On-field benefits in Herbalife deal?
March, 16, 2012
By Scott French | ESPNLosAngeles.com
Robert Mora/L.A. GalaxyA check is presented to Children's Institute, Inc., as part of the Galaxy's sponsorship agreement with Herbalife.
TORRANCE -- The Galaxy announced a 10-year extension to its sponsorship agreement with Herbalife, a $44 million investment from the nutritional supplements company that AEG president and CEO Tim Leiweke promises will be seen on the field.
Add that cash to the 10-year, $55 million broadcast deal signed last fall with Time Warner Cable, and L.A. has plenty of money to acquire -- and develop -- talent.
“What it allows us to do, it gives us resources that other teams don't have,” Leiweke said following Friday morning's news conference at Children's Institute, Inc.'s South Bay facility. “As much as people question our commitment and our expenditure of money on Designated Players, the reality is we have the economic wherewithal to do it. ...
“For us to have local revenue like this [as opposed to revenue shared within the league, under its single-entity business structure] gives us the ability to make sure that for the next 10 years that this brand and this team is going to be on top of its game. We're going to put every penny back into the team: Some of that will be on DPs, some of that will be on our development system, some of that will be on our training facilities. But now this empowers us and encourages us to make sure that the brand and the team are doing it better than anyone, so when a player wants to come [to Major League Soccer], he wants to come here.”
The Galaxy have hardly been spendthrifts -- they've got three DPs (David Beckham, Robbie Keane and Landon Donovan) and a payroll around $15 million, more than three times the league average. They've poured resources into their Academy, which is starting to churn out top talent, and are aiming to dominate within MLS, claiming every trophy available to them.
That kind of commitment, Leiweke notes, requires appropriate funding. The deals with Herbalife and Time Warner provide much of the fuel.
“It certainly gives us the wherewithal to continue to spend what we're spending now …,” Leiweke said. “What all this does, it allows us to continue that spending spree that we've been on here.”
Herbalife has been associated with the Galaxy since 2005 and became its jersey and presenting sponsor in 2007. The new deal extends that arrangement through 2022 and targets $2.5 million for work by the Los Angeles Galaxy Foundation and Herbalife Family Foundation helping at-risk children. The foundations presented a $1 million donation to Children's Institute, Inc., to be paid over 10 years, to support nutrition and fitness programs at a facility planned for Watts.
The deal, the richest sponsorship agreement in MLS history, also brings the Galaxy closer to becoming a “break-even organization” -- “our goal,” Leiweke said -- which is the root to front-office changes that last month cost president of business operations Tom Payne, communications director Patrick Donnelly and marketing director Veronica Avila their jobs.
It was part of a greater reorganization within AEG, with the creation of a new AEG Sports division. L.A. Kings chief operating officer Chris McGowan added similar responsibilities within the Galaxy, and former midfielder Chris Klein, the Galaxy Academy director, took on business responsibilities.
The moves, Leiweke said, are about season ticket sales. The Galaxy's season ticket base hovers around 7,500, far off the Seattle Sounders' league-best 32,000.
“It's a signal that the Galaxy have to lead the pack,” Leiweke said. We have great respect for Seattle: They do a much better job on ticket sales than we do, they have more [stadium] capacity, they do a much better job on season-ticket sales. So do another half-dozen teams in the league. So we've fallen by the wayside on season tickets. And what Chris McGowan and his team will do is make that a higher priority. We need to have a season ticket base for this team of 10,000 people, and we need to be in a position where we're not out trying to sell single tickets every game.
“That's all that's about, trying to refocus an organization on something that is not at the top of our game. We're at the top of every revenue stream in Major League Soccer with the exception of a couple, and one of them is season tickets. And we need to be at the top because we do spend more than any club in the league, so it's a high priority, we weren't dealing with it in the right way, and we brought in some fresh blood and experienced veterans who understand this marketplace.”
WORTH NOTING: Head coach Bruce Arena also appeared at the news conference, and eight Galaxy players -- Donovan, Beckham, Keane, defenders Omar Gonzalez, Sean Franklin, A.J. DeLaGarza and Bryan Jordan, and midfielder Juninho -- were on hand to play soccer with some children at CII, a nonprofit that works with youth and families affected by violence.