MLS expands to St. Louis: Why $200M startup fee may soon seem like a bargain

With Major League Soccer’s team valuations and overall expansion progressing at a rapid pace, the $200 million fee paid by a St. Louis ownership group to launch a new franchise in the city may soon seem inexpensive, according to one sports industry veteran.

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For the St. Louis-based ownership group, which includes Enterprise Holdings president Carolyn Kindle Betz and six female members of the company’s founding family, the Taylors, the MLS record expansion fee was the cost of doing business. The St. Louis franchise is set to begin play at a new soccer-specific stadium in time for the 2022 season as the MLS’ 28th team.

The MLS expansion fee as doubled since New York City FC entered the league in 2013 – an increase that coincides with ongoing growth in paid game attendance, corporate sponsorships and a broadcast rights package valued at a combined $90 million annually. With the average MLS team now worth $240 million, according to Forbes’ calculations, owning a franchise in the once-fledging league is now an attractive investment to sports-minded executives, according to Steve Ryan, former commissioner of the now-defunct Major League Indoor Soccer.

“I think it will continue to go up, and the reason for it is that there’s really a small number of teams around North America,” Ryan told FOX Business. “In order to get into the ‘club,’ the demand is outstripping the supply now, and that’s going to force the prices to continue to go up, as it has in all of sports. The valuations on teams have, over the last four of five years, incredibly accelerated. One of the beneficiaries has been Major League Soccer.”

Under Commission Don Garber, MLS has prioritized quick expansion into viable markets in recent years in a bid to capitalize on growing interest in soccer among U.S. sports fans. The league’s current plans call for an increase to 30 teams in the coming years, with Sacramento seen as a leading candidate to host the 29th team. Like the ownership group in St. Louis, the 29th MLS franchise is expected to pay a $200 million expansion fee.

The St. Louis franchise will play its home games at a soccer-specific stadium that will serve as the centerpiece of a new real estate development in the city’s Downtown West neighborhood. The ownership group has said that the stadium will not require any direct citywide tax or tax increment financing, ESPN reported.

Local interest in soccer among fans in St. Louis, which has served as home to several pro teams and the storied St. Louis University soccer program over the last several decades, should provide a strong base for the MLS’ latest experiment, according to Ryan. But to become a financial success, the franchise will have to find a way to turn that interest into a loyal, active fan base.

“When you talk about St. Louis, you immediately think about baseball, and the Cardinals have such a deep following and foundation, not just there, but all throughout the Midwest,” Ryan said. “The National Football League has been there twice and has not been able to make it. The ability to monetize the grassroots support is going to be important, both in terms of attendance and in terms of sponsorship.”

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For the Taylor family and the rest of the franchise’s ownership group, $200 million in startup costs this year should yield a significant return – provided the MLS remains on its current trajectory.

“I think it’s going to do very well, not only just in metro St. Louis, but obviously in the suburbs and in Southern Illinois. I think it’s a great choice for MLS,” Ryan added.