Today’s guest columnist is AJ Swoboda, managing director at Twenty First Group.
Lionel Messi is now formally under contract with Major League Soccer and is expected to make his first appearance for Inter Miami CF on July 21. The match will mark his first competitive domestic professional soccer match in an Adidas kit, which this season is now also neatly branded with a prominent Apple TV logo.
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The Messi acquisition drastically improves Inter Miami, which has struggled on and off the pitch since its first kick in 2020. Messi’s mere presence will shift the David Beckham-owned squad’s on-pitch fortunes, and he has already massively altered the team’s connections with fans both old and new. His arrival, however, does not impact MLS’ ability on the whole to grow two fundamental aspects of its sporting product that go beyond fan connection—quality and jeopardy. (More about those later.)
Still, the deal helps the league in two major ways.
First, Messi’s impending arrival has dramatically increased its ability to create increased connection with fans in local markets domestically and throughout the world.
Second, the signing showcases the power of a single-entity sports league with long-term, blue-chip, league-wide partners. During an increasingly hectic time in global football, it is quite a contrast to the tumult of major European leagues and the hulking fiscal might of sports entities tied to the Persian Gulf.
The Sporting Product
Messi’s immediate impact on MLS is monumental. But conversations about his impact center on short-term business metrics. Metrics that do not necessarily translate to long-term enterprise value. The most important conversation to be having is about the effects this signing will have on the league’s sporting product.
Professional sports properties have been attracting record interest from investors. Sports clubs and leagues are businesses with extreme durability, where customers are life-long fanatics, scarcity creates near monopolies, and brand appeal can border on being omnipresent.
A fundamental reason why enterprise values of professional sports properties are growing is that sport is a pure form of entertainment—unscripted, appointment-viewing, narrative-dominant content—that captivates audiences. At the heart of live sport is the sporting product.
This makes the sporting product the single most important long-term value creation lever for any sports property. In the case of a single-entity league like Major League Soccer, the league’s sporting product is particularly essential to owners.
Entities that generate and sustain sporting success subsequently increase their potential for capturing commercial yield, through increased rights values and revenues.
For a sporting product to succeed, it must inspire fans through the quality of its athletes and teams, excite fans through high levels of uncertainty and jeopardy throughout the competition, and connect with fans, giving them a reason to care.
While dramatic, Messi’s impact on the quality, jeopardy and connection of Major League Soccer and of Inter Miami is a mixed bag.
Quality
Without a doubt, Messi’s arrival significantly improves Inter Miami’s quality. At the start of July 2023, Inter Miami was the second weakest team across both MLS conferences, according to Twenty First Group’s World Super League ratings. With at least Messi and Sergio Busquets joining the roster, it will become the fourth-strongest club in the league.
From an MLS perspective, however, Messi’s arrival has minimal impact on the immediate quality of the overall league.
Messi is the best player to have ever joined Major League Soccer. Busquets will be the second best. (Zlatan Ibrahimović and Thierry Henry were previously first and second best.)
Yet the overall quality of play within MLS will hardly change when Messi steps on the pitch. Nearly 970,000 player-minutes were played in the entirety of the 2022 MLS regular and postseasons. Messi and Busquets coming to Miami will push the envelope of the league’s most-elite players. But unless their arrival opens the floodgates for many more elite players to join MLS, it will not impact the playing caliber of the lion’s share of professional minutes across the league.
Jeopardy
Currently, Inter Miami has a 2% chance of qualifying for the MLS Cup Playoffs and a 51% chance of qualifying out of this year’s expanded Leagues Cup group stages, according to Twenty First Group’s League Projections Model. When Messi and Busquets begin playing July 21, the club’s respective chances improve to 16% and 74%.
Notably, if the regular season were to restart today, Miami’s chances of reaching the MLS Cup Playoffs is 5%, but would grow to over 50% with their two new stars playing regularly.
At the league level, the overall sporting jeopardy in the annual competitions remains largely unchanged irrespective of Messi and Busquets joining.
The season-long race to qualify for MLS Cup Playoffs in the Eastern Conference becomes a bit tighter, as what was effectively nine spots reduces to eight-and-a-half thanks to Miami having over a 50% chance of qualifying. The Western Conference postseason race is of course unaffected.
And the odds that an MLS club will win this first year of the expanded Leagues Cup competition with Liga MX clubs is relatively unchanged; there is still less than a 3% chance of Miami winning the cup.
Connection
Messi amplifies the relevance of MLS within North American sport and around the world. The immediacy and size of the amplification of its Connection with fans is already paying dividends on the commercial side of the league.
Since the June 7 announcement, jersey sales, MLS Season Pass subscriptions, ticket prices, matchday attendance and social media have experienced major lifts that will likely persist in the months that follow. None of that accounts for the league’s increased potential to attract other star players and their respective orbits.
This growth in relevance will supercharge MLS’ capacity to maximize the commercial yield it generates for the caliber of sporting product it operates, at least in the short term.
Lionel Messi creates an unprecedented level of connection with sports fans all over the world. Major League Soccer, and its many partners, will be able to capitalize on that.
But there are some big questions for MLS and its owners to address right now. For starters, how will the league retain this uplift in fan interest and attention, particularly when one day Messi stops playing in MLS?
This latest injection of increased Connection in the sporting product will continue flowing to short-term commercial successes. The league has energized existing fans and piqued the interest of potential new fans. But the only way to capture this in the medium and long term is to also improve the quality and jeopardy of the sporting product.
Major League Soccer’s short-term outlook over the next couple years is much brighter now compared to before the Messi signing. The league’s medium-term prospects, over the next five to ten years, remain an open question, with two sporting product chasms to cross in both Quality and Jeopardy. Crucially, this will be around the same time that MLS’ media rights deal is up for renewal.
But the long-term outlook is bright. It looks particularly so as the rest of global football (and world sport, to an extent) faces major questions around governance and financial strength.
MLS is situated in the largest professional sports market in the world, and the league is showing that it can deftly wield its single-entity structure just as the sports and entertainment industry arrives at a significant crossroads.
AJ Swoboda leads Twenty First Group’s business in the Americas and the firm’s global Investment Intelligence practice. He advises a wide range of investors and owners in sport, as well as major sports leagues and clubs.
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