Red Bull's first season in MLS (a business disaster)

Were you wondering how the first year as MLS owners went for Red Bull? Things didn't go so well.

The club lost a league-record $14 million in 2006, a number that may not even do justice to the disarray the club is in from a business standpoint. I touched on the subject in today's Herald News soccer column.

So what exactly has the club done wrong? You name it and they've done it wrong, whether it's driving off long-time corporate sponsors or mishandling ticket sales strategies. I really could have turned the column into a lengthy expose on the club's poor business practices but I'm not a business writer.

Is it really all about that big number, $14 million? Not at all. You can argue, and I'm sure that Red Bull would, that the $14 million figure is just another part of its investment in the club. You can also go with the belief that the club is preparing for the opening of the stadium in 2008, which would make some sense, but that still doesn't change the fact that Red Bull hasn't done anything right from a business standpoint since buying the club.

Here is a list of problems:

Corporate sponsors fleeing. Regardless of the club's strategy, it can't be a good thing to part ways with companies that supported the club for years and that have strong ties to the area. This is an area you would have expected Red Bull to be able to deliver new sponsors but that hasn't been the case. At least not yet anyway.

Practice facility disaster. Here is a subject I didn't get to touch on in the column but sources tell me that Red Bull management have dropped the ball repeatedly on practice site projects (including a deal in Kearny that sources say was an ideal situation) and still haven't found a deal when an original deal to move the team's practice facilities to Pequannock would have been built by now.

Ticket sales issues. The club spent a boatload of money to market last year's home opener and when the game wasn't even halfway to a sellout Red Bull decided that spending money on marketing wasn't worth it. What happened next. We saw some of the smallest crowds in years for months. This no frills approach has apparently carried over to 2007 as the club isn't spending any money on marketing this year either.

TV Deal dilemma- The season opener is on April 7th and the club STILL doesn't have a TV deal done. This is a pro team we're talking about. Sources have revealed that the club had a good deal in place back in October but that fell apart and the Red Bulls have spent four months trying to salvage a deal.

Will losing $14 million really hurt Red Bull? Obviously not. The company practically prints money (Have you seen how much cans of Red Bull cost?). The issue here is whether the people running the club on the business side are capable of doing their jobs. There is clear evidence to suggest that there is some serious doubt about this.

What does it mean for Red Bull fans? It may not mean much immediately. Bruce Arena is building a respectable team that should compete this year. The problem is it doesn't seem as if the people running the Red Bulls are competent enough to maximize the potential of the club if Arena does turn it into a winner. That would be a serious shame, especially with the stadium opening next year.

Comments

[michael]

Dear Ives,
I have been out since 1996 as a Metro-Red Burial and I can't take it anymore!!! Red Bull Co. might be able to put a show on in other arenas (pardon the punn) but I'm not interested in circus tricks. I just want a team. A team to be proud of. I want to invite friends who aren't lovers of the game and show them a caliber of sport that they aren't used to and win over new fans. Red Bull Co. might have a lot of caffine, but they don't have me. I am done. I am going to put an ad on craigslist.org: single white male looking for single identity soccer franchise who enjoys wins in the park and a serious relationship.

[Wamiq]

Wow... wow.
Good stuff Ives.
The marketing aspect really bothers me. DC United is such a part of the public consciousness in DC. In NJ? No one is aware of Red Bull. Short radio spots, short TV ads, a billboard or poster here or there - is that so much to ask for? I mean, I've seen more ads for Major League Lacrosse than I have for Red Bull NY.

[Napoleon]

Wamiq - winning a few titles can help, add that DC area is a true melting pot with tons of soccer fans.

I suspect that if some Brazilian teams, or any Latin America teams decided to play a few matches in the NY area? they would sell-out Giants stadium in a heartbeat...

Santos vs?
Boca vs?

also, The market in the NY/NJ metro area is overgrown with other sports teams, to much competition.

[inkedAG]

Reading your post here and your linked article really made me sad. It seems like no matter what, the franchise in this Metro (pardon the pun) area is just pitiful. For awhile there, I felt "Hey, at least we ain't Real Salt Lake or Columbus." I guess the reality is, we're just as pathetic. Boy am I depressed right now....

How is it Gio gets canned and Marc de Grandpre is still employed??

[Jr.]

inkedAG - To answer your question... Marc de Grandpre is the one that fired Gio !!

[Wamiq]

Napoleon - no doubt, those things help a lot.

At the same time, I see no reason why there can't be Red Bull ads in the NY subways when there are United ads in the DC subways. Average people in DC at least know what DC United is.

[Napoleon]

Wamiq - *sigh*...the issue of mediocrity and competition has put them in an irreversable hole as far as support with a NY/NJ team? I hate to do this but...

Giants, Jets, Knicks, Yankees, Mets, Nets, Rangers, Islanders, Devils. I am not even counting the college sports...or HIGH SCHOOL sports. Too many choices and the product has not shone on the field. result? ambigious results at best. I was truly hoping that the infusion of Red Bull could ignite the team. It still might....yet Claudio Reyna (a good player no doubt) does NOT generate the excitment and headline grabbing that a back-up RB getting money from the Giants generates.

Culture and demand I suppose?

[inkedAG]

Napoleon,

There can be a million teams in this area. The fact is, the people at RBNY have f**ked up big time and seem to be continuing to do so. No sponsors, no marketing, no visibility. If you want visibility, you have to go out there and create it. You have to market the product on and off the field. That means a TV deal should not be sewn up less than a month before the season starts. That means all Mass Transit should have signage. That means on local TV, there's 30, 15, whatever seconds spots on. You work the phones, the emails, whatever, to get your players into peoples consciousness.

[Jr.]

I agree with you both. It is a challenge with all the other professional sports teams in the area. I think the sales team is doing a great job trying to reach as many people as they can with little to no support. Calls, emails, face to face meetings mean nothing when there is no marketing support. (10 Sale executives for the tri-state area) The product is very important but let's face it the children & families that come out know very little about the game. All that matters is that they have fun experience at the game, win or lose. RBNY really have destroyed many relationships that where in place for years. All these relationships would help get the schedule and the players out in the market on a grass roots level. The MetroStars set league high's in sponsorship revenue from 2002 to 2005. At that time is was hard and a struggle to get MSG to sign on with the Metros. Why wouldn't you work with them as they have been great partners for the last 6 years?? With a month away Shep & Ethan should have there show up and running to create some sort of buzz in the soccer world. I don't even get a game schedule in the mail anymore, not sure what the RBNY executives are doing!

[Sylvia Browne]

Great line: "The result has been a club with no direction in the board room, a business that has burned more bridges than napalm in the past year."

I think if the club starts to win, more people will come with or without a significant increase in advertising assuming the team's TV and print coverage maintains the coverage of at least the past couple years. But if the results do not come, attendance could continue to drop.

Under previous ownership, the team had a good youth fan club. Red Bull has dropped it.

[The Old Gray Mullet]

Ives, I love your work buddy, but that Practice Facility paragraph of yours seems a bit off. Pequannock? Sure, they don't have anything finished. Sure, they may have bungled a primo Kearny spot. But, Pequannock was put there because Nick lived nearby and the town was going to put up money for it only if the front office agreed to move their offices to a place 30 miles from the stadium. Lalas killed that pro-Nick, Anti-Metro deal in 2005, long before anyone heard of Red Bull. So to blame RB for not "being in Pequannock by now" is an outrageous accusation when the front office had bungled a practice facility for 10 years before RB even got there. At least RB committed to building one, even if they haven't started it yet. And what of this article? http://www.bigapplesoccer.com/teams/redbulls2.php?article_id=8566

A lot of the stuff you put in is great, but Pequannock was a total canard, and I don't think RB can take the fall for that by any stretch of the imagination. Nail 'em for blowing a Kearny deal, fine, but P'quock had nothing to do with Red Bull.

[Ives]

Mullet, while it is true that Lalas squashed the Pequannock deal originally, Red Bull was approached with the same site and rejected it. You can trumpet the whole "Pequannock was a Sakiewicz sweetheart deal" rumor all you want but Pequannock is in my coverage area and I have every reason to believe that the site would have worked well for the club.

And Pequanock isn't exactly "far away" from Harrison. It is 20 miles, hardly a crazy distance.

As for Montclair State, that is a temporary fix. And how about posting the story that actually broke that news rather than a story that was three month late?

[Area Code 212]

What's $14 million for RB?

Just add up the media mentions they got due to their ownership of the team and it's all worth it to them.

How many ad buys did they cancel on Mondays? LOL

[The Old Gray Mullet]

My thoughts on Pquock & it's distance from Harrison comes from the time I sat with two MFO employees right after they announced it, who said they'd rather quit than drive there every day. So, hey, it might be a great place, but it's location was in question by the people who'd be working there, which makes it's location a valid question at least.

I remember reading at the time that those fields have a problem with flooding, and I remember the rumors (unconfirmed) that it was in pquock- over locations closer to Harrison- because of Nick.

So, if it was such a prime location, why did RB & Lalas both turn it down? Hey, if they blow a great deal from Kearny, shame on them. And, again, both articles you wrote were a great help to us, I just don't see this one point. Them spending money on a temporary fix is a bad thing? Why? They bought the team in March, and spent all of their time playing catch up for opening day. Then they had to find a coach and a direction. So, they've wasted from August until December or so, at which point they bit on temporary digs that does wonders for Montclair State, and they'll find a permanent home when they are ready. Maybe I'm blind, but I don't see that as mismanagement, nor do I see how, even if they got started on Pquock on March 10, 2006, that they'd have built a building for the front office and fields and be training there right now. Not arguing, just differing an opinion.

[The Old Gray Mullet]

And, sorry I didn't rep your article, I remembered ML's because of the picture, that was all. No slight was intended there.

[Tim]

One thing I feel the Red Bulls have done well is to make improvements to the stadium design from both a player and fan standpoint!