What the hell is Soccer United Marketing?

The United States men’s national team’s failure to qualify for the 2018 World Cup has fans hungry for change at the top of U.S. Soccer. Saturday’s presidential election will decide a lot about the organization’s future, and there’s a lot of focus on the resume of one candidate in particular: Soccer United Marketing president Kathy Carter.

Carter has served as the president of SUM since 2010 and has worked for MLS since its inception in 1996. Both outgoing president, Sunil Gulati, and MLS commissioner Don Garber, who is also SUM’s CEO, have reportedly recruited USSF voting members to support Carter.

SUM is a sports marketing company and the commercial arm of Major League Soccer. Its owners are the league’s club owners. It holds the rights to market U.S. national team TV broadcasts and sponsorships through 2022.

As MLS has grown in stature and the U.S. national teams’ progress has slowed considerably, SUM has become an American soccer bogeyman. It’s not particularly strange for a federation to sell its rights to a sports marketing company, but what is unconventional about this arrangement is that SUM packages U.S. Soccer’s rights with MLS rights and sells them together. That raises questions about whether U.S. Soccer is getting maximum value for its product or is being used to prop up MLS instead.

Detractors of the partnership between U.S. Soccer and SUM — including the former second division North American Soccer League, which is suing USSF — believe that the dealings between the two organizations are an example of cronyism at its worst, redirecting money that should go to the women’s national team, player development, and underfunded programs into the pockets of MLS owners. The defenders of U.S. Soccer’s partnership with SUM — Gulati, Garber, and Carter chief among them — believe the deal has benefited all parties greatly and has been an engine for growth at all levels of soccer.

On Saturday, U.S. Soccer voting members will elect a new president. Carter’s resume and public statements about the SUM deal suggest that her election would be good for MLS owners. A victory for Carlos Cordeiro — the current U.S. Soccer vice president, whom SUM has dealt with before — likely wouldn’t be a bad outcome for MLS either. But if anyone else prevails, SUM’s days of sealing favorable deals with U.S. Soccer without competition may be numbered.

What is a sports marketing company, and why does U.S. Soccer do business with one?

Sports marketing companies buy broadcasting and sponsorship rights from organizations like clubs, leagues, and international federations, then attempt to flip them for a profit. Many sports organizations like this arrangement because they lack business expertise and want to focus solely on sporting development. The team or organizing body gets money up front from the sports marketing company for the rights to its product, and that company is betting that it can use their business expertise to make a profit on reselling those rights.

“There’s 50 people at SUM who wake up every day and think about the U.S. Soccer Federation,” Carter said about U.S. Soccer’s deal with SUM in her United Soccer Coaches convention panel. She said that USSF not having to hire and manage a huge marketing department itself is a major benefit of the partnership between the federation and SUM. Carter also extolled the virtues of the federation protecting itself from the risk of its properties losing value.

“Part of the issue is that people don’t understand the contract,” said Carter. “In fact, the federation is protected because there’s no downside risk.”

U.S. Soccer gets a set payment from SUM every year as part of the deal. We can see the benefit to an arrangement like this right now: SUM will now make significantly less money off its deal with the federation than it anticipated, due to the USMNT missing the World Cup. But the amount of money that SUM has to pay U.S. Soccer will not change.

How did SUM come to exist?

The 2002 World Cup was held in South Korea and Japan, which was inconvenient for North American TV audiences and broadcasters. Games were played in a time zone 14 hours ahead of the East Coast, meaning they were on in the middle of the night. For that reason, broadcasters had little interest in buying the English-language rights.

At this time, MLS was at the bottom of its popularity and quality of play. Two teams, the Miami Fusion and Tampa Bay Mutiny, had just folded. American soccer’s growth had stunted and not having the World Cup on television would further exacerbate MLS’s problems. So MLS owners formed SUM, bought the World Cup rights, then worked on convincing a broadcaster to air the games.

The owners went on to lose money on the deal, but that loss was outweighed by the long-term benefits. SUM eventually got Disney on board, and both live and tape-delayed games were broadcast on ESPN, ESPN2, and ABC. The USMNT’s dramatic run to the quarterfinals made the World Cup a surprise success, and the business of American soccer (if not always the play on the field) has continued on an uninterrupted upward trajectory ever since.

SUM went on to take over U.S. Soccer’s marketing out of necessity at a time when there appeared to be little money to be made off the national teams. “Our master licensee at that time in 2002 was a joint venture between Nike and IMG,” Gulati said at his United Soccer Coaches convention panel, “and IMG wanted out.” SUM took over the deal in 2004, and it has been renewed three times since.

SUM is why MLS can charge a $150 million expansion fee

After paying a $150 million expansion fee, spending somewhere in the nine figures on a stadium and other facilities, and paying staff for multiple years before a team gets on the field, an MLS owner will be left with a team seemingly worth less than what was spent to get it off the ground. On top of that, most MLS teams report losing money year over year.

So why buy in? There’s a strong argument that it’s to get an equity stake in SUM, something currently much more valuable than an MLS team itself. Here’s an excerpt from a Forbes piece on MLS team valuations regarding SUM’s rapid growth:

Providence bought a 25% stake of SUM in 2012 for $150 million, valuing the property at $600 million. The recent sale of Providence’s remaining 20% stake – its holding had been diluted by the league’s expansion – was for a little over $400 million, valuing SUM at more than $2 billion, or a nearly 250% increase over the last five years.

In addition to U.S. Soccer and MLS, SUM also holds the marketing rights to the Mexico men’s national team games in the United States and the Gold Cup. It bought the rights to market the 2016 Copa America Centenario, which proved to be an enormous success. The company does not have a public listing of all its partners — such a list used to exist on SUMWorld.com, but that site now redirects to a general “advertising with MLS” page.

Even if MLS’s growth stagnates considerably and it never catches up to the more established American leagues in revenue, it’s clear that soccer as a whole is still growing in popularity. When you add up everything — men’s and women’s; youth, college and adult; club and international; TV viewership for domestic soccer, international tournaments, European leagues, South American leagues and Liga MX — soccer as a whole is a massive mainstream sport in the United States. MLS is only a small part of that, but its owners have figured out how to make money off a soccer audience who never engages with its core-owned-and-operated product.

A $150 million expansion fee for an MLS team is a bad deal, but a $150 million fee for an MLS team and an equity stake in SUM, one could argue, is a bargain.

Costs and benefits for American soccer

Carter, Gulati, and Garber are consistent in their messaging, insisting that MLS and U.S. Soccer are stronger together than they are apart. According to them, marketing the two properties together is the best way to generate revenue and grow the game at all levels.

Since SUM is the business arm of MLS, it doesn’t have to buy the league’s broadcast rights — it just has them. SUM bundles its MLS rights with its purchased U.S. Soccer rights all into one package to make the rights more attractive to broadcasters. The entire bundle takes in $90 million per year through 2022.

The broadcasters who bought the rights have no reason to publicly disclose how valuable they thought the different portions of the package were, so it’s difficult to figure out whether U.S. Soccer is receiving a fair cut. It’s possible that the U.S. Soccer rights are worth much more than the MLS rights and that the federation is shortchanging itself to the benefit of MLS owners, given that MLS national TV broadcasts average 300,000 viewers, USWNT broadcasts do slightly better, and USMNT broadcasts average about three times as many viewers as MLS. However, Gulati, Garber, and Carter do not subscribe to this theory.

“If we went to all the TV networks three years ago, there wouldn’t have been a long line of networks willing to pay nine figures,” Gulati said. He pointed out additional benefits to the USSF-SUM partnership as well.

“The reason for continuing the partnership is synergies between selling all of soccer,” Gulati said. “We’ve been satisfied with synergies between U.S. Soccer and MLS.” Gulati believes that the federation’s ability to use MLS facilities in Los Angeles and Kansas City, use MLS office space for the 2026 World Cup bid committee, and MLS owners’ investment in NWSL are major benefits of the partnership between the federation and MLS. However, it’s difficult to imagine that two entities as closely linked as MLS and U.S. Soccer would stop working together, even if U.S. Soccer contracted with another sports marketing company other than SUM or sold its rights directly.

Photo by Spencer Platt/Getty Images

“The operations of SUM are not intended just to make a lot of money, but to create a lot of money” for its partners, Carter said, insisting that SUM is not just a business that exists to make money for its stakeholders, but an organization intended to grow soccer in America. In an interview with Grant Wahl at Sports Illustrated, Garber notes that the structure of the deal, which guarantees U.S. Soccer the same payment every year, allows the organization to “invest more deeply in the growth of the sport at all levels and to engage in long-term planning based on a guaranteed consistent cash flow.”

One of Carter’s opponents in the presidential race, former USMNT star Eric Wynalda, disagrees with this theory entirely. “I can tell you without hesitation that this is not fair value for our product,” Wynalda said of U.S. Soccer’s deal with SUM. At his United Soccer Coaches convention panel, he was extremely critical of U.S. Soccer for not letting its exclusive negotiating period with SUM expire at the conclusion of its previous deal. When asked if he believed the federation could have made more money that way, he said that “there was never a fair bidding process, so we’ll never know.”

Wynalda’s campaign is partially funded by Riccardo Silva, owner of Miami FC. The team played in USSF Division 2 league NASL in 2017 but will start 2018 in Division 4 league NPSL due to a sanctioning dispute and teams exiting NASL. Silva is also party to a lawsuit that accuses U.S. Soccer of favoring MLS to the detriment of other leagues.

Additionally, Silva proposed a $4 billion media rights deal to MLS, which the league said it cannot legally consider because its contracts with broadcasters have exclusive negotiating periods. Carter said that her campaign is independently financed and that she has not received contributions from anyone but her boyfriend.

Where does the money go?

In May of 2015, a bunch of people who ran sports marketing companies that competed with SUM got arrested. SUM and U.S. Soccer went on to benefit greatly.

The United States Department of Justice’s investigation into corruption in global soccer led it to a lot of people who made money by flipping the media rights to soccer competitions. Two of them were Traffic Group founder Jose Hawilla and the president of its subsidiary Traffic Sports USA, Aaron Davidson. Up until the indictment was handed down, Traffic was SUM’s biggest competitor, and it held the American marketing rights for the 2016 Copa America Centenario tournament.

Pre-indictment, excitement for the tournament was high. For the first time, South America’s continental championship would be held in the United States, with the USMNT, Mexico, and four other teams from CONCACAF invited. But the FIFA scandal indictment revealed that the tournament was essentially created for the purpose of committing fraud, putting the entire tournament in doubt.

The tournament went forward eventually, with SUM taking over marketing from Traffic.

“The hardest part of doing that was deciding to go through with working with people who were indicted,” Gulati said about the decisions that led up to a very successful Copa America. U.S. Soccer and SUM worked closely with officials in the Department of Justice to make sure that everything it did was legal, and for that reason, some of the funds earned from the tournament were not released until 2017, well after the tournament had concluded.

U.S. Soccer’s eventual take was $46 million. It would be surprising if SUM did not make several times that, though the company will not disclose financial information and is under no obligation to do so.

At her United Soccer Coaches convention panel, Hope Solo — a former USWNT star and candidate for U.S. Soccer president — repeatedly stated that she believes the federation’s deal with SUM leads to the USWNT being used to finance MLS. As one example, Solo said she was told by an unnamed USSF official that the “WNT Animated” series from 2016 was for fans, not for a sponsor, and that was the condition on which she volunteered her time for it. The series is sponsored by Ritz.

Solo said the players signed away their marketing rights in the previous collective bargaining agreement and, therefore, as stipulated in her contract, she did not receive additional compensation for her video. (The players negotiated the retention of some of their marketing rights in the new CBA.)

“I have requested that the federation be transparent in their dealings with Soccer United Marketing,” Solo said, and she’s not alone. Senators Dianne Feinstein and Patty Murphy requested financial details during the USWNT’s CBA dispute with the federation, though they never got any and did not follow through with any threats after the players and federation agreed on a contract.

Wynalda agrees with Solo that SUM is primarily used to make money from non-MLS soccer, then put it into MLS. “Looking at where that money is coming from, it’s not coming from MLS, but it’s going to MLS through the Mexican national team and other contracts,” he said.

But Wynalda and Solo aren’t totally off on an island — more moderate candidates are also campaigning on the need for the federation to be transparent in its dealings with SUM. The U.S. Soccer Athlete Council asked how the federation’s relationship with SUM affects athletes, and the candidates were universal in calling for more transparency. Presidential candidate Kyle Martino said that “perceived conflict of interests are a liability to U.S. Soccer to which the current leadership seems blind,” and even Carter said that “poor communication by the current U.S. Soccer leadership has created significant confusion in this area.”

Carter also does not believe there is anything wrong with U.S. Soccer’s relationship with SUM. “What I haven’t been able to understand is why people think it’s a conflict of interest,” she said. “I don’t think it is.”

The machinations of what Solo and Wynalda are alleging, without value judgments attached, are not in dispute. Soccer United Marketing buys the rights to U.S. Soccer TV broadcasts and sponsorship rights, as well as the rights to other soccer properties, at a price it believes to be lower than full market value so that it can turn around and resell those rights at a profit. Those profits go to MLS owners.

Garber told SI that “all of the profits from SUM have been reinvested back into initiatives to grow the sport in this country.” When asked what some of these initiatives were, an MLS spokesperson cited investment in NWSL teams, the creation of over 3,000 full-time soccer jobs with the league and clubs, academy teams for boys and girls, coaching programs, referee development, purpose-built stadiums, and training facilities, such as the $75 million training center in Kansas City that Gulati cited as a benefit of a close relationship between MLS and USSF. MLS said that its clubs spend $60 million annually on player development, including the investments in academy and USL teams.

Garber and the candidates for U.S. Soccer president who are critical of the federation’s deal with SUM have a difference of opinion about how much those initiatives have benefited all of American soccer. Many of these investments have a positive effect on the sport outside of MLS, but they are also direct investments into MLS clubs themselves, made with the expectation that they will grow the value of MLS clubs long term. MLS owners are putting SUM’s profits back into the sport, but they’re the still ones benefiting most.

Kyle Terada-USA TODAY Sports

SUM is owned entirely by MLS owners, with no one at U.S. Soccer sitting on its board. Anyone who is affiliated with SUM sits out U.S. Soccer board meetings where contracts with the company are discussed. “The people who might have a perceived conflict are left out of the vote,” Gulati said, adding that “we have outside council look at that.”

Carter points out that this is common in a lot of the federation’s business, not just its deal with SUM. “Everyone on the board represents a constituency in our game,” she said, “so there are moments when any board member has to recuse themselves.”

Two very different ideas for the best way forward

The fundamental difference between candidates in the election for U.S. Soccer president is what they believe the federation is for. “I believe that our sport is our business and our business is our sport,” Carter said. “I don’t believe they are separate.”

Wynalda believes the opposite. “We are in the soccer business, not the business of soccer,” he responded when told about Carter’s quote. Wynalda added, “We have a business model that is not really about the soccer.”

In the manifesto he released on his website called the Everyone’s Game Progress Plan, Martino criticizes U.S. Soccer for putting business above players. “The U.S. Soccer Federation has risen with the tide of interest of the game in the U.S., generating record profits and an impressive surplus,” he said. “Yet while riding that financial wave, it has also lost touch with the grassroots soul of the sport, failed to invest in success at all levels of the soccer pyramid, and, most importantly, overlooked the critical role of its membership in helping build an enduring soccer culture.”

The USMNT’s failure to make the World Cup has brought about calls for dramatic change from both fans and voting members of U.S. Soccer. Carter believes that continuing with a similar business strategy will generate the most amount of money possible, giving the federation the financial resources to make those changes. Her pitch is that she has experience, valuable connections, and business acumen far exceeding that of any other candidate and that the federation can’t do everything it wants to do unless it’s generating a lot of money.

Her opponents disagree. They think that the federation’s two biggest problems are that it’s put business above developing soccer players, and that it’s put MLS above the rest of American soccer through its deals with SUM.

You’re likely to see all of MLS vote together for Carter during Saturday’s election. Because many of its owners also run several National Women’s Soccer League and United Soccer League teams, she can probably count on several of those votes as well.

But a lot of people vote in the election, from U.S. Soccer board members, to the Athlete Council, to delegates from state associations, and Carter can’t get above 50 percent of the vote with the support of U.S. Soccer board members and MLS-affiliated pro teams alone. She’ll need to convince people from other corners of the game that she has the right vision for the federation.

If someone other than Carter wins, SUM will have to plan for a future where it may need to compete for U.S. Soccer’s business in an open marketplace. At the same time, the new president’s constituents will demand that the federation start working as well for them as it currently does for MLS.