So, some people are going to accuse me (yet again) of trolling Don Garber and all things MLS, but I just can’t resist commenting on the new Forbes valuations. Forbes has valued the 20 franchises that were in place last year, as well as revenue and operating profit/losses (earnings before interest, tax, depreciation and amortization (EBITDA). The revenue and EBITDA numbers are estimates for 2016.

Once again, I’m puzzled. On the figures, revenues last year were up 6% and operating losses increased – from $6 million to $20 million (here are the 2016 numbers). Note that EBITDA does not include capital costs, such as stadium construction costs. But clubs do have significant capital costs, so actual losses were even larger. Despite all this, the aggregate valuation of the franchise increased by 20%.

Aha, you say, surely last year’s revenues and profits are irrelevant to this year’s valuations. Maybe, but then what is the evidence that things are going so well this year? According to the splendidly name blog “Take me out to the ballgame”, aggregate attendance this year is flat: average 21,538 this year, compared to 21,492 last year (2016) and 21,298 the year before (2015), based on the first 258 games of the season. And according to Collin Werner at WorldSoccerTalk, average TV viewership this year is also flat- 260,183 per game compared to 257,683 (an increase of just under 1% if you want to be picky).

It’s difficult to tell which is worse. The attendance figures are horrible because they are buoyed only by the dramatic figures at newbies Atlanta whose 46,318 average is the highest in the league. Of the 20 franchises that existed last season, 12 have lower averages this year, and while Orlando and Vancouver can be explained away, that still leaves fully half of the pre-existing franchises down this year. Minnesota, the other new team, must also be worried; since their opening home game against Atlanta drew 35,000, the highest attendance has been 22,000 and they have been averaging below 20,000. Maybe this is compensated by a huge hike in prices. I’ve not seen anything to suggest that is the case.

But arguably the TV numbers are far worse. The only way to generate big money in a pro sports league today is to have a big TV contract, and to do that you need to grow the audience. There’s been some talk recently that MLS aspires to replace NHL as the fourth team sport in the US, given that NHL ratings have been falling. As a comparison NHL signed a 10-year deal with NBC in 2011 giving $200 million a year. In 2016/17 the total viewership across 106 games was 49 million. This year’s MLS schedule includes 84 regular season games plus 13 playoff games for a total of 97, which at the current average will generate 25 million. MLS needs to grow viewership at 14% per year just to reach NHL’s figure for the US by 2022. That might enable it to get a contract comparable to the NHL/NBC contract in 2023- but even suppose that were double the current number, this would still amount to $14 million a year per team (assuming 28 teams) compared to the current contract, which at $90 million a year is worth no more than $4 million (given that the deal includes rights for the national teams as well). An extra $10 million or so a year might be enough to staunch losses at current levels, but hardly enough to recover all the investment up to 2023.

So against this background, why is Forbes continuing to declare inflating franchise values? They are pretty frank:

“…prospective MLS team owners across the country are clamoring for a piece of the league, even with the next round of expansion now costing new owners a fee of $150 million, a whopping 275% increase from just five years ago when the Montreal Impact paid $40 million. And it’s that tremendous demand that goes a long way toward explaining why the average MLS team is now worth $223 million, up 20% from last year.”

So they’re valuable because people think they’re valuable. Which is fine, as long as people continue to think that this is the case. Neil deMause wrote an interesting piece for Deadspin a couple of weeks ago asking if MLS is a Ponzi Scheme. Certainly, if MLS believed what I believe about the prospects for the League they could be guilty of mis-selling, which is probably why Don Garber is quoted in Forbes as saying “Anybody who thinks that expansion fees are funding the league is ignorant.” I feel ya. But if sentiment were to move then things would get rocky. Many people are questioning whether the markets in general are over-valued, and if there were a correction then confidence in MLS might also decline. If the fundamentals looked stronger then valuations would be less vulnerable.

Now, not all is gloom and doom. MLS boosters will immediately point to the impressive 6-year, $700 million Adidas deal announced last week. That’s worth just under $5 million per franchise per year, subject to the usual caveats about the exact coverage of the deal (does it also relate to the national team? And how much is payment in kind rather than cash?). And then there’s always SUM- the business within unknown contracts for unknown amounts of money which are very, very valuable. If you want to believe, then there are things for you to believe in. It’s just that, in contrast to the bad news, which is in-your-face, the good news seems rather less concrete.

I’ll be honest, I’m not a person of faith. I need evidence to believe, not someone else’s say so. I especially do not believe the argument that something is a good bet because lots of rich people think it is. I don’t think rich people are in general smarter than the rest of us. Some are, some aren’t. But since most wealth these days is inherited, being rich doesn’t, generally speaking, imply you are talented at making money.

I just don’t see a plausible construction of the evidence that warrants increasing valuations other than that there is some kind of bubble. But please, if I’ve got this all wrong, just tell me where the profits are going to come from.