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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Introduction

When improving growth and development of a league there are many aspects which in turn could affect this; such as tv broadcasting, youth development, marketing and governance. This report primary focus will be the USA and MLS league. Exploring how football has developed and the competition around that in the US. Analysing the league of MLS through SWOT and PESTEL. As well as focusing on the structure model and governance of the league. Discussing whether this has impacted on the progression of American soccer comparing it to European football and argument on whether the current structure is the reason why European football outshines them or whether in the long term they have the better concept of structure. The final section of the report will look at an aspect of business in more detail of MLS and how this could be improved so that soccer continues to grow in the US.

Development of football in America

With the growth of the British Empire many British goods and trade were spread across the world. (Waddington and Roderick, 1996) Explains from this came large groups of British workers socialising and bringing enthusiasm of sport which lead to the introduction and development of football to many different countries including the United States of America; resulting in the first game to be played at New Orleans (Crawford,2013)

As soccer grew and became a popular sport up until the First World War it then reached a point where conflict arose between American Football Association (AFA) and the American Amateur Football Association (AAFA). Reck and Dick explain that both the organisations wanted to become members within FIFA but disagreements about ignoring amateur football caused delayed membership from the US as FIFA did not want to be a part of the conflict (Reck and Dick,2015). This then leads to a long period of negotiations between the two organsisations. Starting soccer wars between different setups of leagues and tournaments, this allowed for other sports that were unified to get ahead of Soccer and become more well known.

There was a reappearance in the 1960s after the two professional leagues United Soccer Association and National Professional Soccer league had merged together to create the North American Soccer League (NASL). This was a turning point in the progression of soccer in America, the popularity of the league grew increasingly when Pele signed for New York Cosmos. Around 10 million people watched Pele's debut game (Nasl.com, 2018). The game continued to grow steadily and the arguable factor contributing this, alongside influential players joining the league, the hosting of the 1994 World cup (figure 1) show that the USA holds the record for highest total attendances and highest average attendance. The success of the World Cup hindered the creation on the MLS as a deal between the US and FIFA.

MLS Overview

The MLS was formed in 1993 playing it first season in 1996. It is the first division of professional soccer in America. There are currently 23 teams within this league split into the Western and Eastern Leagues 20 from US and 3 from Canada. MLSGB has broken down the format and structure of the season differs to others. Each team plays 34 games through a season, 23 within their conference and 11 from the other. The top six from each conference then play in the MLS Cup. However, the points system defines the winner of the league for that year and presented with a shield as a league title. There are domestic cups throughout the year and CONCACAF Champions League tournament. The league also has a unique All-Star game where an international team is invited to play against a side created from MLS players.

SWOT Analysis of MLS

According to Stacey a SWOT analysis as a way of finding an organisations strengths and weaknesses by assessing its internal resources and capabilities plus any threats that may affect the organisation from achieving its highest potential (Stacey,1993). The MLS is financially prudent and one of the best leagues in terms of fairness of distribution of revenue to clubs. As the MLS is run as a single entity all the majority of revenue earned is owned by the league and therefore is distributed back into the clubs and then they can decide where the money is reinvested. This allows for more even competition and the unity of working alongside each other as they own shares in the MLS so have a partnership and not a rivalry.

The increase in media attention has helped the leagues presence and growth in the last decade. With the in-stadium attendances growing MLS has now started to focus on TV viewership. The most recent broadcasting deal with ESPN, Fox, and Univision worth around $90 million (Miller,2012). This is a step in that direction and this is why it's considered a strength because the league is looking to enhance the amount of content and control the viewing times of matches. Ourand and Botta, review that ESPN will also control the out-of-market package which was originally streamed by MLS digital platforms so now would encourage more viewers to subscribe as they would be benefiting from more content.

With an increase in popularity, this encouraged big name signings to the MLS in order to become globally recognised as a league with potential. Many superstars have played in the MLS English legends of the game players such as Beckham, Gerrard, Rooney, and Lampard but also international stars such as Kaka, Ibrahimovic, Drogba, Pirlo, David Villa and Thierry Henry. The arrival of these players increased the profile of the MLS as internationally idolised player bringing in new supporters from around the world. This in turn helped contribute to the success of the younger generation encouraging more of an interest in football. Bondys article reported that in the Gallup poll in regards to Americas favorite sports a statistic 11% of people between 18-34 favorite sport was soccer this tied with basketball; beating baseball by 5%(Bondy,2018). This shows that the future of soccer is looking to become one of the more dominant sports.

Although the growth and popularity of MLS is increasing progressively other sports are still ranked higher than soccer and for this reason it means the league have got a far way to go to create a generation where soccer becomes an engraved in the culture and identity of the US for example American football, basketball and ice hockey are all quick sports in terms of short exciting play whereas soccer is perceived as a slower sport. Not only does the competition of other sports dominate in America the MLS as a new product are struggling to tap into new markets around the world. The clubs within this league don't have the financial capabilities that clubs such as Barcelona, Manchester United and Real Madrid because of the way the teams are financially managed are different. Therefore, struggle to create an identity and gain support on an international scale.

While the strength of bringing in high profile players boosts the leagues reputation and image there is a lack of younger well-known talented stars. For this reason, could be seen as a weakness as the league has been scrutinised as a ‘retirement' league. This contributes to the struggle of finding developed American players not wanting to carry on playing in America and when a European side shows interest they may feel European clubs is where the top players from all around the world showcase their talent.

There are many opportunities for the MLS to exploit. The biggest being the interest soccer in the younger generation, money and profits made from the league should be invested more in the development of the grassroots game. This will create more excitement about soccer from a younger age and potentially better players coming through the youth system. Having a financially stable league is positive however in sport in order for it to become more popular especially with the high population of America the governing bodies need to speculate to accumulate. With the investment of youth football, Scavuzzo and Pratt (2018) discuss more facilities need to be created as players sometimes will have to travel for up to 2 hours to get to their club.

There are however threats that can slow down the expansion of the MLS as previously mentioned European football is seen as more exciting with the promotion/relegation system and extremely popular with the majority of the most supported and biggest-earning clubs in terms of revenue.  Another threat is that the MLS was looking to buy players to boost the profile of the league but China has also done this by spending large sums of money on player transfer fees and offering wages that MLS just wouldn't be able to compete against. BBC (2018) article confirms that CSL last year spending 615,000 per week for Carlos Tevez and 400,000 a week for Oscar, for this reason, the CSL remains a threat to the MLS.

PESTEL Analysis

There are also environmental factors to consider when analysing a league. PESTLE analysis main purpose is to examine the environmental factors that influence the organisation and to help it strategic management (Williams and Figueiredo, 2011). America is considered a capitalist country. They encourage people to work in order to gain wealth. However, this is not the case when it comes to Soccer as previously mentioned the MLS runs as a single entity where investors become shareholders on the league. This contradicts the countries view by working more socially and coefficient as when teams within the league don't perform they do not see relegation they start again the season after.

On an international scale, America in terms of rankings of GPD ranks highly this shows the sum of the market value and services. This illustrates that the economy of the US is strong and therefore rate in which the economy is growing within the sports industry and within soccer the country can keep up with that rate of growth. Barclay(2017) explains that the expansions of Atlanta and Minnesota each paid a franchise fee of around $100 million and fees for future expansion could cost around $200 million this has seen a huge jump from when Toronto FC expanded in 2007 costing them $10million.

America is one of the most diverse and highly populated countries in the world. The 3rd highest populated behind China and India. With a population of 327.550 million (Worldpopulationreview.com). This is encouraging because of the size and wide diversification soccer can grow to bring everybody closer together with a sense of community a lot like with other sports within the US. La Galaxy for example also has fan clubs to help bring fans together on match days and create a better atmosphere.

Companies such as Apple, Google, Facebook and Microsoft have all grown and founded by Americans this shows how big of an influence they have been and in leading at the front in terms of technology with products that grown and become recognised worldwide. Every aspect of football has advanced from technology, stadiums, boots and even kits. Technology can impact the MLS positively with new technology people can view sporting content any time anywhere they go. The MLS has taken advantage of this and created a platform app for smartphones and other devices, fans can keep up to date with news, results and discussion about current affairs.

Founded in the continent of North America. There are environmental problems that the US face. There are times that America has been hit by extreme weather conditions for example; hurricanes, floods and storms. This can be a negative as games could be canceled and cause disruption to the season. The last element, legal factors in order for a Country with the size and stature that it has how it is governed. Similarly, sports also has a structure and governance which rules needed to be abided to in order for the game to run successfully. An example of this is illustrated by (Giulanotti and Robertson, 2009) that MLS created a designated player rule so that only the first $350,000 would count towards salary cap the rest would come from outside sponsorship.  There are many other rules set in place for players for example; special discovery players, rosters and homegrown players.

Financial Stability

From the SWOT and PESTEL analysis, the business aspect focused on here will be the financial stability of the MLS. Analysing the structure of the league and whether this will continue to create a strong league with high returns, or whether the structure will have to change in order to try and compete on a larger scale. As well as the league structure this report will look at the impact the salary cap and sponsorship have on MLS.

Franchise Model

As previously mentioned the MLS runs as a single entity and teams are known as franchises. As the MLS is growing the cost of owning these franchises have increased significantly. According to (Farrell and Clopton, 2015) The MLS oversees the player contracts as they are signed to them and they have control to make changes through trades, discoveries, and the draft system. The league is also closed which means no team can be relegated out of the MLS. (Chadwick et al, 2017) suggest that the American soccer industry is all about market growth and not gaining success on the field. This is why financial stability has been chosen as an aspect of business when running of the organisation.

An aspect to focus on is the distribution of revenue to clubs. The MLS has chosen to structure the league in this way as the NASL had seen it collapse from poor decision making on a business level. By working coherently this will stop this happening again as the investors will be working to grow the league so that it becomes more entertaining to fans and spectators and generate revenue from gate receipts, tv broadcasting or merchandise sales.

Salary Caps

Salary caps alongside revenue sharing is a way of increasing competitive balance of the league however this will only be a competitive balance within the league itself. If this restriction carries on there will be no way of attracting talent of players who are in their prime who receive offers from clubs who the MLS just can't compete with. However, salary budget rules aren't simple to understand. The positives of a salary cap are that a team can't buy success on the pitch by investing in world-class players. This means the competition will be at a similar level throughout the game and leading to better rivalries and on-pitch performances.

There are drawbacks such as the tension between players who are performing but don't feel the rewards because the allocation money has been spent on another player and as previously mentioned restricts any club buying and paying wages to a player that makes them want to come to or stay in the MLS.

Sponsorship

In order for the league to progress further, it needs to build up more of a reputation, a key way to do this is being recognized through sponsorship. MLS have already signed to work with global sports business such as Adidas who supply all the kits to the teams within the league and AT&T one of the biggest telecommunication companies in the US.

Partnering with brands such as these will help the image of both the league and the company itself. (Shank 2009) agrees and states that this is a two-way street between sports entity and sponsoring organisation that benefits both parties. The sponsoring company will want loyalty and business and the league wants public who use products from the organisation to be made the MSL associates itself with them. Heineken is a good example where they have a partnership with MLS and promote when rival teams play each other and in use the slogan ‘Soccer is here' (MLS,2018). This will have positive financial implication as Heninakin pay MLS to be the beer of soccer, with other sponsors will mean regular revenue for the league and money will get recycled into the organisation.

Conclusion

The MLS is a hard league to discuss although it has increasingly progressed over the 23 years. It is still in investor mode, still expanding and still trying to grow, up against fierce competition of other sports. This report has looked at the league through analysing internal strengths and environmental influences and chosen to focus on the financial stability of the league. As long as the competitive balance between teams then this structure works well and will continue to work to create a financially stable league although as seen the price to enter into the league will have to rise in order for the revenue to grow as the league grows.

The recommendation concluded from this report is to increase the salary cap, not to abolish the rule as its great for the financial prudence of clubs within the league. So that more talented younger players in their prime from around the world are encouraged to sign for clubs in this league which in turn will bring more fans from other geographic locations and this will increase the popularity on a larger scale.

Keeping the structure of a closed league will also ensure the financial stability of the league, even though there is no relegation and promotion it has still expanded proven that it has popularity and looking to expand even further. It offers the investors a less risky approach to investing in a sport. Although it could be argued that although it will continue as it has done in expanding there is only a limit in which it can grow to.

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