Meanwhile, revenues from corporate sponsorships failed to cover costs. “The sponsorships were just not strong enough to provide the promotion the league needed,” says Stephen Greyser, a professor at Harvard Business School who teaches a course on the business of sports. Weak television ratings also made sponsorships a more difficult sell. Although the WUSA originally planned to sell eight national sponsorships for $2.5 million apiece, only two deals came through.
Venues were another big problem — literally. The teams often played in cavernous football stadiums and were never the primary tenant. That meant they received little or nothing from the many revenue streams flowing from the stadiums, such as on-field sponsorships, parking, and concessions.
Mia Hamm’s team, the Washington Freedom, played at RFK Stadium, former home of the National Football League’s Washington Redskins. Her star power helped draw more than 30,000 fans for the Freedom’s first game at RFK, but attendance soon dwindled. As a result, the costs of renting the stadium and paying staff for ticket-taking, concessions, security, and field maintenance usually exhausted the Freedom’s total gate revenue.
“If you’re paying close to six figures to open a facility that’s going to have 5,000 or 7,000 fans in it, you’re not going to make any money,” comments Antonucci. Some teams played in university stadiums, which were easier to fill and generally cheaper to rent, but in some cases the schools limited the promotion the teams could do on-site. In other locations, staggering up-front costs squelched any hope of turning a profit. “The league entered into some facility relationships where they were making seven figures’ worth of capital improvements to the facility just for the right to play there,” says Antonucci.
Betting on the Franchise
With the wisdom of hindsight, the new league hopes to avoid most if not all of the financial pitfalls that wrecked its predecessor. “We heard loud and clear in meetings with potential owners that we really needed to focus on cost containment,” says Antonucci.
The league will kick off its inaugural season with at least seven teams, based in Boston, Chicago, Dallas, Los Angeles, New York, St. Louis, and Washington, D.C. Antonucci says it would like to add an eighth before the season begins. A team from Philadelphia will enter the league in 2010. To limit downside risk and control costs, the league will use a franchise model instead of the single-entity structure of the WUSA. Each franchise is owned by an individual or syndicate that will also own an equal share of the league itself. “We would rather take the inherent risk of a franchise model — that some teams will struggle — versus having all the owners subsidize the weakest members,” says Antonucci.
“It’s very important to us that all the teams succeed,” says WPS general counsel and Shearman & Sterling attorney Vicki Veenker. “But the franchise structure certainly means that some teams can succeed at greater levels than others. Some teams may have greater attendance, but then others may have lower stadium costs.” The franchise approach will also enable each ownership group to take advantage of local market expertise to find the best stadium deal, identify strong local sponsors, and seek out the media outlets that will best market their team.