Major League Soccer's Most Valuable Teams 2018: Atlanta United Debuts On Top

On Sunday night, Atlanta United played host to New York City FC for the second leg of their Eastern Conference Semifinals showdown. Also in the building that night? A record-breaking 70,526 fans, the biggest crowd ever gathered for an MLS playoff game. That sort of attendance is more in line with what popular NFL teams draw, and it was hardly an anomaly for the second-year MLS team: Sunday’s crowd pushed Atlanta past one million tickets sold on the year.

That unprecedented success has made Atlanta United one of the greatest team debuts in American pro sports history, and it also explains why Atlanta is now Major League Soccer’s most valuable team, worth $330 million.

The Seattle Sounders’ home-game attendance numbers have long been the envy of the league; Seattle has drawn over 40,000 fans per game for the last seven years, a stretch during which no other team eclipsed average attendance of 33,000. That is, until Atlanta’s arrival. Last season, average home-game attendance was 48,200, and this year the team is drawing over 50,000 fans per game. In just two seasons Atlanta has already laid claim to the league’s eight best-attended games ever, and nine of the top eleven.

That sort of popularity extends well past ticket sales. Last year, Atlanta was responsible for one-quarter of league-wide merchandise sales through the MLS online store. This season, the team’s top two stars, Josef Martinez and Miguel Almiron, would have the league’s two best-selling jerseys if not for the arrivals of Zlatan Ibrahimovic, Carlos Vela and Wayne Rooney. Overall, five Atlanta players rank among the 25 top-selling jerseys; no other team has more than three on the list.

“It’s just an incredible success story,” says MLS commissioner Don Garber, “I think it’s one of the great expansion stories in the history of professional sports. The team continues to defy our expectations.”

And on the field, the team has even exceeded the expectations of the man who constructed the roster. When Atlanta United president Darren Eales spoke with Forbes prior to the team’s debut last season, he indicated that the playoffs were an unlikely longshot. And yet last year Atlanta had little trouble becoming the first expansion team to make the posteason since the Sounders achieved the feat in 2009. This season the club led the league in scoring and came up just two points shy of winning the Supporters’ Shield; in a few weeks’ time, Atlanta will take on the New York Red Bulls in the Eastern Conference Finals.

That sort of immediate on-field success is obviously a tremendous boon for business, and we estimate that last season Atlanta generated $47 million in revenue despite playing more than half of its home games at Georgia Tech’s Bobby Dodd Stadium. With this year’s full season and a deep playoff run in the brand new, $1.6 billion Mercedes-Benz Stadium, we expect Atlanta’s 2018 could blow away last year’s haul. What’s more, the team’s on-field approach has been built specifically with future value in mind. Unlike some expansion clubs that turned to aging superstars to drive fan interest—David Villa in New York City, Kaka in Orlando, etc.—Atlanta instead brought in young up-and-coming stars like Martinez, Almiron and Hector Villalba, who the team can eventually sell for a profit (Almiron has already been the subject of multiple Premier League rumors).

Rounding out the league’s three most valuable teams are the LA Galaxy ($320 million) and Seattle ($310 million), which ranked first and second, respectively, last year. As noted above, the Sounders have a tremendous fan base, no doubt the result of some remarkably sustained on-field success: Seattle has never once missed the playoffs in its decade of MLS play. More recently, the Sounders have competed in the last two MLS Cup finals, winning one in 2016.

And the Galaxy have been the league’s premier franchise ever since the very start in 1996, which has led to financial clout and an unrivaled reputation. Last season, no team came close to matching the Galaxy’s $63 million in revenue, and no other team had the cachet required to sign Zlatan Ibrahimovic to a sweetheart, $1.5 million-per-year contract (he doesn’t even qualify as one of the team’s designated players). The Galaxy make an average $5.5 million annually from local TV rights while many MLS teams still count local broadcasts as an expense, and it’s those sorts of financial advantages that allow the five-time champions to maintain the perennially star-studded roster necessary to stay relevant in such a competitive market.

Fourth on the list is the Galaxy’s new crosstown rival: LAFC. Though the league’s newest member is drawing smaller crowds, that’s only because of stadium capacity—LAFC has sold out every home game it’s played so far. The team has secured a stadium naming rights deal with Banc of California reportedly worth close to $7 million annually, and we estimate the team is now worth $305 million independent of the downtown stadium that cost $350 million to build. “I think Atlanta is getting a lot of attention,” says Garber, “but I can’t emphasize this enough: LAFC is an amazing story.” Garber credits the ownership group led by Larry Berg for piecing together a team that’s been remarkably competitive both on and off the field (this year LAFC matched Atlanta’s accomplishment of cracking the playoffs in its debut season).

The third new addition to this year’s valuation ranks is Minnesota United, which joined the league along with Atlanta last season. In some respects, it’s been an underwhelming start for the former NASL club. The team has thus far yet to excel on the field, finishing bottom-six in points in each of its first two seasons. Financial performance has also lagged behind thanks to playing home games at the University of Minnesota’s TCF Bank Stadium; we estimate that last year the team generated $24 million in revenue, tied for third-lowest in the league.

But our bullish ranking—Minnesota is at No. 12, worth $248 million—is based largely on the fact that next season the team moves into the privately financed Allianz Field. The new building should allow the club to further monetize a sizable fan base—this season Minnesota ranked fifth in average home game attendance—and continue increasing its roster investments after signing the team’s first two designated players earlier this year.

Note: All figures are Forbes estimates; team values do not include stadiums or real estate. Revenue and operating income are for 2017 season, and operating income is earnings before interest, taxes, depreciation and amortization. 

Thanks largely to those new additions, the average MLS team is now worth $240 million, up 7.6% from last year (ignoring the trio of new teams, the average MLS club value is up 4% year-over-year). Our valuations and financial estimates are based on recent team transactions, dozens of interviews with league insiders and estimates of individual revenue and expense streams.

The league’s continued financial growth has made it an attractive investment for prospective team owners, and that demand helps explain why the most recently announced expansion teams are paying a whopping $150 million in expansion fees, a 650% increase from a decade ago.

It’s worth noting that the league allows incoming owners to pay their expansion fees in installments over time; expansion owners typically pay 70% of the total between their initial announcement and when their teams begin playing, with the remainder being paid shortly thereafter. But even if the spread-out payments soften the blow, that $150 million cost of entry is still more than double the $70 million that Atlanta and Orlando City SC paid in recent years, and it’s more than triple the $40 million paid by the Montreal Impact, which joined the league in 2012.

Yet prospective owners haven’t flinched at the skyrocketing upfront cost. In fact, demand has far exceeded the supply, with a dozen cities applying for the league’s latest round of expansion to 28 total teams. Cincinnati joins the league next year, and Nashville follows in 2020; both are paying the league-record $150 million expansion fee. David Beckham’s long-awaited Miami team is slated to come online alongside Nashville, though the exact expansion fee remains unclear (Beckham’s player contract reportedly included a clause offering him the option of team ownership for $25 million).

And No. 27 will be Austin, the result of the messy relocation saga in Columbus; some aspects remain in flux, but it’s currently believed that billionaire Cleveland Browns owner Jimmy Haslam will take over the Columbus Crew as an expansion owner—his expansion fee has not yet been determined—allowing current owner Anthony Precourt to relocate his franchise operating rights to Texas, where he’ll build a new club from the ground up. Garber says the goal for the Austin team is to begin play in 2021.

That leaves one expansion slot left to reach the stated goal of 28 teams. MLS has yet to announce timing, but at least ten potential cities—Sacramento, St. Louis and Detroit principal among them—are still in the mix despite an expectation that the selected ownership group will be paying even more than the current $150 million price tag (the league has previously floated the notion of expansion fees hitting $200 million). After that? No official word yet, though Garber isn’t closing the door on potentially growing beyond 28 teams: “I’m sure at some point in the off-season we’ll take a deep look at that and determine if anything will change in terms of our expansion strategy.”

The rapid increase in expansion fees also points to the surging value of Soccer United Marketing (SUM), the MLS subsidiary that controls the commercial rights for both the league and other North American soccer properties. SUM is a significant moneymaker, so existing owners naturally expect to be compensated for diluting their stakes in the marketing body each time a new expansion owner joins the ranks (SUM stakes are also included in the our team valuations). And there’s no denying the property’s value: As we reported last year, when league owners bought back Providence Equity Partners’ 20% stake in SUM last year, they did so at a valuation of more than $2 billion, a staggering 250% increase from five years earlier.

That valuation is built in part on the fact that SUM seems to be involved in nearly every major corporate partnership in the North American soccer scene. Last year SUM and MLS agreed with Adidas on a six-year, $117 million-per-year extension; that deal is a fivefold increase over the previous agreement and is worth 70% more per year than what the NHL is getting from Adidas. SUM is also responsible for the league’s TV agreements with ESPN, Fox and Univision that pay an average $90 million annually. Outside of MLS, SUM played a key role in the hugely successful Copa America Centenario, and it continues to manage the commercial rights for the U.S. Soccer Federation, Concacaf and the Mexican national team’s U.S. tours, among other properties. In total, we estimate that SUM generates annual revenues in the neighborhood of $350 million, with roughly three fourths of that sum coming from MLS broadcast and sponsorship deals.

A $2 billion valuation would therefore mean SUM traded at about 5.7-times revenue; for context, that puts SUM almost exactly at the midpoint between the recent sales of UFC (7-times revenue) and Formula One (4.5-times revenue). That’s a strong position, and it no doubt helps that SUM is profitable. Plus now that Providence has been bought out, league owners don’t need to share SUM dividends with a co-owner that wasn’t helping cover MLS league-level losses, which remain significant (last year MLS owners were responsible for a league capital call of more than $2 million apiece even after accounting for SUM dividends).

Continuing losses are troublesome, but in league circles they’re generally seen as a continuing investment into the competitive quality of the league. This season MLS granted teams nearly $3 million apiece in discretionary Targeted Allocation Money, unlocking up to $64 million in additional player spending. Garber notes that fans shouldn’t expect to see further increases to roster spending in the near future, but that owners will continue to make significant investments into infrastructure, training facilities, academy programs, sports science and analytics: “These are all things that are helping to drive product quality, and they’re really, enormously expensive.” Garber says that the league is collectively spending over $100 million per year on player development, and that it’s time for owners to start seeing a return on their investments.

The early financial returns have been encouraging, if limited. Two years ago, the New York Red Bulls sold defenseman Matt Miazga to Chelsea for $5 million, then one of the biggest transfer fees ever for a homegrown MLS player. In July, the Vancouver Whitecaps agreed to transfer winger Alphonso Davies to Bayern Munich for $22 million, far and away an MLS record sum.

And beyond those direct profits, a significant part of the player development ROI is the league’s rising level of play, which Garber credits for recent increases in TV viewership (total regular season viewership on ESPN, Fox and Univision was up 6% year-over-year in 2018). A much more meaningful return will presumably follow when MLS renegotiates its TV rights agreements; the trio of domestic broadcast partners are signed through 2022, and some are already pointing to the upcoming renewal negotiations as the next big benchmark for MLS success.

But a jump in TV rights money could pale in comparison to what’s just a little bit further down the road: World Cup 2026. It’s too early to tell exactly what role either MLS or SUM will play in North America hosting the international tournament, but the league has long credited the World Cup (and, more specifically, the resulting surge in stateside soccer popularity) for much of its past success. With the world’s biggest sporting event being played on home soil for the first time since the league’s 1996 founding, the sky could very well be the limit.

“There’s no doubt for me or anybody else involved in MLS that the World Cup in 2026 is going to be, in many ways, the rocket fuel that will elevate the sport of soccer and MLS to entirely new levels,” says Garber. “It will be our 30th anniversary, and it will be a great way for us to celebrate the founding of our league, which was born out of the World Cup in 1994.”

Garber is naturally hopeful that MLS and SUM will play an integral role in tournament operations, but he ultimately thinks that the World Cup’s potential impact is far bigger than just growing MLS: “It has the potential to drive a whole new generation, if not multiple generations, of opportunities for everyone involved in the sport,” says Garber. “Not just MLS, but the entire North American soccer community.”