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USSF to End Relationship with SUM

The US Soccer Federation has a long-standing media rights relationship with SUM, the media arm of MLS. Well, we just learned that that is about to end.

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2019 MLS Cup - Toronto FC v Seattle Sounders Photo by Omar Vega/Getty Images

Reporting is coming out that USSF and SUM are ending their commercial arrangement.

Because SUM is a big player in the domestic soccer landscape, this break-up will have significant ramifications. But that’s getting ahead of myself. To talk about this, we have to discuss three big questions: What is SUM?, Why is this relationship with USSF and SUM ending?, and What does this mean?

What is SUM?

Ok, but what even is SUM? I’ve explained in the past how SUM works, but I’m always happy to go over it again. Alternatively, if you want to hear it from someone else, you can do that too.

SUM stands for Soccer United Marketing and it serves as the media rights arm of MLS. The owners of SUM are the same owners of MLS; each MLS owner owns an equal share in the media company. To take the words of Don Garber, SUM CEO and MLS commissioner, SUM is a “leading marketing, media, sponsorship sales and licensing companies devoted to the sport of soccer” in the United States. Basically, what SUM does is it collects the broadcast and sponsorship rights to as much soccer in the US as it can get, bundles it together with MLS, and sells it as a package to broadcasters and sponsors. Originally, SUM served as a way to get broadcasters to take the rights of the 2002 and 2006 World Cups as the likes of ESPN were antsy about paying for the rights to a relatively unpopular sport being played in the timezones of Japan and South Korea. SUM stepped in, took the rights to the tournaments, and sold them at a modest lost, betting that it would grow the sport in the long run. That bet proved successful and the sport grew tremendously with the USMNT making a run to the quarterfinals in ‘02.

SUM no longer holds the rights to the World Cup. Instead, the most prominent assets it has the rights to are MLS and the national teams. The publicly available financial audit forms show that SUM paid USSF approximately $30 million for the broadcast and marketing rights to USSF’s properties, including the national teams. It is thought that this is an undervaluation, but because there is not an open bid system for USSF’s broadcast rights, we don’t know how much they are valued. However, the national team rights are thought to be worth much more than the MLS rights. So when SUM bundles the two together and keeps the profit, they end up raising the amount of money MLS can make from its media rights.

Why did this happen?

The relationship between USSF and SUM has been criticized for a while now, with critics arguing that the relationship is too close and carries too many conflicts of interest. This has been a sticking point in a few of the ongoing lawsuits, particularly the NASL anti-trust suit.

Then USSF vice president Carlos Cordeiro said the following while running for USSF president in 2018:

The unique ownership of SUM creates conflicts that need to be addressed. To avoid any and all conflicts going forward, USSF will need to ensure that any individuals with potential conflicts of interest are recused from any future negotiations with SUM

Amusingly, in that same article, Don Garber, who sits on the USSF Board of Directors, contested Cordiero’s statement. Garber stated that members with ties with SUM (specifically himself) already did recuse, or step aside due to a conflict of interest, when SUM matters were discussed. In any case, under Cordiero’s (brief) term as president, there weren’t major changes to the relationship between USSF and SUM. So while it’s clear there were calls for change, that doesn’t explain why the changes have come now. If you allow me a moment to speculate, I’d guess that this goes back to the USWNT player lawsuit and Cordiero’s resignation.

In case you don’t recall, after USSF presented legal arguments belittling the quality of women’s soccer before the court in their dispute with the women’s national team player association, the federation experienced an enormous amount of pushback, ultimately leading to the resignation (read: firing) of then president Carlos Cordiero in early 2020.° That whole episode demonstrated that the balance of power had shifted such that USSF HAD to respect the women’s national team or else face consequences from sponsors and the board of directors.

Remember, the legal dispute between the USWNT players and USSF essentially boils down to charges that the federation favors the male players, whether that be through wages or through treatment. Part of that is undoubtedly the relationship of USSF and SUM. As I explained in a 2019 article, the rights to the USWNT are part of the broadcast rights that USSF sells to SUM, rights that SUM in turn sells at great mark up, profiting the difference. Because any money that SUM makes goes to MLS, this means that the USWNT is subsidizing the men’s game through MLS. Which, erm, looks like favoritism. That’s a bad look for the federation.

Given what happened to Cordiero, it seemed clear that USSF needed to show more effort to the USWNT. Under Cordiero’s successor, former USWNT player Cindy Parlow Cone, USSF appears to have done just that, working with the players to settle a portion of that particular lawsuit (the portion about player wages is being appealed). The split between between USSF and SUM appears to be a continuation of that trend.

Alternatively, USSF has been bled so hard by so many lawsuits (equal pay/treatment with the USWNT, a similar case with Hope Solo, an anti-trust case with the NASL, an anti-trust case with Relevant Sports on match sanctioning, a now settled case with the US Soccer Foundation over trademarks, and arbitration with the USMNT players association over jersey license fees (I sincerely apologize if I missed a lawsuit, there are a lot)) that the federation is losing much too much money and needs to increase revenue. Following the 2016 Copa America Centenario, USSF announced it had a war chest of over $100 million. Now, USSF is saying that significantly more than half will have been spent by 2023. While some of that is merely because USSF decided to spend that money on programs, it’s still not very good that tens of millions of dollars will have gone to lawsuits by that point. Managing the broadcast rights themselves could give USSF a way to generate tens of millions of dollars for itself and help offset some of that legal spending.

° I cannot believe it’s only been a year since Cordiero was fired. It feels like it’s been five.

What is this going to happen because of this?

We don’t know.

Right now, it’s probably fair to say that SUM, which was valued at approximately $2 billion in 2017, will see their margins decrease. We don’t know what the nature of this eventual break up will look like — will USSF still sell to SUM at a higher rate in the end (USSF doesn’t currently actually have anyone on staff to manage the rights), or will they try to sell directly to a broadcast group like ESPN or FOX — but in either scenario, SUM will see reduced profits as either costs will go up, or lose out on a particularly lucrative portion of their portfolio. But even there, because we don’t know the separate market-rate valuations of MLS’s broadcast rights and those of the national teams, we don’t know how big of an impact this will have.

However, if USSF is comfortable removing this windfall from MLS and the league’s owners, it probably means that the federation is confident that the league is stable enough to go without such a subsidy. The valuations of MLS clubs and the cost of expansion fees similarly suggest that wealthy owners feel very positively about the league’s prospects. In 2013, NYCFC’s ownership group paid $100 million to join the league. Meanwhile, the most recent expansion team, Charlotte NC, paid $325 million in 2019. Similarly, Orlando City’s ownership paid $70 million for the rights to field an MLS club and are in negotiations to sell the club (along with the stadium and the NWSL team, the Orlando Pride) for between $400-$450 million.

Such strong valuation growth suggests a level of strength in the league that could survive losing on the national team broadcast rights. In addition, while the USMNT and USWNT broadcast deals are a significant asset to SUM, they aren’t the only things the company has to work with. In addition to the MLS broadcast rights, SUM also has rights to a number of other different broadcast and sponsorship entities, most prominently the Mexican national team. It’s likely SUM will emerge out of this completely fine.

On the other hand, there is the potential that losing the national team broadcast rights will undercut the valuation of MLS’ media rights, expected to be renewed as well in 2022. Because the most recent collective bargaining agreement made by the MLS player association included a portion of the broadcast rights, diminishing the media money could cut into player pay, depending on how the portions were to be divided up.

Finally, there are the ramifications for USSF. Ending this deal seems to signal a change in how USSF wants to operate as an organization under president Parlow Cone. The current arrangements between MLS and USSF were largely organized by former USSF president Sunil Gulati, one of the chief architects of MLS’ business structure. Gulati took a very top-down approach to growing soccer in America. Gulati felt that, if you could attract wealthy investors, you could successfully grow large and stable leagues. As quoted in The National Team, by Caitlin Murray, Gulati believed strongly in the power of leagues to grow the sport.

The benefits of residency are for a small group of players in preparation for an event. The benefits of a league, if you can make it work, are far beyond that... You’re developing markets, you’re developing coaches, you’re developing referees, you’re developing administrators, you’re developing fans across the country for... the game. For everything other than the short-term technical preparation of the national for a competition, it’s a far better setup.”

To Gulati’s credit, this plan of growth has worked. In 2001, when SUM was founded, MLS had eliminated two teams and was on the verge of collapse. In 2021, MLS teams are valued more highly than some clubs in the English Premier League, like Newcastle United or Crystal Palace, demanding hundreds of millions of dollars for expansion fees. In turn, MLS provides soccer careers for an ever-expanding number of coaches, administrators, and players. MLS is fully dedicated to youth development, with every club required to have some sort of youth program, though the quality varies by club. Finally, MLS ownership has turned to providing support for other parts of the professional soccer landscape, owning and housing NWSL and USL teams.

However, following Gulati’s departure, there have been growing calls (including from myself) to restructure spending so that, instead of enriching billionaires, the federation spent that money more directly on other projects, such as the women’s professional game, grassroots soccer, and accessibility for minorities and neglected communities. Instead of indirectly growing the sport by leveraging MLS, Parlow Cone has an opportunity to increase revenue and put money into projects that need it, thereby restructuring (and expanding) how USSF does business. USSF can do what it wants instead of handing MLS a check and hoping that they will get to it. However, while we can be sure that there will be significant changes, what the new structure will look like is currently in the realm of mere speculation. But if we were to speculate, given Parlow Cone’s history on the USWNT and the apparent steps USSF have made since she took charge, I would guess that some attention will be turned towards ramping up and expanding the women’s game so that the NWSL is more comparable to MLS. But that’s me speculating.

What do you think of the end of USSF and SUM’s relationship? I’m sure a lot of you have thoughts about this, so go down to comments and discuss away!