S L S 3 6 0 5

MLS IN MEMPHIS

Bringing Major League Soccer to

Memphis

Adel Alammari

Fall 14

08 Fall

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Introduction

This Feasibility study was made to perceptively look at the possibilities of building a soccer

stadium with all its facilities and also launch a Major League Soccer franchise that’ll represent

Memphis and it’s Metropolitan. During the making of this study a lot of factors were taken into

consideration; factors like the intended investors, the demographics of the region, possible

location, costs of comparable stadiums and the predictable outcomes of this huge project.

Investing in Memphis Soccer

The Memphis Metropolitan, also known as the Greater Memphis area, is considered one

of the most populated areas in the region. Investing in such a huge populated area without a

soccer franchise that represent the city and its surrounding pride will be a great investment for

foreign investors that are looking for possible markets to put their money in. USMNT

performance in 2010 and 2014 World Cup spread the popularity of the sport throughout the

country and also helped the MLS to grow faster and bigger. In the last few years international

investors have invaded the American soccer market looking for new investment opportunities by

buying an existing club, co-owning or building a new one from scratch. DC United was bought

by an Indonesian named Eric Tohir.The league set to add at least five clubs in the next six

years, and Memphis can and should be one of the new grounds for an MLS franchise.

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More investors like David Beckham, Dolphins owner Stephen Ross , And Alessandro

Butini, an Italian investor living in London, has gone public with his desire to bring his

money to invest in an MLS team. New York, Nevada, Miami, Minneapolis, Atlanta are

the possible candidates to hold new MLS teams within the next few years. Memphis

geographical location give it an advantage because it’s located on the banks of the

Mississippi river and connects 3 states; Tennessee, Arkansas and Mississippi. Memphis

contains up to 10 local soccer clubs and organizations that has been in the city for at least

a decade, soccer in this city has been growing at a moderate rate in the last 5 years.

One of the main drivers of the league’s growth has been the development of soccer-

specific stadiums (instead of teams playing in NFL stadiums that aremuch larger

thannecessary for professional soccer). As the number of soccer-specific stadiums

has increased, sohas attendance of the soccer games. MLS’ current average attendance of

more than 18,000 is greater than theaverage attendance of both the NBA and

NHL.Compared to other MLS metro areas, the Memphis metro area is relatively

small, with a smallercorporate base and lower income levels. Having an MLS team that

represent this city and can absorb the talent that these local clubs produce and put them

into the elite level of soccer can be a huge game-changer in the region.

Technical Feasibility

Location

The location of the proposed MLS stadium will be in the Downtown area. It’s one

of the best possible areas in the city to possibly build a stadium at. One of the main perks

of building it in the downtown is that it’ll be next to almost all of Memphis icons like;

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The Pyramid, Beale street, the famous “M” bridge, FedEx forum and Mud Island. This is

considered one of Memphis liveliest area, adding an MLS team will present Memphis to

the nation in a very nice way.

Facilities

The Stadium will be will contain but not limited to the following: a soccer field that is

110–120 yards (100–110 m) long by 70–80 yards (64–73 m) wide, a range of seats of

20,000 to 35,000. The stadium should have the following; a digital scoreboard, video

screen, concession stands outside the stadium, parking spaces, dressing rooms, media

center, and VIP section. The seats should be wide and comfortable for the pa ying fans;

out of the 18,000-25,000 seats there will be a range of 500-1,500 seats specialized for

disabled people. Also there will be a canopy that should cover all seating sections, an

estimate of 25-35 suites, and that’s including one or two party suites and an owners’

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suite, 2000-4000fan club seats, eight locker rooms. Restaurants and small shops will also

be added.

Usage

The new stadium will be one of a kind in the region as it will be the 1st soccer-specific

stadium built. The usage for this soccer-specific stadium will mainly be soccer related activities

such as Major League Soccer games, NWSL matches, USMNT international competitive and

friendly matches, college soccer, and regional nun-MLS soccer matches. Alongside those

activities there will be other none soccer related activities held there, for example; music

concerts, festivals, ceremonies and so on. The following is brief summarization of all the

possible and estimated usage of the stadium followed by a chart that shows the projected

activities that will be held at the stadium:

MLS Matches

MLS by the year 2017 will have about 20 teams spread out across the country. The regular MLS

season start in the beginning of March and it usually ends by the last week of October of the

same year. Assuming that the projected Memphis MLS team will play only the regular season it

means Memphis stadium will surely host minimum of 18 home MLS games in the 1st and it’s

expected to be this way for the following 4 years.

NASL Matches

National American Soccer League also knows as the NASL it’s the second division of

professional soccer in the United States. There will be approximately 11 NASL matches held in

the new stadium and this can be a reasonable source of income.

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Major Soccer Matches

In the summer European teams come to the U.S. to prepare for upcoming season by practicing

and also playing some friendly games with either MLS teams or other European teams. Clubs

like Real Madrid, FC Bayern, and Manchester United come to play in the U.S. in several cities

and states. The new Memphis soccer stadium will host an estimate of 7 major soccer matches;

most of them will be in the summer.

Other Major Sporting Events (Pro/College)

The other expected events that are expected to be held in the new stadium are Pro/College

activities that can either be soccer or other sports activities that are suitable to be played in a

soccer specific stadium.

Other Sporting Events (Other Amateur)

The new Memphis stadium is also expected to host other amateur activities in the city. These

activities can be either amateur soccer matches or any kind of activities that can be held in the

future stadium.

Concert/Festivals

Music concerts and festivals are a good usage and also a good source of revenue for the new

stadium. There’s an estimation of 4 music concerts that can be held in the new stadium. This can

create a new tourist and attraction spot in the city even to people who don’t watch soccer.

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Other Events

The new soccer specific stadium in Memphis will not only be a home to the city future MLS

team but it’ll be a good place to host a lot of different other events. All the events will be ticketed

which means a great source of revenue; there will be entertainment, community, and

social/private events taking place there.

2017 2018 2019 2020 2021

MLS Matches 18 18 18 18 18

NWSL Matches 11 11 11 11 11

Major Soccer Matches 7 7 7 7 7

Other Major Sporting

Events (Pro/College)

3 3 3 5 5

Other Sporting Events

(Other Amateur)

6 6 7 7 8

Concert/Festivals 4 4 4 6 6

Other Ticketed

Entertainment Events

2 2 2 2 3

Community Events 11 11 11 12 12

Social/Private Events 10 11 11 12 12

Other Events 5 5 5 5 5

Total 77 78 78 82 84

Source: AECOM 1 Projected Event Demand

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Expenses and Revenues

Generally, the expenses and revenues of the new stadium are estimated based on actual figures of

other existing MLS stadiums, alongside any expenses and revenues that might be an exception in

the city of Memphis. The following is a summary of all of the possible expenses and revenues

for the projected stadium, remember that all these number are either assumptions based on other

stadiums, or estimations and are not actual figures.

Salaries and Benefits

The Salaries & benefits are mainly estimated to be around $1.0 million in an average MLS

stadium’s 1st year, and it’ll increase to $1.1 million after five years. This number does includes

costs for all full-time stadium staff.

Contractual Services

Services that are not staffed directly by the stadium workers are considered a contractual service.

Expenses for contractual services can include but not limited to security systems and janitors and

other similar services, and are estimated to be roughly $310,000 in the stadium’s 1styear.

Utilities

Roughly, Utility expenses are assumed to be around $620,000 in the stadium’s 1st year. No

method has been determined, but it’s more than likely that the new stadium will have and require

a cooling system because of the heat waves that Memphis have in the summer and it’s around the

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time of the MLS regular season.These projected systems would have to cool mainly the spectator

areas and might also cool the playing field as well.

General and Administrative

The General and administrative costs are estimated to be roughly $880,000 per year. These costs

covers: office supplies, staff uniforms, travel, and training, dues and subscriptions, and other

items that might be needed.

Repairs and Maintenance

Repairs and maintenance expense is estimated to be roughly $310,000 in the stadium’s 1st year,

and it’s expected to increase to roughly $325,000 after five years.

Insurance

Insurance expense is estimated to be roughly $260,000 in the stadium’s 1st year.

Management Fees

It’s assumed that the MLS ownership entity is hired to operate the stadium and is paid an exact

amount of $800,000 per year (based on 2014 prices).

Capital Maintenance Account

It’s assume that an amount of $400,000 per year will be and should be deposited into an account

for future capital maintenance, and that the team will also be responsible for keeping a minimum

amount of capital per year and it’d required to have certain capital improvements on a yearly

bases. The capital maintenance account is not expected to be spendingin the early years of the

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franchise but it will still be included as an operating expense.

Other Expenses

Other miscellaneous expenses that are not included in the previous categories are estimated to be

roughly $310,000 per year.

Total Operating Expenditures

Total operating expenses are estimated to be roughly $5.0 million in the stadium’s 1st year, net

of the team’s share of expenses, and increase to roughly $5.2 million after five years of

operating.

Net Operating Income

Based on the projected operating revenues and expenses of the stadium on first year then into

five years ahead, the facility’s net operating income is estimated to be roughly $2.5 million in its

1st year, and this amount is expected to increase to approximately $3.6 million after five years.

All numbers in the table are in thousands.

2017 2018 2019 2020 2021

Operating Revenues

(Net)

Rent $964 $982 $999 $1,25 $1,278

Concessions 856 869 882 1,176 1,193

Catering 58 58 59 77 78

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Merchandise 86 88 89 118 119

Premium Seating 784 796 808 1,054 1,070

Other

Advertising/Sponsorship

675 685 695 706 716

Facility Fees 306 306 306 399 399

Ticketing/Convenience

Fees

607 616 625 835 847

Parking 351 357 362 367 373

Tenant Reimbursement 2,743 2,743 2,743 2,743 2,743

Total $7,431 $7,500 $7,570 $8,731 $8,818

Operating Expenses

Salaries and Benefits $1,034 $1,050 $1,065 $1,081 $1,098

Contractual Services 310 315 320 324 329

Utilities 620 630 639 649 659

General and

Administrative

879 892 90 919 933

Repairs and

Maintenance

310 315 320 324 329

Insurance 259 262 266 270 274

Management Fees 827 840 852 865 878

Capital Maintenance 400 400 400 400 400

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Account

Other Expenses 310 315 320 324 329

Total $4,950 $5,018 $5,087 $5,158 $5,299

Net Operating Income $2,481 $2,481 $2,482 $3,573 $3,589

Source: AECOM 2 Projected Event Demand

This is a table that shows all the MLS teams values, revenues, and operating income in

2013.

Source: FORBES3 Projected Value & Operating Income

Rank Value ($M) Revenue ($M) Operating Income

($M)1

Seattle Sounders 175 48.0 18.2

LA Galaxy 170 44.0 7.8

Portland Timbers 141 39.1 9.4

Houston Dynamo 125 32.6 8.2

Toronto FC 121 30.9 4.5

New York Red Bulls 114 28.1 -6.3

Sporting Kansas City 108 27.7 5.1

Chicago Fire 102 24.5 -3.2

FC Dallas 97 24.2 0.6

Montreal Impact 96 26.2 3.4

Philadelphia Union 90 21.4 1.1

New England

Revolution

89 17.1 2.6

Vancouver Whitecaps 86 23.0 0.0

Real Salt Lake 85 23.0 -0.1

Colorado Rapids 76 18.1 -2.9

San Jose Earthquakes 75 15.0 -4.5

Columbus Crew 73 18.6 -1.6

DC United 71 17.7 -2.8

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Chivas USA 64 15.0 -5.5

Organizational/Managerial Feasibility

In any MLS team there should be an organizational structure to the franchisethat

keeps it going. The potential Memphis MLS team should have the following employees:

President– A personal with this status should have full knowledge of the game, a

good CV in managing teams and corporations. Educationally, they should have a Masters

in any degree that is related to sports, managing, accounting, financing, law etc.

Vice President–It’s usually a co-owner who’s considered the 2nd most important

man in the franchise, to be a VP the qualifications should be no less than the

qualifications of the president, the only difference is that either the President has more

years of experience or that they are the only owners of the club.

Spokesperson & Media Relations–spokesperson for an MLS franchise is similar to

a public relations specialist. They are responsible for setting up public appearances,

handling conflicts and keeping the public updated on vital team information. They also

have to take care of e-mails, phone calls, letters and press releases, so they should be

effective writers in addition to being eloquent speakers.

General Manager– A soccer GM should have years of experience piled up in his

record. They should’ve coached or took part in assisting coaching a team in a top league

in the world. They should also have on field experience in playing soccer. Being a GM

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automatically means they’re the coach and are held responsible for all athletics duties. A

minimum of USSF “B” coaching license should be required to get this position.

Assisting Coach– It’s usually a job for a personal that’s gaining experience in

becoming a soccer coach. They should have a minimum of USSF “C” coaching license to

qualify for this position. An assisting coach should also have on field experience in

playing soccer. As usual in topflight soccer clubs, the GM should have between 2-3

assisting coaches.

Goal Keepers Coach– This is the person who’s responsible for keeping the goalies

in top form and in charge of picking the best goalie to start each game. It’s usually former

soccer keepers who get this job due to their experience in this position.

Other Positions– other positions to fill up are Head Athletic trainer, Assistant

Athletic trainer, Head Team Physician, Primary Care Physician, Director of Soccer

Operations, & Equipment Manager.

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MLS and Other Leagues’ Overview

Major League Soccer (MLS) is currently in the end of its 19th season. MLS is the

US’s preeminent professional soccer league, and is structured as a single-entity league,

and has grown to the current size of 19 teams across the US and Canada (with also four

expansion teams, in Orlando, New York, Atlanta, and Miami, to join the league in the

next 2-4 years). Its schedule consists of 34 games that are played from April throughout

November. After the regular season is over, teams also compete in playoffs series to

determine the league winner. In addition to the normal league, teams also compete

against teams from around the world, in events such as the US Open Cup, the Canadian

Championship, and the CONCACAF Champions League.MLS was created as a result of

the 1994 World Cup that was held across the US and the granting of “Division One”

President

General Manager

Assisting Coach

Goal Keepers Coach

Assistant Athletic trainer

Head Team Physician

Primary Care Physician

Director of Soccer

Operations

Vice President

Spokesperson & Media Relations

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status to the league by FIFA, the organizing body for international soccer. The league’s

1st season took place in 1996, with ten teams. During its initial years, MLS gradually

expanded, although teams were also contracted for various reasons. The following map

shows the location of the league’s 19 current teams, not including the planned expansions

to New York, Orlando, and Miami.

League Structure

The Major League Soccer is the only major professional sports league that is organized

and built as a single entity league. This means that the player’s contracts are with and paid by the

MLS itself. The stadiums leases, national and international partnership, and any other big picture

league matter are the central league office responsibilities. However, this doesn’t mean that each

franchise won’t have an independent ownership/operator group that is responsible for managing

its team day-to-day operations. Generally, teams are responsible for team-specific expenses

(except player’s payroll) and have the right to fins and contract a local sponsorship to generate

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revenue. The Soccer United Market (SUM) is the entity responsible for all the league wide and

national partnerships. The league created SUM in 2002; it holds various commercial rights

associated with MLS and other soccer leagues in the country. Each MLS team has its own

individual unit in the league and in SUM.

The following list summarizes the sharing of revenues and expenses between teams and

the league (netof any separate sharing arrangements with stadium owners). Over time, the

sharing arrangement haschanged to further incentive teams to generate revenues that they

retain.

Ticket sales – 33.5 percent is currently shared with the league.

Stadium revenues(such as concessions, parking, etc.) – are retained by teams.

Sponsorships –

o The teams retain local sponsorships and media, as well as jersey sponsorships .

o National media and sponsorships are league revenues.

Expenses – aside from player salaries (with the exception of designated players),

all expensesare the responsibility of teams.In addition to running its local team,

investor/operators are also often creating youth developmentacademies in their markets.

These academies create an organized and well-funded system to developfuture soccer

players under the auspices of each MLS team. As an additional incentive to youngsoccer

players, MLS teams can retain certain players that are developed through thei r academies.

Also,MLS has a partnership with USL PRO, which includes affiliations between MLS

clubs and USL PROclubs.

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Demographics

Memphis Area has approximately 4,577.85 square miles of land area and 121.57 square miles of

water area. As of 2010, the total Memphis Area population is 1,316,100. Memphis Area has a

median household income of $47,477 in 2008-2012 which increased by 4.78% increase since

2005-2009. Memphis Area also has a median house value is $136,800 in 2008-2012 and that’s a

5.39% increase since 2005-2009. Memphis Area has a population density of 280.06 person per

square mile compared with 81.32 per square mile for the whole United States. Following is chart

that shows population in Memphis Metropolitan by race:

Table 1 via 2010 census

POPULATION BY RACE

White: 630,715 (47.92%)

Black: 601,043 (45.67%)

Hispanics: 65,395 (4.97%)

Asians: 24,479 (1.86%)

Native: 3,973 (0.30%)

0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%

Native

Asians

Hispanics

Black

White

U.S.

Memphis Area

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Comparable MLS teams

This section will show a quick summary of the planning, operations, use, and other

characteristics of existing soccer MLS stadiums in other markets across the United States. This

summary of these facilities will help us define what has been successfully implemented in other

major metropolitan areas. The facilities analyzed are the following:

Sporting Park in Kansas City

Sporting Park, Kansas City, Kansas

Sporting Park is an 18,500-seat soccer-specific stadium located in Kansas City, which is

the home of one of the MLS team,Sporting KC and the NWLS team FC Kansas City. The

stadium was built for around $200-million and it opened in May of 2011 and issurrounded by the

Community America Ballpark, the Kansas Speedway, the Nebraska Furniture Mart, and also the

Legends at Village West outlet mall.

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Market

The market of the Sporting Kansas is the City of Kansas City, whichhas roughlya population of

150,000 residents, and the 15-county Kansas City metro area (which includes Kansas City,

Missouri) has roughly a population of 2.3 million residents.

Ownership and Management

The stadium of Sporting Kansas, Kansas Park, is owned and operated by a company named

Kansas Unified Development, LLC, which is controlled by team ownership. Delaware North

Sportservice provides food service.

Funding

The stadium was primarily funded through $50 million from the team and the remaining $150

million of Sales Tax Revenue.

Facilities and Offerings

The stadium size is 342,000-square foot and it includes the following facilities:

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A 75 x 120-yard field, Roughly 18,500 seats, and a maximum capacity (for

concerts) of 25,000, A canopy that covers all seating sections, 37 suites, including one party

suite and an owners’ suite, 3,400 club seats, The 124,000-square foot Sprint Plaza that is used for

pre-game activities and standalone events, and six locker rooms.

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Conclusion

In Conclusion, Memphis is city that should have a hometown pride in soccer; it deserves

to be one of the 1st 24 cities in the U.S. to have an MLS franchise. The question that this semi-

thorough study tried to answer is “Is it possible?” The city is ready to have a second franchise

alongside the Grizzlies to represent it on the national level. Soccer is growing in Memphis, and

soccer community needs a home; a home in which they can be proud of and also refer to every

game day. The main Obstacle that’s in the way is finding a national or even an international

investor that will want to spend their money in the city to start an MLS franchise. Until then, I

believe that having an MLS with a soccer-specific stadium is very unlikely to happen.

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Sources

"AECOM - A Global Provider of Architecture, Design, Engineering, and Construction

Services." AECOM - A Global Provider of Architecture, Design, Engineering, and

Construction Services. N.p., n.d. Web. 18 Nov. 2014.

"MLSsoccer.com." MLSSoccer.com. N.p., n.d. Web. 18 Nov. 2014.

Smith, Chris. "Major League Soccer's Most Valuable Teams." Forbes. Forbes Magazine,

20 Nov. 2013. Web. 17 Nov. 2014.

"Sporting Park Home." Sporting Kansas City. Sporting Park, n.d. Web. 15 Nov. 2014.