FC Cincinnati, MLS, feeling effects of COVID-19

FC Cincinnati carrying on with West End stadium project despite uncertainty

FC Cincinnati is going ahead with the construction of their West End stadium despite financial uncertainty due to COVID-19. The team is hoping the new stadium will help earn back lost revenue if play resumes at home stadiums.

Local Major League Soccer (MLS) team FC Cincinnati (FCC) has been treading during the financial crisis, choosing to continue on with its $500 million dollar stadium project despite uncertainty about when the team will play again.

MLS announced during the second week of March that play would be suspended. Since then, teams have missed playing upwards of eight games each.

The owner of the Seattle Sounders, Adrian Hanauer, said that the league could lose hundreds of millions to even a billion dollars due to COVID-19, and projected the losses for his team alone to be in the tens of millions.

FC Cincinnati Chief Operating Officer Dennis Carroll has said that the team froze all spending as the postponement of matches began, and then attempted to look at places where they could cut spending.

As a result, several of the top executives in the front office took a 15% pay cut for an indefinite period and 11 salaried positions were cut and won’t be filled during the 2020 calendar year.

However, FC Cincinnati’s stadium project remains on schedule to open next year, and fans can see the stadium beginning to take shape as the concrete for the upper and lower bowls, as well as the steel for the roof canopy, are already completed.

The West End stadium is an important part of FC Cincinnati’s future plans to earn back revenue after the financial crisis. Currently, FC Cincinnati plays in University of Cincinnati’s Nippert Stadium, in which they split their revenue from tickets with the university.

The ticket sales from matches play a key part in FC Cincinnati’s revenue, and opening the privately owned West End stadium could go a long way for the team.

While MLS is one of the fastest growing sports leagues in the world, expanding from just 16 teams in 2010 to 30 teams by 2022, their profit structure is still much different than other top leagues in the United States.

90% of the league’s revenue comes from in person game attendance, which has been halted since the onset of COVID-19. 

MLS was just two games into their 34 game season when all games were postponed for an indefinite period.

The NFL and MLB receive $6 billion and $1.5 billion respectively from their television contracts, as opposed to the $90 million MLS nets from its television broadcast deal.

In addition, in order to offset losses, MLS has been able to lean heavily on its single- entity structure to ensure stability, which is a major reason why the league remains in good shape despite the financial crisis.

The single-entity structure means that instead of ownership groups exclusively owning their franchise, as is the case in other American sports leagues, MLS has each team’s ‘owners’ be investors and shareholders in the league itself. The league owns the contracts of all of its players, not the individual teams themselves. Further, with each new team joining the league, their ownership group must pay a hefty expansion fee, which is then reinvested in the league.

The positives to this structure is that it provides financial stability. If two or three teams are operating at a loss, that loss can be offset by the profits from other teams in order to keep all teams operating.

While it’s not impossible for teams to fold (the Tampa Bay Mutiny, Miami Fusion, and Chivas USA have all folded during MLS’ 25 years of existence), the single entity structure prioritizes keeping the league steady as a whole as opposed to individual franchises.

MLS players could begin voluntary individual workouts at team facilities starting May 6 and the league has hopes to resume games by June 8.

While the league has said all options are on the table to resume play, the league’s wishes are to return to  games in hometown markets (as opposed to in a centralized location, as the MLB has proposed), with fans in attendance as opposed to empty arenas, as several sports leagues are considering.

Due to the league’s unique financial structure, having fans in attendance is crucial to MLS returning to business.