Today, Forbes magazine published its annual evaluation of MLS teams. Omitted from last year’s rankings for lack of adequate data, Atlanta United and Minnesota United made their debuts on the list this year. Minnesota came in at a respectable #12, but the Five Stripes naturally had to make a flashy entrance, topping the list at the first try.
Forbes’ valuation of Atlanta was $330 million, $10 million more than the second most valuable team, the LA Galaxy, and significantly above the league average valuation of $240 million. Contributing factors in Forbes’ assessment were the record-breaking attendance numbers, the ludicrous merchandise income (if you didn’t know, Atlanta accounts for 25% of all MLS merch sales) and the forward-looking business model designed to generate future value from player sales rather than depending on aging superstars to turn a quick buck.
This value compares with the MLS franchise fee of around $150 million, which means that Arthur Blank has made a gain of 220% on his original investment. If only my 401k could perform like that.
Another point that must be made is that business values do not necessarily correspond to profitability. If that were the case, Apple, Facebook and Amazon would have long since gone bankrupt. Rather, the values reflect what a potential buyer might be willing to pay for the enterprise. This is especially true in the sports business, where relatively few entities actually make money.
As a group, the 22 MLS teams active in 2017 (2018 numbers are obviously not yet available) made an operating loss of $63 million, with only 7 teams turning a profit (before depreciation, taxes and interest), and those 7 likely made a net loss after non-operating items too. The most profitable teams were the Galaxy and the Seattle Sounders, both making $6 million. The biggest loss was made by New York City FC: a hefty $15 million, which can be partly explained by Andrea Pirlo’s wastefully large $5.9 million salary. On-field success does not guarantee a positive bottom line either – last year’s champions, Toronto FC, lost $10 million. Again, that’s due to a massive payroll.
Atlanta, even with its big revenue numbers ($47 million), also made a loss in 2017, although a relatively modest one at $2 million. Forbes believes revenues for 2018 should be considerably higher with a full season at the Benz, but it is less than clear if that will translate to black ink for the year.
The listing had a couple of surprises, too. First, LAFC was included on the list despite not being active in 2017 and came in at a lofty $305 million for fourth place. Second, Orlando City SC proved that product quality is not always a concern, coming at #8 and a value of $275 million. Clearly, P.T. Barnum was right.