The Quietest Earthquake in US Soccer

Last week, two bits of news dropped in American soccer that may have been the most consequential shift in recent years and may signal a new front in the 30 Years War of the #SoccerWarz. Did you miss it? You probably did.

In March, USSF quietly updated its team ownership requirements in its League Standards. It’s a move that has not officially been ratified, but seems to have been released publicly nonetheless. The federation changed the rules so that teams no longer have to have a principal owner with a 35% stake. Instead, they only need a 15% stake.

The only change in the standards is the shift from the principal owner holding a 35% stake to a 15% stake.

The change could have come for a number of reasons. It may be innocuous and it may even be for the benefit of the US soccer landscape. For example, we may be finding that more ownership groups are looking like Angel City and LAFC where finding a single billionaire isn’t enough, but a collection of 60 very wealthy people makes more sense. I am skeptical, but I want to leave it open how we might view this change. Regardless, we don’t know why it was done or how to understand the change, because it was done without any explanation.

The other change was far bigger and I can’t help but think the timing of the first bit of news is related. Last week, MLS Next Pro announced a deal with the private equity investment group KKR. Ostensibly, the partnership will allow the league, which functions as a reserve league for MLS but includes a few independent teams, to establish a much larger footprint and build lots of stadiums.

In the release, Don Garber explained: “This investment will help build and grow MLS NEXT Pro and reflects our ambition to expand into new markets, develop soccer-specific infrastructure, elevate the matchday experience, and deepen connections between our clubs and their communities.”

I was surprised by how little attention this announcement received. This seems to be a massive investment in lower division soccer explicitly tied to private equity, which has found a way to ruin everything it touches in the last half century.

KKR?

Private Equity has been understandingly maligned in the last few decades (Mitt Romney & Bain Capital anyone?), but the last few years—in the age of Enshittification—it feels like private equity has finally moved up toward the top of great evils making our lives shittier. If you want to take a few moments, here are a few places to read up on how private equity has turned everything we enjoy into hollowed out carapaces lining the road: one, two, three.

And what is KKR? Well, let’s ask the folks at the Private Equity Stakeholder Project:

KKR helped invent the leveraged buyout, and today, its model continues to extract value at the expense of workers, patients, and communities. Despite public commitments to employee ownership and responsible investment, KKR-owned companies have faced repeated labor violations, workplace safety hazards, surprise medical billing controversies, anti-union campaigns, and high-profile bankruptcies that cost jobs and jeopardize essential services.

These are the folks that bankrupted Toys ‘R’ Us. They are constant violators of workplace rights and safety regulations. Here’s the full case study, but it runs through all the different ways they bought out companies, treated the workers like shit, and ditched them once they extracted every last ounce of wealth.

Private Equity has existed in sports and even soccer for quite some time. KKR even owns a separate fund called Arctos Partners that has stakes in a number of teams like Liverpool, PSG, Atalanta, as well as a number of other major sports teams. And USL, the major force in American lower division soccer has had a number of deals with private equity. So what’s different now?

What’s Different?

Before we go further, we should talk about the purposes of the USSF league standards in the first place. The league standards include strict rules about what their teams should look like. They should be able to operate from day one for five years at a loss. They should have an owner who owns a certain amount (used to be 35%) of the club who had a very large bank account.

These rules exist to protect the league (and the US soccer landscape) from being dotted with constant booms and busts. No one wins when you have teams showing up in a community and dying in just a few years. We need standards to make sure we have high standards and a stable landscape. By tying the teams to a principal owner, the idea is that someone is responsible and empowered to operate the club sustainably.

While private equity has already invested in leagues and in a minor way with teams in the US, these two changes seems to signal something quite different. KKR has specifically targeted smaller communities, saying:

KKR’s investment thesis is underpinned by what executives view as significant untapped demand. Glick said there are more than 100 U.S. markets that are large enough to support professional soccer but don’t have a team.

On its face, I find nothing wrong with this. We can look at a number of smaller markets where well-run lower division soccer thrives: Des Moines Menace or Vermont Green for example.

But these two are outliers for very different reasons. Des Moines Menace are backed by the very wealthy local owner of the amazingly nomenclatured Kum & Go gas stations and he seems to be motivated by a sense of local pride and buoyed by the teams very deep roots in the community. Vermont Green have been run by a bunch of soccer geeks who know how to DIY their way into creating a dynamic community.

For every Des Moines Menace, however, there are 20 other clubs that—forgive me Father for this—come and go. The number of soccer teams in US Soccer history run by sometimes well-meaning dudes, but mostly itinerant monorail salesmen, that then crash and burn is depressing as hell. There are reasons we need strict vetting of owners, because each time one of these clubs fails, it hurts the entire ecosystem and makes it harder for the next club to come along and earn the trust of the community. And rather than tightening the standards for ownership in the US, both MLS and USSF seem to be loosening those standards.

Success in an individual market relies upon a two basic things: a stable financial situation (including deep pockets that understand losing money) and community buy-in. I’ve counted the Johnny Appleseed of American soccer, Peter Wilt, as a friend for over a decade and he has shown that you can make markets as small as Madison, WI punch far above its weight.¹ Community buy-in doesn’t come from surveys and market reports. Community buy-in means going town to town and holding townhalls. It means going out and—handshake to handshake—creating a group of fans who feel not only engaged, but empowered. Just last week, I was writing about how MLS briefly learned the lesson that rather than creating clubs like Chivas USA that are designed to appeal to what they think soccer fans want, they turned to grassroots clubs with real connections to their communities such as the Portland Timbers and Seattle Sounders.

Changing USSF league standards away from a primary owner, responsible for the club and accountable for its failures could allow for us to see far more chimera clubs—clubs with equity firms tied to perhaps a local owner who has a couple of car dealerships. Of course, they’ll be backed with financial wealth (KKR has $774B in holdings), but they will likely involve a large number of disinterested financial partners who are there for the exact purpose as KKR: the extraction of wealth from these communities.

What I see in these two changes is the foolish and short-sighted rejection of trying go to specific markets and building tailored and stable plans for success. And instead of a scalpel, we have a shotgun. We could be looking at the launch of a whole raft of clubs directed from a centralized capital machine that has a track record of giving fuck all about its employees and communities. The whole program is explicitly tied to building stadium infrastructure, so we’re also going to see these clubs going to their local markets and promising the moon in exchange for public funding.

What we will also see is the Silicon Valley disrupter mentality brought to the #SoccerWarz of lower division soccer. When the NASL and USL were at the peak of the #SoccerWarz, you would see them trying to muscle in on each others territory with clubs like VSI Tampa Bay (meant to rival the NASL’s Rowdies). spreading private equity back clubs means we could see this old habit return with a vengeance. Because if you have enough financial backing, you can throw a club into a USL market and try to undercut it, diffusing the media and fan energy so that even if their astroturfed club doesn’t succeed, it hurts their rivals.

None of this adds to the health of American Soccer. The USSF has often acted as the most pliant figurehead of a colonized client state rather than offering up forceful leadership that will build a stable, growing soccer ecosystem. And what do we possibly gain by embracing a more lax environment for the creation and demolition of clubs? American soccer needs to be nurtured thoughtfully and it needs stability more than anything. What we have seen instead is sitting back while leagues and teams fight amongst themselves. We’ve seen them make it easier for failure and we’ve seen a complete abdication of responsibility.

I look forward to reading actual journalism about the change in USSF League Standards. It may be that I’ve conflated two issues unfairly. Maybe these two news items are a coincidence. However, the wholesale embrace of private equity in the lower divisions remains a grave threat to the long-term stability of American soccer. And the time has come for USSF to build a holistic, longterm vision for the American soccer pyramid rather than letting it continue as warring fiefdoms of capitalism.

1. Peter has talked about small market expansion a lot, but here’s a good, if slightly outdated article and podcast episode.