SPORTS LEAGUE PAIR TRADE: Short MLB, Long MLS

A-Rod/A-Fraud/A-Roid is in the news again, and in desperate need for some brilliant PR help. As paparazzi cannon fodder goes, he makes Tom Cruise look like Machiavelli.

At the end of the day, however, A-Rod still has his guaranteed millions to collect, if not the public adoration he desperately seeks. The real loser here appears to be MLB. Ultimately, I would not be surprised if the league’s special monopoly exemption gets revoked within the span of Obama’s administration unless it dramatically reforms itself. I envision the NFL league capitalism/franchise socialism model will be the only alternative. In other words, the Yankee spendthrift payroll strategy is about to come to an end.

Out of Touch.  The demand for escapist entertainment is escalating with every passing day, but MLB has effectively conceded its ability to cement itself in the minds of an already highly distracted younger generation by doing its best to disgust the adults that currently support the sport. Even "better," both player union and league management is culpable for allowing the American Pastime become so vulnerable. The SI article (see A-Roid) makes it clear that union leadership probably tipped off players about to be “randomly” tested for banned substances, so any breach of ethics is imaginable. Regarding league management, Commissioner Bud Selig collected a $17.5 million base salary for the 2007 fiscal year ending October 31, 2007, and signed a three-year extension through 2012. I think we all know the direction, if not magnitude, of his future compensation. For what seems to be an absentee job relative to the visibility and engagement of NFL commissioner Roger Goodell, Selig’s income, the most lucrative among the major sports leagues by wide margin, is revolting. How is that acceptable for a league enjoying such a luxury as no competition? Considering the mood in Washington, I can’t see how this lasts much longer. The public should have access to the detailed financial condition of the league and all of its franchises.

It's the Economy, Stupid.  Greed, impropriety and apathy aside, MLB has another problem: the economy. Sports may be recession-resistance, but hardly anything can withstand a depression. [The IMF has just reported that the global economy may be already in a depression] During the Great Depression baseball attendance fell dramatically. This time around it doesn’t even have the availability of a national icon like Babe Ruth. The nature of media and entertainment being so “long-tailed” as it is, that caliber of hero may only be reserved for a [successful] war-time President. In any case, the probability of at least one team contracting from the league seems better than even.

The Bigger They Are...  The fallout of the financial and economic crisis disproportionately affects the NY Metro region so it will be very interesting to see how well the four new stadia opening will perform: new Yankee Stadium, Citi Field (Mets), new Meadowlands Stadium (Jets/Giants) and Red Bulls Arena (soccer team). I suspect Year 1 will be o.k., but disastrous for years following. After all, the impetus of all these fields was to capitalize on luxury boxes that catered to [formerly] deep-pocketed corporations. Now, I suspect I’ll soon be able to afford to rent one of these boxes for personal use.

Soccer is the Big Winner.  The best a business can realistically hope for over the prolonged difficult economic period ahead is to gain market share. And within the sports leagues it would seem that Major League Soccer is positioned to be the big winner. Soccer is not only a global sport that Americans are rapidly becoming more fond of, but attending games is still family-friendly and affordable. Its popularity from the top-down is driven by the growing quality of the men’s national team; from the grassroots by the millions of kids playing the sport from a young age.

Over the course of his three month loan to AC Milan, MLS’ top (read: only) celebrity, David Beckham, has brought the league millions of dollars worth of free advertising as speculation of a permanent transfer took a life of its own. Whether he leaves or not is not that important; the L.A. Galaxy, and by extension MLS, is being mentioned in the same breath as a world famous club such as AC Milan of Serie A. As a player, Becks is not the caliber of LeBron James anyway, a bottom dwelling team like the Galaxy can lose just as many games without him. Sure, the reported $15m transfer fee (goes to the league) is being refused for now, but one superstar celebrity does not a team make, and saying no now is rule #1 in the art of negotiation (especially while you’re scrambling to construct a backup plan)

In a cash strapped environment, this is just the type of excitement, albeit somewhat insulting, a marginal league needs in spades. Besides, the election of Barack Obama could be a major consideration for FIFA to award Chicago the 2016 World Cup and thereby providing a turbo boost to the sports domestic popularity. Yes, if I had a few million to allocate toward an investment in a sports franchise, it would probably be toward one in the MLS.