September 28th, 2006

Major League Soccer Teams Will Sell Ad Space on Players' Jerseys

By Jon Weinbach
Wall Street Journal

Major League Soccer doesn’t have the talent, tradition or TV ratings of more storied American sports leagues. But starting next spring, MLS will be the first major team sports league in the U.S. to showcase ads where viewers can’t miss them: on the fronts of player jerseys.

Aside from Nascar, no major American sports league permits prominent advertising on team jerseys, though the practice has long been accepted in Europe, Asia and Latin America. The MLS deal allows clubs to sell their own jersey rights and keep a majority of the revenue, a marked change for the 11-year-old league, which in the past has conducted most of its business through a central office and pooled sponsorship dollars.

Corporate logos on MLS jerseys could be a sign of things to come. A few years ago, Major League Baseball toyed with the idea of selling sponsorships on jersey sleeves, and MLB and the National Football League already allow apparel makers such as Reebok and Majestic to display their logos on team uniforms. In an interview last year, National Basketball Association commissioner David Stern conceded that the league would “consider changing our policies” on uniform sponsors. The reason: In an era of soaring player salaries and sagging TV ratings, teams and leagues are under increasing pressure to generate ancillary income from merchandise, stadium amenities and local media deals.

No advertiser has officially signed on to sponsor an MLS jersey yet for next season, but the Los Angeles Galaxy club is in discussions for a “multimillion dollar” deal, according to people familiar with the situation.

The MLS operates as a “single entity,” with investors owning all the teams collectively and players signing contracts with MLS rather than with a single franchise. The system was designed to control spending by owners and limit free agency for players until the league generated significant revenues.

Players’ paychecks remain low—the average salary is about $90,000, including bonuses—but the league is beginning to attract real dollars. MLS recently completed TV-rights deals with several networks—including ESPN, Univision and Fox Soccer Channel—that will pay about $20 million a year, the first time MLS will be compensated for its games. (Previously, the league either bought air time or shared advertising.)

It’s also in the midst of a stadium-building boom: Seven teams, including an expansion franchise in Toronto, will be playing in “soccer-specific” venues next season, and the league’s New York team, owned by Red Bull GmbH, the makers of the popular energy drink, just broke ground on a stadium in northern New Jersey that’s expected to be open by 2008.

Since the league’s inception in 1996, there has been advertising on the backs of jerseys and on shorts—currently, Sierra Mist, Budweiser, Honda and RadioShack have such positions. But those rights were purchased as part of broader sponsorship pacts with MLS and never included space on jersey fronts, the most visible and thus most marketable spot.

Teams don’t have complete freedom to sign jersey sponsors. MLS is establishing a “floor” of $500,000 a year for uniform sponsors, with the league collecting a flat fee of about $200,000 from all deals. In addition, the commissioner’s office has authority to reject deals, and the league won’t allow hard liquor or Internet casinos to buy space on uniforms. “We don’t want the local bail-bonds company on the front of the Columbus Crew jersey,” says MLS commissioner Don Garber.

Across the globe, jersey advertisements are an accepted—and lucrative—part of the sports business. U.S. insurance giant AIG recently agreed to pay about $25 million a year through 2010 to display its logo on the jerseys of Manchester United, the storied British soccer club controlled by Malcolm Glazer, who also owns the NFL’s Tampa Bay Buccaneers.

The go-ahead to sell ads on MLS jersey fronts was spurred by two of the league’s newest investors, both of whom made their names outside the U.S.: Dietrich Mateschitz, chief executive of Red Bull, which purchased the league’s New York franchise earlier this year, and Mexican billionaire Jorge Vergara, who owns a successful Mexican soccer club and operates Chivas USA, a two-year-old MLS team based in Los Angeles. (His Mexican club, also called Chivas, is based in Guadalajara.)

As part of Red Bull’s $100 million investment in MLS, which included $25 million to operate the New York team, the energy-drink maker lobbied to put its logo on the front of the club’s jersey. The league’s board of governors approved the move, which took effect at the start of the current season. Meanwhile, when Mr. Vergara’s Mexican club sold jersey sponsorships for the first time last year, several companies inquired about advertising on MLS team jerseys as well.

“This is industry standard in the soccer business,” says Doug Quinn, president of Soccer United Marketing, the league’s business and promotions arm. The U.S., he adds, “is the only market in the world where sports marketing doesn’t include jersey sponsorship.” When he worked for the NFL’s international division, Mr. Quinn persuaded owners to support on-jersey advertising for clubs in NFL Europe.

Attitudes regarding on-field advertising and uniform sponsors have varied widely over the years. In soccer, major European teams didn’t begin to sell jersey space until the late 1970s, and before 1985, the Union of European Football Associations didn’t allow clubs to wear sponsored uniforms during major competitions like the UEFA Cup. In the U.S., advertising covered outfield walls and ice-rink boards for decades before falling out of favor in the late 1970s and early 1980s—only to resurface in an even bigger way in recent years. One sign of the times: At college football stadiums across the country, the net that catches field goals and point-after kicks is now sponsored by Allstate Insurance.

For their part, MLS team executives don’t think jersey ads will alienate U.S. soccer fans. “It’s so accepted everywhere else. Big clubs are synonymous with big brands, and I think Americans know that now,” says Shawn Hunter, president of Anschutz Entertainment Group’s sports division, which operates four MLS teams. “This will end up being a very safe trial for other leagues.”

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