How LAFC Became the No. 1 MLS Team Valued at $860 Million – Los Angeles Business Journal

By Steve Lowery

Monday, October 25, 2021

Packed stands at a game between LAFC and the Portland Timbers.

Packed stands at a game between LAFC and the Portland Timbers.

Although it’s come to mean so much to him, Paul Ruiz admits he just didn’t get Los Angeles Football Club at first. It was in July 2017 that Ruiz, a member of the sales team at Delta Air Lines Inc. — an early corporate partner of downtown-based LAFC — was asked to attend an event announcing the Major League Soccer franchise’s first coach, Bob Bradley.



That made sense, but just about nothing else did. “So, I went to this event when they announced Bob Bradley,” he said. “There was no team and no stadium, but there was this crazy fanbase, yelling, cheering, running around, and I thought: ‘Well, this is peculiar. These people are into it.’”




What seemed incongruous to Ruiz during that first LAFC encounter — rabid fans committed passionately to a club not scheduled to play its first game for eight months — was, in fact, the fruition of a strategy developed when the club was formed in 2014, one that seemed to turn the sports aphorism, “If you build it, they will come,” on its head.


 

“We really believed there was an opportunity here, that a certain approach could work,” said club Co-President Larry Freedman. “But it would involve changing the notion of what some people think of as the ‘club’ and how club and community are connected.”




Before there was a team, LAFC amassed a community of supporter groups. The SGs comprise a wide swath of Los Angeles and include supporters tied together by where they drink — LAFC Luckys SG is based out of Lucky Baldwin’s pub in Old Town Pasadena — or where they’re from — Empire Boys SG are from the Inland Empire, Tiger Supporters Group from Koreatown — and what they believe — District 9 Ultras pushes social commitment and service while the Black Army says it represents the working class.




There are a lot more, and new ones are created each season, including Pride Republic, an LGBTQ SG co-founded by Ruiz. He said he’s come to see the wisdom in what he initially could not understand, that reaching out to the community has gained for LAFC something that “goes a long way past brand loyalty; it’s brand passion.”



Most valuable

That passion led to immediate and sustained success for LAFC both on and off the pitch. The team made the playoffs in each of its first three seasons — 2018-2020 — and had the league’s best record in 2019.

 

It recorded 39 consecutive sellouts at Banc of California Stadium, located in Exposition Park where the L.A. Sports Arena once stood, until the pandemic eliminated spectators from games in 2020. In February of that year, LAFC announced it had sold out its available 18,300 season tickets, which had increased from 17,500 the year before.


 

Its black and gold gear is among the MLS’ most popular merchandise with LAFC forward Carlos Vela’s jersey ranking first in sales.


 

When LAFC’s celebrity-laden ownership group, which includes Magic Johnson, Will Ferrell, Mia Hamm-Garciaparra and Tony Robbins, began the process of buying out Malaysian businessman Vincent Tan’s 20% stake in the club, LAFC was given a valuation of $700 million at the time — the most for an MLS team. This summer, sports business news source Sportico ranked it as the MLS’ most valuable franchise at $860 million. The LA Galaxy ranked third at $835 million.




“We made the decision, when it was just five of us in a room (in 2014), that we were going to go grassroots, block by block, but that takes time and a lot of patience,” said Rich Orosco, LAFC executive vice president of brand and community.


 

But in studying successful European clubs such as Borussia Dortmund of the German Bundesliga and the Dutch club Ajax, LAFC leadership was persuaded that, while a team changes season to season, what is constant is the community that supports it — fans connected by a region’s culture.




LAFC’s leadership decided what distinguished Los Angeles was its diversity and an often-overlooked strong work ethic. They also decided they did not want to “Americanize” their product because Americans have shown a growing interest in European football. This summer, more people (9.4 million) viewed the UEFA Euro Championship match between Italy and England on ESPN, TUDN and Univision than watched three games of the 2021 NBA Finals (an average of 9.89 million viewers).




“We knew we wanted to be authentic. That started with something as simple but as important as putting football in the club name,” Orosco said. “I think a lot of new organizations just immediately think about transactions before they do relationships. We were willing to do the hard work of internally figuring out what we were about. Because of that, it allowed us to go out and enroll people in what we’re doing, whether they’re fans, corporate partners or SGs.” 



‘No substitute’

SGs garner significant space on the team’s official website in the form of descriptions and links, and together, they created The 3252, a rooting section like no other in L.A., where members show up more than an hour before game time and immediately begin the raucous, never-ending, heart-pounding cavalcade of singing, cheering and drumming that has made LAFC’s in-game experience arguably the best in the city. How good? When the Los Angeles Clippers recently broke ground on its soon-to-be new home, the Intuit Dome, it did so with plans of creating The Wall, a section specifically set aside for raucous fans modeled after The 3252.



The experience created by The 3252 has proven valuable not only in attracting fans but corporate sponsors, some of which were less than enthusiastic about getting involved with the club.




“I’ve had (potential partners) say ‘I don’t do sports,’” said Freedman. “I tell them I’ll give them tickets to a game, and I’ll come to their seats about 20 minutes in. The reaction is the same each time: They want to get involved with what they’re seeing, what they’re feeling. There is absolutely no substitute for it. You can describe it, show it on a video, but there is no substitute for being in the venue and experiencing it for yourself. It doesn’t matter if you understand the game or not; the building has energy.”




That energy, a product of strong community ties and brand passion, has made LAFC attractive to corporate partners that include the likes of Delta Air Lines Inc., Target Corp., PepsiCo Inc., Toyota Motor Corp. and Adidas.




“They took an interesting approach,” said Timothy Nickloff, director key cities with Adidas Los Angeles. “They built from the culture, from the community first, developed the supporters before the team existed. I was fascinated by the approach. I think it showed how much they understand Los Angeles — a huge city where the one thing that seems to connect the entire region is sports.”




LAFC’s success is all the more impressive when you consider the new club was entering arguably the most crowded professional sports landscape in the nation, with two professional baseball, basketball, football and hockey teams, not to mention, teams at USC and UCLA with sizable followings. Add to that the fact that the Galaxy was not already here, but in terms of championships (five), the most successful team in MLS history.




“You add to that the beach, the mountains, theme parks and everything else there is to do (in L.A.), and you’ve got to work really hard just to get someone’s attention,” Freedman said.




LAFC has done a lot more than that. Of course, every day, every season presents a new challenge in sports. With the 2021 season winding down, it appears that the team will not qualify for the playoffs, making this the first time it will have to move forward under those circumstances. One of the first things it will have to do is find a new naming rights partner for the stadium as the 15-year, $100 million deal with Banc of California Inc. was terminated in 2020.




Freedman said he’s confident there will be a new partnership announced before or at the start of the next season in the spring. Whether talking about the team, the SGs or a new naming partner, his tone is energetic and optimistic. From five people in a room to building one of the best fan experiences in the city, the LAFC plan seems to be working.    




“Football is the world’s game,” Freedman said. “And in one of the most diverse cities in the world, we felt if we built a club that reflected that, we could find success.”

Correction

A story in the Oct. 18 issue headlined “Homegrown Hope” misstated the revenue of Homeboy Electronics Recycling. Its revenue is $2.1 million.

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