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Business/ Sports business Alt

Waiting for That Winning Kick

Elina Frumerman

America loves soccer. It's fast, unisex, and inexpensive to play. Soccer leagues sprawl across suburbia as more than 9 million kids ages 6 to 17 kick the ball around. The demographics are enviable, with lots of high-income families participating. The sport is so prevalent that it even spawned a political category: "soccer moms." Besides all that, the America-hosted 1999 Women's World Cup and 1994 Men's World Cup were huge successes.

Still, the two U.S. pro organizations --Major League Soccer, which on Oct. 20 wraps up its seventh season with the MLS Cup in Foxboro, Mass., and the two-year-old Women's United Soccer Assn. (WUSA)--have yet to become more than marginal attractions.

Since last summer, when the U.S. National Team launched a surprising run to the quarter-finals of the 2002 World Cup--its best showing in 72 years--the question has lingered: Is pro soccer's moment in America finally here? The answer may be as simple as naming the final four teams duking it out for the MLS crown. Odds are you can't.

Having "people watching at a moment of exultation doesn't mean the establishment of soccer in American sport," says Andrew Zimbalist, a sports-business expert at Smith College. Among the obstacles facing pro soccer are a weak TV contract, low player salaries, tight league control, and a highly saturated U.S. sports market. The future of MLS is further clouded by questions surrounding the role at Qwest Communications International Inc. of billionaire Philip F. Anschutz, a major investor in pro soccer.

For several shining moments in June, however, America's brash men's team ignited interest. With an average of 3.77 million households tuned in, the U.S. quarter-final loss to Germany was ESPN's most-watched and highest-rated soccer telecast--despite a 7:30 a.m. EDT start.

But that spike didn't translate into sustained interest. Regular-season ratings of MLS on ESPN sister channel ESPN 2 actually fell 14% in 2002. True, attendance at MLS games increased 6% this season over 2001, to about 15,800 per game, but some uptick is probably due to MLS contracting from 12 teams to 10. And WUSA saw declines in both TV ratings and attendance in 2002.

The painful truth is that since the 1970s, soccer leagues big and small have folded--lost in a haze of Hail Mary passes, three-pointers, and stat-smashing home runs. Today, both pro leagues remain financially frail. MLS has accumulated losses of $250 million to $300 million since its inception. And WUSA was forced to solicit new funds from main investors such as Cox Communications, Comcast, and John S. Hendricks, founder of the Discovery Channel, after burning through its five-year budget--$40 million--in its initial season. It now has backing for the remaining three years of its five-year plan but won't disclose how much more investors have put up.

Boosters have been crowing for years that demographics favor f?tbol. And it's true that the U.S. Hispanic population, which now totals more than 35 million, is soccer-crazy and too big to be ignored. Besides, from 1989 to 1999, youth participation in soccer surged by 73%, far exceeding a 7% gain for basketball and 5% for baseball, according to trade association SGMA International.

But while companies such as MasterCard, Gillette, and Coca-Cola dished out $26 million to be official World Cup sponsors, corporations haven't exactly lined up behind U.S. pro soccer. And with the economy stalling, they may be even more reluctant to do so. Since June, only ADT Security Services Inc. has signed on to become a new MLS sponsor.

"We could have won the World Cup, and it wouldn't have been a panacea," says MLS Executive Vice-President Mark Noonan. But with a TV deal through the 2006 World Cup, a soccer stadium under way in Los Angeles, and an improving bottom line--50% better than last year--the tide is turning, officials contend. WUSA, for its part, says revenues jumped 43% from 2001, largely because of three new sponsors: Maytag, Coke, and McDonald's. But current MLS and WUSA sponsors--all of whom say publicly they are satisfied with their pro soccer involvement--are proceeding with caution. They include Gillette, American Honda, Coke, and Anheuser-Busch.

With both leagues staring at several more years of red ink, how long can they absorb losses before backers lose faith and bail out? Under MLS's feeble TV contract, it gets no rights fees up front and is responsible for selling its own ads. The league's limited ownership and top-down structure keeps salaries low and many players unhappy--encouraging defections to high-paying leagues in Europe. And problems now extend to MLS ?ber-backer Anschutz, who owns half the MLS teams.

The Qwest founder is under scrutiny because of alleged accounting irregularities at the telecom. He also has been sued for steering investment-banking business to Salomon Smith Barney in exchange for being let in on hot IPOs. Anschutz denies both allegations.

Despite Anschutz' troubles and plummeting net worth, "the commitment of the company and of [Anschutz] himself is a very solid one," says Kevin Payne, managing director for soccer at AEG, the wholly owned sports and entertainment arm of Anschutz Corp. Whether other deep pockets behind MLS--such as oilman Lamar Hunt, owner of the Kansas City Chiefs, and Boston's Kraft family, owners of the New England Patriots--will also be willing to stick out a long march to profitability is another question.

Still, as sports-marketing consultant Frank E. Cuzzi of Corner Kick International Inc. points out, soccer in America is a young sport. It's easy to forget, Cuzzi says, that in 1961 there were only eight NFL teams and football had been around for 50 years.