Friday, February 22, 2008

Allow me to start by thanking everyone who took the time to submit questions. One of the objectives of league management is to improve and expand its communication processes on all fronts in 2008 (and beyond). A critical, and occasionally overlooked, aspect of this is communication with our fans. While it is impractical for us to be able to communicate as regularly or directly with respect to the questions about our leagues that you may have as we would ideally prefer, we will be experimenting with different and creative means of doing so over the next several months, primarily via our website.

While some of your questions are challenging, they are also fair, and I have done my utmost to be candid and transparent in addressing them. I would impress upon you that a commonality amongst our hard working staff is that they are fanatical and passionate about the sport of soccer just as you are. We are privileged to be able to serve the game and support the incredible efforts and commitments of our franchises/clubs in each of their markets. To that end, we genuinely appreciate your interest and support of our leagues/ teams and it is not ever taken for granted. Thank you!

Now to the Q&A…USL Director of Public Relations Gerald Barnhart has been all over my case for the past few days to get this completed. To get the ball rolling, I present to you “Part One” of the Q&A with focus on league expansion, stability, ownership, and miscellaneous issues. “Part Two” will be posted next week and cover competition-related issues, as well as strategic league direction inquiries.

TOPIC: EXPANSION / USL-1 TEAMS

(Mikey - Charleston, SC) Is USL or any potential owners, actively pursuing an expansion franchise in the near future, particularly in Division 1?

TH: Clearly league expansion at all levels of USL is the most popular topic for fans besides perhaps the competition itself. The majority of the questions were related to this subject and with that being the case, I have chosen to answer broadly in terms of overall USL expansion.

There are literally dozens of groups with which we are in active dialogue at any given point in time regarding USL franchise ownership. This will be my tenth year at USL and I can confidently state that we are receiving more franchise ownership interest at all levels of USL than at any other time over the past decade. Our Senior Director, Franchise Development Matt Weibe has done a fantastic job over the past 6-9 months reforming all aspects of the franchise recruitment, evaluation, acquisition, and development processes. The restructuring of his role at USL has allowed us for the first time to have one of our senior executives dedicated to not only the growth of our leagues through expansion, but just as importantly to creating new opportunities for existing franchises to share best practices and improve internal communications.

While the PDL receives the most significant franchise interest, there has recently been a resurgence of inquiries in USL-1 and USL-2 from prospective ownership groups, domestic and international. It is important to note that only a minute percentage of those who apply for USL franchise ownership are actually offered the right to acquire a franchise.

Including the recently announced Austin Aztex franchise which will begin competition in 2009, there are presently 12 active USL-1 clubs. It is our objective to reach 16 clubs by the 2010 season at which point we expect to further evaluate league growth and expansion. This is genuinely achievable without sacrificing quality in the process. Clearly, we need to increase our footprint west of the Mississippi in USL-1 and therefore this is primarily where our proactive efforts to identify ownership groups are focused. A short list of markets from which we believe a USL-1 franchise could be successful with the proper ownership and venue include, but are not limited to (in no specific order): Omaha (NE), Tulsa (OK), San Antonio (TX), Tampa (FL), Phoenix (AZ), Boise (ID), Oklahoma City (OK), Albuquerque (NM), Memphis (TN), and Birmingham (AL) We are currently in advanced discussions with interested parties in several of these markets.

(JBSilverbacksFan - Rome, GA) What is the relationship between the Silverbacks owners and other USL Franchises? Some was said about Boris having a investment in a team in Cary.

TH: The Atlanta Silverbacks ownership group is highly respected, not only at the USL-1 level, but throughout our system of leagues. In less than a decade, they have taken a single professional team with sporadic attendance that competed at an inadequate venue and completely transformed it into as complete a soccer club as exists in the United States replete with the expanding Silverbacks Park as their permanent home. Not only have they continued to add teams at all levels of USL, but these teams are all nationally-competitive with USL-1, W-League, and Super Y-League finalists in 2007.

To answer your second question, the Silverbacks principal owner Boris Jerkunica does hold a minority stake in the Carolina RailHawks. This has been reviewed and approved by USL, which screens any proposed player transactions between the two franchises in order to protect for any real or perceived competitive inequities.

(Nate Bolton - Victoria, BC) How has the USL’s ownership screening criteria changed since the California Victory and Virginia Beach Mariners debacles of last year?

TH: The hard reality is that there is no absolute protection from franchises at any level of USL becoming unsustainable. This is not an excuse. After consecutive seasons (2005 & 2006) during which we were successful in stabilizing USL-1 in terms of franchise viability over the period of the competition, the situation involving Virginia Beach in 2007was undoubtedly a setback for us and something for which league management must ultimately accept responsibility. We do our utmost to control the timing of these situations and are fully cognizant of the adverse impact a situation like that of the Virginia Beach Mariners can have on a growing league fighting to gain credibility as a major professional soccer league with its fans and in local and national media.

Contrary to what you may read on discussion boards, blogs, or elsewhere on the internet, we are incredibly discerning about which groups we believe are qualified to successfully own and operate USL franchises. There is no perfect formula to predict franchise viability and longevity, however our due diligence requirements at all levels of USL are undoubtedly more stringent than ever before. Generally they involve the provision of detailed information in the form of biographical information, business references, financial references & statements, criminal history statements, and a comprehensive business plan. The result of this focus on more thoroughly evaluating prospective franchisees is an increased retention rate of franchises over the past three years and more successful first-year franchises. While we strive for 100% success, the reality is that we remain a growing business in a relatively young industry. Further, no two situations are the same and unpredictability is a part of business. As such, there will continue to periodically be franchises that are not able to sustain themselves due to flawed plans or insufficient execution.

Certainly, we have learned some important lessons from the past 12 months with respect to how we handle franchise crisis situations. We haven’t shouted from the rooftops when we have saved several USL-1 teams mid-season over the past decade in some instances at substantial financial expense to USL. Some of these our fans have been aware of and others they have not. We have stepped into certain situations because of the overall importance to the viability of the league to do so. In at least two of these cases, we were able to provide the bridge to get teams through to the end of a season where they were then acquired by new ownership groups and are now amongst our elite franchises.

While we were as disappointed by the necessity of removing Virginia Beach prior to last season and the failure of California Victory to return for this season, we opt to view these instances as opportunity to spur changes much the same way MLS used the contraction of the Mutiny and Fusion in 2001 as a catalyst for its future growth.

(ssf soccer - San Francisco, CA) My question concerns the status of the California Victory. There is discussion on the teams possible return in 2009. Since Austin has now joined, and there is some talk about future expansion on the west coast, is there any progress being made with current negotiations with the franchise and is there any possibility that other investors could come forward from the outside that want to see a team kept here in SF. I would think that the USL’s efforts to keep the west coast a viable option would include San Francisco.

TH: Due to the challenges experienced by California Victory ownership/management in 2007, I still do not believe we are in position to have accurately ascertained whether San Francisco can be a successful USL-1 market. The same instincts that led us to guide their parent Club Deportivo Alaves into this particular market over others, lead us to believe that a USL-1 franchise can achieve success in the “City by the Bay”.

Last year, the Victory got off to a late start hitting the market and was always playing catch up. This was exacerbated by the insolvency of CD Alaves, which essentially left the team on life support for the second half of the season. The League took the necessary actions to ensure that the team was able to fulfill its schedule obligations through the end of the regular season, however without the unwavering commitment of the players, coach, and GM this team may not have made it to September.

There have been two groups that have engaged us in dialogue about the possibility of restarting in San Francisco in 2009, however there is nothing imminent. We have an obligation to be very thorough in assessing the viability of any USL-1 initiative in the San Francisco Bay Area before moving forward again, particularly as the return of the San Jose Earthquakes fills the void left by their departure for many fans.

Regardless of whether or not we return to San Francisco in 2009 or beyond, we are bullish about USL-1 expansion on the West Coast. There are several very professionally managed and well-established PDL franchises in key markets that have the wherewithal to make the jump to the professional division, as well as other interested groups in the aforementioned target markets which we believe are very strong candidates to join our league in 2009 or 2010.

TOPIC: NIKE / UMBRO

(Garrettt - Canton, GA) Being that Nike bought out league sponsor Umbro back in October, should we expect to see any kind of Nike influence in the near future?

(Boca Sounders - Seattle, WA) 1. How much money did Umbro receive for selling the league to Nike? 2. What is the money cap per year that Nike is going to put into the league? 3. How much money per team is Nike going to delve out to the first division teams? 4. Will it be in cash or in kits, merchandise and other miscellaneous equipment? Or will it be all 4? 5. What percentage of the League does Nike own? Also In the next few years, what cities, might we see new expansion teams in the USL Divisions 1 and 2?

TH: There have understandably been several inquiries on this topic and perhaps even some level of confusion. Here are the facts: Umbro International owns 98% of USL. Nike is in the process of finalizing an acquisition of Umbro which is due to close early next month. Umbro will become a Nike affiliate company continuing to operate under the Umbro brand. In the event the acquisition is finalized as expected, Nike will own Umbro, which owns USL.

It is both premature and inappropriate at this stage for us to publicly speculate specifically what this will mean for USL on any front, but it is difficult to imagine any scenario that would not benefit the overall USL business. As Francisco said recently during an interview on FSC, “I can think of 10 probable scenarios and none of them are bad.” I agree. In fact, we believe that this development has the ability to be the catalyst that takes USL and its franchises to an even greater level of significance in the North American soccer landscape regardless of the brand affiliation.

TOPIC: GENERAL

(Daniel Williams - Lindon, UT) On the USL website RSL Arizona and RSL Utah do not show as Super Y league teams. Have these two Real Salt Lake affiliates chosen to not compete in the Super Y league or have they quite competing altogether? Will there be a Rocky Mountain Division of the Super Y league at the Boys U-16 and U-17 levels?

TH: Our Senior Director, Youth League Development Jeff McRaney and the SYL operations team have been working hard to solidify the Rocky Mountain Division for 2008. At this stage, it remains a work-in-progress. In 2007, we were not able to finalize all of the details until the month of April, which is of course not our preferred scenario. The RSL teams have been the most supportive and active in working with us to develop enough quality clubs committed at enough age groups to justify the continuation of this division but we are not all the way there yet.

(Celtico – Atlanta) USL should, if they haven’t done so already, contact the new American owners of Derby County, who’ve mentioned they’re interested in starting a Rams US club. I saw MLS mentioned as a possibility, but USL would be a much less onerous investment, with growth opportunities if they do well.

TH: A very astute observation/suggestion. We steadfastly believe that the USL model is a natural fit for international clubs looking to establish a presence in the U.S., Canada, or the Caribbean. We believe our unique differentiators are a relatively low cost of establishment as well as access to a vertically-integrated and evolved system of leagues/teams. Crystal Palace is a great example of a big club that has recognized the opportunity in this market via USL and they are really starting to hit their stride in Maryland. Although less direct from a branding standpoint, the Austin Aztex strong ties with Stoke City is similar in nature.

Alternatively, we believe that many of our existing clubs are perfect vehicles for investment/partnership with international clubs, particularly those with a full player development set-up. Simply stated, they have done the building work over the years, understand the local soccer markets, and have basically created a turnkey structure for prospective international partners. A USL club like the Richmond Kickers, which has several thousand players under its umbrella and elite programs for all ages youth through professional, would appear to be a prototypical situation for a meaningful international club partnership. They are not alone and we have an increasing number of similar situations in both the US and Canada.

(Bill – Nottingham, MD) The home fields of Crystal Palace Baltimore and Real Maryland FC will be just 40 miles apart this season. How is the league approaching this? I am under the impression that new teams are required to be 50 miles apart. If both Real Maryland and CPB become successful this season, could future distance requirement become altered to accommodate the possibility of local rivalries?

TH: One of the hallmarks of USL over the years has been an emphasis on geographic rivalries. We look at this Maryland Derby as a potentially great rivalry within USL-2 beginning in 2008 and hopefully for many years to come. The two clubs share this view.

While our leagues are structured in a manner where each franchise owner has an exclusive operating territory, each varies in terms of size as a function of their geographic location and taking into account population density. There is no hard and fast distance requirement. Using your 50-mile radius example, this would have a much different value if centered in New York City than it would in Montana. In every situation we consider the potential effect that expansion would have on existing and neighboring franchises. But again, having geographically-proximate opponents reduces the travel costs, increases visiting fans traveling to matches, and creates rivalries – these are all positives. The bottom line is that each territory situation is looked at on its own merits, rather than governed by an absolute distance requirement.

Again, thank you for your patience in awaiting my reply. We hope to have the Part Two for you very soon.

Tim Holt