Forbes has come out with a report on the finances and value of each Major League Soccer teams. With pretty sharp criticism from Vancouver Whitecaps fans about spending levels, Forbes report is important information to examine. Frankly this report makes things look pretty bleak for the overall finances of the Whitecaps. Of course, there are many factors to consider, and some of the numbers may be a bit deceptive if taken at face value. However, even when accounting for these, it makes the perceived lack of investment in the squad a little more understandable. I should mention that I’m about as far from an economist as is possible, but I think even with a layman understanding there are some interesting takeaways from the report.

Team Value:

Forbes values the Whitecaps at $150 million. This puts them third from the bottom ahead of only the Colorado Rapids ($135 million) and Columbus Crew ($130 million). For comparison the current expansion fee for incoming teams is $150 million. The most valuable team is, perhaps unsurprisingly, LA Galaxy at a whopping $315 million. The median team is the San Jose Earthquakes at $235 million. We should note that since MLS has been growing pretty steadily, these teams could probably sell for more than what they’re worth. Nevertheless, these numbers provide a good framing device to view a team’s financial state.

Revenue and Profits:

The ‘Caps revenue is even worse. They are second from the bottom in revenue, bringing in only $19 million. This is less then a third of what the LA Galaxy bring in ($63 million). As for profits, well, there aren’t any. The Vancouver Whitecaps are run at an annual loss of $3 million. Now, as is made clear in the article and by Don Garber, MLS is very much still in “investment mode.” Thus the majority of MLS teams operate at an annual loss. The ‘Caps loss is far from the biggest. That would be a tie between Toronto FC and New York City FC who both lose $9 million a year (though both are in the top five in terms of overall team value). At Vancouver’s end of things both Colorado ($6 million) and Columbus ($5 million) are taking bigger losses.

How Did Things Get So Bad?:

So why are the Vancouver Whitecaps, who are top 10 in attendance, in the bottom five in value? Well there are a few things to consider. First, the Canadian dollar is less valuable than the American dollar. This could be why the Montreal Impact are also further down the value table. However the dollar does not explain why TFC are so far up the table. Of course, Toronto has the backing of MLSE which no doubt helps them significantly. Probably the most significant thing holding the Whitecaps back is that they do not own BC Place. As such they are losing out on a lot of revenue in terms of concession, parking, and so forth. Owning their own stadium would go a long way to making the ‘Caps more financially competitive. Of course, as we’ve seen with some big clubs, building a new stadium can lead to a short-term cut back in squad investment. Considering the already high levels of frustration surrounding this issue with the Whitecaps, you have to wonder if fans would be willing to accept this trade off.

Does Spending More Money Lead to Better Team Value?

To an extent. At the top of the team value table you see a lot of teams who either currently are, or historically have been big spenders in the league. It certainly helps to have a recognizable player like David Villa or David Beckham to increase awareness of your club on a national and international stage. More brand recognition leads to more merchandise sales, higher licensing fees, better TV deals and so forth. The single entity nature of MLS offsets some of these benefits, but the impact of being known globally because of a big name signing is clear to see in the values of LA Galaxy, NYCFC and the New York Red Bulls.

The thing is though, it has to be specifically “a name.” Spending money on solid talents who aren’t known doesn’t seem to do much for you. Colorado Rapids, Philadelphia Union, and Real Salt Lake are all in the upper middle class of spending but down at the bottom of team value. Conversely the Montreal Impact are over performing their spending in terms of team ability despite having the Canadian Dollar to contend with. Is their value helped by Didier Drogba’s cameo for them? Possibly, it seems to be a consistent trend that signing a big name ups your team value.

There are some exceptions to the rule though. There are three teams in the top 10 of team value which haven’t had a recognizable name at some point since the introduction of the DP rule: the Portland Timbers, Sporting Kansas City, and the San Jose Earthquakes. However, all three of these teams own their own soccer-specific stadium. If you do not have a group of billionaires willing to spend to bring in a big name (e.g., TFC or NYCFC), then owning your own stadium can go a long way. For the Vancouver Whitecaps who neither own their own stadium nor have any big recognizable names (you could maybe stretch Nigel Reo Coker and Y.P Lee but they aren’t on the level of a Beckham, a Villa or even a Freddie Ljungberg) it’s a bad situation.

How Much are the Whitecaps Really Investing in Their Squad?:

In 2017, the Vancouver Whitecaps spent a little more then $8 million on player salaries. This is about 40% of their annual revenue (20 million). Is that enough? The biggest spenders are Toronto FC who spend more than Vancouver’s entire annual revenue on player salaries at $22 million. This is a greater percentage of their annual revenue ($46 million) at approximately 48%. The lowest spenders are Houston Dynamo at just shy of $5 million or about 20% of their revenue (they profit about $1 million a year). The fact that Houston is at the top of the West despite spending basically nothing is just further proof that MLS success is almost completely random and that nothing matters. The median team is RSL, who spend just shy of $8 million, or about 37% of their total revenue. Basically the Whitecaps are spending a little bit above the average in terms of both player salaries, as a percentage of their revenue. Hardly big spenders but it may be unfair to characterize them as miserly penny pinchers.

Where is the Loss Coming From?

No doubt a myriad of operation costs contribute to the $3 million annual loss. Of course, there is also heavy travel involved, with the Whitecaps often traveling the most/furthest in an MLS season. But no doubt the biggest culprit is the investment in youth development. With the recent construction of the training centre at UBC, a USL side that can’t be bringing in much revenue, and a network of academies across the country there’s no doubt that the ‘Caps invest a lot in player development.

Is the Investment Worth It?

A lot of people are frustrated with the level of production from the Whitecaps residency program. Despite good showings in youth tournaments, the argument goes, none of those players have become regular first team contributors for the first team. This is true, but I think it’s also a bit a reductionist take on the situation. The residency has been around for quite some time, and it existed in a much smaller capacity pre-MLS.

Although the program hasn’t produced any regular MLS starters, it has produced a lot of solid professionals. Russell Teibert, Kianz Froese, Dario Zanatta, Marco Carducci, Ben McKendry, and Sam Adekugbe are all playing at a decent level of professional soccer, and some may still start in MLS. Not bad for an academy that’s still growing and has only been around in its full capacity for six years.

Of course the club has also brought through Alphonso Davies who, while he isn’t a regular starter yet, is expected to become a superstar. You could argue that Davies isn’t a true residency product as he was brought in from a club in Edmonton but I don’t think this is really a fair criticism. With the network of academies across the country pulling in players from other sources is clearly a part of the the Whitecaps’ model. Sure maybe some of the players I listed weren’t managed the best but ultimately if the club produces a generational talent every five years that’s fine by me. Once they start developing players that can be sold off (and not let go for free like Zanatta was, sigh) the revenue should greatly increase and likely the value of the club will follow suit. If we’re still in the same situation five years from now then it might be time to re-evaluate the residency approach. But for now, even though it’s hard, be patient.

Conclusions/TL;DR