Red Bulls rebranding yet to take off
Red Bull gives you wings, so the marketing slogan goes. But does $14 million give you results?
Ives Galarcep reported last week in the Herald News that Red Bull has lost $14 million in the team's first year of operation. The numbers -- the largest single-season loss ever taken by a franchise in league history -- are close to mind-boggling.
When asked if the Red Bulls' financial performance is as bad as it seems, Alexi Lalas, the former MetroStars general manager who now holds the same position with Los Angeles, said, "I believe good people see around the corner and see the potential where others do not."
The question remains though, are Red Bull "good business people" as Alexi terms it? "I don't know," Lalas says. "I wasn't there long enough to have an opinion, to make a fair assessment, to see the numbers."
On the surface, the numbers are clear. Attendance is down substantially, the team has yet to ink a local television contract and the fan base is as apathetic as it was at any point in franchise history, and as Galarcep documents, sponsors are fleeing the team.
The man who has born much of the brunt of all criticism levied against Red Bull in 2006 is Marc de Grandpre, who assumed the leadership role from Lalas shortly after the team's takeover.
"It is inaccurate," de Grandpre said about the reported losses. "Obviously the next question becomes, 'So what did the balance sheet look like at the end of '06?' Red Bull as an organization does not ever disclose any financials, period. We successfully delivered on our business plan's financials for the 2006 season, and we will do so again in 2007. We will continue to invest in our team for our fans."
De Grandpre is not a soccer guy, although he points to having played the game as a youth. He does not claim a soccer résumé and up until this time last year, did not consider himself a fan of the game. He is an easy target for the fans of the team to rail against.
The fans are dwindling. Attendance figures for 2006 were bolstered by the star-studded and costly home opener and an international doubleheader featuring Ecuador and Colombia held in May, rumored to have cost in excess of $2 million. Minus those two events, the numbers in the stands rival those posted by the contracted Tampa Bay and Miami franchises. Prior to Red Bull's purchase in March 2006, the combined 10-year per-game attendance average for the franchise was 17,617. Red Bull's first year of ownership saw the attendance average dip below 15,000 for only the second time in club history, finishing the season at 14,569.
How do the numbers stack up? Consider that in 1999, a league source says the MetroStars' operating losses were in excess of $10 million and some tallies were close to $12 million. Enter AEG in 2001, and four years later the operating losses of the team were down to $5.5 million (which includes a $2 million league capital call that all teams contribute to). The secret to the turnaround, according to the source, was the emphasis that AEG placed on corporate sponsorship.
By 2005, the team was selling close to $2 million per year in corporate sponsorships, among the top in the league. The Red Bulls were also among the better franchises in the league in attendance. Now, the sponsorship money, according to a league source, is approximately one-fifth of what it was in 2005. It is an issue that does not concern the man who now calls the shots in New Jersey.
"We deliberately shed off all our sponsors at the end of the year because we, as an organization, do not rely on sponsorship revenue as a principal revenue stream," de Grandpre said. "We will add sponsors as our team progresses; those sponsors will share similar values to those of our team."
It's strange talk, until you've sipped the Red Bull.
He references a plan, a desire to take the team to the next level, to constantly win. Energy alone, however, does not sell tickets and does not win over a fan base that still is wary of the franchise as a gimmick.
"No doubt that the Red Bull name brings extremely high expectations for us and our fans, and rightfully so," de Grandpre said. "We are fully committed to turning this team into a winner that one day all of our fans are proud to support. We never expected it to happen overnight. This plan will gradually make this franchise the class of MLS. After 12 months we are extremely satisfied of our progress."
The progress, thus far is what has fans and followers of the league scratching their heads. On the field, the team was bland and failed to advance in the playoffs, continuing a streak from 2001, but de Grandpre sees not just a vision, but also results.
He points to the signing of Bruce Arena as a monument to the team's commitment to winning, a move Lalas terms as "brilliant." A move into new offices, and additions including technical director Jeff Agoos and a new training facility, built on the campus of Montclair State University, are heralded as positive commitments from the team to achieve results. On the youth development front, the Red Bull youth league, termed "Red Bull National League 17," is referred to as a benchmark of commitment from the company to the sport in this country.
But is it enough? Losses are understandable in light of the costs of transition, rebranding and the necessary study and analysis that a new ownership will participate in. Coupled with a one-off event such as the gaudy home opener, the numbers are indeed perhaps closer to the pre-AEG losses in 1999. A second league source, also speaking on the condition of anonymity, states that typical teams in MLS "lose between $2 million to $3 million a season, maybe a couple are in that $4 million to $5 million range." The fact that Red Bull might have lost nearly three times that number shows either an uncanny conviction in their league and their product or some questionable fiscal decisions.
The Red Bulls continue to look ahead.
"You will see more concerted effort this year -- but nothing grandiose -- we have developed a new ad campaign that will run throughout the summer on radio; this will supplement our grassroots efforts. I've said before we do not believe in marketing an inferior product, the soccer enthusiasts in this area are too smart for that," de Grandpre said. "We are focused on turning the team on the field into a winner and once we do so, then you will see a more aggressive marketing campaign. Until then, we are focused on marketing at the grassroots levels."
As far as this year, de Grandpre refers to ticket sales as "up 30 percent in season tickets sold year to date compared to last year, and up 48 percent in individual ticket packages sold compared to 2006."
In New York, a tough place to sell tickets, the figures are impressive.
"New York faces the same challenges that we in L.A. face," said Lalas, who remembers well the difficulties of the New York job. "There is an incredible competition for the entertainment dollar there, 16 professional sports team call that area home. It's not an easy nut to crack."
There is a bigger picture to consider here. Perhaps Red Bull is receiving criticism because, well, it is Red Bull. Although nary a soul thought the name MetroStars was a good team name, one will be hard-pressed to find any who saw the new emblem as an upgrade. Whether right or wrong in its approach, Red Bull has shown an impressive commitment to the league in terms of dollars and cents, if not always dollars and sense.
"They're a different animal, they're Red Bull," said John Guppy, the former executive vice president of the MetroStars and now general manager of the Chicago Fire. "At least they can sit back and say at least that the Red Bull brand is getting exposure at this price. I don't know how they look at it, if they even look at it that way, but perhaps they do."
For his part, de Grandpre underscores that it is a marathon and not a sprint, a point that Lalas agrees with.
"The reality is that this effort [by Red Bull] is a long-term play. This league, the teams -- all of them -- are going in the right direction," Lalas said.
While the reported losses dwarf the operating budget of other teams, it is nevertheless an investment of energy and resources into the club. The question is very much worth asking: Would, in fact, the new ownership be hailed for its infusion of resources had the team not been labeled after a brand?
The answer, simply put, may never be known. Perhaps it all boils down to the name and the animosity that still stems from a rebranding that many saw as drastic. It is no secret that Red Bull faces a monumental task to just reach the level of success enjoyed by the team two seasons ago.
"Take solace in the fact that we can't fail," de Grandpre avowed. "See our logo on our jersey as an insurance policy for our fans. We have too much at stake, thus we are committed to all our fans that we will bring them a winning team."
Kristian R. Dyer covers U.S. Soccer and MLS for ESPNsoccernet. He appears regularly in the New York City newspaper Metro. He can be reached for comment at KristianRDyer@yahoo.com.