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NSC Gets Serious in Request for Minnesota Stars Business Partners

2010 August 30
by Brian Quarstad

The National Sports Center, owner of the NSC Stars pro soccer team, made another plea today for business partners in order to keep the team alive in 2011. The NSC released a more gently worded statement several weeks ago which IMS published and elaborated on. This statement gives a few more details than the original press release and explains the graveness of the situation.

Pro soccer to leave Minnesota unless National Sports Center is able to recruit financial partner

BLAINE, Minn. (August 30, 2010) – Several weeks ago, the United States Soccer Federation (USSF) released new higher standards for Division 2 professional soccer teams playing in a USSF-sanctioned league in 2011. The NSC Minnesota Stars, which currently play in the USSF Division 2 league, are facing a dilemma. The team, which is owned by the non-profit National Sports Center (NSC) Foundation, is unable to meet the higher financial benchmarks necessary for league membership next year.

“While we support the efforts of the USSF to upgrade the standards for pro soccer, the new standards will necessitate that we find an organization or individual willing to join us as a financial partner,” said Kris Bjerkness, Stars’ General Manager. “That’s what we need to qualify under the new higher standards.”

“When we assumed ownership of the team last January, we were very public about our desire to eventually pursue a creative public/private ownership model to bring more financial resources to team operations,” continued Bjerkness. “Now’s the time for that to happen.”

The NSC acquired this new franchise in January 2010 and has operated the team throughout the USSF Division 2 league schedule, which started in April. The NSC Stars replaced the Minnesota Thunder which had played on and off at the NSC for 20 years.

The NSC has performed several tasks at a highly successful level.  Stadium presentation, public relations, coaching staff, team selection, social media, website, and game-day operations and presentation have all been very positive.

However, the NSC has not met its goals in brand awareness, ticket marketing and sales.

The NSC believes that there is a great opportunity for a private investor to help us build on the successes and improve on those areas where the team fell short of goals.

The Stars have posted an average attendance of 1,413 through 13 home games of the inaugural 2010 season. Two more home games remain in the 2010 season, September 15 vs. the Carolina RailHawks and September 18 against the Vancouver Whitecaps.

“The team needs to be selling between 2,500 and 3,000 tickets per game to be financially successful” stated Kris Bjerkness, General Manager of the NSC Minnesota Stars.

“The NSC had many motivations in starting the Stars pro team,” said Paul Erickson, Executive Director.  “But one of our primary reasons was to preserve the long and proud history of professional soccer in Minnesota at the highest level possible. We were happy to step in and keep pro soccer alive for this one year, but the new USSF standards mean that we can’t go forward without additional investment.”

“Ownership of a team based at the NSC is a unique opportunity,” continued Erickson. “The National Sports Center boasts one of the best soccer-specific stadiums in the country, at the largest amateur sports campus in the world.

“We are proud of what we have accomplished in the past eight months, but the reality is that we will need a new financial partner to continue pro soccer in Minnesota.”

33 Responses
  1. jw7 permalink
    August 30, 2010

    Douh!

  2. pony permalink
    August 30, 2010

    Good luck NSC!

  3. Bart permalink
    August 30, 2010

    If the article is interpreted correctly, that would mean that NSC is losing money, something an investor will have to take into consideration for its capital requirements. Due to the public/private partnership structure, this will be difficult to finalize for 2011.

  4. Sounder74 permalink
    August 30, 2010

    Why don’t they just drop down to Division 3 next year it not that bad.

  5. Wayne permalink
    August 30, 2010

    Now that Adidas has extended its contract with the MLS with a proviso that part of its investment is used to establish a Reserve League, D2 may be doomed. If the MLS can pay the reservists more and provide a similar number of games, why not play for the reserves with a shot at making the MLS team rather than D2. D3 may be the way to go or even PDL until a D3 Midwest league can be formed.

  6. Zlatan permalink
    August 31, 2010

    I will speculate that USSF’s plan all along, included this raise in financial requirements. Most likely to give MLS another shot at D2. I believe the reserve will be D2 and there may be a few other non-MLS teams scattered in the bunch. I believe they also will strongly support a regional D3 league dimilar to PDL, NPSL or USL3. May even strong arm them into combining or pushing one to a D4 local league.

  7. Jer permalink
    August 31, 2010

    Sad day. Are there any IMS readers out there worth at least $20 million that wouldn’t mind investing a little bit of money to save professional soccer in MN? Does anyone think playing the lottery may give us better odds?

  8. August 31, 2010

    If we lose a team, next year will be the first time in over 21 years that Minnesota has not had pro soccer. That will indeed be a sad day.

  9. ERic permalink
    August 31, 2010

    Dropping down to D3 wouldn’t be much easier. There are few D3 teams anywhere near Minnesota. The Stars would still have to travel a good distance for most of their games.

    As to MLS taking over D2, while I personally love the idea, the comments that have been drifting out about the Reserve League that looks likely to start up next year don’t give any indication that it would be a merger with D2. All indications are that MLS is looking at a 10 game season or so, well short of the 30 games the D2 teams are playing this year.

    I hate seeing this press release. It’s sad to see a market that has had such a long history in D2 fizzling out. Here’s hoping something comes of this, but I’m not optimistic. Enjoy it while you have it, fans.

  10. August 31, 2010

    Hey guys-

    We will still have the PDL team in Rochester!! I would love it if some of you guys would travel down here (I will pay for the gas) and see what we are doing down here.

  11. Soccer Boy permalink
    August 31, 2010

    Like I have said all along, all I want to do next summer is be outside, drink beer and watch a higher level of soccer.

  12. Trevor permalink
    August 31, 2010

    @Wayne–I’m not sure that a strong MLS reserves league means a weak D-2. Certainly, it means that MLS teams will be able to provide more valuable minutes for the top young talent in the country, but that doesn’t mean D-2 won’t see quality play. D-2, unlike the PDL (where a number of MLS teams already have squads) is not primarily made up of young players; it’s a whole different talent pool than the one drawn on by MLS. A reserve league may mean that D-2 will have to someday go back to being region based (as has been discussed on this blog in depth), but the two leagues don’t necessarily have to compete.

    The St. Paul Saints and their league (the AAIPB) provide a pretty decent analogy for what the future of D-2 may look like. They draw a crowd because they provide a different experience from the Twins, cost less, and have a more intimate atmosphere.

  13. August 31, 2010

    Is there any chance the team will drop down to pdl/npsl? I’ve gone to many Rochester Thunder games as I live down here, but it would be great to have another nearby rival for some fun road games. Also, they could spend some time in the fourth tier until an investor is found, and they could then move back to D2 (or D3 if more teams come along)

  14. August 31, 2010

    From my understanding, at the current time, there is no interest in joining a league that is primarily based on the east coast.

    The NSC tried a NPSL team previously and it was not very successful although I’m not sure it really got the support it needed in the way of marketing.

    With that said please remember, the Twin Cities is a major league market. It’s the 16th largest metro area in the country and hosts MLB, NBA, NFL and NBA. On top of that it has D1 sports with the U of M which most markets the size of Mpls and St. Paul don’t have if they also have major league sports.

    While a PDL team would be great, don’t expect it to draw even the meager numbers the Stars have gotten this season. D 3 would be pretty much the same expenses to run the team (- the USSF Bond) with out the draw of D2 teams like Puerto Rico, Montreal, Portland or Austin.

    Markets are tricky and each area has it’s own peculiarities. The Twin Cities is no different. If the Stars do not find investors do not expect “Pro” soccer to continue here. It’s just a sad reality.

  15. August 31, 2010

    BTW, we have two NPSL teams here already and hardly anyone comes out to see them. I can’t imagine another NPSL team would be needed here and would have to get the approval of the Twin Stars who own the rights. This would not be a good idea.

  16. smatthew permalink
    August 31, 2010

    “The NSC tried a PDL team previously and it was not very successful although I’m not sure it really got the support it needed in the way of marketing.”

    They did? When? Or did you mean to say NPSL team?

  17. August 31, 2010

    Where does it say that? 🙂 Should have been NPSL, correct now. Thanks Matt.

  18. tomASS permalink
    August 31, 2010

    Good Business Investments don’t plead for help. This is not how one raises capital. NSC’s business approach is lacking and very naive.

    Maybe I can convince Mike Riley to get rid of one of his two minor league hockey teams and go with a soccer team. His younger daughter does play soccer.

  19. August 31, 2010

    TomASS, you’re being tomAss again. The reality is, the NSC was already looking for investors when the USSF Standards came out. I think the Standards were so high they surprised everyone and the league itself is in jeopardy for next year. Think about it, PR who’s been around since ’04 and been a competitor almost every year in D2 as well as CONCACAF Champions League competition is facing the possibilities of not playing next year.

    The new standards along with the fact the USSF announced bid for sanctioning of leagues needed to be submitted by Sept. 15th has escalated this process.

    The members of NSC along with coach Lagos and a few other people involved in the soccer community in MN have all been working hard to find investors. Can we not jump the gun here and point fingers without having background?

    As I pointed out in this article, the fact that they are so transparent, which I applaud after some past ownership, and the plea for help is indeed a sign that time is running out for the organization. Your comment “Good Business Investments don’t plead for help.” may be true in normal circumstances. I don’t think this particular situation is a normal circumstance. While we can all debate on another day if the NSC should have ever jumped into this last winter, we are where we are and we go from here. Right?

  20. Tom permalink
    August 31, 2010

    IMO, the #1 priority of the USSF (whether they admit it or not) is fielding the best MNT possible (it’s an old cliche, but follow the money….). They may talk about the importance of D2 to the overall “fibre” of soccer here in the US, but if they do not intend on using it for the MLS reserve league, then the current D2 player pool holds little interest for them. Look at where the vast majority of current MLS rosters come from (especially the “up-and-comers”) – college, super-draft, and now the DA. I bet there are as many MLS players with PDL experience than D2 experience. The best young talent they hope goes overseas to develop. If they have no interest in the player pool, then they most likely have limited interest in the league in its current form. I agree with BQ that anything less than some form of “major league” soccer will not work in the Twin Cities. I usually tend to fall on the glass half full side of things, but not feeling too good about this.

  21. Wayne permalink
    August 31, 2010

    @Trevor. I hope you’re right. Why the reserve league didn’t work last time: Short schedule, pay of around $12,000, etc. If the MLS does that again, then I think you are right, D2 can exist and will in fact draw reservists away. I coach with an individual who trained Jonny Steele when he was a school boy in Ireland. Plenty of MLS teams want to sign him, but he can make more money in D2 so he plays there. If you read the Beckham Experiment, you will see the salary disparity on the LA Galaxy at the time. It was (and still may be) ridiculous.
    The additional Adidas investment may help remedy some of this.

    IF the MLS changes this up, pays its players and reservists more and competes with the salaries that D2 pays, and schedules 20-30 games a year plus friendlies, I believe D2 becomes D3 or PDL.

    @Brian. If someone can pony up the bond and is worth $20 million+, go for an MLS franchise. That person should be able to attract like-minded investors and we are off to the races. We are a major league, not a minor league town. I agree!!

  22. jmb321 permalink
    August 31, 2010

    Brian, Where did you get the impression that the USSF performance bond for Div III was or will be $750K?

  23. August 31, 2010

    When did I say D3 was 750K. I don’t believe I ever said that. If I did perhaps I wasn’t being clear about something. D2 is however 750K and can be found in the document US Soccer released to me.

    http://www.insidemnsoccer.com/2010/08/12/ussf-d-2-professional-league-standards/

    Financial Viability
    i. Each team must submit a letter of credit in the amount of $750,000 with the joint beneficiaries being the Federation and the league in a form satisfactory to the Federation on an annual basis. The letter of credit will be used to cover the costs of the team’s operations (including, without limitation, player and staff salaries and wages, stadium lease commitments and third party vendor obligations in addition to commitments by each team to the league) for a season should that become necessary. The letters of credit must be submitted 120 days prior to the start of the next season for each team. Any team that utilizes the letter of credit during the season will be required to replenish the letter of credit at least 120 days prior to the next year.

  24. jmb321 permalink
    August 31, 2010

    This was posted above:

    “D 3 would be pretty much the same expenses to run the team (- the USSF Bond) with out the draw of D2 teams…”

    Maybe I misread this but trust me the bond is not nor ever will be that level ($750K) for D3 mandated by either by USSF nor a league.

    Regardless the cost of running a D3 level team currently in all aspects is significantly less than D2. In Minnesota’s case the issue would be travel costs as you have pointed out previously.

  25. August 31, 2010

    “(- the USSF Bond) ” In other words, minus the USSF $750 K bond. As in they don’t need to pay a $750K bond if you are playing D3. Not sure what’s confusing about that.

    Please do explain how running a D3 team is different in cost than running a D2 team if you take the travel equation out.

    You still need :
    a stadium (rent)
    game day presence (personal)
    media person for PR
    ticket sales people (if your doing it correctly)
    player salaries and worker comp (If you’re competitive like Charleston their salary was pretty much the same as D2) (Read the 4-part series I did on D2 soccer. You will find that Charleston mainly cut their cost from less travel)
    You probably have a lower performance bond than the $350 K that was required by USSF this year but is it any lower than the 100K that USL used to require for D2?
    So where is the significant cost savings?
    I guess some teams may cut corners but aren’t they going to pay the price in attendance then also?

  26. Me XMan permalink
    August 31, 2010

    Man it’s a tough business in hockey state.

  27. Saverio permalink
    September 1, 2010

    Its a tough business everywhere, especially in areas that recognize good soccer. Over here in the West Coast of Canada, we’ve had good local amateur soccer. At one point, most of our national players came from our local leagues. Having said that, the problem that occurs for any one one trying to start up a semi-professional or professional league needs to show that the calibre is head and shoulders above what can be seen locally. The product on the field must justify the price that will charged on the pitch. Owners must not only be very knowledgeable of soccer but also need to be able to promote the product effectively. Here in Victoria after many failed attempts we have an owner that has done just that. Our local PDL team (Victoria Highlanders) are one the most attended PDL clubs in North America even outdrawing some USL 1 teams. May be we need to look at some other sports models in the short term in order to generate interest across the continent. Hockey has the Junior model and second and third tier leagues (ECHL, Central, and American leagues. Baseball has the Majors and MInors (AAA, AA, A and independent leagues). The key to successful soccer in N.A. is the development of our youth. We need more PDL type of leagues something similar to Junior hockey. Have we put the horse before the cart with trying to develop D2/D3 soccer before we have developed our U-21 players?

  28. September 1, 2010

    Excellent comment Saverio! You have hit the nail on the head and you if you read my four part series called Rethinking D2 Soccer in North America you will find some of the same ideas. In fact buried in your comments are some of the exact problems we have had here in MN over the last 10 years.

    I also agree with you about the cart (D2 and D3) before the horse (PDL). The USL’s PDL program is one of best things that USL or anyone has done for soccer in North America.

  29. jmb321 permalink
    September 1, 2010

    Please continue to disseminate the myth that Div 3 operating budgets are similar to Div 2. This will keep less than serious investors away from examining franchise acquisition at this level. 2+ years of significant due diligence of existing clubs financial records and budget development has proved otherwise.

    Your premise is utterly wrong but keep up the good work!

  30. September 1, 2010

    jmb321, since you’ve done due diligence on the league help us to understand where the differences fall. I made some points which you evidently disagree with me on. That’s cool and you may be correct but you still haven’t made any specific points.

    My biggest point was actually summed up well by Saverio.
    “any one one trying to start up a semi-professional or professional league needs to show that the calibre is head and shoulders above what can be seen locally. The product on the field must justify the price that will charged on the pitch. Owners must not only be very knowledgeable of soccer but also need to be able to promote the product effectively.”

    I’ve seen lots of teams come and go over the years. It’s one thing to throw a team together and present it on a high school turf field with football lines and poor game day presentations. I truly believe that at the D3 level which is pro soccer, one should present themselves as a professional team and the team should be promoted “effectively.” I think there should be a big difference between a PDL team and D3 team. Not just in talent but in how the product is presented. Look at the Des Moines Menace. They are a PDL team and I know they do as much if not more promotions as some D3 teams and possibly as much as a few D2 teams this season. They also have a much better attendance then some D2 teams and most D3 teams. In fact better than all D3 teams except the Battery.

  31. jmb321 permalink
    September 1, 2010

    First and most obvious is that Div 3 is a 20 match season. So if you have the same costs structure for a 20 game match as about a 30 in Div 2 there is something seriously wrong. Much of what follows results from this shorter season but not all.

    Year round front office staffing and costs should be significantly less for D3 and in line with reasonable revenues for this shorter season. This is recognized and formalized by all leagues involved. And for this staff to be effective the owner(s) must be actively involved in the club operations and do much of the non-revenue functions in house like accounting . These functions have no impact on the game day presentation but have much impact in the financial viability of the club.

    The roster budget must be held in line with anticipated revenues. This doesn’t mean not being able to put a competitive team on the pitch playing attractive soccer but when budget parameters are established they must be maintained. Any deviation from the budget must be evaluated only by its impact on increased gate/sponsorship revenue. For a 20 game schedule at this level having a $300K+ roster budget is doomed to failure in the long run. And failure is defined as an eventual inability for the club to be self-sustaining where costs exceed revenues. “Success” cannot be proclaimed because the club had a cash call for only $100K this year as opposed to $500K in previous years.

    These are only 2 of many line items in the operating statements that are and should be different between D2 and D3.

  32. Tom permalink
    September 1, 2010

    Solid examples – so is it kind of like “you get what you pay for (or don’t pay for)”? IMO, part-time staff + low rent players + secondary gameday experience due to the locations = lower quality soccer. Sure exceptions exist, but I due agree with BQ in that I’m not sure how well this product would sell here in MSP.

  33. Mikey permalink
    September 1, 2010

    There was a pretty big drop in the budget for travel and player budget for the Battery this season.

    From what I can surmise, the Battery travel budget was around $225,000 while in D2, I know the playoff match in Montreal cost the team more than $20,000 for one destination last year.

    I figure that was on the high end but $15,000 x 15 games = $225,000 isnt that unrealistic

    This season, chartered busses were used for all matches about $5,000 per trip x10,
    that is a big difference.

    Player budgets were cut significantly, as the season is shorter (nearly two months) and the roster size was smaller this season as well. I do know that most players probably got around $10-$15 for their four months while with the Battery minus bonuses. I figure the player budget was about $300,000 to $350,000 this season.

    There were a couple spots in the front office that people moved on from that weren’t filled but the team is very effecient in game day operation and the sells team is very good at getting groups, and renewing season tickets. but the Batterys front office is pretty large in comparison to other clubs.

    Also cheaper is insurance, league fees, and player registration fees.

    Over all I would say it is somewhere between 20% – 30% lower maybe a bit more.

    As to performance on the field, it was a more attack oriented side this season than what I have seen in the past and played some very entertaining ball. The other benefit was the local rivalry (historically Richmond and Charlotte are big rivals) and being able to travel to a few away trips this year. We had around 50 travel to Charlotte and I think there was a Battery prescence at nearly every away match this year. I initially was hesitant about the drop, but honestly I think it was a great move by the ownership

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