MLSE Is Not A Charity
That time of year is here again. It is the time when Toronto FC sends out season ticket renewals for the next year with of course the now annual healthy price increase. It is the time of the year when fans, awaiting a good product on the field feel gouged by the team they love and support. It is the time of the year when something controversial gets slipped into the mix that makes fans feel that they are really getting screwed.
And with the release of season ticket renewal information this week TFC definitely has checked off all these boxes. Once again prices are going up significantly more than inflation (which is sitting at an annual 1.7% in Canada as of today), and that statement takes into consideration that there are more games next year. I am talking about on a per ticket basis. For the fourth year in a row the MLS playoffs are a pipe dream. And of course in order to get your TFC season tickets renewed you also have to purchase MLS Cup tickets whether you wish to or not. That is quite the trifecta eh?
And here is the breakdown of the increase on a per game basis (courtesy of Pedro at NEE).
Other than the already overpriced sections of BMO Field everyone will be paying more than inflation in 2011.
Now sometimes I think that we as fans forget that Maple Leaf Sports & Entertainment is not a charity. They have every right to make a profit on their investments and making a profit means that the business as a whole, and the club that we support in particular, can exist and hopefully prosper. MLSE is not a public company and unlike them they do not have to disclose their profitability or lack thereof, which is again their right.
TD Bank and the Ontario Teachers Pension Plan (public entities unlike MLSE) are of course significant investors in this business. Not only are these two motivated by profit, they also have a fiduciary and legal responsibility to their shareholders to maximize return on their investments. And part of that entire picture is that profits not only need to be steady but that there is an expectation that profit margins increase year over year. It is not good enough for the Teachers to make 10% a year. They need 11% this year, 12% next year and so on. So in MLSE we have an owner for TFC that desires to grow their profit margins annually to satisfy their primary shareholders yet they do not have the accountability that an actual public firm would have.
However when you look at a business like Toronto FC, this approach to making a profit is a very risky one to take. TFC is not the Maple Leafs. The soccer business in this city has probably over these four years surpassed MLSE’s projections when it comes to profitability however there are some real problems out there. There has never been a softer secondary market for tickets as there exists today. And of course by “secondary market” I mean scalpers. It is a fact that they have been having a harder and harder time getting rid of their tickets for each and every game. And they have been even getting more aggressive. The last home game for example there was a desperate scalper brazen enough to be three feet outside gate three flagrantly pitching tickets he could not sell. Surly scalpers selling tickets below face is now a common site on the way to BMO Field. Below face means that of course the market sees that the value proposition on a $70 ticket is not what it once was in 2007, and it gets sold for $25 or $30 instead. The market is speaking.
And the departure of Mo Johnston in particular has only calmed the fan base to a degree. The playoffs are most likely not going to happen this year. Advancing past the group stages of the Champions League is going to be a tall order as well. So TFC is again charging more in 2011 for what has been yet again a substandard product. And charging more yet again for “we will do better next season” is certainly not the smartest way to go either, especially when there has been some real softness in crowds actually showing up in numbers. Tickets that are sold are not even being used as often as they were previously. And yet TFC feels that it can get away with raising prices on tickets that are sold yet not often considered valuable enough to even use by many of its customers.
Considering what this club has put its fans through, especially since the inglorious end of the 2009 season I feel that anything more than increases adjusted to inflation is one of those short sided moves that makes me think that MLSE are structurally deaf as a company to many of the concerns of their customers. And they ARE making money. The stadium came cheap. There is a strict salary cap in MLS and a relative cost certainty exists in the business. The team has to fly commercial and not charter for league games. $80 million in expansion fees are coming into the league next year. CONCACAF success led to four additional home dates that drew in additional revenues in 2010. The club and for that matter the league as a whole is profitable. Yet prices are still increasing far faster then they should.
And forcing us to buy the MLS Cup is certainly not something a lot of fans are going to be pleased with either. I for one freely admit that I am far more of a Toronto FC fan than I am a fan of MLS as a league. I personally do not have any interest in going to a game in November that may see Columbus Crew or LA Galaxy for example lift the cup on our turf. Many will, but not me. If TFC is there then it would be the game of a lifetime, but I don’t expect that to be the case and I am certainly not alone in thinking that. Most of all I do not like the fact that I have no choice in the matter. If the tickets were offered as an option and I was given perhaps a discount for being a loyal fan then fine, but forcing me to buy these is like forcing SOCCER fans to buy AHL HOCKEY tickets in order to get into BMO Field. It is not the way you reward loyal fans, by forcing upon them a product they may have no interest in. If anyone wants a pair of tickets to the MLS Cup cheap just drop me a line.
There are ways to make a profit and there are ways to screw your fans over. But you do no have to to have one with the other! A nice profit margin can come from Toronto FC as an overall investment if the powers that be take more than a short term perspective. And that is the problem here. I think the very nature of MLSE as an owner often precludes them from looking any farther then the next year ahead. And that may come back to bite them in the collective ass down he road. Until MLSE realizes that steady reasonable profits over the long term versus short term profit at the expense of fan loyalty is the way to go then they run the risk of destroying all they have built to date. And sadly until the institutional investors are out of the picture at MLSE I fear for the worst over the long haul.
What do you think? Comment are always welcome and appreciated.