Manchester City’s MLS Gamble

New York City FC is a new MLS expansion franchise, a joint venture between Manchester City and the New York Yankees that will start play next season. It is no secret that MLS teams are not usually profitable, and as a less prestigious league, I doubt that Manchester City’s owners would inject money into an MLS franchise for the sole reason of winning a championship. So why did Manchester City embark on this joint venture with the Yankees? Why are they starting a team in the MLS? I can point to two factors. TV Exposure, and avoiding Financial Fair Play rules.

Manchester City’s Exposure problem

The soccer market in the UK is exceptionally saturated. England and Wales  have a total population of 54.1 million people, which support 20 premier league clubs. Unlike the vast geographical area of the North American sports markets, the close geographical proximity of the English clubs makes the North American regional sports network model unrealistic. Looking at the Premier League TV schedule, it seems like on average, only 4 games get shown on TV each week. 60% of the league does not have any broadcast TV coverage every week. When it comes to fan support, Manchester City faces stiff competition against their (geographically) close rivals Manchester United and Liverpool. Old Trafford is a mere four miles from their stadium, while Anfield is 35 miles away – less than an hour’s drive. The Etihad Stadium, Old Trafford, Anfield, and Goodison Park are all located within 40 miles of each other. Considering Manchester City have only been back in the Premiership since the 02-03 season, they lack a successful history possessed by the likes of United and Liverpool and as such, they play second fiddle to their local rivals.

Internationally, Manchester City has only become prominent in the last few seasons. City’s profile has greatly increased in the past few seasons due to recent success in both domestic and continental competitions. However, their international reputation still lags behind Manchester United and Liverpool. Barcelona’s Dani Alves admits that he has never heard of Manchester City until five years ago, a sentiment shared by many others.

English teams love international fans. Sure, the local fans usually don’t like them, calling them plastic glory hunters, but sold merchandise is sold merchandise. Manchester City wants international exposure, and NYC FC is a great way for them to get it.

The New York Yankees own the YES network, the world’s largest regional sports network with 14 million subscribers. The YES network used to show Manchester United games, but due to the increased cooperation with the New York Yankees over NYC FC, Manchester City is now shown instead.

Manchester City wants the exposure in the US, and they can get it through NYC FC. Unlike local fans from England, foreign fans usually don’t have a very strong connection to the club that they support. Good luck trying to convert a Liverpool fan from Liverpool into rooting for Manchester City, but a guy from New York who casually watches Liverpool FC games? I’m sure NYC FC can attract a few casual fans to watch Manchester City games and to purchase Manchester City memorabilia.

Financial fair play

UEFA is clamping down hard on overspending teams, and as the biggest spenders in all of sports, Manchester City is facing financial fair play sanctions. Knowing their owners however, I can assure you that they won’t just roll over and stop spending. NYC FC actually provides a great way for Manchester City to evade Financial Fair Play.

Players can play in both the Premier League and the MLS. Yes, they would probably have to miss a few fixtures on either side, as there is overlap between the two seasons, but playing in both leagues is not impossible. It is possible that Manchester City would use NYC FC as a feeder club, bouncing players they sign through the MLS to evade financial fair play.

Transfers in the MLS are interesting. The salaries in the MLS are capped. Teams intake amateurs through the MLS Superdraft, and players switch teams through the redistribution draft (free agency does not exist in the MLS). However, each squad has 3 designated players who are not subject to the salary cap and do not need to go through the draft. However, transfer fees in the MLS are not capped.

Manchester City’s owners can inject the money that they would have injected into Manchester City FC into NYC FC, which NYC FC would use on purchasing players. New York City FC can buy up to 3 big name players, and loan them out to Manchester City while even covering their salaries. Manchester city had losses of £51.6m last year. They bought three big players, Fernandinho, Álvaro Negredo and Stevan Jovetic for a combined £79m. If they got NYC FC to buy them instead and loan them out to Manchester City, Manchester City FC would have been in the black (and thus complying with Financial Fair Play regulations).

Whether Manchester City would actually exploit this loophole is still to be seen, but it is widely speculated that they would use NYC FC to avoid Financial Fair Play. Buying players through non-UEFA teams owned by the same owners is an obvious loophole that I’m sure UEFA would try to close. But knowing FIFA, with their legendary corruption and inefficiency, I don’t think they would be able to close this loophole anytime soon.

Conclusion

In my opinion, forming an MLS team as a joint venture with the New York Yankees is probably one of the smartest things Manchester City FC has ever done. In one swoop, they managed to establish a beachhead in the United States, rapidly raising their international profile, and they managed to get themselves an almost perfect financial fair play loophole. The NYC FC deal is a very shrewd move, one which should pay dividends for years to come.