MLS Next Pro Tries to Build Off World Cup Momentum

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2:46But first, Randall, we need to talk about some big old stories that got our attention this week. And let's start with the Greek freak landing in South Beach. Giannis Antetokounmpo is now a member of the Miami Heat after a big trade that sent him from the Milwaukee Bucks in a deal initially reported by ESPN involving Tyler Harrell and three first round picks. We should also note that that trade cannot be finalized until July 6th. By the way, and I forgot about this, that shows you how much of a geezer I am, Antetokounmpo is now 31 years old. It seems like yesterday he won a championship, but we're in this era of the NBA that I would call the, it's the fair era.

3:27Because there's been eight different champions in eight seasons and nothing is guaranteed. And I don't think that him being traded to the Miami Heat automatically guaranteed that they're going to be a championship contender. when you trade for a superstar like Giannis. That means you have to give up a lot to get him. Now you've got to jump in for agency and convince a lot of people to go live in South Beach, which shouldn't be that hard. Now this is interesting because I forgot he had some injury problems last season when he was with the Bucs. Injury problems in quotation marks. There was a lot of drama about that.

4:01Him. But he only was in 36 games. I think he's fine. I think Giannis will be fine. It's just about really building the team around him and the investment from the Miami Heat. After you do a trade like this, like I said, it depletes the team. And so I'm excited to see what things look like on the eastern side of the conference. Everybody is still raving and ranting about the Knicks, rightfully so. But who are their challenges and what is the fallout of this? Because, of course, the Celtics were in on this as well, trying to trade Jalen Brown, the 2024 NBA Finals MVP. That did not happen. And if you're Jalen Brown, do you feel like I want to still be here or I want my own team?

4:41So it's going to be very interesting in weeks to come as the NBA approaches free agency. What's going to happen? And several days ago, the NBA held the draft with the number one pick heading to the Washington Wizards, A.J. DiBansa from BYU. And he was awesome back then when he was with BYU. Yep. I was at the NBA draft and was able to ask AJ a question along with our intern on the sports business team, Caitlin Poley. And AJ is primed for the moment. He's just so confident. He has an aura about him that says he wants to revive basketball in Washington, D.C. And I'm going to be honest, I hope he's successful because I think things are better in the NBA when the big markets are trying to topple each other.

5:29And let's talk about soccer, the Men's World Cup. You know, the soccer dudes, Cristiano Ronaldo and Lionel Messi, they have set records in this World Cup. Yes, Messi is the all-time leader in goals scored at the World Cup, and Ronaldo became the first player to score in six World Cups. But let's be honest here. I think Messi is the GOAT, right? I don't think there's any conversation anymore. I think Ronaldo is one of the all-time, or if not the all-time greatest goal scorer. But in terms of the undisputed GOAT, Messi got it. See, when I was on the cruise several days ago, and they had this thing in Miami.

6:08You heard of Miami, where maybe they're going to hold some games there. And they had this display where they had 10 of the best soccer players. And I got a shot right in between Lionel Messi and Cristiano Ronaldo. See, that's not ideal. You got to pick a side. You know how it goes. We don't do the middle play here. Which side are you on? You know what? I'm sorry. Anyways, like I said, Ronaldo's an all-time great. It's really, I think we're in this era of longevity for players, period. We saw Brady play into his 40s. We're seeing LeBron and KD and Steph. And even on football right now, we see Messi and Ronaldo continuing to dominate.

6:45So it's a beautiful time in sports to see the greats continue to age gracefully. Well, speaking of the World Cup, we recently spoke with Ali Curtis, who is the president of MLS Next Pro. MLS Next Pro is going to try to build off the momentum of the World Cup once it ends by getting the next generation ready to compete at the highest level. Let's take a listen to that conversation with Ali Curtis, president of MLS Next Pro. To date, 255 players who have competed in MLS Next Pro have gone on to sign first team contracts in MLS. That is impressive. What do you think that MLS Next Pro is going to have as an impact on the game of soccer itself?

7:31Well, you know, what you just mentioned in terms of the 250 plus players that have been developed in MLS Next Pro and signed first team contracts. That's a really great indicator, but it's not just, you know, we call it the pro pathway. It's not just the pro player pathway because players are developing in MLS Next Pro and they're going on to play in MLS or play for the national team or playing internationally. But that's also the case as it relates to so many other jobs that are being created and that folks are being developed. So when you think of sports scientists and medical folks and then also coaches, they're being developed in MLS Next Pro, and then they're going on internationally and or playing in or working in Major League Soccer.

8:17Michael Bradley is a great example. He's a former MLS player, played in the World Cup, and he was the coach for Red Bull 2 that won the MLS Next Pro Cup last season, and now he's the first team coach for Red Bull's first team. So there are several different areas where MLS Next Pro is having a really positive impact on the sport and on the ecosystem. And so that professional pathway is just one illustration or it's one pillar of that. There are several other areas of the sport where MLS Next Pro is having a really positive impact. We call ourselves the League of Opportunity. And within that, we really look at three, four key pillars.

9:01One, as I mentioned, the pro pathway, but also as it relates to local communities, innovation and access. And so when you think about some of the different other local communities outside of the MLS markets that we're in, like Connecticut and Huntsville, Alabama, and Chattanooga, Tennessee, we're really trying to grow and expand and have a really positive impact on the sport in several different communities. High Point, North Carolina is another community that I failed to mention. Innovation is also a really, really important area of the sport that we're having an impact on. And it's really timely, especially as it relates to what's happening in the World Cup.

9:44And so we use MLS Next Pro to identify and test potential new rules that can help evolve and grow the sport. And we've tested and used a few rules in MLS Next Pro. We piloted them there and then we implemented them in Major League Soccer. And now the governing body, FIFA and IFAB, they've implemented those new rules into the global game and you'll see them into the World Cup. So, you know, we're having an impact not just on our local communities and on the domestic soccer and sports landscape, but we're also having an impact on the global game. So a lot of things exciting as it relates to our impact and what we're doing.

10:28And, you know, so this is exciting times. Ali, I think that's really interesting. And it's something that people might not know about, you know, how MLX Next Pro works and then how it relates to the rest of, you know, the steps that go into professional soccer. As you mentioned, the rule changes in the World Cup. This is a thing that developmental leagues do, right? They test certain products and to see it then go all the way up to the World Cup is actually really amazing. Yeah, I will say this. We are one of we're one of the few leagues that are piloting new rules and testing them out into our first.

11:05We've got a really great what I would say pro pathway, a development pathway that is very unique to the U.S. sports landscape. And so we have a, you know, the pathway we look at from recreational soccer all the way to the pros. And so we've got several other leagues that we own and operate. MLS Go is our rec platform. We've got the top youth soccer league in North America, and that's called MLS Next. And so all the top young players that are playing soccer in the U.S. and Canada, they play in that league. And then some of those players sign contracts to play in MLS Next Pro. And some of those and then some of the MLS Next Pro players, as we talked about earlier, they sign contracts and they play in MLS.

11:56And along the way, they're playing for all the youth national teams and or the senior national team. And so that infrastructure is very healthy and it allows us to really look at the sport in a really dimensional way and test different ideas and concepts that make sense. Now, you know, the game has been around for over 100 years, and it is beautiful on its own. It's an amazing sport. And we don't want to do anything to change the game. But we also know that it's important that there are elements of the game that we can evolve. And so if we're thoughtful about how we think about our league and our sport, we can make small changes that can really have positive impact on the game.

12:43So two rules that we started in 2022, so four and a half years ago, one's called the time substitution rule. IFAB adopts slightly variations called the time limited substitution law and then the off field treatment law. So those two rules are rules that we created in MLS Next Pro in 2024. One has to deal with, you know, improving player health and safety, but then also reducing gamesmanship and time wasting. And then the other one has to deal primarily with keeping the flow of the game moving and not having to spend too much time wasting as it relates to substitutions. And, you know, Americans and folks in North America, you know, we hate to see flopping and wasting time and all those types of things.

13:32And so with our off-field treatment rule, we effectively have had a significant impact on reducing those instances where you might see a player that is just faking an injury. And so before we tested the off-field treatment rule, on average, five or six times per game, you would have a player that would go down on the field for extended period of time. And then automatically, miraculously, they would get back up and then they would continue playing. Once we implemented our new rule, you saw that data point be reduced from five or six times to one to 1.3 times per game. And the amount of time associated with that potential injury was also significantly reduced.

14:17That was MLS Next Pro President Ali Curtis, along with me, Michael and Vanessa. Up next, it's one of my favorite topics. Race car, baby. We'll check in with the chairman of ASEAN Williams F1 team. That is straight ahead on the Bloomberg Business of Sports. For Vanessa Perdomo-Maglione and Brandon Williams, I'm Michael Barr. You are listening to the Bloomberg Business of Sports, Bloomberg Radio around the world.

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16:48This is Bloomberg Business of Sports from Bloomberg Radio. This is the Bloomberg Business of Sports where we explore the big money issues in the world of sports. I'm Michael Barr. And I'm Randall Williams. Vanessa Perdomo Maglione told us she is out on assignment in France doing some reporting for the Canleon International Festival of Creativity. She's having the time of her life. But as a matter of fact, you can hear a selection of her conversation from the festival now on the Bloomberg Business of Sports podcast feed. Find it on Apple, Spotify, the Bloomberg Business app, and anywhere else you get your podcasts.

17:25Before Vanessa went off to have some fun, I mean work in France. she sat with us for a conversation with Matthew Savage he's the chairman of Doralton Capital and Atlassian Williams F1 team that's right Michael we spoke to Matthew about their philosophy for how to invest where to invest in the team in order to get the best results on the track and on the business side let's take a listen to Vanessa and Randall's conversation with Matthew Savage chairman of Doralton Capital and Atlassian Williams F1 team. Matthew, it's been about six years since you got into Formula One. Tell us about your journey over this amount of time.

18:09Thanks for having me on the show, Vanessa. It's great to be here and to talk about the exciting sport of Formula One. We had the opportunity during COVID, actually, to acquire Williams, and it's been a fascinating journey ever since. I think jumping into it, we had originally seen an opportunity to pick up an iconic sports brand at a much lower valuation than we had seen in the U.S. market with some of the NBA and NFL teams. And we also saw business where Liberty Media had sort of taken over the global management of it, and we believed in the growth that Liberty could produce. And that obviously has come through in spades for the benefit of the sport and the owners and so on.

18:58So like all things, you know, I'd hope that we would have moved forward a bit more. It's been a journey. But the truth of Formula One teams is it's not all about the players. We have two drivers and 1 ,000 employees. And it's very much an engineering and manufacturing business. So you can't just go into free agency or have a great draft and then go compete the next year. It's a matter of really baking in proper business processes using modern software techniques and tools to rebuild the business and become competitive. And so let's talk Formula One valuations. They've risen at a dramatic pace, as have the rest of the sports valuation world.

19:45What do you think enables a team's success in Formula One for its valuations to continue to rise? Well, I think we're seeing tremendous, well, there's a couple of things. We're still seeing tremendous growth in partnership income. So to give you a sense, from 24 to 25, I think we doubled partnership income. This year, we're going to be up another 50%, and next year, I think we'll be up 30 % to 40%. So you're seeing massive growth on the commercial side. I think you're also seeing a global audience and a very much growing U.S. audience with Asia still, I think, underrepresented. So I think just to give you some scale, I think globally we have something like 700 million fans.

20:32In the U.S., I think it's 50 million. And I think that plays into how these teams are valued. What I did see at the time we bought the team, and we paid something like one-time revenues for the business at a time when I think NFL teams were going for something like eight to ten times, I think there was a real mismatch. And people didn't fully understand what the Formula One platform was. It is a sport where historically 154 teams have failed and have liquidated. So very much eyes wide open. But today, I think what we represent as Formula One is a multifaceted marketing and sports platform with only 11 teams.

21:18So you have scarcity factor, a scarcity factor that comes into it. And there is also a commercial opportunity for team owners if you're a car company or, for example, Red Bull selling caffeinated lemonade. Matthew, one of the things, you know, I mean, you had mentioned there about the U.S. and about 50 million fans, you had said how much of the recent success in those valuations rising is by unlocking the U.S. market more than it really ever has before with obviously the the popularity of drive to survive. I think that's been a key piece to this because I think it has raised awareness with a whole new class of potential partners.

22:04Interestingly, though, I think it's the global play that appeals to a lot of the partners. But, you know, one fact that I learned recently that blew me away is I think something like 82 % of all partners in Formula One today are based in the US. And I think if we We had not, Liberty had not raised the interest level of the sport over here. It wouldn't have been in the psyche of senior executives, perhaps, when looking at sports sponsorships and partnerships. I think they would have tended to stick more with the traditional NFL, MLB, NBA, maybe Premier League. So it's the growing interest over here that has really heightened the opportunity to enter into those new partnerships.

22:49And then that has combined with, I think, the global tech industry, of course, being led out of the U.S. And so you've seen a whole bunch of partnerships come out of that industry. Let's talk Cadillac F1 really quickly. They're the newest team that's been headed to Formula One. And from an owner's perspective, do you think adding in expansion teams is good for business? And at what point is there too many teams? Right now, there's just 11, 22 drivers altogether. But is there a world where, you know, let's say you get to 26 or 28 and that's too many? I think that's right. It's great to see Cadillac in the sport.

23:28And I think it's another feature of our growing fan base here. It's not just Cadillac, by the way. Ford has also partnered with Red Bull on the engine side. So now you have the two of the, actually we have all three because Stellantis is present there through Ferrari. But it's great to have Cadillac on board. I think they add a lot of visibility to the sport in the U.S. Obviously, it's diluted our income in the price fund. And it's another competitor when we pursue sponsorships and partnerships. But overall, I think they will be good for the sport. I do think there's a limit on teams just from the perspective of safety and garage facilities.

24:19You know, there are only so many garages that each track. I think some tracks, especially the shorter tracks, if we hit a point where there are so many cars on the track during quality or practice, for example, I think it can become quite dangerous. So I think there is a natural limit to the number of teams that can be in Formula One. We're speaking with Matthew Savage, chairman of Doralton Capital and Williams Racing. Matthew, Formula One's this really unique, you know, sport in the way that innovation comes every year, every year for every sport. but in such a specific way and such a big way for Formula 1 all the time, having to change things year after year.

25:05Under the cost cap, how do you navigate that year after year with the money that you're investing? Do you change it every year, or has it been kind of the same ethos you've driven and gone through the different seasons that you've been part of the team? The cost cap is actually one of the reasons why we bought into the sport. we would not have bought a team without there being a cost cap. I think if you go back 10 years, teams like Mercedes and Red Bull Ferrari would probably be spending 700, 800 million dollars a year, while Williams was spending 150 million. So the cost cap really creates a level playing field here or more level playing field.

25:48And what's interesting is it makes it something of a business competition. So it puts an onus on having quality systems where you know how cost is being allocated right across the board so that we can make decisions as to where do we invest, where's the maximum return on lap time for the investment. And then there are a whole string of decisions to make in terms of do we invest in next year's car or do we try to improve this year's car or do we perhaps invest in further out R &D to take a bigger leap. So last year, for example, we stopped developing the car quite early and tried to set ourselves up to design a great car for this year.

26:37Unfortunately, that didn't quite pan out. And again, it comes back to some of the internal systems not being quite where they should be. We were surprised to find that the car was overweight at the beginning of the year. But those decisions are constant. And so we now have a decision that's very live. Do we take weight out of the car this year or do we just focus on next year's car again and try to take that leap over the winter? I think the answer for us right now is we will take weight out. We will improve the car. I think you may see a new chassis on the car later this year that we've brought forward from next year.

27:18But there are financial decisions constantly coming at us in terms of whether you spend on jam today or jam tomorrow. I guess which flavor of jam as well. Interesting. And so with Vanessa and I being here in the U.S., we have three races. We have the Austin Grand Prix, the Vegas Grand Prix, and of course the Miami Grand Prix. And I wonder if you think that Formula One has maximized the number of races that can be here. There have been conversations about New York And, you know, there's the NASCAR Chicago street race. And so it's clear that other cities can do this. But from your perspective, being someone directly involved in this, is three races the right amount?

27:56Do you think there's a market for a fourth or do you think it's perfect right now? I think the three races create a good platform here. And I'd also throw in maybe Montreal as another race in North America. And I think there's a balance to achieve. I do view this as a global sport. And so achieving a balance between various regions is important. Europe, Asia, the Americas, and what have you. So I think it's something that the folks at Liberty study very carefully. And one of the great things right now is that they're not short on cities around the world that want to host races. So, you know, we could probably, I don't think we could physically do it, but we could probably, you know, arrange 30, 40, 30, 35 races quite easily based on folks that want to hold races.