More details on Montreal emerge

Further information on the no-MLS-for-Montreal situation has come out since my last post on the subject, thanks once again to Ben Knight of The Globe and Mail's On Soccer blog. The devil may be in the details, and if so, he's hiding after the jump.

First, some quotes from Impact owner Joey Saputo at his aforementioned press conference Monday:

“First: Montreal never at any point withdrew its bid from the process. We were rather informed that our bid was not retained.
Second: The Montreal partnership never, at any point, had any trouble whatsoever financing its bid.
Third: There was never any question of using public funds to finance this project.”

The second point is the most interesting new information here. My earlier speculation was that this might have been due to financial struggles on the part of George Gillett, Saputo's partner in the bid and the owner of the Montreal Canadians and co-owner of Liverpool FC (which is having financial problems of its own [Roy Collins, The Times of London]. Basically, what Saputo's saying here is that the amount Montreal was willing to pay was sustainable and did not change; what changed was the league's willingness to consider it (and also the drop in the Canadian dollar, which made the Saputo/Gillett bid worth a lot less).

On the financial details front, the league asked for expansion fees of $40 million U.S. Montreal apparently offered $43 million Canadian, including stadium renovations. Considering that the Canadian dollar was reasonably close to par at this point, this was probably a reasonable offer; not quite what the league was looking for, but close enough that they might have been able to work something out.

The Canadian dollar has tanked since then, though, losing close to a fifth of its value. As Knight writes, "That effectively means the Impact were bidding about $34.4-million (U.S.), minus whatever rebuilding a stadium costs in a town where construction expenses are – at best and most charitable – imprecise."

Look under "Stadium, Olympic" if you want an example of that imprecision. Presuming that the other cities were ponying up the asked-for $40 million franchise fee in addition to stadium costs, it's not hard to see why MLS would drop Montreal from consideration. It's interesting that they did so publicly, though; might it not have made better business sense to have everyone think that Montreal still had pole position in the expansion race, compelling them to sweeten their own bids? This also looks bad on Saputo and Gillett, as they're now seen somewhat as cheapskates who didn't want to pay the required price. It would have been a better situation for MLS commissioner Don Garber to quietly tell the Montreal guys that their bid wasn't sufficient at its current level, but then have both sides keep that information under wraps and just announce that Montreal wasn't one of the selected cities when the decision was eventually made. That way, both sides save face.

Knight argues that this makes some sense for Montreal, and I tend to agree. As I wrote back in September, their current situation is pretty good. Not joining MLS may hurt them in the long term, but unlike many of the cities in this expansion race, they have a very tenable fallback position. This position is certainly strengthened by their success in the CONCACAF Champions League; they've proved they can play with bigger clubs, and they can offer potential players a large and supportive crowd and a chance to play international soccer. MLS would be great for Montreal and great for the Impact, but they aren't compelled to try and get in at any price.

However, I'm not sure that the MLS expansion fees are as ludicrous as Saputo seems to be claiming. Perhaps $40 million plus stadium building/renovations is too steep in this economic climate, but there are six cities that seem willing to pay that (and the majority, if not the entirety, would likely face steeper stadium costs than Montreal). It's supply and demand, and MLS is in a very good position here; they have several strong bids to consider for only a couple of slots, so they can play the cities off against each other and force them to keep raising the stakes. Montreal wasn't interested in that game, and that's fine; they have less to lose than any of these other cities, given their existing stadium, strong supporter base and CONCACAF success. The long-term viability of the USL is in no way assured, though, particularly if some of the stronger franchises like Vancouver and Portland jump to the MLS.

It's going to be tough to evaluate this decision exhaustively at the moment, as we don't know what will happen. MLS could bring in two to four other franchises, halt expansion and take off in popularity; Montreal would then be left on the outside looking in. If Vancouver and/or Ottawa get into MLS, that will also hurt the Impact; it will be tougher to sell the USL when there's a national alternative league, rather than just one franchise in Toronto. Alternatively, the other cities may overpay and struggle financially, and the league may lose popularity. The USL might even mount a challenge to MLS. There could be a mix of the two scenarios as well, where Montreal stays in the USL for a few more years and then jumps to the MLS later on. My feeling is that MLS expansion prices are going to rise, not fall, but you never know what will happen. Regardless of what eventually comes of this, though, this is a significant move for both Montreal and Canadian soccer. We'll see if it's remembered as a smart business decision or as a missed opportunity.

Was Montreal's bid axed by MLS?

Yes, the Grey Cup's set to kick off in a few hours (and I'll have a full preview up shortly), but that's not the only subject making news in Montreal. On Friday night, Duane and I both wrote here about how Montreal had seemingly dropped its bid for an MLS franchise, which seemed curious to say the least. New information has now arisen that muddies the situation further. Ben Knight of the excellent On Soccer blog over at The Globe and Mail has dug up a really interesting press release, presumably from the Montreal Impact, which suggests that they wanted to keep the bid alive but it was axed by MLS commissioner Don Garber. The release is after the jump.


Here's the release:

"RECTIFICATION REGARDING MONTREAL'S BID FOR MAJOR LEAGUE SOCCER

Following MLS Commissioner Don Garber's statements regarding Montreal's bid, the Montreal partnership group would like to bring one important rectification:

Montreal did not withdrew its bid from Major League Soccer but was informed that the league did not retain its bid. Out of respect for the Grey Cup festivities, the partnership group will not make any additional statements over the weekend. However, the President of the Montreal Impact [and] Saputo Stadium, Mr. Joey Saputo, who is spearheading Montreal's MLS bid, will meet the media: Monday, November 24, 2008, 10:30 am, Saputo Stadium, 4750 Sherbrooke Street, Montreal."

That's fascinating. According to this release, it wasn't that Montreal backed out; MLS decided not to consider their application. It's hard to imagine why at first, especially considering that most observers thought Montreal had the strongest bid of any city and was pretty much a lock. However, there could be concerns with the financial health of George Gillett's sporting empire, especially considering Liverpool's troubles [Ian Herbert and Andrew Warshaw, The Independent]. Joey Saputo, the owner of the Impact and Gillett's partner in the MLS bid, has also brought up the notion of staying in the USL, so perhaps Garber was concerned about Montreal's commitment to MLS.

We have conflicting statements, though. From the AP story with Garber's comments:

"Garber said that Montreal's delegation — led by Joey Saputo and George Gillett, who owns Liverpool FC in England's Premier League and the NHL's Montreal Canadiens — had informed him within the past week of possible trouble.

'Montreal has had to evaluate what kinds of private capital they needed to refinance their stadium to fund the expansion fee, and what kind of public support would be available,' Garber said. 'I'm not sure they were able to come to terms in this economic environment.'"

Garber doesn't directly say that Montreal withdrew their bid on their own, but that's certainly the logical inference, and it's the one the unnamed AP writer drew; his lede reads "Montreal withdrew its bid for a Major League Soccer expansion team, commissioner Don Garber said Friday in his state-of-the-league address."

Garber and Saputo (or whoever wrote the Impact's press release) could both telling the truth, though. Garber never said that Montreal abandoned their bid, even though he implied it. It's possible Saputo and Gillett wanted to keep the bid alive despite financial trouble, but Garber canned it after seeing the numbers.

Still, kicking Montreal of the bid process seems rather unusual, especially given the strength of their bid. Even if the league had already decided to go with a different franchises, retaining Montreal as an option would force the other markets to up the ante of their bids in an attempt to compete. If the press release is accurate, this decision doesn't seem to make business sense for MLS on the surface; less markets under consideration means less competition for the limited expansion slots, and more complaining about and reluctance to pay the sky-high expansion fees sure to be required. You have to wonder if there's more going on here. Monday's press conference will surely be illuminating.

(Cross-posted to Sporting Madness.)

Montreal pulls out of MLS expansion

Update: Great (or not-so-great) minds thought alike here: Duane wrote about this at the same time I did. Check out his post below for more thoughts on the matter.

With all the focus on Canadian football this weekend, the interesting news tonight on that other kind of football (European, not American) might be overlooked. According to The Associated Press (via The Globe and Mail), Major League Soccer commissioner Don Garber announced Friday that Montreal has officially dropped out of the crowded field of entrants trying to get a MLS franchise. Some of Garber's quotes and an analysis of what this could mean for the other Canadian franchise bids follow after the jump.

From the story:

Garber said that Montreal's delegation — led by Joey Saputo and George Gillett, who owns Liverpool FC in England's Premier League and the NHL's Montreal Canadiens — had informed him within the past week of possible trouble.

"Montreal has had to evaluate what kinds of private capital they needed to refinance their stadium to fund the expansion fee, and what kind of public support would be available," Garber said. "I'm not sure they were able to come to terms in this economic environment." ...

"They're out for the next round of expansion," Garber said. "I don't think it's gone forever but it's gone for now."

This is a pretty big shocker. Duane ranked Montreal as 90 per cent likely to get in his initial evaluation of the bids, and many others, including famed American analyst Yves Galarcep, concurred. In fact, it was even speculated for a while that Montreal would jump the queue entirely and replace Philadelphia as a franchise entering in 2010 instead of in 2011. Thus, this is a dramatic twist worthy of a daytime soap opera, and also perhaps one of the first real quantifiable effects of the economic crisis on sports.*

*Interestingly, Gillett was on Prime Time Sports for almost an hour today and discussed how the economic crisis might affect sports for a good part of that, but never once mentioned soccer. The focus was on the Canadiens. Keep in mind that he's facing massive debt issues in England with regards to Liverpool that could result in fire sales of players [James Ducker, The Times of London] or even the team [Ian Herbert and Andrew Warshaw, The Independent]. If things are in that bad shape over there, you can bet he has no money to pay a high Montreal expansion fee and renovate their stadium, especially with the hits his investments have likely taken recently (if his stocks are like anyone else's). It would have been nice to see Bob McCown and Stephen Brunt ask him about Liverpool's troubles, especially with the economic focus of their show; that was probably nixed by McCown's hatred for all things soccer, though. It's too bad; he might have landed a nice scoop on the Impact.

Keep in mind that this didn't come completely out of the blue, though. Back in September, there were musings and rumours floating around about how the club might decide to stay in the USL. I saw where the club was coming from, but ultimately concluded that MLS is a much better long-term solution for them. Duane was less gentle. Remember that they do have a very strong and high-profile USL franchise, though, and a nice new stadium that's USL-suitable, but would need significant expensive upgrades to be MLS-ready. If they can't pull off the MLS expansion at the moment, it may hurt them down the road, but they'll still be successful in the USL for the immediate future, and they may get another shot at MLS once the economic situation improves.

Paradoxically, though, what's bad for Canada in one way may be good for the country in another. It's obviously disappointing that the Impact won't be playing in MLS in the near future; they're a great team, and they already have a good rivalry with Toronto, plus their success in the CONCACAF Champions League seemed a natural foundation on which to create a strong MLS franchise. However, Montreal's loss could be a gain for Vancouver and Ottawa. Montreal had the best of the Canadian bids by many evaluations; with them out of the picture, the other two cities look better by comparision. This is especially important considering that Garber added that the Canadian bids are strong, but "expanding into Canada might jeopardize the growth of the sport in the United States" (the AP writer's words, not Garber's).

"We don't have a lot of commercial businesses in Canada today," Garber said of league sponsorships. "The more teams we add there, the more it takes away out from growing our footprint and our television ratings in the United States."

With comments like that, it seems likely that MLS would have been hesistant to expand by only two Canadian teams even if Montreal and Vancouver had the best bids. Thus, if the league decideds they're going to stick with the quota of only allowing two teams to join in 2011 and will only include one Canadian team in that, Vancouver's chances look a lot better all of a sudden. Again, Duane's a much bigger Vancouver skeptic than many thanks to the stadium issue, and he had them ranked third in the initial list behind only Montreal and St. Louis.

Garber also had some very positive things to say about Vancouver, as the AP story goes on to show. "Garber called Vancouver's presentation "one of the best I've ever seen, and I was involved in sports expansion in (the NFL)," he said." That's some high praise right there. Furthermore, the man is smart; he endorsed the rivalry concept I've been promoting for quite a while. Rivalries are what sell, especially in sports that aren't necessarily as popular, and soccer has a better tradition of fierce rivalries than almost anyone else. There's a long-established rivalry on the West Coast between the USL versions of the Vancouver Whitecaps, Seattle Sounders and Portland Timbers; bringing them all into MLS gives the league a strong West Coast presence and a great way to sell those games to fans, advertisers and television networks. Vancouver-Toronto would be a similarly great rivalry to sell to Canadian television and marketers.

Ottawa's bid, which seemed somewhat ridiculous at first, also seems to be growing stronger.

Ottawa blew us away," Garber said. "They do give a very focused plan as to where they'd build the stadium. Their presentation was not just about how they were going to build the stadium but how they were going to build the sport."

That's good to hear, but a presentation can only do so much. Ottawa may still be a longer-term project, and there are also issues with their bid coming into conflict with the CFL plan. What could help them is if rather than limiting expansion to two teams, the league goes ahead with four or five and brings in both Vancouver and Ottawa to strengthen the Canadian part of MLS and try and pick up a lucrative national television deal. Ottawa isn't as helpful as Montreal in that regard, but it's still something. Still, when you look at the other bids and how they're shaping up (especially with Albert Pujols buying in in St. Louis), Ottawa seems to come up a bit short.

We'll see what becomes of this, but this decision could substantially change the MLS expansion discussion. The favourites are out, and that will make room for some of the challengers. The question is if Vancouver and Ottawa will be in that group.