A Candid Conversation with Bobby Warshaw

"I don't think we should trade tens of thousands of young people’s teenage years and young professional years at the risk of the small percentage chance we have of winning a World Cup."

I reached out to Bobby a few weeks ago because I really enjoyed his book When the Dream Becomes Reality and noticed he wasn’t affiliated with Major League Soccer anymore despite having been an analyst for MLSSoccer.com since his retirement from professional soccer.

What progressed was not only one of my favorite conversations I’ve had since starting this channel, but it reminded me of all the incredibly positive aspects of the love and obsession we can have with this beautiful sport. We cover everything from the Apple/MLS deal, if the U20 success is actually impressive, why owning a soccer club is less about the financials, and so much more. I want to thank Bobby for doing this because there are so many gems here that I know you will enjoy.

I work very hard on bringing you value as a reader and viewer of It’s Called Soccer. From outreach and managing guests, to the editing, transcribing, and publishing process on all media platforms. The first part of this conversation is available to everyone. The second half is available to paid members. If you’d like to listen to the audio version you can become a paid substack subscriber or a Patreon.

Anyways… I hope you enjoy this candid conversation with one of the world’s best soccer thinkers: Bobby Warshaw.

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Jake: Former professional player now turned analyst and incredibly talented author, Bobby Warshaw is joining It's Called Soccer today! Bobby, how are you? What's up? 

Bobby Warshaw: I'm great. I'm great. Thank you for those kind words.

I forgot about the author part at this point, so I appreciate that. 

Jake: I read your book during Covid which kind of got me reconnected back to your Twitter and everything. So I'm happy to remind you because if it helps just one person hear about the book and hear about your story, then I think it's a good thing.

Bobby Warshaw: Thank you. I appreciate that. Now that you're two years removed from reading, do you remember the thing that resonated the most with you? 

Jake: So there's two moments. The first is having the luck of the coach and the team align with where you are in your career and being in the right headspace.

And it seems like you can control some of your transfer opportunities. You can't control others. You can't control if a coach gets fired in the middle of the season and what the next coach feels about you. And that's just something that you don't really think about having not played the game professionally.

So for me it was a really nice insight into the humanity and the risk taking that you have to do within your transfer opportunities and the decisions that you make throughout your career. Especially if you're not one of the, I hope you don't mind me saying this, but not one of the premier players within the country.

Then the second one, there's a moment in the book where you have to ask yourself the question if you're gay or not, if you're attracted to men. And I just thought the way that you wrote about that and your thought process of “oh, I've never in my life actually just checked myself if I think this way or not.”

I just thought that was an oddly human thought to have, and it's just something you don't think about from an everyday perspective, which wasn't necessarily related to soccer, but I just thought that was a nice little moment where you captured what a lot of people do when you get to, 20, 25, 30.

Bobby Warshaw: You know it's funny, looking back, I could probably say that a big reason I wrote the book was actually for that chapter and the one on relationships. The book started as a collection of essays, and it was George Quraishi. Do you remember George from his time in soccer?

Jake: No.

Bobby Warshaw: He started Howler and then he was the first editor of The Athletic soccer vertical. George nudged me to create a through line, but at first it was just essays and the chapter about the sexuality and then maintaining a relationship as a professional athlete.

Were probably the two that I really felt like I had a story to tell for. So that was fun.

Jake: It worked!

I hope you're ready for this, maybe let's just start from the transition of being an accomplished soccer player to an analyst and an author. What were some of the more challenging parts of making that transition from having played the game for most of your life professionally to now needing to look at it from the outsider's perspective?

Bobby Warshaw: I would say the main thing is that when current players watch people on TV or hear their podcasts, they're always talking.

You think to yourself, oh, it's just sitting up there talking about soccer. How hard can that be? I talk about soccer all day, every day with my friends, but once you go in front of a camera, or once you actually become a member of the media, as a personality, it is so much more than talking about soccer because being in front of a camera or behind a microphone is a real craft, right?

The way that we all sit at a restaurant and talk about soccer is different and it requires different energy, different cadence, different verbiage than it does to be in front of a camera. And if you were to do A, in the scenario of B, it would be bad and suck. And the second difference is just the topics that people want.

The truth is that when you turn on the TV and ESPN and Fox, these places are so good at it. You expect to get certain topics that you know are naturally compelling and engaging and you want to think and talk about them. And that's actually hard to catch onto.

As a player for instance you want to talk about the undervalued domestic players or the glue players on a team. And the second you go to the media, nobody gives a shit about any of that. They only truly, deeply want to talk about Zlatan (as an example), which is hard to accept, but that's what pays the bills and you come around to it at some point.

Jake: I've even noticed in the YouTube sphere the things that I maybe wanna talk about or am most passionate about are things like the underlying tactics or highlighting a lesser known player and maybe how they take a first touch and they're the pivot player, but that doesn't get the views.

So is there anything that frustrates you about the way that media covers it? Because of the fact that it needs to be engaging content. Is there something that you just wished was a little bit more prevalent within the media space? 

Bobby Warshaw: Yeah, that's another awesome question. I think about this often. I tell anybody that will listen, so I appreciate you giving the space.

I think that there's two things. One I'm gonna say this both as not pulling a punch, but as you don't know what you don't know as I can, I think that people in the media are bad at doing a good job. Oh God, that was a bad stupid sentence.

Jake: Please elaborate.

Bobby Warshaw: Like sometimes there's a complicated thing that happens, and part of the reason that I was ready to get out of media is that I wanted skin in the game.

Part of the reason that I have a venture in the betting space now is that betting content is regular content, but better and harder and more specific and actually involves honesty and authenticity because you're putting skin in the game. It's one thing to be like, oh yeah, that team is good because of X and Y.

But once you turn that into betting focused content, you actually have to be right. It's not just a thing you say “so a complicated thing happens,” and I should say the other part of my work is in the strategy and advisory. So again, I need to be good and right because there are real wins and losses and revenue on the line.

When something happens in the soccer space and I look around, I'm like, “there are six dimensions to this, and why are we only talking about two of them?” And I get to the original point that people want simplicity. But there's also a space where it's… I don't know, somebody should just explain what's happening in the world and why a decision maker who is maybe getting bashed or praised would've done that because that person had to go through all six layers.

And just because you at The Athletic only have six hours to churn out an article doesn't mean you can't go through all six layers. I don't know if that's a lack of experience, the fact that people that cover soccer have not actually been at clubs or been in the business world, so they might only have experience with the first two, but I think there's still a giant space to dig deeper into the complexities of what's happening at the level to which the decision maker actually has to do it.

And I think… well first, what do you think of the Apple deal for MLS? 

Jake: Okay, so my perspective on this is that I appreciate the enhancement of the coverage, but I don't appreciate that it takes away local markets, that it puts it behind a paywall.

And if I think about my own intention in the media as a way to help lower the barrier for people to fall in love with the game, then the Apple deal is bad for that. Maybe it's good for me as someone who's just obsessed completely with it, but that's where I need to separate myself. Part of what makes soccer special is that other people love it as much as you do and you can share in that.

And I think the Apple deal kind of falls short in making sure that happens.

Bobby Warshaw: Just to clarify, because they took out ESPN, there's still some, the same number of games a week on cable. 

Jake: So for instance, I live in the Philadelphia suburb and before the Apple deal you could have bars that were showing the Philadelphia Union games. There is still I think a deal with the satellite company where bars can pay and show that, but from my personal experience now going within that Philadelphia area, there's not really an interest at the local level, unless you're already a fan of that team.

And maybe that's not the point that you're getting at, but…

Bobby Warshaw: No, I think it's a fair point. What I'm thinking about a little more is the monetary part of it, right? They put out 2.5 billion over 10 years. What does that mean? Everyone's like “a great deal, great job, MLS!"

But you ask anybody in our space like, okay, break that down for me. It hasn't really been done. So if we do break it down, and these are the layers, like 3, 4, 5, 6, that I wish had come out more, right? $250 million. So $2.5 billion to 10 is $250 million a year, right? That in itself would be a great number.

The original deal… and stop me if this is not what you want to hear. This is boring, but like I'm keen.

Jake: No, it's perfect.

Bobby Warshaw: The original deal for MLS was highlighted at $90 million that included MLS plus US Soccer. Best estimates, from what I've seen, are that about $30 million of that was the US Soccer component.

So the MLS deal was about $60 million a year. Only MLS. So you say $60 million to $250 million. That's great. But a part of that $250 million are production costs, which are not usually included in deals. Best estimates of that are about $50 to $60 million on its own. So that is, down from $250m to $190m straight away.

$190 is still pretty good compared to $60. It's about three times the previous deal. If you look at traditional sports rights growth in the US and the best points here. Are NBA and NHL, because NFL is its own frigging thing. And baseball dying. So the best comps are NBA and NHL. Domestically, they grow a three times deal over deal, usually on four to five year rights deals.

So this is great, right? MLS went from $60 million to something like $190 million. Overall, they hit that three X. The problem is they did it on twice as long of a cycle. So the first four years might be great. They got their three x. But they're flat on that on the next cycle. It's a zero.

So over four years at three x of $190. They're losing what? Leaving like a billion dollars on the table relative to what you would expect? Just on natural sports rights growth.

Jake: That’s just present value of a dollar. So in my day job, I'm in financial services.

You would look at. The future value of what that number is, $250 million today isn't the same value as $250 million, eight or nine years from now.

Bobby Warshaw: Totally. So there's these all the elements where like everyone says 10 years, $2.5 billion, Apple, whatever, great job. But I don't know, maybe we should just spend five more minutes and Google some things and look at it.

The other part is… how does this compare to the other leagues in the world? Because as fans we care about what it does to our team and the value. So it's $190 million once the league takes off, so $190 distributed to 30 MLS teams.

That's $6 million a year on the TV deal to each team. What does that mean? Like how valuable is that? How impactful is that? I don't know. I do know cause I've looked it up, but like most of us don't know because nobody told us. I think it's something like seventh in the world.

It's the big five (Premier League, Serie A, Bundesliga, La Liga, Ligue 1) then I believe Portugal is a bigger TV deal per team, and then it's MLS. So like, all right, that's pretty good. We wanna be one of the biggest leagues in the world. Like that matters. So this is my example of I think that there's this rich level. I think the other thing is the transparency around salaries.

And I can say this because I, Paul and Sam and Tom and I go back and forth all the time, but I'm like, no, this is a pretty clear and dry…

Jake: You're talking about the athletic writers? (Paul Tenorio, Sam Stejskal, Tom Bogert)

Bobby Warshaw: Yeah, we'll go back forth.

I think that they're overall awesome and very good people. But, I think that's another example of there are answers here. Let's just go down the chain and spend the time actually doing the research to figure this out. 

Jake: Do you feel like there's an issue in terms of the dilution of the league with adding more and more teams or is that something separate?

Bobby Warshaw: And you're saying a dilution in what player quality or?

Jake: I'd be interested to hear your perspective on that, but now that you're down the rabbit hole of finances, do you feel like that has an impact as well on the finance part, or is it the difference between 30 teams and 32 doesn't really make a huge difference?

Bobby Warshaw: San Diego expansion paid $500 million.

So like in the last three years with Charlotte, and with St. Louis they (MLS) basically made $800 million off them. So that in itself is $25 million each. Yeah, they're obviously gonna keep expanding. This is the other thing. I guess they're obviously not gonna stop at 30 because they're all cashflow, they're all on an operating loss.

Maybe not all, but I don't know, probably 26 of 30 right now are at a yearly loss. Like obviously they're gonna take $25 million if it comes to them. 

Jake: I guess the big question is it a good financial decision to own a major league soccer team?

Bobby Warshaw: Oh! This is a great… this is awesome!

Is it a good decision? Because this is part of what I do. We do a fair amount of mergers and acquisitions advisory. How much do you know or how much do you think about this question about sports team investments?

Jake: I personally think about it a lot and I find it interesting and I'm not sure where the audience is even feeling like this is going, but I'd be interested to hear your perspective.

Bobby Warshaw: Why don't you go first?

Jake: If I'm a very wealthy person and I have enough money to buy a club my investment and my outlook on the future is more about leveraging the value of my club over time.

So what I mean by that is if I'm St. Louis City and I spend $250 million on an entry fee, and I run an operation for 10, 15 years, and the value of MLS goes up, the value of teams around me goes up, the entry fee for MLS goes to $700, $800 million, and that makes my club more valuable than what I started it at and it's a better investment than I can get in, then that's a good financial decision.

A lot of people consider, and maybe you'll talk about the operating loss, but a lot of people consider that so many teams run at an operating loss to be a bad financial decision. Why would anyone want to own a soccer club or a football club?

But it's not necessarily about the year over year amount of money that you're spending or making. It's also about the investment that you have to be able to sell later on.

Bobby Warshaw: Right. Yeah. And what you're speaking to there at the end is the difference is basically the difference between capital gains and writing off the losses.

So the very simple one sentence to someone listening, and you'll do a better job of explaining this than I would, but it's basically as long as your asset value growth exceeds your losses. Or even matches your losses, you've made money because you're writing off those losses at your income tax rate and you're making money at a capital gains rate.

If you're gonna make money you'd rather buy, have an asset that makes it on the enterprise value than the cash flow value. Is a very simple sentence here. I feel very strongly about this and I come in, I guess I come in everything hot in these podcasts, but I'm coming in hot on this because I've just done this like a dozen times and everyone comes in with the financial, where teams and sports teams grow at this, and I just find it to be so disingenuous.

Sports teams from a financial perspective are useful as a diversification method. It's really hard to predict the future of the world, but we're pretty confident that people are gonna wanna show up to a stadium or watch a game on TV.

We're all gonna care about sports in 15 years, even if we don't know what real estate markets, what technology will look like. Whether it is an actual growth asset I think is much more complicated and probably the answer is no. Yes, it does rise, but people that can buy sports teams - billionaires have 15-20% return options come across their desk every single day, and they come with much more predictable and controllable asset classes.

So what I usually tell people is if you wanna buy a team, that's great. We can make that happen. You can make that happen. But let's not spin this narrative in the pitch deck or in your mind that this is about financial return. Yes, maybe you get financial return, but it's more about doing an awesome thing that you can do because you can afford it.

And that's also fair, right? People buy houses. They buy cars. They buy art, right? This is the same thing, and it'll be fun. I just think that is a much better level setting than the idea that you're gonna come in and make a financial return year over year.

Jake: I'm with you. It's essentially: do you have enough money to play FIFA or football manager in real life? And do you want to do that to impact a community?