You don't have to dig deep in the history of professional sports to notice a simple fact: every major league in the United States has undergone a merger at some point in its history. Will the professional ultimate leagues be next?
May 21, 2013 by Charlie Eisenhood in Analysis, Featured with 11 comments
Major League Baseball formed in 1903 with the merger of the National and American leagues. The National Hockey League absorbed the World Hockey Association in 1979, bringing on four of the six remaining WHA teams, after a period of nasty years where the two leagues frequently fought in court. In 1967, the American Basketball Association was formed explicitly to merge with the National Basketball Association; they did so in 1976.
There are, of course, huge advantages to monopoly — singular market control — in professional sports1. You don’t have to compete for athletes, you can comfortably plan expansion without the threat of an insurgent league “taking” a city, and you can drive up profits by leveraging economies of scale and controlling prices. Many argue that sports leagues are “natural monopolies,” because it allows fans to see all the best players in one league.
It simply isn’t sustainable to have two major sports leagues competing for talent, fans, and sponsorship dollars over the course of time.
Recent mergers have happened relatively quickly — the NHL merged with the WHA after nine years of competition, the ABA joined the NBA after seven. Often, it was the attractiveness of certain markets that made merging even more compelling to the executives; why try to compete when you could join forces and have a wide reach across the country?
That is now a question for the American Ultimate Disc League and Major League Ultimate. When Jeff Snader and the Philadelphia Spinners spun off from the AUDL late last year, things were bleak in the AUDL. The league was still battling the Connecticut Constitution in court, and many of the team owners had little faith in President Josh Moore and the rest of the ownership of the league.
Snader saw the potential of professional ultimate, but thought he could do it better himself, outside of the drama of the AUDL.
Since that time, the AUDL has overhauled its front office. The league settled with the Constitution, and Rob Lloyd, a deep-pocketed high-powered executive at Cisco, gathered investors to buy the league from Moore.
New owners breathed life into a league that saw six of its eight first-year franchises either fail or move locations. While many teams are still struggling to fill seats, the league is doing quite well in the Midwest and has what could be considered the most successful team in pro ultimate in the Toronto Rush.
In the MLU, Jeff Snader has made savvy partnerships and taken the league through the first half of a successful first year. The MLU placed its teams specifically in coastal markets known for strong ultimate communities, and has reaped the benefits by drawing better talent and, on average, more fans than the AUDL.
But their planned expansion into the center of the country — Chicago, Minneapolis, Toronto, Pittsburgh, and Denver — in 2014 is no longer certain.
“I think we are flexible with our plans,” said MLU Vice President Nic Darling. “Our goal is to create a very stable and very consciously thought out road map…The approach that we take is a measured one.”
Three of those cities — Chicago, Minneapolis, and Toronto — have successful AUDL teams operating there with much of the best talent in the area. That would make it substantially more difficult for the MLU to enter and compete in those markets.
The AUDL, though, isn’t shying away from aggressive expansion into MLU territories. The league is reportedly expanding next year into 23 new cities, including every one of the MLU cities. The massive growth will make the AUDL the first truly national ultimate league.
“I feel very good about the way the league is shaped right now, and where we’re positioned,” said AUDL Commissioner Steve Gordon.
But the AUDL is still struggling in many areas where the MLU is more impressive — web presence, large-scale sponsorship deals, and, perhaps most importantly, recruiting players and bringing in fans in markets where there is direct competition between the leagues.
That means that the AUDL has hugely varying attendance numbers from city to city — Toronto had nearly 2300 fans at their home opener, the most in pro ultimate history. Markets like Detroit and Washington DC often don’t have more than 100 fans.
“The disparity in the attendance numbers I believe are a product of the initial model that was put in place when the league started,” said Gordon. “As you know when we took over in the last few months, we’ve been making a lot of changes. But we haven’t had the time to see the effects of those changes.”
They are beginning to support the local franchises more with revenue sharing agreements and more training. They are hoping to replicate the Toronto model — they hire out a lot of professional services like season ticket selling and game day management — across the league.
“Are we happy with where we’re at in the attendance numbers? No,” Gordon added. “Are we happy with where we’re heading? Yes.”
The MLU is learning as well. Despite some markets doing very well week-to-week, like Seattle and Philadelphia, others are struggling. Boston and New York, both of which have inconvenient field locations, have played to relatively small crowds of around 300 people. That has to be concerning for the league, which spends a great deal more money on staff, production, and travel than the AUDL.
“I think, by and large, I’m not unhappy with attendance,” said Darling, adding later, “In the end, the development of various markets teaches us different things. The markets that we’re working on now are teaching us about which markets are good for ultimate in the near term, and which need a longer approach.”
He said that they have learned that stadium location is a huge driver of attendance, and pointed to the reams of data they collect as a sign that next year, they will be much better situated. Many of their locations do not have on-site concessions or liquor licenses. That was partly due to the hectic run up to their inaugural season.
But Darling is very optimistic about the future. “We think that what we have done so far in this season has proven that this is the sport,” he said. “That this is the next thing. We believe that wholeheartedly. And we just want to make sure that we do our part, that we do what we’re supposed to do — to give it a chance to be what we all know it is.”
But can it become that without the two leagues joining forces? History would say no, as would the dilution of talent in cities like New York where both leagues have teams.
Despite that, neither side has held any discussion about a merger.
“It’s not something we’re talking about now,” said Darling. “We’re very committed to making sure that what we have works. And we think we have eight very strong teams in eight very strong markets.”
Gordon also said that they have not considered a merger. But he does think it will happen eventually.
“From a big picture perspective, I think it’s inevitable that at some point we will see a merger, whether of the leagues or at least of assets,” he said.
One of the challenges to any merger is the vastly different operating models of the two leagues. The AUDL has a franchise model, where team owners purchase the rights to a team and then operate largely independently. The MLU has central investors and centrally-run teams. Local staff organize on the ground, but the league sets prices, coordinates the web presence, and manages all of the financials for each of the teams.
Gordon thinks a middle ground is the most appealing.
“I don’t think [the different models] are a major issue,” he said. “I believe that if you look quantitatively at both, one can be described as pure capitalism, the other as pure centralization. I think the best model contains elements of both.”
If that sounds like an overture to a merger, he says that it’s not. They are not concerned about heading into MLU’s markets in 2014 and feel that they have the better leadership and better system.
“We believe that when we go head-to-head with MLU, we believe that we have the pieces in place to compete effectively,” he said.
Ultimately, however, he looks down the road and sees the leagues joining forces. That’s an outlook shaped by history. Given the formation of many of the most popular professional sports in America, having two competing leagues may be the best sign of professional ultimate being a good idea.
Gordon concluded simply, “We’re gonna end up with one league, and when we do, we’ve got a chance to make this very, very special.”
It’s more accurate to call sports leagues cartels, since they are technically oligopolies, not monopolies ↩