http://deadspin.com/is-mls-a-ponzi-scheme-1797509617

That business model and this financial trajectory suggests that MLS’s sea of red ink is either a loss leader or a Ponzi scheme, and it’s not always easy to tell the difference between the two until it’s too late. Several sports economists, though, aren’t optimistic.

“The best indicator of expansion franchise worth is success at the bottom of the league” in revenues, says Stanford economist Roger Noll. For MLS, “that still looks more like AAA baseball except for a few million per year more in TV revenue.”

(http://www.autoadmit.com/thread.php?thread_id=3089273&forum_id=2#33920737)

(http://www.autoadmit.com/thread.php?thread_id=3089273&forum_id=2#33920793)

The deal came at significant cost to Tepper, who will pay a whopping $325 million expansion fee just for the privilege of joining the league. The all-time record amount represents a $125 million jump from the $200 million expansion fees that MLS charged earlier this year when it awarded teams 28 and 29 to St. Louis and Sacramento.

Oddly enough, it’s also roughly the same amount that Michael Jordan spent to buy the NBA’s Charlotte Hornets in 2010. Jordan paid $275 million to purchase the then-Bobcats in March of 2010, which, when adjusting for inflation, equates to $324.4 million in 2019 dollars.

Sources detailed to The Athletic over the last couple of days the mechanics of how the expansion fees are paid by incoming clubs and distributed to existing ones.

The payment process for each expansion club is determined as part of their individual expansion agreement to join the league. Those details are hammered out in negotiations, with sources confirming that the vast majority of expansion teams pay their fees in multiple installments, almost always within a period of four to six years. Multiple sources said that the league typically wants the bulk of the fee paid before the club starts play in the league.

The sources also confirmed that recent expansion clubs Minnesota United and FC Cincinnati are both still in the process of paying off their expansion fees. Minnesota was awarded an MLS team in 2015 for an expansion fee of $100 million; Cincinnati was granted entry into the league in 2018 for a fee of $150 million.

The league distributes expansion fees equally among its “fully-vested” clubs. How long it takes for a club to become fully-vested in the league is also something that’s negotiated during the expansion process; some teams, said multiple sources, have become fully-vested after a percentage — but not all — of the fee is paid off, while others became fully-vested when the balance of their expansion fee was paid in full.

The growth of the league’s cost of entry has been exponential, rising just over 4,200 percent since Real Salt Lake paid $7.5 million to join MLS in 2005. TFC paid $10 million in 2007, a fee which jumped to $30 million with the 2009 addition of the Seattle Sounders and the 2010 debut of the Philadelphia Union. The Portland Timbers and Vancouver Whitecaps both paid $35 million for an MLS franchise and debuted in 2011. Montreal then paid $40 million and entered in 2012. By the time NYCFC joined MLS in 2015, the fee had hit $100 million. The increase from Cincinnati’s $150 million fee and the $200 million paid by St. Louis and Sacramento to Charlotte’s $325 million, though is truly unprecedented.

According to multiple sources, the huge jump in the fee came down to a couple of factors. First, Tepper had some serious urgency. He was a bit of a late-comer to the MLS expansion race, and he was willing to pay a premium to ensure his quick entry into the league. He felt he had the strongest bid in 2019, but he didn’t want to waste time and risk letting interested parties in Detroit, San Diego, Las Vegas, Phoenix or elsewhere get back into the game. His desire to obtain public funds to help construct team headquarters and a practice facility just north of central Charlotte and to refurbish Bank of America Stadium, which has housed the Panthers since their inaugural season in 1996 and will be the home of Charlotte’s MLS team, also played a significant role. He had better odds of getting taxpayer funds for stadium renovations if he could tell city officials that Bank of America Stadium would host around 30 NFL and MLS games per year and not just 10 or so NFL contests.

Charlotte mayor Vi Lyles has committed $110 million toward stadium renovations and to the construction of a training facility for the team. Tepper said on Tuesday that he anticipates putting some of his own money into stadium renovations and into the facility.

“I’ll tell you this, there is more money going into the training facility than (into renovating) the stadium,” said Tepper. “And we’re going to have to obviously add dollars on top of those numbers to get those things done.”

For a league in which many teams struggle to generate significant revenue, those payouts can be important. To clubs like the Colorado Rapids or FC Dallas, for example, which are both perennially in the bottom third of MLS attendance rankings, it can be a massive infusion of cash. Based on our own, back-of-the-envelope calculations, when NYCFC joined the league in 2015 for $100 million, the Rapids and FCD likely saw an influx of anywhere from $5-7 million, a range arrived at by dividing that fee by the potential number of fully-vested teams. With franchise fees going for over triple that amount, those same two clubs are now receiving much larger payments, likely in the $10-12 million range — a not insignificant sum of money for any MLS team, let alone a low-revenue one.

(http://www.autoadmit.com/thread.php?thread_id=3089273&forum_id=2#39296182)