The $500,000,000 (Soccer) Pyramid

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Out of the ashes of the scorched-earth legal proceedings involving the North American Soccer League, the United States Soccer Federation and Major League Soccer comes a glimmer of a path forward. I shouldn’t overstate this; it barely qualifies as spark at this point. But as first reported by Brian Straus and Graham Parker and later released by the New York Cosmos, Rocco Commisso has put forward a proposal which purports to invest upwards of $500,000,000 in domestic soccer. It’s an interesting proposal; not fully fleshed out so it’s not a formal offer. Additionally, it at this point DOES NOT offer to resolve the legal proceedings involving NASL/MLS/USSF. But it does at least outline a potential off-ramp for the parties. Well, for NASL and USSF anyway.

Essentially, a number of correspondences (initiated by Mr. Commisso) have been exchanged by the parties to the original lawsuit, NASL and USSF. As Mr. Commisso initiated this exchange, let’s look at his “proposal” first. I’m going to skip the background and get to the meat of the matter.

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Based on my understanding, and Mr. Commisso’s recent interview with Jason Davis, this investment would basically take the form of Mr. Commisso and other interested owners (Robert Palmer and Riccardo Silva were referenced) returning their teams, and the league to (Division 2?) USSF sanctioning, and bringing along teams that were previously referenced in the initial lawsuit proceedings. You can image it would be some combination of the following teams:

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This would obviously present sufficient teams to start a new “provisional” Division 2 league; it would be an open question as to whether NASL would return in this form or whether the name would go away. That is something of a moot point I suppose, given the following request by Mr. Commisso.

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So a lot to unpack here. Mr. Commisso is correct that MLS had single owners operating multiple teams until relatively recently (coughSaveTheCrewcough), though as was pointed out to me by Kartik Krishnaiyer, Traffic owned multiple NASL teams as well. I think the premise of one owner/one team is a sound one for any number of sporting/financial reasons, but as we all know soccer (lower league soccer at that) in the United States poses a unique set of challenges. So under the circumstances, Mr. Commisso’s proposal seems to have merit, if for no other reason than the precedent set by USSF and MLS.

As to a 10-year runway, that seems quite long, doesn’t it? However, it’s not much different from what NASL has proposed in the past. One would think that there is room for the parties to meet in the middle on this issue, if the financial bona fides are there.

On the financial portion of this, the other thing that I think it’s fair to say caught everyone’s eye was the reference to SUM, and Mr. Commisso’s offer to “buy” the rights as it pertains to the USSF.

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So there are a number of things here. First, the obvious concern is that (for lack of a better phrase), are we just exchanging the devil we know for the devil we don’t? If you have concerns about MLS’ influence over the USSF, why would it be better if USSF got into bed with Mr. Commisso? Who also is an interested party by way of the fact he’ll be starting a new league with upwards of $500 million in funding (half of it his)? In his defense, as outlined by Cosmos CEO Eric Stover, this may be as much about separating USSF from MLS and maximizing the media rights fees they are entitled to (so it maximizes the benefit to the US Soccer as a whole) as it is about Mr. Commisso becoming USSF’s marketing/media partner. But as he made the proposal, I think it’s fair to critique it.

The last section of Mr. Commisso’s letter deals with the set of conditions he’d like to see in exchange for this investment. Setting aside the 10-year runway issue (which again I think is something that could be resolved), the remainder seems like contents of a settlement offer. Maybe one that was presented back in the fall of 2017? That is supposition on my part, but lets’ take a look at what we’ve got here:

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Some of these I would suggest have little chance of agreement/implementation; mainly because MLS would blow their top (but that’s the point isn’t it; MLS being too tied with the USSF). Particularly the equal representation on the USSF board.  Frankly the conflict-of-interest policies could use some improvement (the District Court implied as much), and Garber selecting independent directors seems very shady, at the least. But I’d like to focus on the “poaching” provision.

I don’t see any way such a provision passes anti-trust muster. Professor Steven Bank outlines the issue, the long and short of is that such a thing is really antithetical to the notion of the free market, and frankly goes against what seems to be NASL’s stated premise in this lawsuit, which is to allow competition. MLS “poaching” teams may veer toward the unseemly, but it isn’t illegal, and why should those teams not be allowed to leave if they want to. This of course moves towards the pro/rel argument, which Mr. Commisso next references in his letter.

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Asking for pro/rel in 18 months is aggressive in the way that my goal of losing 30 pounds in the next two months is aggressive; it’s possible, but I wouldn’t count on it. This presumes that MLS would agree to it, or that USSF would mandate it. Which also goes against one of the stated prayers for relief in the anti-trust lawsuit.

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US Soccer’s response:

USSF president Carlos Cordeiro provided a written response on April 19, and it…wasn’t totally dismissive of the idea. However, Mr. Commisso’s request for a meeting was predicated on one thing, which is a problem going forward.

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As you can image, Mr. Commisso was reluctant to do so.

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Frankly both sides have reasonable points. There is such a high amount of hostility and vitriol in this case, that trust seems to be at a near-low point. Frankly, Mr. Commisso’s interview with Jason Davis today probably didn’t help.

But the point stands. USSF/MLS have a financial connection such that Mr. Commisso has a right to be concerned that “trade secrets” could mysteriously end up in MLS hands, even with a NDA. But USSF is the regulator here; they are the ones that would be sanctioning Mr. Commisso’s league, so a review of the financial bona fides would come at some point. So we’re chicken-and-egging here.

I’m not sure what the solution is; someone will probably have to agree to extend a hand here. We’ve got motions to dismiss the various cases set for early this summer; if there is a chance to resolve things, or at least move them in the right direction, someone is going to have to make the first move.

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