Dan Gilbert and Tom Gores want to build a soccer stadium in downtown Detroit and then become owners of a Major League Soccer (MLS) Team. Gilbert is founder and chairman of Quicken Loans and owner of the Cleveland Cavaliers, and Tom Gores owns the Detroit Pistons with his private equity firm.
Gilbert wants to build this new soccer stadium on the unfinished Wayne County jail site, which stopped construction due to cost overruns. He wants the stadium so badly that he’s offering to build a new $500 million criminal justice complex for the county somewhere else.
The question is, why?
An article in Deadspin says Major League Soccer is expanding at a furious rate, and no one is making any money. Yet, franchise values are rising, even while annual losses continue to mount.
The University of Michigan’s Stefan Szymanski, a professor in the School of Kinesiology, was quoted in that article and he joined Stateside today.
Deadspin’s headline asks, “Is MLS a Ponzi scheme?”
“That’s a fairly serious accusation since Ponzi schemes are illegal,” Szymanski said. “But what it is hard to understand is how Major League Soccer can, at the same time, say that they are losing money, and then say that they can sell franchises for $150 million each. It seems like some kind of pyramid scheme and it’s really hard to see how this is ultimately going to make money for the owners.”
Listen above to hear Szymanski explain the issues with Major League Soccer’s business model, and why soccer’s growing popularity in the United States may not be enough to keep a new MLS team afloat.