Major League Soccer media rights negotiations in "ninth inning." A conversation with global media rights consultant Daniel Cohen

It’s the most important moment in the future of Major League Soccer.

Daniel Cohen is the Senior Vice President in the division of Global Media Consulting for Octagon. Consequently, he is educated on the pending media rights deal for Major League Soccer with clients who are going to be impacted by the result. Our conversation revolves around the advantages and disadvantages at play for MLS and the varying influences that will determine the final figure.

We also evaluate streaming versus linear television viewing and how that could affect the soccer media landscape.

You can listen to the interview in its entirety below and on the “On Frame” podcast available on Apple Podcasts, Spotify and TuneIn.

The following transcription has been edited for clarity.

Glenn Crooks: The current MLS video rights package is $90 million dollars with ESPN, Fox and Univision. There are a lot of numbers being thrown around – there have been some reports that MLS won’t accept anything under $300 million which seems unfathomable. Where do you stand with all this?

Daniel Cohen: I think the first thing you have to look at is the package itself is incredibly different from the last time they went to market seven years ago. There are some real headwinds here but there's also some tremendous tailwinds. The rights on offer you alluded to was a $90 million package before. It's not a $90 million package today. Half of the rights value was set in the national team package which are no longer part of this package.

GC: U.S. Soccer has made the decision they're going to part ways with SUM (Soccer United Marketing)?

DC: Yes, and they're also in the market right now selling against MLS. So that'll be interesting to see how that all plays out as well.

GC: I guess you never really know the exact figures, right?

DC: In our business we can quickly get to a fair market value of the two separate packages. And the rights on offer this time around are very different from having a national team package and a club competition package. And that might be a headwind. For the tailwind perspective you've got a lot of additional content that's being offered this time around - primarily the League's Cup and that is what CONCACAF together with SUM is trying to plug in as a replacement value for the National Team rights. It’s that one month starting in 2023 when Major League Soccer and Liga MX pause in their domestic leagues and play a 48 team, brand new competition. There's a tremendous value in having Mexican football clubs in an MLS TV rights package.

GC: When do you anticipate the deal gets done?

DC: I have to assume they're in the ninth inning of closing this. We don't represent Major League Soccer in the media rights side so I can't pretend to know exactly where they are in the length of their negotiations. But my guess is within the next four to six weeks at most they're going to announce these new partnerships with a broadcaster and platform.

GC: Do you have any insight as to what kind of figures are being bounced around?

DC: If I'm Major League Soccer, I walk out feeling good if I've if I've climbed over this optical mountain of a $200 million a year. If I'm able to tell my owners that are now valuing clubs north of $300 million - if I'm walking out of those negotiations with ESPN, Fox, Amazon, CBS, etcetera and I have a 200 plus million-dollar deal, I've done really well.

GC: Is that realistic?

DC: Well, that's the beauty of the of the business that we do, Glenn. It's art and it's science. The science of the value proposition that MLS brings to the table is not $200 million. If you're looking at strict empirical, quantitative analysis [of the viewing data] it’s shy of that, probably around the $150 million mark. But then you have to keep in mind the art part. And when I say art, it's all the intangibles. When you talk about how many rights are available in the marketplace right now for Tier One content, MLS has moved up to Tier One property.

GC: Does Tier One represent the sheer volume or is or does that mean joining the likes of the NFL, Major League Baseball, NBA and NHL?

DC: It's the latter. It's the company that you keep and the brands that you attract. It's the attendance which has been a major boon for MLS the last few years that you can attract. It's the broadcasters that promote you and it's also the level of competition on the field and the stars that you have in in your league. Data doesn't support a 200 plus million-dollar rights fee but the art part - the cable erosion and the importance of live Tier One sports properties. MLS is continuing to grow.

GC: What else points to it being Tier One?

DC: You've got to look at the ownership. Years ago, maybe you knew one or two or three of the owners. Now you've got titans of the industry owning these teams. You're talking about serious players with serious money to invest back in the league and the teams and then attract talent. The salary cap is a pet peeve of mine with Major League Soccer. I think it's blocking them from some future international growth.

GC:  What role does demographics play in negotiations?

DC: It plays a big factor. Seth Bacon and his team have done a tremendous job at parsing through their fan demographics to pitch that story because I think it's an important story. I think the fact that the average fan of MLS being under 40 years old - the only one of the major five leagues that can claim that. The NBA is next at basically 42 years of age. When you talk about Gen Z and Millennial fandom, almost 60% of MLS fans are Gen Z and Millennial fans. The next closest again is the NBA at 50%. When you talk about the digital [awareness] of Major League Soccer fandom they're well above 40%. They're the only league in the Big Five that can claim that and then I think the other part you must talk about is the cultural element. The Hispanic fan base of MLS is massively important. They are double that of the next league - the NBA is at 16%. So, I think you've got the cultural, racial, ethnic play there. You've got an age play there that really does set you apart from the NBA, the NHL, the NFL and Major League Baseball.

GC: When we talk about ratings are the streaming entities taken into consideration?

DC: Yeah, they are factored in and they're becoming even more important than ever before. I've been doing this for quite some time, and I can tell you that we have had to shift our modeling and become much more sophisticated when looking at digital consumption and also looking at social engagement because these are factors that do drive value for the networks. And as these networks shift to more digital distribution models that data becomes even more important and MLS is doing a nice job of touting how much they've grown their digital engagement both on website and on social. It's really been incredible when you compare it to where they were just five years ago.

GC: I suppose they figure they've got the young techies as part of their negotiation.

DC: Yeah, very much so and I think soccer in the U.S. is the most digitally diverse fan group of any sport out there. And that's why you saw Bleacher Report under Turner not too long ago make that first dive into the Champions League and acquire those rights. They said, ‘we're going to go direct because we know that soccer fans will pay up for streaming services, and we know that soccer fans are comfortable streaming soccer content.’ And that's why you see CBS making a huge push into soccer right now with Paramount Plus. So, I think you're going to continue to see this trend of soccer being a digitally powerful sector of sport for any of these legacy media companies making that transition into streaming.

GC: Don’t the paywalls add to the challenge for MLS?

DC: Yeah, they do. I think that a paywall for a league that is still in its growth can be problematic. We're seeing it with the NHL, right? The NHL is kind of the canary in the coal mine that I think analysts should be watching because they just went off any free-to-air exposure by leaving NBC and going to ESPN and Turner. So, you look at something like the other week with The Winter Classic. Turner did extremely well in terms of how they produced the game and the actual game itself was fantastic. But it was also one of the lowest rated Winter Classics in recent history because it moved to cable behind a paywall - the original paywall, so to speak.

GC: From my time doing the radio broadcasts for NYCFC, I know not everyone has cable.

DC: A decade ago, we're at 100 million cable homes in America. And we're now less than 70 million so that's a massive drop. I'm not one of these naysayers but I do think that it's important to note that based on our estimates at Octagon, we're projecting a 7% drop in cable subscriptions every year through 2025.

GC: Let's stick with streaming versus linear television viewing. Where are we headed? I’ve got all these different services I’m trying to juggle – and pay for.

DC: The good news is that it's unsustainable but there will be a continuation of choice. There are over 400 streaming services available to us. There's going to be consolidation. There has to be because the average household in the U.S. really can't afford to have more than five streaming services at a time right now. We're hovering right around four. And we're seeing that from our internal research we’re inching closer to an inflection point where the wallet in the U.S. household is getting pretty thin when spending on streaming services.

GC: Do you have any other interesting indicators?

DC: The average time consuming on television is dropping and the average time consuming on a laptop or on a phone is growing at three times that rate. And you see the advertising market follow that as well. I think 2019 was the first year in which digital advertising surpassed that of linear television advertising in terms of total spend in the U.S. And that's only going to continue to go up.

GC: Daniel, I’ve got a lot of friends in the industry that are commentators on regional telecasts for Major League Soccer. The MLS Commissioner, Don Garber has told them all to halt any discussions on future deals. What are the benefits for MLS to eliminate these regional broadcast teams many of whom are part of that community and are important to the fabric of the clubs?

DC: I'm not too close to that part. But I’ll put on my fan hat and I don't like that. I don't really like that model. I know that commissioner Garber comes from the NFL and it's the NFL format.* They're not the NFL and they don't have these national personalities that can carry the broadcast. No offense, but I'm not tuning in to listen to Alexi Lalas. But I am tuning in to listen to Tony Romo for an NFL game. If I don't care about that game, I’ll still tune in because of him.

*(MLS is reportedly considering a smaller stable of broadcasters who would cover local games on ESPN+).

GC: NFL fans are conditioned for that which could be the argument on the MLS side – that eventually everyone will be conditioned like they have been in the NFL.

DC: I think you're right, but I also think that Major League Soccer doesn't yet have enough stardom within each team and it's not enough for a national broadcaster to walk in - these guys and women come in the morning of they get a bunch of stat sheets and they get some press notes. I don't think that works for Major League Soccer. I think at this point you need someone who is with the team, knows the team, knows the players, knows the storylines they can create because they're not going to be found on a quick Wiki search. So, I think you still need that local talent that follows this team day in and day out to create that compelling content.

GC: How much do other sports factor into the final figure for MLS media rights?

DC: It plays a massive roll. When I hear people talk about just how much money is left that's the truth. That's what we're talking about. And the system has been sucked of a lot of that. And COVID has not made it easier. If you couple the impact of the pandemic on the media ecosystem, broadcasters have less to spend and then you look at the fact that over $110 billion just got sucked out of the market with the NFL rights going. Major League Baseball just saw a nice uptick with ESPN with close to a 20% increase for all their packages. And then you've got the SEC going from 65 million to 300 million plus at ESPN. The NHL just saw a nice increase going to Turner and ESPN. As I alluded to before, the wallet for the American consumer is getting thin and it’s the same on the broadcast side who need to be more selective about the sports rights that they acquire.