Despite the release of a new website earlier this month, Major League Ultimate, the newest entrant to the professional Ultimate market, has been slow to release information about the upstart organization. Ultiworld has now learned more details about the financial background of the league.
November 26, 2012 by Charlie Eisenhood in News with 11 comments
Despite the release of a new website earlier this month, Major League Ultimate, the new entrant to the professional Ultimate market started by the American Ultimate Disc League, has been slow to release information about the upstart organization. However, Ultiworld has learned more details about the financial background of the league that could prove enlightening.
Interested parties seeking to own the management rights to a Major League Ultimate team will have to invest $125,000 in the league, the MLU’s Executive Vice President Nic Darling told Ultiworld on Saturday, creating a budget for the first year of $1.25 million.
Investors won’t buy teams outright, but will instead buy shares of the league, much like in the initial Major League Soccer model. Each investor will have control over one of the MLU’s 15 markets (just 10 cities will play in the league in its in inaugural 2013 season). “Those management rights carry both rights and responsibilities to the market you are buying,” explained Darling. “But your key responsibility, since this is a shareholder operation, is to the league itself.”
The $125,000 investment is planned to be the only one expected of the shareholders — they will not have to pay for any team expenses, including travel, equipment, and marketing. Instead, the league front office will pay for those expenses and maintain centralized control, which they expect to bring down costs and improve messaging and branding. Darling did acknowledge the risk involved, saying “there are plenty of potential unpredictable circumstances that can occur” that could require additional investments from the shareholders.
But why $125,000? “What this number comes from is an understanding of what it costs to run a sports team, and particularly a professional ultimate team,” said Darling. “We focused it with an understanding of what we did with the Philadelphia Spinners last year.”
He would not specify which, if any, markets had been sold. He explained, “We have a number of markets that will be closing in negotiation over the next couple of weeks. We are not at liberty to comment more fully on that as we are still in the process of negotiating with prospective shareholders.” Darling insisted that there was no question the first season would be happening.
In the case in which a particular market doesn’t sell, the MLU has other options. “We have several investors who are interested in providing the pickup funding for a team or two that don’t get picked up in the first year,” Darling explained.
The league may also sell some of the Central Division teams soon, even though they won’t join the league until 2014. However, the first year budget will remain $1.25 million, regardless. “We just don’t want to run the risk of overextending ourselves in the first year,” said Darling. “It has nothing to do with the viability of Ultimate in those central cities…We have just learned from varied experience in running businesses to start with a small, stable core and build outwards.”
There is a significant vetting process involved in taking on new investors, since they will be not just team owners, but business partners as major shareholders. Most of the interested parties so far, according to Darling, are “people who have some connection, understanding, and passion for the game [of Ultimate].”
The organizational model for the MLU will be complicated. Darling called it a blend of Major League Soccer’s original structure and a franchise model. “We have created a structure where the centrally funded operation that manages the marketing, the PR, the administration, and the day-to-day operations of the league as a whole is connected but a separate organization from the operational management of the individual teams,” he said. The two organizations will be “closely tied together with the same goals and the same financial benefits.”
“Our governing principle in this league is that no single person or entity can benefit at the expense of another person or entity within the league,” he added.
For the MLU, the goal is to maintain stability — a word their top administrators use often. They see the path forward as requiring highly aligned incentives, revenue sharing, and a league-first mentality. Building a successful league is a long game.
“If you put it in perspective,” said Darling, “the investment that we’re building in the first year of this sport pales in comparison to where we expect this sport to go.”