Rhode Island Bound & Private Equity Opens Pandora's Box In Lower League Soccer

Before we get to the meat of this Tuesday's newsletter, I need to promte:

MORNING KICKAROUND IS GOING TO RHODE ISLAND.

Our little American soccer show that focuses on the growth of the game from the bottom up will be broadcasting live from Centreville Bank Stadium in Pawtucket, RI on Saturday ahead of the USL Championship match between Rhode Island FC and the Tampa Bay Rowdies.

The show starts at 6 PM Eastern on May 9th.

We have a killer line up of guests coming together and we'll be highlight some of the sights and sounds of the wide Blackstone Valley region and the soccer culture of Rhode Island.

Make sure you like the video over on YouTube to be notified when we're live. Better yet, subscribe to the Morning Kickaround channel so don't miss anything.

Most of us, those of us who call ourselves "soccer fans", tend to focus on the games. We fall in love with soccer watching 22 players execute an intricate dance-cum-war in a quest for victory. We come for the clever play, athleticism, and goals.

Maybe someone trash talks, maybe there's a red card. Sporting drama, the best mankind has ever conceived.

But the thing about being a soccer fan of the American variety—meaning a fan of American soccer as played in America—is that it's never as simple as just watching the games. Being an American soccer fan comes with a host of other concerns, considerations, and what I'll call, for lack of a better word, "responsibilities."

Last week those responsibilities got a little more complicated. On Thursday, Major League Soccer announced a new investment into MLS Next Pro by KKR, a global private equity firm. As part of the deal, MLS and KKR created Hometown Soccer Holdings, a new company (they called it a "platform") whose aim is to "accelerate growth" of the game at the local level. Tom Glick will be CEO and Chris Klein will serve as president.

The move means that MLS will again push to turn its reserve teams into free-standing brands in their own right (something a few clubs tried in the past) and relocate those second teams to secondary markets to expand the league's footprint.

Like so many things happening in American soccer right now, all signs point to this being a real estate play. An effort to build stadiums is front and center in the league's announcment about KKR's investment.

In partnership with MLS NEXT Pro leadership, as well as municipalities, civic leaders, and community stakeholders, HSH will pursue the development of new soccer stadiums designed to deliver best-in-class fan experiences and serve as long-term anchors for professional soccer in their communities.

I included an item on the news in GOOD SOCCER/BAD SOCCER, the weekly news roundup that from Soccer Eagle. My bottom line assessment was BAD SOCCER, though I threw in a qualifier that the investment could also do "some good."

That feeling, the part about "some good", mostly comes from a realpolitik recognition that investment in lower division soccer is hit and miss and it would be silly to turn our noses up at millions of dollars (presumably) flowing into the sport in places that might be able to support a professional club but don't have the wherewithal to make it happen organically.

I've been thinking a lot about my initial response to the KKR news, the pains I took to find some good in it, and the response from around American soccer to it.

On that last part, there hasn't been much. We talked about it on Friday's edition of Morning Kickaround, paired with word that US Soccer updated the Pro League Standards with zero fanfare a few months back (more on this development in a minute), but otherwise the news was largely covered as Just Another Soccer Happening with very little analysis or criticism (see Tenorio, Kennedy, et al).

Soccer friend Wes Burdine felt compelled to post his thoughts on what he termed an "earthquake" and although I (stupidly) took some umbrage with his "under the radar" comments on Bluesky (via replies to his post below), it's certainly true that we should be digging deeper into what this might mean for soccer across the country.

You're never going to catch me caping for private equity. There are too many horror stories of how firms (like KKR and exactly KKR) have sucked businesses dry while ignoring the human costs of the endeavor. At the risk of sounding like a blinkered lefty, PE is what happens when "investment" is uncritically flattened into a universal good and the quest for return is allowed to justify any action done in service of it.

If you asked me the ideal way for American soccer to grow, the words "private equity" would never pass my lips. I'd talk instead about local ownership groups, the coalescing of a soccer community around the idea of a pro team, the repurposing of stadiums already built (to better benefit everyone, even the non-soccer fans), and the organic forming of bonds when a club connects directly with its hometown in authentic, genuine ways.

Portland of Hearts of Pine is the most recent club to strike that chord. If only there were hundreds of clubs like them.

And maybe there could be, given enough time with the current rate of cultural integration of our sport. Soccer's run to the mainstream was a very long time in the making and although it's mostly established in the sporting landscape as Another Thing Americans Do, that doesn't mean American soccer is now, in the era of digital media and instant communication, going to develop the same way the game did in places like England in the late 19th and early 20th centuries.

In other words, we're well past the "every town is going to form its own soccer club and we'll just stitch together a number of professional tiers from that collection" moment. Modern American soccer was built in the image of every other American sports league (i.e. the franchise model) and it would be naive to the point of insanity to imagine a new model will take hold in a white hot capitalist moment.

While acknowledging all of that queasiness (as I wrote last week, calling the new company "Hometown Soccer Holdings" is so obviously a ploy to engender the warm and fuzzies that it borders on insulting), there are two issues that most concern me about KKR's investment and Major League Soccer using the truck stick to turn MLS Next Pro into a revenue-generating operation.

1. At the risk of echoing Wes, it's the "Soccer Warz" part of the story. With USL now backed by private equity (and with that PE element having already flexed it muscle by pushing Justin Papadakis out of his role as chief real estate officer), both MLS/MLSNP/HSH and USL are incentivized to rush into cities and towns to plant their flags before the other one gets there. We've talked plenty on Morning Kickaround about the USL campaign (led by Papadakis) to engage medium-sized Americans towns with any reasonable soccer culture in exclusive agreements to kick the tires on a pro soccer team. Look no further than Modesto, CA, Green Bay, WI, Pensacola, FL, and Firestone, CO to name just a few. MLS and its new partners engaging in a lower division soccer war with USL runs the risk of club churn the likes of which we've never seen.
2. How MLS intends to balance its commitment to developing players through MLS Next Pro with the desire of KKR/HSH to increase revenue and, you know, make money. Words are cheap, so I'm not going to put much stock in what the league's press release announcing KKR's move into lower division says about the issue. It's not crazy to say that MLS Next Pro has been a significant force multiplier of the league's ability to crank out talented young players who can a) help their MLS teams win soccer games and b) move on to bigger and better things, thereby validating American soccer and putting money back into system to further improve the development of American soccer players. If we ever want MLS to be among the best leagues in the world and/or the USMNT to win a World Cup, that contribution must be protected. HSH's raison d'être is to deliver financial return to KKR and its constituent investors, not help grow a new generation of top class soccer players for its own sake.

So where is US Soccer in all of this?

What role does the Federation play in regulating/sanctioning/guiding the growth of lower league soccer in a country that is hardly touched in terms of potential?

Would it sound silly of me to say "none"? Of course US Soccer sanctions leagues and clubs, connecting professional American soccer to the wider soccer world (i.e., FIFA); that doesn't mean it has much control when it comes to how money is changing the trajectory of lower division soccer here.

It seems fairly clear to me that we have a "tail wagging the dog" situation re: the changes to the Pro League Standards and the announcement of KKR's investment in MLS Next Pro. While at first I was hesitant to directly connect the two (see the Morning Kickaround discussion from Friday) because lowering the thresholds for ownership stake of the controlling owner of a professional team from 35% to 15% could be seen as a expansion of the pool of potential club investors and a positive step towards opening the door to more minority owners, the move makes much more sense as a way to allow the mixed-ownership model likely to stem from private equity's involvement to meet sanctioning requirements.

I sympathize with US Soccer when it comes to these issues. Litigation is a consequence of almost anything the Fed does when it comes to sanctioning and professional league governance because by their nature those actions are meant to restrict (nominally for the good of the game) and almost always engender the hostility of monied groups ready and willing to go to court to challenge those restrictions (see, Commisso, Rocco and NASL v. USSF).

It's one thing to punt on direct action on development of lower division soccer in America out of fear of legal fees. It's something else to bend willingly to the interests of private equity when private equity's brand of parasitic capitalism is well known. While I'm of the opinon that the Fed is largely a paper tiger when it comes to professional soccer, the way the Pro League Standards were altered (with public statement or acknowledgement) is a giant red flag.

I want our soccer map to be dotted with professional clubs because I believe the gospel of soccer is one worth spreading. As an impatient realist, I recognize that dotting the map might not happen via my preferred method. I will likely continue to wrestle with what's happening when it comes to investment in lower division soccer, even as I feel the buzz of excitment that comes with knowing I'll soon have new American socccer clubs to talk about.