The USL is changing.
Over the last year, the league has reorganized its leadership team, taken on new private equity investment, and cemented a collective bargaining agreement for the USL Championship. A promotion and relegation system capped by the first-tier USL Premier is on the way.
Last month’s adoption of an inaugural revenue-sharing agreement between the league and its team owners is yet another example of how the USL’s model is evolving.
“The league and our clubs are building this business together, and if we grow the USL and create more value, our clubs should participate in that growth. The revenue-sharing model creates greater alignment between the league and our owners at an important time for the USL,” Paul McDonough, president and CEO of the United Soccer League, wrote to Backheeled via email. “We want a system where performance matters and clubs have something to play for, but the economics have to support that system as well. Revenue sharing is one part of putting that structure in place.”
Reform across the league has been swift over the last year, coinciding with strategic investment by BellTower Partners and Weatherford Capital. Per McDonough, their presence has “helped us professionalize different parts of the organization and think more deliberately about how we grow the USL.”
The change in approach has been palpable. For the prior decade-and-a-half, NuRock Soccer Holdings (led by Alec Papadakis and Rob Hoskins) had set the league’s direction. In March, Justin Papadakis – formerly the league’s deputy CEO and chief real estate officer – departed. In May, the USL further re-structured its executive team. Alec Papadakis was replaced by McDonough as the organization’s president and CEO; meanwhile, BellTower founder Kewsong Lee stepped up as the co-chair of the USL’s board.
NuRock still maintains a sizable interest in the USL, but club stakeholders attest that headquarters’ approach has changed.
“You have the catalysts of the leadership of Paul McDonough, the new investment in the USL, along with a lot of owners that have put a lot of time and passion and money into building their local teams,” Jeff Garner, president of the Pittsburgh Riverhounds, told Backheeled. “We have to be in it together. And I don't know, historically, if you could totally say that. I think there was some separation across the USL.”
Drew McKenna, the managing partner of One Knoxville SC, came to a similar conclusion. In his mind, McDonough and BellTower have focused on “alignment” between the league and the clubs above all else. Success in the local market is still vital, but organizations within the USL now have a direct financial incentive to help grow the league.
Such alignment hasn’t always been a feature of the USL’s structure. While the league trialed a so-called “Club Dividend Plan” for a short period of time starting in 2020, that agreement did not distribute revenue earned from expansion fees and other key buckets. The new revenue-sharing model likely won’t share every dollar earned by the league office, but it’s far more expansive in scope.
How lucrative will revenue sharing be?
USL leadership has noted that the revenue-sharing talks had been in progress for the last 12 months. All told, the agreement will last five years and grant clubs from the USL Championship, USL League One, and the yet-to-be-finalized USL Premier a portion of leaguewide revenue from expansion fees, media rights, national commercial partnerships, and gambling. Given that clubs have historically paid in to USL HQ, the reforms are a sea change.
For organizations across the USL, physical attendance has long been the one meaningful way to generate revenue. About 40% of a typical Championship team’s revenue comes from ticket sales alone – and that’s before you account for sponsorship and merchandise sales that are reliant on in-stadium engagement. Even the USL’s most successful clubs lose money under that model; last year, Detroit City co-owner Sean Mann told Backheeled that “losing $4 million a year puts us in the top quartile of most profitable teams in the league.”
