P2P profits from Youth Soccer & the DA...

Discussion in 'Boys Development Academy' started by younothat, Jan 12, 2019.

  1. younothat

    younothat Silver

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    FC Dallas taking in $15,000,000 per year off of their pay-to-play youth academy that features 5,000 kids.
    https://sportsday.dallasnews.com/so...-mens-national-team-fc-dallas-academy-problem

    "Let's look at FC Dallas for example. They currently have about 5000 kids in the FC Dallas Youth system, both boys and girls. According to people we've talked to, on a rough average they each pay $3000 per year for the club fee (again before kit and travel expenses). That's $15 million in revenue for FC Dallas.

    Now there are a lot of expenses and overhead FCD is paying, but a lot of those are sunk costs FCD (and Frisco?) paid up front. Sunk costs like building the complex at the stadium. Make no mistake FC Dallas is making a profit off their youth club. Since the senior club breaks even at best, and probably losses money some years, the youth profit is potentially FCD's only profit"

    Let's take look at another for example the Chicago Fire Jr's system. They have 16,000 players in their pay-to-play system from all over the country! How much revenue is this generating for the owners of the Fire?

    Colorado Rapids have 4,000 kids... just those two teams make 20,000 more players.

    These numbers are not unique across MLS. MLS owners are generating HUGE amounts of revenue off of the pay-to-play system of youth soccer in this country.

    "Why is Pay-For-Play a problem for the US Men's National Team?

    The problem as it relates to the National Team is that pay-for-play creates a barrier to entry for kids. Effectively, only kids whose families can afford it can play soccer. Particularly high level elite soccer which is even more expensive. You can easily see how this limits the pool of players to only kids with money.

    Therefore soccer, in general, misses out on all the talent in the pool of players without money, leaving out all the "disadvantaged" kids and that, many people will claim, is where the very best athletes are.

    For every success story like Eddie Johnson - single working mother, lived with a coach who paid his soccer fees, who became a father figure - there may be an unnumbered set of kids who we as a country miss out on.

    The second problem the pay-for-play system creates is the emphasis it places on volume. If clubs revenue is tied to player fees then profit is based on the number of players the club has. The more players, the more volume, and the more profit.

    Instead of putting efforts into creating the best players and teams, a.k.a quality, the incentive for clubs is to add as many teams and players as possible with no regard for the quality of said teams and players, a.k.a quantity.

    For nearly the last decade, Major League Soccer has promoted its homegrown program as a league-led initiative that will drive both the league’s growth and that of U.S. Soccer by developing talent within its own borders.
    https://www.fourfourtwo.com/us/feat...-homegrown-players-youth-development-progress

    Measuring the progress of the homegrown program can be done in several ways.

    The first, and probably the most important, is how many Homegrown Players have come through the system and established themselves as top-level starters in MLS. That list is not as long as you may think. Despite nine years of homegrown signings, it’s not an easy exercise to pick out a top-20 of bona fide homegrown stars.

    Another measure of the progress of the homegrown program is whether MLS teams are turning the investment in MLS academies into sales in the foreign market. Fewer than 10 Homegrown Players have been sold on the transfer market, however, including Miazga, Najar, Yedlin, Shane O’Neill and Carlos Salcedo.

    The DA system has been around for about a decade but MLS has turned this in to a piece of their model for profitability.

    "Why is Pay-For-Play a problem for FC Dallas?

    Well in one way it isn't. As we mentioned FCD is making money from this setup.

    Revenue is good.

    In addition, in FCD's case, the youth system fees pay for the Academy teams. The FCD Academy is free-to-play as the academy teams are subsidized and paid for by all the youth team fees. FCD needs pay-for-play for the FCD Academy teams to exist and function. The youth clubs prop up the whole FCD system.

    Side note: Most academy teams aren't free, not even all the MLS academy teams are free.

    The actual problem for FCD isn't how pay-for-play works, it's that pay-for-play is the system we have rather than one that compensates the club if a player moves to a professional team.

    For FCD to truly capitalize on their academy they need to see a return on players who chose not to sign with the parent club.

    Plus they need a U23 team but that's a different column.
     
  2. Wez

    Wez

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    While acknowledging the problems with a pay-to-play system, I fail to see how this dynamic changes in the US. We're motivated by revenue and profits, that's not going to change. The number of Clubs that operate a truly charitable system where they give the least affluent in America the chance to play organized high level soccer, will always be small.

    The biggest factor holding the US back from being a serious player on the Soccer scene, is the huge money found in 3 other sports. Globally, soccer is where the money is, here, it's Baseball, Football and Basketball.

    When we have every kid aspiring to play professional soccer in America, we'll start taking our place on the World stage.
     
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  3. MWN

    MWN Silver Elite

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    The articles numbers are wildly inaccurate. FC Dallas may or may not have 5,000 kids in its system (whether that number includes its affiliates is unknown). If 5,000 is correct, it includes the Juniors and Select levels and nobody is paying close to $3k, let alone $2k for 10 year olds in the Juniors/Select levels. Poorly researched article and ignores the reality that FC Dallas' "Academy" teams are fully-funded (i.e. no pay to play) ... funded by the Juniors and Select levels.
     
  4. espola

    espola Silver Elite

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    Baseball and basketball will have an advantage for years to come because of the huge pool of really good players who are willing to act as volunteer coaches (and not just dad/mom coaches).
     
  5. texanincali

    texanincali Bronze

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    I agree with you. I know very well the FCD fee structure and it looks something like this:
    • U11 - U19 (All teams except DA) pay ~ $3k for dues - uniforms and travel are additional
    • U10 and below - pay ~ $1500 for dues - uniforms and travel are additional
    A simple look at youthsoccerrankings.us shows that FCD has no fewer than 456 teams. Yes, some of these are affiliates, but it also doesn't list any team U9 and below.

    While the math in the article isn't as simple as made out - I don't doubt for a minute that FCD generates $15M in revenue through its Youth Program. When you take into account sponsorships, Adidas, local soccer stores, tournaments, field rentals to outside teams and deals with local training facilities for individual training sessions - I can easily see how they get to $15M.

    There is no doubt that the Junior/Select level teams are what funds the Academy. While the Academy may be fully funded, there are many International trips in which players and families pay for, all organized by FCD which they surely are getting a cut.

    I would argue that the Youth Program actually helps fund some of the first team activities, but that is a discussion for another day.
     
  6. espola

    espola Silver Elite

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    If you take a club-loyalty viewpoint, that would make sense. Players (or parents, actually) pay for the training at the entry levels for the opportunity they hope that will lead to recruitment to the club's first-level teams, where most of the expenses are absorbed by the club.
     
  7. MWN

    MWN Silver Elite

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    Generating Revenue of $15M and spending 90% on the program is what I would expect. Fields, Coaches, Referee Fees, Tournament Fees, Insurance, League Fees, etc. are all part of the deal. Sears made 13.8 Billion in 2016 ... its bankrupt because its debts are more that 14 Billion.

    I don't know the "Affiliate" relationship deal, but generally speaking clubs get anywhere from $50 to $400 per kid. So if the affiliates represent a significant portion of the 456 teams, then the total revenue should be significantly less that $15M.

    With regard to the travel to Europe, I actually was talking to one of the companies that works with Dallas FC at the USC convention in Chicago. The model they sell is $2,500 to $3,000k per "traveler" and subsidize the coach out of that or a small commission (5%). They promote these trips to create brand loyalty to the club. For example, all the U15 travel to Europe ... so if you are a U10, stick it out 5 years with XYZ club to get the opportunity to see West Ham play East Ham.
     
  8. texanincali

    texanincali Bronze

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    I get what you are saying, but the financial model isn't laid out that way. You have to remember that the Hunts own this club and given their reputation, a 10% return wouldn't fly with them. Based on some of the financial information I have seen for other clubs across the country, I would guess (somewhat educated) that they are returning 20%-25% of that revenue to the bottom line.

    Their complex hosts, USYS National Championships, Generation Adidas, Dallas Cup (some matches), National Team training camps (some foreign teams) and dozens of other local and regional youth tournaments - in addition, they also have local tackle football leagues on some of their fields. Their is a ton of revenue involved here - more than I think we realize.

    As for what the "dues" are for - typically they cover one league (fall and spring) and two yearly tournaments. Any additional leagues or tournaments are collected on top of dues. Junior/Select coaches can earn $800-$1500 per month, per team and it is widely known that their DA staff is not paid very well. Their model of one DA coach per team does not afford the opportunity for DA coaches to earn the income like those in a non-MLS club that may coach, 2 or 3 DA teams, or be a DOC.

    Standard agreement with clubs and soccer stores in the area is around 2% from apparel sales, and with the amount of kids in the club, this is no small change.

    Compare the revenue mentioned in the article to a local SoCal club that lists 250 teams and you can see where the figure could easily approach $15M. Pateadores has 247 teams listed in youthsoccerrankings.us (I know this isn't scientific, but it is directionally good) and an annual revenue of $5.5M. This is a club that is probably half the size of FCD and without the sophistication of Hunt Sports Group.

    I think we are on the same page, but personally, I have no doubt that the $15M number is realistic.
     
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  9. younothat

    younothat Silver

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    I've been to Dallas twice in the last year or so and I heard the the exact same thing...they are double digits $million$ revenue and turning $5mil in profit or more that is reinvested in different ways.

    There are so many DBA's, affiliates, shadow cos they and many other clubs are involved in that hide wants really going with these shell games while having a couple of parent non-profits/ businesses they show only a fraction of the total so people think there operations are much smaller than they really are. You have to untangle the web and its takes a lot of work if you can figure out all the people involved in the fillings of all these different companies...Dallas Cup has there own for example as many tournaments do, Youth League has one, Affiliates another, and so on. People always tend to underestimate; oh look at the clubs xxxxx filing see only x amt of revenue, only paying the director peanuts all the while not knowing or realizing there can be several other DBA's/companies that are always involved for example.

    Either way youth sports is big business and people are making $$$, call it non-profit all you want but people and businesses are profiting in the tune of millions from some organizations like the article mentioned. The exact numbers are just estimates are guesses since untangling the web web would take a Mueller type team & threaten the "non-profit" model which won't be popular so its likely to remain hidden.

    So what's the answer?

    Incentives for the club getting the best coaching and training as possible rather than just having as many players as possible.

    "A compensation system is what virtually everyone else in the worlds uses. If a youth club develops a player and said player signs with a professional team then the youth club receives a fee to pay for the development of that player. In general terms: the better the player, the more he's worth and signs for, the higher the fee to the youth club.

    Many people call these payments solidarity payments. That's the slang term and it comes from the longer phrase "training compensation and solidarity within the US youth system."

    This kind of a compensation system is one that emphasizes quality. Because revenue is tied to how good a player is produced the incentive for the club is in getting the best coaching and training as possible rather than just having as many players as possible. There would be incentive to mine every part of our society for talent as quality of talent would be worth more than quantity of paying players.

    You can easily see how this would benefit the US National Team in the long run.

    Indeed, a bigger player pool equals more players from which to find talent. But if you actually nurture and develop the talent then the profit rises. The incentive moves to development.

    If your academy is good enough you might be able to make the entire structure free-to-play because the fees coming in as players turn pro might pay for the entire massive club set up.

    Specifically for FC Dallas, this would mean profit even if they can't keep the player themselves. The best example of this is Weston McKennie, a product of their academy now starting in the Bundesliga. Rather than sign with FCD, McKennie signed with German club Schalke 04, which he is, of course, free to do. But FC Dallas got nothing in return. No profit returned to the club for developing the player. A different pro team benefited from FCD's investment.

    This is a MLS and USSDA problem and some of the MLS clubs want to walk away because they are getting very low return on investment as the better players walk away for free to Euporean and Foregin teams all the time like the above example or just moved on to college soccer on a scholarship they earned partly do to the investment the clubs don't ever see returned.
     
  10. texanincali

    texanincali Bronze

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    You are actually seeing a move toward structuring as corporations or LLC's instead of 501c3. This is such a big business and the clubs that were started by a single coach many years ago are now big clubs that generate a ton of revenue. Some are savvy enough to create a structure that allows the club to be an asset that can be sold. Others have not and are stuck with a $3M-$5M business that isn't worth a penny other than the salary they pay themselves.
     
  11. espola

    espola Silver Elite

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    I believe it is required (or at least implied) that all "Affiliate Members" (that is to say, clubs and leagues) of Cal South must be organized as non-profit corporations, and must show evidence of such incorporation (SoS declaration and IRS 990 forms) upon application to be accepted as Affiliate Members of Cal South.
     
  12. texanincali

    texanincali Bronze

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    You could be correct, but I don't think that is true. There are some clubs already set up with a structure that is for profit. They are the minority, but I know for a fact some exist. They may register their teams under a non-profit if what you are saying is correct.

    Where it becomes difficult for a corporation or LLC is when they need to rent fields. Non-profits are most often given priority and often times reduced rental rates. Some of these guys pay themselves a decent chunk of change, but as many age out, they realize that the business they have built over the past 20/25 years has no value as a non-profit. This is one of the reasons we are seeing more and more clubs move to corp or LLC's recently.
     
  13. jpeter

    jpeter Silver

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    USSDA is not part of Cal South so the MLS or other companies invloved dont need to be non profit.
     
  14. espola

    espola Silver Elite

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    Which clubs?
     
  15. espola

    espola Silver Elite

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    Apparently, it's a secret, which makes sense since then Cal South would have to boot them out or explain why they are changing policy.
     
  16. Wez

    Wez

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    What's your point? Despite a 501c3 structure, Clubs still operate like a business. They charge for access to "professional" coaching and field space, among other items. Their "charitable" status doesn't mean they give away the farm. Most clubs have scholarship programs, but that's not enough to get everyone playing who wants to be playing.

    Having said that, most clubs would offer near full scholarships to extremely talented players because they want them on their teams.

    My point is, we're not 2nd class citizens in the World Soccer forum because of our "pay-to-play" system, it's because soccer is a 2nd class sport to us.
     
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  17. espola

    espola Silver Elite

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    The point is that Cal South has long had a policy not to accept for-profit businesses as affiliate members.
     
  18. Wez

    Wez

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    Ok, was someone else making this point?
     
  19. espola

    espola Silver Elite

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    Back up the thread, someone stated that some clubs are reconstituting themselves as for-profit companies, but apparently, he can't discuss how that is done or what he knows about it.
     
  20. MWN

    MWN Silver Elite

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    @espola,
    Generally speaking, how its done is you create multiple entities, with 1 of those entities as the non-profit. The entities I generally recommend are:
    1. Intellectual Property, LLC - Holds onto the intellectual property / club name, marketing-website, etc. We generally separate out the IP because we can treat this differently and domicile the IP LLC in states that are friendly.
    2. Fixed Assets, LLC - Holds onto all real assets, such as, equipment, office buildings/space, lease rights, etc.
    3. Non-Profit, Inc. - Operates the youth clubs/teams.
    The trick is to keep Non-Profit, Inc. a break even operation. It will pay license rights to use the IP to IP, LLC, and rent/lease/sub-lease all fixed assets from Fixed Assets, LLC. The only entity the public sees is Non-Profit, Inc. Any monies that Non-Profit, Inc. needs as capital will come in the form of loans from Fixed Assets, LLC, which may also have a secured interest.
     
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