Toronto FC folding soon? Not a chance.--------by Section 112 Blizzard
Oct 19th 2006

Steve Simmons, a sports columnist for the Toronto Sun, recently suggested that Toronto FC should perhaps have been called Toronto FS with the FS standing for "Folding Soon". On the surface this quip probably seemed perfectly reasonable to most people who have not been following the MLS expansion story too closely given what happened previously to:

Toronto City (ECPSL,USL 1961-67)
Toronto Italia (ECPSL 1961-65)
Toronto Inter-Roma (ECPSL 1963-65)
Toronto Falcons (NPSL,NASL 1967-68)
Toronto Metros[-Croatia] (NASL 1971-82)
Toronto Blizzard (NASL,CSL,APSL 1982-93)
North York/Toronto Rockets (CSL,APSL 1987-94)
Toronto Shooting Stars (NPSL 1996-97)
Toronto Thunderhawks (NPSL 2000-01)
Toronto Lynx (APSL,USL 1997-2006)

but the reality is that the situation is very different this time. So why you may ask is Toronto FC going to avoid going to the graveyard of failed Toronto pro soccer teams? Well the answer is that Major League Soccer has already survived well past the stage where the league's ongoing existence is a serious question mark so there is no danger of the NASL Blizzard scenario where a healthy and successful Toronto franchise is left high and dry with nobody to play against because of events elsewhere.

Major League Soccer is currently in its 11th season. The league kicked off in 1996 two summers after the 1994 World Cup finals in the United States. FIFA accepted the United States bid based on a commitment by the USSF to use the legacy funds left by the tournament to kick start a new first division level pro league.

In 1993, MLS, with a business plan based on using large NFL and college football stadia located in major media markets, managed to fend off rival bids by the existing American Professional Soccer League and a group called League One America, which had favoured business plans based on slow incremental growth and a network of new soccer stadia tied into suburban real estate projects, respectively.

Unfortunately, MLS started to fizzle before a ball was even kicked. The plan had been to award charter franchises to cities that accumulated 10,000 season ticket deposits but with the exception of Columbus, Ohio (where people were probably eager to obtain their first ever major league franchise) this target was not met and investor interest was also slow to gather given the $US 5 million per franchise asking price.

When the league finally staggered past the starting line it had 6 investor groups operating 7 teams located in New England (Krafts), New York/New Jersey (Metromedia), Washington DC (George Soros), Columbus (Lamar Hunt), Kansas City (Lamar Hunt), Colorado (Phil Anschutz) and Los Angeles (Marc Rapaport) within a single entity structure that shared financial responsibility for three additional league office operated franchises in Tampa Bay, Dallas and San Jose. The hope was that additional investors would soon be found for these teams.

After the initial novelty factor had worn off and despite the fact that rosters were comprised primarily of American players resulting in playing standards that were initially markedly lower than had been the case in the NASL era, fan support was reasonably solid in the 10,000 to 15,000 sort of range for most games. This could and should have been a major success but the MLS investors had expected and budgeted for a much bigger afterglow from the World Cup.

Despite a relatively low salary cap of under $US 2 million p.a. the league wound up initially losing about $US 50 million per season because of the huge rental fees required to operate out of NFL and major college stadia and the lack of access to key revenue streams like parking and concessions. In 1998 two expansion franchises were added in Chicago (Phil Anschutz) and Miami (Ken Horowitz) but over the first few seasons many of the initial investors started to bail out.

The league was kept afloat at this point largely by the actions of a reclusive billionaire called Phil Anschutz who bought the operating rights to the LA Galaxy, NY/NJ Metrostars and DC United and wound up owning 5 out of the league's 12 franchises. By the end of the 2001 season something had to give. There were no new investors on the horizon and there was no obvious route to league profitability within the league's original business plan.

A variety of options, including folding the league outright, were considered. MLS would probably have been history but for the fact that the Columbus franchise had already pointed the way to a potential solution. Lamar Hunt had built a 22,500 seat soccer specific stadium for the Columbus Crew in 1999. The MLS investors were surprised to learn just how much extra revenue could be derived from control of the stadium. This additional revenue had brought the Crew close to break even point before payments for losses accrued elsewhere within the league were factored in.

After careful and prolonged consideration, MLS contracted two franchises in Miami and Tampa Bay, while Phil Anschutz and Lamar Hunt took over the responsibility for the San Jose and Dallas franchises, so that future league cash calls would be significantly reduced for new investors. The second part of revised economic model was to move out of the oversized football stadia and into new 20,000 to 30,000 seat soccer specific stadia.

Over the last 5 years new stadia have been successfully built in Los Angeles, Dallas and Chicago and new investors have been attracted for the New York/New Jersey (Red Bull), Kansas City (consortium of local investors) and Colorado (Stan Kroenke) franchises. Two expansion franchises were also added in 2005 in Salt Lake City (Dave Checketts) and in Los Angeles (Jorge Vergara and CD Guadalajara). The league aims to have 16 franchises by 2010 with almost all of them playing in new soccer specific stadia.

Stadia are currently under construction in New York/New Jersey, Colorado and Toronto with potential stadium projects being actively pursued in New England, Cleveland, Washington DC, Milwaukee, Kansas City, Houston and San Jose. Stadium related revenue streams coupled with a 10 year merchandising deal with Adidas worth $US 150 million and the first ever league broadcast rights fees negotiated recently with ESPN, Fox Soccer Channel, HDNet and Univision worth collectively about $30 million a year, have finally placed MLS firmly on the path to profitability.

So the bottom line is if you have been burned before and are wary of making another emotional investment in pro soccer in Toronto, there is no need to worry. This league is here to stay this time.

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