Authors: Sarbjit Singh*
Sarbjit Singh is Assistant Professor, Sport Management, at Farmingdale State College in New York
*Corresponding Author:
Sarbjit Singh, MBA/JD
Farmingdale State College
2350 Broadhollow Road
Farmingdale, NY 11735
singhs@farmingdale.edu
631-794-6212
ABSTRACT
The New York Cosmos were the dominant professional soccer franchise, on and off the field, during the 1970s and ‘80s. However, the team folded just a few years after its peak, succumbing to excessive spending and lagging revenues. Twenty-five years later, the Cosmos returned seeking a place on the local, national and global sports scenes. Via a case study, we take a look at the team’s history, its relaunch, and factors such as facility development and league affiliation impacting the team’s business plans. Like the franchise itself, the reader is tasked with determining whether the team’s new strategy and efforts can make it a profitable enterprise. The reader is also encouraged to think of practical ideas that will connect the team with both its first-generation of fans who regaled in their winning history and attract new fans who may not know their history and may be impatient when it comes to the team’s performance on the field.
The “Twice in a Lifetime” case study is grounded with a review of historical and recent literature on the life of the Cosmos brand, providing a foundation for readers to understand the birth of the Cosmos franchise, its subsequent evolution, and those impacting the direction in which the team would go, e.g. Stephen Ross, Warner Communications, the NASL, and Pele. The proposed discussion builds on this understanding and the specifics of the Cosmos relaunch and asks us to act like real-life managers who may have some important information, but not all, and still must make important decisions determining the fate of the franchise.
KEYWORDS: Strategy, Sports Business, Entrepreneurship, Brand Management, International, Case Study
INTRODUCTION
Seth Miller, Chief Executive Officer(1) of the New York Cosmos, stood on the sidelines of Shuart Stadium at Hofstra University on Long Island (NY) and contemplated another victory for the team. The team was finding success in 2015, the third year back for the storied soccer franchise in the also just-launched North American Soccer League (NASL). In their first year, the Cosmos won the NASL championship, thereby adding another trophy to their enviable haul from the 1970s and ‘80s. Even after another playoff appearance in 2014, and a strong start to the 2015 season, Miller knew the victories the franchise truly needed would have to take place off the field. And he would have to answer to his bosses just when and how the franchise would best achieve those victories.
In name, the Cosmos were the same as the legendary franchise from the 1970s and ‘80s that spent freely, won NASL championships, and were made up of world-class players from all over the globe. That club was the predecessor to today’s globally-known soccer powers such as FC Barcelona, Real Madrid, and Manchester United. It was, in essence, a global team with a global presence. Today, Miller was tasked to build a team with a much smaller budget that instead focused on its local market but remained relevant internationally. Miller would have to accomplish this in a different sports business market than the original Cosmos faced. Instead of a handful of professional teams in its market, the Cosmos were sharing the New York-area with 12 professional sports franchises – including two Major League Soccer teams (Table A.1). There were also several colleges and hundreds of high schools with sports teams sitting alongside Broadway shows, a slew of major concerts and live performances, and the everyday hustle and bustle of the New York metropolitan area. Globally, the soccer market had grown tremendously with teams spending hundreds of millions of dollars to land the sport’s top players and fans rooting for teams playing on different continents.(2) It was within this dual environment that Cosmos management was working to identify the club’s best strategic position while some soccer observers asked if there was room even for a legendary franchise like the Cosmos.
The Cosmos welcomed their on-field success starting in 2013 as they executed a business strategy of incremental and steady growth. Today’s strategy – finding success as a local team with a global presence – was going to be different from the past. The current Cosmos saw growth being built mainly on the team’s legendary history, a price-conscious and fan-friendly environment, and talented but inexpensive players (with the occasional star player in the mix). The old strategy, landing global superstars at or near their prime, was not going to be possible for the Cosmos in light of this new approach. (That sentiment was true for almost every professional soccer team in the United States.)(3) The team was also restricted somewhat by not owning its home stadium and not having a significant television presence. As part of the franchise’s growth strategy, these issues were ones the team was planning to address as early as possible.
Even after winning the 2013 NASL championship, Miller knew wins on the field would not be enough to achieve the commercial goals the team had for itself. The franchise needed to have important partners in the areas of media, sponsorship, and facility development willing to stand with it as it took this deliberate approach to building the franchise. It would also have to work with the NASL, the league it had chosen to be a part of in its return to the soccer scene, to find ways to elevate the business of all member teams.
In addition to putting together a very competitive team on the field, the overriding short-term goals for the franchise were to drive awareness of the team and bring more fans to the stadium. The team had been hovering around the 5,500 mark for attendance – just around the league average – but for management that was not good enough, especially in light of the soccer-rich communities surrounding the team on Long Island and in Queens, NY. The team needed more fans to generate greater revenues, attract media attention, and to serve as ambassadors who could tout the team in their communities. The team had initiated several efforts to bring in fans, including offering various season ticket packages; promotions for fans in attendance; a youth academy affiliate program; and a rewards program for fans who spent money on the Cosmos and their partners. The various departments within the Cosmos franchise all had additional ideas on how to grow the Cosmos business, from ticket sales – discounts for selected target markets, to operations – adding pre and post-game activities for the fans in attendance, to marketing – better use of social media channels. CEO Miller had to collect these and future ideas, evaluate them, and begin to put some of them in play. He knew that the team’s growth trajectory was directly dependent on its ability to double or triple its current attendance. In addition, he knew that game attendance would have to increase significantly if the team was to have a chance of sustaining itself in the 25,000-seat, $400-million stadium the franchise was pitching to the local marketplace.
The proposed stadium in Elmont, Long Island (NY) signified where the Cosmos wanted to be as a world-class soccer franchise. The size of the facility and its proposed amenities approximated those of other modern sports facilities in the U.S. and around the world. However, the stadium also represented the club’s greatest challenge. First and foremost, the club would need to win the bid for the land on which to construct the stadium and a planned mixed-use development. This contest was in a New York market where government bodies were notorious for dragging out the facility-development process and being somewhat unpredictable.(4) Recently, the NHL’s New York Islanders abandoned their years-long effort to secure a new arena on Long Island and moved their games to Brooklyn (NY).(5) Second, the Cosmos would have to build a professional sports team business warranting significant fan, media, and corporate support. While confident of its ability in that regard, the Cosmos franchise was still at the mercy of those government officials deciding on the bid for the land. The team’s future, at least on Long Island, hinged on a favorable decision.
In addition to the stadium, Miller was also being asked to consider the team’s current position in the NASL and the possibility, even if somewhat remote, of the team joining the highest level professional soccer league in the U.S., Major League Soccer (MLS). Having started 20 years ago, MLS had recently earned some significant business successes and was further along in its development than the NASL.
With the final whistle, Miller started walking back to his office basking in the glow of another victory and thinking about the opportunities/challenges that came with being the new New York Cosmos.
DISCUSSION
A. History
Few sports organizations have pasts colorful enough to warrant a book and documentary film. The Cosmos were such a franchise.(6)
The Cosmos launched in 1971, sprung from the vision and bravado of American entertainment industry entrepreneur Stephen Ross and Turkish-born music executive brothers Ahmet and Nesuhi Ertegun. At the beginning, resources were tight, not unusual for a start-up venture.(7) (Newsham, 2006) The team could not get players who reflected the grandiosity implied by the name “Cosmos” as it could not yet pay world-class salaries. The team also was without a stadium to call its own. It was a monumental task just to get a few thousand fans to watch this “new” game of soccer with unfamiliar players, let alone garner the support of a mainstream audience and corporate partners/sponsors. Fortunately for the team Ross and his partners were committed to seeing this not just work, but flourish long-term.
In a preview of its current situation, the team needed a “professional” place to play. There was no extra stadium space for the team to occupy a couple dozen times a year. The city also was in dire financial straits, making the possibility of a publicly-funded stadium close to zero. Though not ideal for professional soccer, the team had to do with what was available, playing in venues such as Yankee Stadium, Downing Stadium, and even their current home, Hofstra University. However, in part because they did not have a true “home field,” the team struggled to build a presence.
Ross, “a natural-born impresario, decided in 1975 that what ailed the team could be cured by the biggest celebrity in the sport.”(8) (Segal, 2011) In a world with few truly global athletes – boxer Muhammad Ali and Olympic champions Nadia Comaneci and Bruce Jenner – Ross went after perhaps the most famous athlete of them all, Brazilian soccer star Pelé. After many international flights and in-person meetings, Pelé was lured out of his recent retirement from national and club soccer and into a Cosmos jersey. The deal? A multiyear contract that paid Pelé more than $1 million annually.(9) (Lewis, 2015) For context, at the time the highest-paid athlete in America’s national pastime, baseball, and home run king Hank Aaron, earned $240,000 per season(10) (Haupert, 2012) and Hall of Fame NBA star Jerry West made $90,000.(11) (“Some Athletes Were Legendary,” 2010)
By bringing in Pelé and leveraging a key strategic business move – Ross brought the Cosmos under the Warner Communications umbrella so that all costs were assumed by the conglomerate – the Cosmos went on a global soccer talent “shopping spree.” Over the course of seven years, the team assembled a veritable “All-Star” team of soccer talent from around the world. In short order, this star power put the Cosmos at the forefront of New York sports, no small accomplishment even at that time. Interestingly, not only was the team dominating the sports pages, it achieved a prominent place in the world of entertainment gossip as well. New York City was full of all types of celebrities and those with international fame were at the top of the list, soccer players included. Stephen Ross’s big bet on Pelé and subsequent stars such as Giorgio Chinaglia (Italy), Carlos Alberto (Brazil), and Franz Beckenbauer (Germany), paid off in the form of a winning sports team whose on and off-the-field exploits served to attract the fans and corporate support that just a few years earlier had been so elusive.(12) (McGowan, 2013)
The team averaged over 35,000 fans per game during this period and eventually captured 5 NASL championships during its first run of 15 years.(13) (Newsham, 2006)
“The Cosmos personified fantasia,” Hudson said. “They were spellbinding. I
remember looking around the field in one game and there were seven World Cup
captains on the field. It was the zenith point for all of us who had the privilege to
play in that league at that time. It will never happen again. I remember I-95 shut
down with fans getting off the exit ramps for Lockhart, and fans shoehorned into
that place, pushed up three deep against the fences.”(14) (Kaufman, 2013)
– Ray Hudson, former star player, Ft. Lauderdale Strikers
However, this impressive run by the New York Cosmos, and to some degree the NASL, was not built to last. The league did not manage its costs well, mostly when it came to player salaries. The Cosmos were bringing in some of the world’s best players and paying them accordingly. Most other teams in the NASL felt pressured to “keep up,” spending money on salaries that was not supported by adequate revenue streams that are so common today, e.g. broadcast rights (local and national), club seats and luxury boxes, as well as robust corporate sponsorship. Teams found it increasingly difficult to put a competitive team on the field, and eventually the NASL could not sustain itself, folding operations in 1985. With the death of the NASL came the death of the New York Cosmos. The team known for its international superstars and huge crowds wherever they played was now reduced to some leftover team memorabilia and intellectual property. The Cosmos were gone as fast as they seemed to appear.
B. The U.S. Soccer Industry Comes Alive
As the 1980s turned into the ‘90s, the U.S. remained without a top-tier professional soccer league. However, on July 4, 1988, FIFA (Fédération Internationale de Football Association), the world governing body for soccer, selected the United States to host the 1994 World Cup. Those in the U.S. passionate about soccer and hoping to have a professional league were thus given a lifeline. The hope was that the world’s biggest single-sport event would spur multiple stakeholders to work together to provide the financial and management expertise needed to make a new professional league work. Having the World Cup in the U.S. would potentially trigger the type of energy and interest that would convert millions of young players and the multitude of parents and coaches involved with the game into fans of a professional league. Despite the naysayers, especially those in the media who disputed the idea that the U.S. could be a “soccer market,” there seemed to be a groundswell of support for the idea of a new league.
The proposed league, Major League Soccer (MLS), was being started by some very deep-pocketed owners such as Phil Anschutz, Bob Kraft, and Lamar Hunt (Anschutz was one of the richest individuals in America, while Kraft and Hunt were both owners of NFL teams). Despite this apparent financial cushion, league organizers chose to adopt a unique organizational structure. As a “single-entity” there were no individual team owners, but rather owner-operators, with ownership coming in the form of a stake in the league as a whole (no major pro sports leagues in the U.S. operated in this manner). This arrangement meant that the free-spending ways of the old NASL would not be repeated as MLS’s league office had to agree to all contract signings. There would also be a team salary cap.
The decision to go with a single-entity structure was seen to be prudent in the face of the sports business environment the new league was facing. MLS had to adopt and implement policies and procedures to assist its development in the short and long term. The single-entity structure gave the league the ability to control costs while it sought to drive significant revenues, much of which would be shared amongst the teams, via a presence on TV, by attracting sponsors, and enticing all of those young soccer players and their families to come to MLS games.
After a delay of two years, MLS launched in 1996, starting out with ten teams. MLS experienced growing pains when it came to generating interest amongst fans, companies, and the sports media even though the U.S. had hosted an incredibly successful World Cup and the league had influential individuals and companies such as Adidas and Budweiser supporting its launch. These early troubles were partly due to the reality of the sports market at the time compared to 25 years before. There was far more competition, including more teams in existing leagues, the formation of new leagues, and the growing presence of international sports offerings on TV. Fans and potential fans were being offered a staggering array of options when it came to entertaining themselves.(15) (Sibor, 2015)
With the support of its deep-pocketed investors, the MLS eventually gained traction in the sports marketplace by first, just surviving. Fans were increasingly identifying with their local team after multiple seasons and rivalries were also forming, giving the league those “must-attend” games. Another significant move by MLS and Commissioner Don Garber was a push for soccer-specific stadiums for its existing and future teams in the league. The advent of these stadiums was considered a “game changer” for MLS. Now games would be played in stadiums that provided an infinitely better experience for soccer spectators, both individuals and corporations/organizations, and for generating sponsor and ticket revenue.
By having a better environment to play in and a better financial arrangement when it came to costs and generating revenue at the stadium, some MLS teams started to show a profit. In addition to team-generated revenues, the league itself achieved milestones. First, the league in 2014 announced that it had signed a new national TV rights deal with ESPN, Fox, and Univision running from 2015 to 2022 that would take the league’s annual haul from $30 million to $90 million.(16) (Smith, 2014) The league also counted 8- and 9-figure expansion fees from the new franchises joining the league from 2010 to 2015. The MLS ended the first decade of the 21st century with 16 teams, reached 2015 with 20 teams, and had a host of cities expressing interest in joining this soccer “party” over the next ten years.(17)
C. The Cosmos Relaunch – Take 1
The buzz around soccer was palpable for not only was MLS establishing itself in the marketplace, the U.S. women’s and men’s national teams were regularly making news for their improved play. The 1999 World Cup win by the women and the 2010 World Cup performance by the men’s team were especially thrilling and grabbed the country’s attention. Soccer was earning a place in the hearts and minds of the U.S. public. At this time, there was also a buzz about the New York Cosmos, the club that first generated excitement around soccer in the U.S., making a return. The buzz was a mix of incredulity, hope, and excitement. The Cosmos represented what many felt soccer could be in the U.S. However, for a not-so-small group, the Cosmos also represented careless spending, big market dominance, and the reality that even with some of the best players in the world, a soccer league in the U.S. was not going to survive. The retort was that a top-level league in the U.S. was not only surviving, its growing success also encouraged the launch of two lower division leagues, the United Soccer League (USL) and the new NASL, in 2011.
The big questions being asked in 2010 when it came to the old/new Cosmos was, “So how do you begin to breathe life back into the New York Cosmos without it coming off as a cheap imitation? How do you go about restarting a professional sports franchise with such a loaded name basically from scratch, anyway?”(18) (Schaerlaeckens, 2010) In other words, should the effort even be undertaken?
Not much had taken place with the Cosmos since their last game in 1985. The team had devolved into a collection of memorabilia and intellectual property rights, both of which were being held by Peppe Pinton, the personal assistant to former Cosmos star Giorgio Chinaglia.
Pinton kept the team’s trademark alive by running Cosmos-branded training camps for kids, maintaining a storage facility with Cosmos gear, trophies, etc. and “by suing anyone who tried to exploit the Cosmos name (by selling t-shirts, for instance). “I spent $800,000 to $900,000 in legal fees over the years,” said Pinton. For years he looked for a buyer who shared his particular fervor for the club.(19) (Segal, 2011)
Relaunching the Cosmos would require the new owners to understand the current sports and entertainment business marketplace, global growth and competition, the incredible impact of technology, and consumer demographics and behavior. The U.S. and the world were different places in the 21st century, and this reality would impact the strategy undertaken by the eventual owners.
The consensus was that if the team was relaunched, it would have to “walk a tightrope between honoring the old and ushering in the new, between capitalizing on the brand and rebranding the club’s identity.” “We are passionate custodians of a great legacy in the New York Cosmos, an icon of this city,” said Dan Cherry, then-chief marketing officer. “Having said that, this is not simply a retro brand play. You do not try to recreate an icon.”(20) (Schaerlaeckens, 2010)
In addition to the strength of the Cosmos name, the new ownership group was counting on its experience and expertise to make this relaunch work. The club’s soccer clout included Paul Kemsley, chairman, who was prominent with the Tottenham Hotspur club in England. He had been working on the reincarnation of the Cosmos since July 2008, gaining considerable momentum when he acquired the club’s rights in October 2009 and formally announced its rebirth in August of 2010. Also, there was Terry Byrne, the club’s director of soccer, who previously worked for clubs Watford and Chelsea and England’s national team; and Rick Parry, board member, who spent nine years as the CEO of the Liverpool club and was in charge of the development of England’s Premier League.(21) Then there was soccer icon Pelé, of course, whose name conjured up memories not only of the Cosmos but the “beautiful game” played at its highest level.
The team’s new ownership was aware that the sports landscape had changed to such a degree that what occurred with the Cosmos the first time around, i.e., signing hugely popular players at huge salaries, truly was “once in a lifetime.” And they professed to understand the way Major League Soccer operated and how it viewed the expansion process.
The new management team at the Cosmos decided against importing global superstars and focused on a strategy it believed was more economically sensible and sustainable. The team planned to develop a pool of emerging talent and in furtherance of this “build vs. buy” approach, the Cosmos acquired two well-known youth soccer clubs in New York and Los Angeles. The hope was that the team would produce several starters by the time the club kicked off its inaugural season and would round out the team with free-agent signings. In all, the Cosmos were investing more than $1 million in youth soccer, a total twice the annual budget of the MLS’s D.C. United soccer academy, which had delivered the best players of any MLS club to date.(22) (Schaerlaeckens, 2010)
With player development on relatively stable ground, the team continued to build out its relaunch. Unfortunately, the promise of a well-connected ownership and executive team did not translate into what seemed to be the Cosmos’s key business and sporting goal, i.e. entrée into Major League Soccer. For despite the wonderful history and pedigree, the Cosmos had to deal with the reality of modern pro sports leagues. They could not just announce their desire to join MLS; they would have to be invited and be accepted by a clear majority of the league’s owners. In professional sports, it was now the league, rather than prospective teams/cities, that had the leverage. And that was true of Major League Soccer. MLS was asking for a significant expansion fee that the Cosmos were known to be against. The league was also looking for the club to have a soccer-specific stadium ready when the team began league play. The Cosmos could not meet that requirement.
After 10+ years of steady progress and growing awareness and income, MLS was fielding more inquiries regarding expansion than it had openings available. Eventual league members Portland, Seattle, Vancouver, Montreal, and New York and future members Atlanta and Minnesota were just some of the cities that saw promise in Major League Soccer. The Cosmos, while desirous of the 20th spot that eventually went to NYCFC, would have to wait its turn to apply, with no guarantee of inclusion, or seek out other options. Being part of a league was essential, for without membership, the Cosmos were nothing more than an interesting idea. For the Kemsley ownership group, the lack of certainty regarding entry into MLS was not something it could accept and it began to seek ways to unload its Cosmos dream.
D. The Cosmos Relaunch – Take 2
In early 2012 Sela Sports stepped in to grab ownership of the “potential” that was the New York Cosmos franchise. The change in ownership also included changes in senior management that got the soccer industry’s attention. First, respected sports marketing executive Troy Kelleher was brought on as chairman. Kelleher was the Deputy Chairman of the Executive Committee at Lagardère Unlimited, overseeing the group’s global sports and entertainment businesses. He was also founder and Executive Chairman of World Sport Group (WSG), one of Asia’s leading sports marketing, media and event management companies. Over 20-plus years, Kelleher established WSG as industry leaders in Asia, employing more than 200 people in nine offices including Beijing, Beirut, Delhi, Dubai, Hong Kong, Seoul, Sydney, Tokyo and its headquarters, Singapore. Kelleher and WSG were recognized as key figures in the development of sports in Asia, specifically football, golf, and cricket.(23) (“Power 100,” 2014)
The Cosmos also brought on senior sports executive Seth Miller to run the day-to-day operations of the team. Miller was no stranger to professional soccer as he previously had a successful run as Managing Director with MLS’s New York Red Bulls (RBNY), in essence running everything related to the team and its players. At RBNY, Miller oversaw the construction and operation of Red Bull Arena, a $200 million state-of-the-art soccer stadium in Harrison, New Jersey. He also successfully recruited international soccer legend Thierry Henry to come to MLS in July of 2010. When Miller left the Red Bulls in August of 2011, they had risen from the bottom of MLS in attendance to #4, which included a 150% increase in season ticket holders. For his work at RBNY, Miller received the 2010 MLS Executive of the Year Award.(24) (Williams, 2013)
The new ownership and management team was not dissuaded by the challenges faced by the previous owners. They were committed to securing a firm position in the sports landscape from which they could pursue a larger, more comprehensive strategy. That meant finding a league of which to be a part. With league membership, the team would have a set of teams against whom it would play on a regular basis, as well as the opportunity to participate in national and international competitions.
While the Paul Kemsley-led Cosmos ownership group had discussions with Major League Soccer about being the 20th franchise in the league, that spot was not explicitly reserved for the Cosmos. The league had multiple ownership groups from around the country interested in joining its growing list of members and it never promised another one or two teams in the New York area. But was MLS the only option for Cosmos? What about barnstorming? Regularly employed by the early professional sports teams in the U.S., barnstorming had been one of the main revenue and publicity drivers for the original Cosmos. Perhaps the power of the Cosmos name would enable the team to regularly schedule games with teams in the U.S. and around the world. The challenge in taking that approach was that it was hard to, if not impossible to, execute as the sole element of a franchise’s business model. Teams needed to produce a product, and that product was the actual game. A team needed a fan base that could plan to see it on a regular basis in a convenient location. Without opponents in an organized league, the Cosmos could do no more than sell merchandise and play an occasional exhibition game. That was clearly not the ultimate intention of the new owners.
E. The Cosmos and the new NASL
Kelleher and Miller continued to confer over the direction of the Cosmos and realized another option did exist. Coincidentally, the opportunity was with a new league that had adopted the name of the home of the original New York Cosmos, the North American Soccer League (NASL).
The new NASL was formed in 2009 and held its first season in 2011. The league started with eight teams and consisted of a bifurcated season schedule.(25) (Diaz, 2012) The league was recognized as the second level league in the United States, one step below Major League Soccer. In 2015, the NASL hosted 11 clubs, with plans to move to 13 in 2016. While the new NASL had no official connection to the former NASL that operated from 1968 to 1984, several of the present-day NASL teams were playing in cities where the former NASL had teams. In particular, the Fort Lauderdale Strikers, Tampa Bay Rowdies, and New York Cosmos clubs shared the same names and similar jersey designs as their NASL predecessors.(26)
The new NASL was owned and operated by its member teams through a Board of Governors. The Board consisted of a representative of each member team and oversaw league rules and regulations, governed the expansion and commercial strategy of the league, and managed the league office.(27) (“NASL Media Guide,” 2012) Unlike MLS, the NASL did not employ a salary cap.
By joining the NASL, the Cosmos had what it sorely needed, a place from which they could execute their business strategy. That strategy, again, meant being a local team with a global presence. The team was excited by the NASL’s business model and felt it was more reflective of the systems throughout the professional soccer world. In addition to not having a salary cap, team ownership was decentralized, as opposed to the unique single-entity model employed by Major League Soccer. Because of the Cosmos’s rich history and strong brand name, the new team owners felt they would be sacrificing too much to the centralized MLS ownership structure, including the right to market and sell Cosmos’ business interests. Also, the expansion fee required for the Cosmos to join the NASL was orders of magnitude less than what was being discussed in MLS ($100 million). The team felt it would be better to use the saved money on putting together a strong collection of veteran and young players that could regularly compete for a league championship and in outside competitions.
Kelleher and Miller agreed that the team’s return to the field in 2013 required them to balance the club’s special history with expectations of the “new” Cosmos in the “new” NASL. Being seen as the soccer world’s most famous expansion team brought some challenges. It also, however, brought with it great promise as the team concluded its first season in the NASL by raising the league championship trophy. The goal to once again be leaders on and off the field was starting to come to fruition.
CONCLUSIONS
After winning the NASL championship in 2013, the Cosmos earned a playoff spot in 2014 and started off 2015 with a 13-game unbeaten streak. During the streak, the team took a ground-breaking trip to Cuba for the first professional sports event involving teams from the respective nations in more than 15 years. The game, which ended with the Cosmos earning a 4-1 win, captured the attention of news outlets throughout the region and much of the world.
This excellent run of play on the field for the Cosmos was an obvious source of pride for the team and its fan base. Winning was certainly better than losing as the club tried to attract fans, sponsors, and other business partners. In pursuit of that goal, team management also knew it had to answer two more important questions to ensure that the relaunch would continue to be successful: 1) when to fully execute its business strategy; and 2) with whom, NASL or MLS, should it align its long-term goals.
First, regarding timing, should the team wait until it had at least secured a formal agreement to build a new stadium before rolling out new major initiatives? Or should it operate as if that was going to take a few years, or in the worst case, not happen at all? Some of the Cosmos’s plans, including the hosting of international friendly matches and selling of premium seats and luxury boxes, were being held up in part due to the stadium issues. The team was still leasing space at Hofstra University’s stadium but did not see it as a viable long-term home for the team due to its limited seating capacity of 12,000. Also, there was limited opportunity to market to corporate entities, whose financial and marketing support were sorely needed.
Miller questioned if the team could build a financially sustainable, winning identity without a stadium to support the vision, strategy, and brand of the team. As he saw with the Red Bulls, you could only get so far without the credibility that a professional-level facility could provide, credibility with players, fans, corporate sponsors, and media partners. Professional sports were no longer just about the game. The Cosmos wanted to effectuate fully their goal of being a successful sports brand and that meant having their own stadium.
Miller knew what a stadium could do for the franchise, but he and Kelleher communicated to the club’s staff and business partners that waiting for that stadium’s development before rolling out marketing and sales initiatives would not be the right way to go. In the notoriously difficult real estate and political environment in the state of New York, a quick resolution to the team’s proposal for a privately-financed, soccer-specific stadium on Long Island was likely not going to happen. The team had to act now and prove to fans, sponsors, broadcast partners, and players considering joining the Cosmos, such as Spanish legend Raul, that it had the ideas to be successful and the ability to follow through on those ideas.
Second, there was the question of which league the club should align with. This had seemingly been answered. The Cosmos had joined the NASL and started off strong. The league itself showed signs of progress with the addition of several expansion teams. However, there was no doubt that the improved fortunes for MLS, which now included a second New York City-area team in 2015, NYCFC, the joint venture between the New York Yankees and Manchester City, made it an attractive, albeit longshot option. There was precedence of lower-division clubs finding a place in MLS, most recently the Minnesota United, a former NASL club that was projected to join MLS in 2017 or 2018. Minnesota joined the Montreal Impact, which went from the NASL to MLS after the second-division league’s inaugural season in 2011, and continued a trend in which teams in lower leagues ascended to MLS, including the Seattle Sounders (2009), Portland Timbers (2011), Vancouver Whitecaps (2011) and Orlando City SC (2015).(28)
The future of the Cosmos and its two New York-area competitors – New York Red Bulls and NYCFC – were tied directly to the development of their respective leagues. While MLS was older and richer, the NASL was also making inroads worthy of attention. In addition to adding teams, the league was improving when it came to media exposure for its teams, a key part of the Cosmos’ strategy. In 2015, the NASL formally announced that it had expanded its relationship with industry powerhouse ESPN, with a minimum of 120 league matches to be carried live on ESPN3, ESPN Play and ESPN Player in 75 different countries. Eight of the league’s clubs were to have all 15 of their regular-season home matches live on ESPN3.(29) (Krishnaiyer, 2015) The Cosmos were encouraged by this new partnership.
Soccer in the U.S. had grown tremendously since the first version of the New York Cosmos dominated the market in the late 1970’s and early ‘80s. At that time, the Cosmos were soccer in the U.S. Now the country was host to a top level professional league, multiple lower-level leagues, and a vibrant youth and high school and college scene. The question now about soccer was not about survival but rather about just how far up the ladder of American sports could it go. The Cosmos were now in a situation where everything regarding the health of soccer in the U.S. did not rise and fall with the team’s fortunes. And without this burden, the franchise was confident of its chances to succeed.
APPLICATIONS IN SPORT
The audience for this case are undergraduate upperclassmen and graduate students studying sport management and/or business management. “New York Cosmos – Twice in a Lifetime” (hereafter “Twice in a Lifetime”) asks the student to understand both the history of a sports business entity – the New York Cosmos – and the challenges and opportunities it now faces in a changed marketplace. With this understanding, the students are asked to consider which strategies may be best for the Cosmos to undertake to achieve ownership’s short and long term goals.
The case is written to provide the necessary foundation for students to understand the basic history of the Cosmos and the related players impacting the direction in which the team may go. Those players are the two top professional soccer leagues in the United States, Major League Soccer (MLS) and the North American Soccer League (NASL). However, the case also purposely gives the instructor the opportunity to assign outside readings and research to the students (sample readings are listed below). This can be done before the case is initially assigned and/or during discussion of the main points presented in the case. The idea is to force students to act like real-life managers who may have some important information, but not all, and therefore, must seek out information and input from other sources.
The case asks the students to imagine themselves as a senior executive with the New York Cosmos.
The learning objectives aimed for with this case study include:
1) Having students appreciate how the history of a franchise can possibly be both an asset and liability.
2) Getting students to take the knowledge of that history to help frame the context of the current situation faced by the team.
3) Encouraging students to undertake efforts to learn about factors in the marketplace that may impact the existing or pending strategies of the franchise.
4) Enabling students to go through the exercise of comparing and contrasting compelling business opportunities.
5) Providing a chance for the students to evaluate a decision and be able to change course as circumstances may have changed in the marketplace.
The case study is purposely left “framework agnostic,” in that the instructor can adopt one of an array of theoretical frameworks, including new product development (NPD), ID branding, venture analysis, or brand development, amongst others, when leading the case. By using these frameworks in class, the students can point out the facts and factors in an organization and marketplace that are impacting the ways sport management professionals handle the challenge of introducing newer versions of brands, e.g. sports teams, which are steeped in history and tradition. This analysis and the related discussions will be valuable additions to the body of knowledge shared by the students and instructor.
Discussion Questions:
1) What are some key factors in today’s sports business marketplace that would have an impact on the Cosmos relaunch and subsequent business activities? How do they differ from what the Cosmos faced in the past?
2) What is the better option for the New York Cosmos in the short term and long term, when it comes to league membership (NASL or MLS)? Please explain in detail the reasoning behind your choice.
a. Start and stay in the NASL
b. Start in the NASL and move to the MLS
3) What marketing and business development opportunities should the Cosmos pursue in the short and long term?
a. Would the approach be different depending on which league the team was in? If so, how?
b. Would the approach be different if the Cosmos were in its own soccer-specific stadium? If so, how?
4) The Cosmos have been referred to at times as a local team with a global footprint. How can the team maintain a global presence while it works to firm up its position in the New York/U.S. soccer market?
5) With the MLS and NASL both experiencing growth on and off the field, what are the chances that we could see them merge, and if they do merge, which business model do you feel would be adopted? Why?
While these questions can be addressed by individual students, the case also lends itself to a group setting, as one or more groups of students can approximate the franchise’s senior management team, while others can be positioned as important franchise stakeholders. One additional possibility is that this exercise, especially as it relates to “Objective #4,” can be executed in debate form, with groups arguing their sides to one or more decision-makers.
Sampling of additional materials for review
Allaway, R. (2009). Corner offices & corner kicks: how big business created America’s two greatest soccer dynasties, Bethlehem Steel and the New York Cosmos. St. Johann Press.
Asher, A. (2014). “How The New York Cosmos Are Quietly Making MLS Nervous,” Soccerlens, Jan. 11, 2014. http://soccerlens.com/new-york-cosmos-quietly-making-mls-nervous/154485/
Bell, J. (2013). “Reborn Cosmos Return to the Field,” New York Times, Aug. 2, 2013.
www.nytimes.com/2013/08/03/sports/soccer/reborn-cosmos-return-to-the-field.html?_r=0
Botta, C. (2013). “For Cosmos, rebirth on a modest scale,” Street & Smith’s SportsBusiness Journal, July 29, 2013, p. 8. http://www.sportsbusinessdaily.com/Journal/Issues/2013/07/29/Franchises/Cosmos.aspx?hl=new%20york%20cosmos&sc=1
Eisenmenger, L.E. (2013). “Doing everything right: NY Cosmos offer free shuttles to games,” examiner.com, July 18, 2013. http://www.examiner.com/article/doing-everything-right-ny-cosmos-offer-free-shuttles-to-games
Griffiths, Ian. (2011). “Failed property tycoon goes for Cosmos glory,” theguardian, June 10, 2011. http://www.theguardian.com/business/2011/jun/10/new-york-cosmos-pele-eric-cantona
Krishnaiyer, K. (2015). “New York Cosmos and NASL need to stop focusing on MLS competition,” World Soccer Talk, Aug. 20, 2015. http://worldsoccertalk.com/2015/08/20/new-york-cosmos-and-nasl-need-to-stop-focusing-on-mls-competition/
Labidou, A. (2013). “New York Cosmos explain reasoning behind ambitious stadium project,” Goal.com, Jan. 17, 2013. http://www.goal.com/en-us/news/66/united-states/2013/01/17/3677255/new-york-cosmos-explain-reasoning-behind-ambitious-stadium
Megdal, H. (2015). “As soccer focuses on New York, the Cosmos aim global,” POLITICO Media, March 26, 2015. http://www.capitalnewyork.com/article/media/2015/03/8564795/soccer-focuses-new-york-cosmos-aim-global
Oshan, J. (2012). “New And Humbled New York Cosmos Seem To Be For Real This Time,” SB Nation, July 13, 2012. http://www.sbnation.com/soccer/2012/7/13/3157936/new-york-cosmos-return-humble
Shires, F. (2015). “New York Cosmos chief hopeful over Georgios Samaras deal,” HITC Sport, Nov. 14, 2015. http://www.hitc.com/en-gb/2015/11/14/new-york-cosmos-chief-hopeful-over-georgios-samaras-deal/
Soshnick, S. (2015). “Knicks All-Star Carmelo Anthony Buys Soccer Team in Puerto Rico,” BloombergBusiness, June 11, 2015. http://www.bloomberg.com/news/articles/2015-06-11/knicks-all-star-carmelo-anthony-buys-soccer-team-in-puerto-rico
Wilson, B. (2015). “NASL football league looks to kick on in North America,” BBC, July 31, 2015. http://www.bbc.com/news/business-33551387
ACKNOWLEDGMENTS
The author would like to acknowledge the guidance and support of the Farmingdale State College (NY) Sport Management department, including Professors Ira Stolzenberg and John Meindl, as well as Professor David Kilpatrick of Mercy College (NY). Research assistance was provided by Christine Meany, Research Director at ORC International, Inc.
There are no material conflicts of interest related to the development of this paper. While the author has had a number of interactions with the New York Cosmos as part of his position as Assistant Professor at Farmingdale State College, no pressure, implicit or otherwise, was exerted by the New York Cosmos franchise in the writing of the case study.
ENDNOTES
1. Names of some individuals as well as the elements of proposed discussions were altered to protect identities and for the purpose of triggering discussions and debate in an academic setting. The case study should be read as a presentation of a realistic business situation rather than a commentary on specific actions taken by any individuals or entities referenced in the case study.
2. “REVEALED! The top 10 BIGGEST SPENDING clubs in world football since 2005,” talkSPORT, http://talksport.com/football/revealed-top-10-biggest-spending-clubs-world-football-2005-141009117930
3. Badenhausen, Kurt, With $300 Million Haul, Floyd Mayweather Tops Forbes’ 2015 List Of The World’s Highest-Paid Athletes,” Forbes.com, http://www.forbes.com/sites/kurtbadenhausen/2015/06/10/with-300-million-haul-floyd-mayweather-tops-forbes-2015-list-of-the-worlds-highest-paid-athletes/
4. Bondy, F. (2005). “Just another building block: Local stadium plans never have the blight stuff,” New York Daily News, Jan. 23, 2005.
5. Singh, S. & Stolzenberg, I. (2013). Nassau Coliseum: Death of an arena? International Journal of Business and Social Science, 4(15), 40-48.
6. Once in a Lifetime: The Extraordinary Story of the New York Cosmos (2006) http://www.imdb.com/title/tt0489247/ (book authored by Gavin Newsham (2006)).
7. Ibid.
8. Segal, David, “The New York Cosmos Want to Take the Field Again,” New York Times, April 15, 2011, http://www.nytimes.com/2011/04/17/magazine/mag-17Cosmos-t.html?_r=0
9. Lewis, Michael, “40 years on: how New York Cosmos lured Pelé to a football wasteland,” The Guardian, http://www.theguardian.com/football/blog/2015/jun/02/40-years-on-how-new-york-cosmos-lured-Pelé-to-a-football-wasteland, June 2, 2015.
10. Haupert, Michael, “MLB’s annual salary leaders, 1874-2012,” Society for American Baseball Research (SABR), http://sabr.org/research/mlbs-annual-salary-leaders-1874-2012 , Fall 2012.
11. “Some Athletes Were Legendary, But Their Salaries Weren’t,” NESN.com, http://nesn.com/2010/05/sports-legends-salaries-may-surprise-you/, May 23, 2010.
12. McGowan, Tom, “New York Cosmos: Reawakened in the city that never sleeps,” CNN.com, August 2, 2013. http://edition.cnn.com/2013/08/02/sport/football/new-york-cosmos-pele-football/
13. Once in a Lifetime: The Extraordinary Story of the New York Cosmos (2006) http://www.imdb.com/title/tt0489247/ (book authored by Gavin Newsham (2006)).
14. Kaufman, Michelle, “Cosmos, Strikers matchup brings back memories of storied rivalry,” The Miami Herald, September 17, 2013.
15. Sibor, Dough, “An Oral History of Major League Soccer’s Frenzied First Season,” Complex, May 12, 2015. http://www.complex.com/sports/2015/05/oral-history-major-league-soccer-first-season. “Welcome to the MLS History Section,” www.majorleaguesoccer.com; “History of Major League Soccer,” https://en.wikipedia.org/wiki/History_of_Major_League_Soccer
16. Smith, Chris, “Major League Soccer Announces New TV Deals With ESPN, Fox, Univision,” Forbes.com, May 12, 2014. http://www.forbes.com/sites/chrissmith/2014/05/12/major-league-soccer-announces-new-tv-deals-with-espn-fox-univision/
17. Carlisle, Jeff, “Examining the candidates for the next round of MLS expansion,” ESPNFC.com, May 7, 2015. http://www.espnfc.us/major-league-soccer/19/blog/post/2438275/examining-the-candidates-for-the-next-round-of-mls-expansion
18. Schaerlaeckens, Leander, “Twice in a Lifetime,” ESPN.com, November 29, 2010.
19. Segal, David, “The New York Cosmos Want to Take the Field Again,” New York Times Sunday Magazine, April 17, 2011, p. MM22.
20. Schaerlaeckens, Leander, “Twice in a Lifetime,” ESPN.com, November 29, 2010.
21. Schaerlaeckens, Leander, “Twice in a Lifetime,” ESPN.com, November 29, 2010.
22. Ibid.
23. “The Power 100 Panelists – Seamus O’Brien – Chairman, CEO, and founder, World Sport Group,” http://www.bloomberg.com/ss/08/10/1002_power100_panel/23.htm; “Seamus O’Brien – Founder & Executive Chairman,” http://www.wsgworld.com/about-us/management/seamus-obrien/
24. “Erik Stover, Chief Operating Officer at New York Cosmos,” https://www.linkedin.com/pub/erik-stover/15/b5b/925; Williams, Jack, “Q. and A. With the Cosmos’ Erik Stover,” New York Times, April 8, 2013. http://goal.blogs.nytimes.com/2013/04/08/q-and-a-with-the-cosmos-erik-stover/?_r=0
25. The split-season model has several intended benefits for NASL. A break in July that coincides with the international transfer window allows teams to acquire (or sell) players during the summer, providing ample time for new players to become acquainted with their new club and league. Secondly, NASL teams can use this break to generate additional revenue by hosting international friendlies or going on tour. (Cesar Diaz (October 2, 2012). “Q & A with N.A.S.L. Commissioner David Downs”. New York Times Soccer Blog. Retrieved August 7, 2013.)
26. North American Soccer League – Wikipedia, the free encyclopedia. (n.d.). Retrieved from https://en.wikipedia.org/wiki/North_American_Soccer_League
27. “NASL 2012 Media Guide” (PDF). July 19, 2012.
28. “Make Way for Minnesota: MLS’ 23rd team to begin play in 2018,” Big Apple Soccer, March 25, 2015. http://www.bigapplesoccer.com/leagues/mls2.php?article_id=40534
29. Krishnaiyer, Kartik, “With NASL-ESPN deal, NASL games now more accessible online than MLS,” Worldsoccertalk.com, http://worldsoccertalk.com/2015/03/26/with-nasl-espn-deal-nasl-games-now-more-accessible-online-than-mls/#JSP0oFBRXR1Vv4xE.99
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Bondy, F. (2005). “Just another building block: Local stadium plans never have the blight stuff,” New York Daily News, Jan. 23, 2005.
Carlisle, J., “Examining the candidates for the next round of MLS expansion,” ESPNFC.com, May 7, 2015. http://www.espnfc.us/major-league-soccer/19/blog/post/2438275/examining-the-candidates-for-the-next-round-of-mls-expansion
Diaz, C. (2012). “Q & A with N.A.S.L. Commissioner David Downs,” New York Times Soccer Blog, Oct. 2, 2012. http://goal.blogs.nytimes.com/2012/10/02/q-a-with-n-a-s-l-commissioner-david-downs/?_r=0.
Haupert, M. (2012). “MLB’s annual salary leaders, 1874-2012,” Society for American Baseball Research (SABR), http://sabr.org/research/mlbs-annual-salary-leaders-1874-2012.
Kaufman, M. (2013). “Cosmos, Strikers matchup brings back memories of storied rivalry,” The Miami Herald, September 17, 2013. http://www.miamiherald.com/sports/article1955086.html.
Krishnaiyer, K. (2015). “With NASL-ESPN deal, NASL games now more accessible online than MLS,” Worldsoccertalk.com, http://worldsoccertalk.com/2015/03/26/with-nasl-espn-deal-nasl-games-now-more-accessible-online-than-mls/#JSP0oFBRXR1Vv4xE.99.
Lewis, B. (2015). “Pelé on what Cosmos must do to become relevant again,” New York Post, http://nypost.com/2015/04/16/Pelé-on-what-cosmos-must-do-to-become-relevant-again/.
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Newsham, G. (2006). Once in a Lifetime: The Extraordinary Story of the New York Cosmos, 2006; Documentary, http://www.imdb.com/title/tt0489247/, 2006.
Schaerlaeckens, L. (2010). “Twice in a Lifetime,” ESPN.com, November 29, 2010.
http://espn.go.com/sports/soccer/news/_/id/5703157/rebirth-new-york-cosmos.
Segal, D. (2011). “The New York Cosmos Want to Take the Field Again,” New York Times, April 15, 2011, http://www.nytimes.com/2011/04/17/magazine/mag-17Cosmos-t.html?_r=0.
Sibor, D. (2015). “An Oral History of Major League Soccer’s Frenzied First Season,” Complex, May 12, 2015. http://www.complex.com/sports/2015/05/oral-history-major-league-soccer-first-season.
Singh, S. & Stolzenberg, I. (2013). Nassau Coliseum: Death of an arena? International Journal of Business and Social Science, 4(15), 40-48.
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announces-new-tv-deals-with-espn-fox-univision/.
Williams, J. (2013). “Q. and A. With the Cosmos’ Erik Stover,” New York Times, April 8, 2013. http://goal.blogs.nytimes.com/2013/04/08/q-and-a-with-the-cosmos-erik-stover/?_r=0.
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