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U.S. Soccer Conference Call Regarding 2010 Division 2 Soccer League

Opening comments:
Sunil Gulati: “Good afternoon and thank you for, on short notice, making yourselves available to participate on the call. For us, 2010 is an extraordinary year. Most of you are familiar with a number of things that are going on, starting obviously with the Men’s National Team’s participation in the World Cup, and we’ve seen the draw and people are excited about that. We also have the unprecedented coverage and support that ESPN is putting behind the National Team and the World Cup, obviously our bid for the World Cup in 2018/2022 and a whole number of other things. There is another MLS season, a second season of WPS, and a number of other programs. We think it’s an exciting time for our sport and the number of people who were able to jump on this call on short notice, frankly far higher than I anticipated, is partly a sign of that. It’s also partly a sign of the interest in professional soccer, and obviously in this case we’re going to be talking about the second division, with an announcement that you’ve probably seen a press release about. We have for the last couple of months been trying to reach an agreement and reviewing two applications for membership. You’re familiar with the background on that. Eight days ago, the U.S. Soccer Board of Directors made a decision and essentially informed both groups that we wouldn’t be sanctioning either one, and asked them to work out a solution. In the last seven days, we have been able to do that. I should very much thank the two groups and in particular, Alec Papadakis and Jeff Cooper and their colleague, who have been working with Dan Flynn, myself and some others. In a very short period of time, we resolved a number of issues in order to make this happen, and when I say make it happen, I’m talking about division two soccer in the United States.

“We will be operating a 12-team league, with two divisions of six teams, and you’ve seen the press release that tells you which team will be playing in which division. One will be the USL conference and the other will be the NASL conference. The teams are playing as independent members of a league that we’re setting up. The Federation will take a much more direct role than it does in other professional leagues in the United States for this year in our arrangement. We’ll be involved with officiating, scheduling and some of the marketing issues if there are any of those, disciplinary issues, and operational issues in terms of settings and general guidelines. We’re going to rely heavily on existing resources within the teams and within the USL structure, they have some additional resources that we may rely on, but U.S. Soccer will take the lead on it. We’ll have a Board of Directors for the league, which will consist of representatives from each of the 12 teams. We’ll have an executive committee that will consist of five people, including one representative from U.S. Soccer, and that executive committee will deal with any issues that may come up that a board for any professional league would handle. U.S. Soccer will be available during any disagreements in the way that the Office of the Commissioner would be, though we’re not going to name a commissioner or anything like that.

“We’ve also managed to reach an agreement that will effectively end the dispute that existed between the USL and certain member teams and other individuals. That dispute, as a result of this agreement has been dropped. There won’t be any litigation out of the events that have taken place, and we’re certainly very pleased about that from a ‘going forward’ standpoint and from an economic point of view. Frankly, we’re quite excited that we’ve been able to get this done. The last two things I’d say are going forward starting today. Our goal is to have a stable, professional soccer environment in the U.S. I think we’ve been able to accomplish that with MLS over the last 14 years, and with the exception of one year, there has been a steady growth of the teams in terms of interest. We want to make sure that we can accomplish that through all of our other professional leagues, which are different from youth soccer or amateur soccer. In the next few months we’ll be laying out some regulations, rules and standards. We’ll put a little more substance into it about what a second division should look like. Everyone has agreed that that’s important and we’ll be working on that. For us, the most important thing here is long-term stability. What we think we’ve achieved today is a short-term solution for the 2010 season, but we want to work with a number of people and all the teams to find a long-term solution so we don’t have teams changing back and forth between divisions. We’re extremely excited about this agreement and certainly about 2010 overall for the sport in the U.S.”

On the financial issues involved in running a national second division:
SG: “I think they’re the same as challenges we have in any startup venture, and this is a unique start up because it’s a conglomeration of teams that already exist and expansion teams. Any startup is a challenge in today’s economy, and obviously we’ve had a number of challenges across the sport over time. MLS, as I mentioned, is very much on stable footing and has been growing. WPS did better than they expected coming out of the blocks, coming out of one of the worst downturns in our nation’s history. There are going to be some challenges, I’m not going to make any bones about that. Our goal is that the people who are going to be investing in teams and leagues understand what those challenges are and are realistic about what it’s going to take to make it work financially. If we see projections from a team or an applicant that says ‘I understand I’m going to have some losses but in the second year I’m going to make money, we are going to look at that very rigorously and make sure that we challenge those assumptions. The absolutely critical notion is that we need investors who understand that this is a long-term investment, a long-term business model. And what we’re seeing from the teams that are involved is that they understand that. We’re going to take some actions that are going to guarantee that we don’t have some of the issues we’ve had in the past. Raising the bar early helps us do that.”

On the biggest obstacles in reaching a deal:
SG: “The last seven days, the hardest thing was getting an agreement on every point. We were trying to do that on a number of small points with 12 people plus league representatives who are scattered around the country. Trying to get an agreement on every point, during the holiday season, made it very hard but things like what this would look like, who would be in control of the structure, were pretty critical. To be blunt, the status of certain teams who were part of our arbitration, were unable to resolve them. Those are not easy issues when there are dollars at stake, contracts that have to be reviewed and lived up to. So, I think those were the hardest things from our point of view. In terms of Atlanta and New York, we don’t really want to be commenting too much on what might happen in the future, but those are both cities that are looking toward the future and playing in the league. In the short term, we weren’t of the opinion that we’d be playing this year. No where in this process have I believed that Atlanta would be playing this year, they made it pretty clear to us that they’d be starting late, and very early in the process it became clear that New York wanted to start playing later if they were going to be part of this set up. Our regulations as they are currently set require eight teams for division two.

“You saw the decision that our Federation’s Board [of Directors] made. We made it very clear to all the groups and the teams that to get to the magic number of eight with people who weren’t ready to start up didn’t make sense, and that they might get approved or might not. It didn’t make sense for the sport, or frankly, for their groups. It makes sense to start when you are ready to get going. MLS had that same issue, where everyone thought we should start in 1995, but we weren’t ready. The WUSA started later than they had hoped. We think the most important thing is to get the right number of teams and if people want to come in later, that’s fine. Some of the strongest franchises in MLS are those that have come in later, you can look at what’s happened in Seattle and Toronto in particular. We want to make this a stable situation, and there’s no reason to push the boundaries of the teams in year one.”

Alec Papadakis: “That’s correct. New York has requested that we delay their participation until 2011. They were not ready to move forward for 2010.”

Jeff Cooper: “Atlanta made very clear to us early in the process that their preference was to start in 2011. They felt like they could better prepare their market and their entire organization for that date.”

On getting all the teams to come to an agreement:
SG: “That’s part of any deal. Everyone was willing to compromise in the end to make sure that they met the standards we were looking for, to make sure that we had a viable and stable Division 2 setup. So you have to put some of those differences behind you and get on with it, and that’s essentially what happened. I can site thousands of situations in the past where people have these sorts of disputes and they get on with it. Are we going to have hiccups along the way? Sure, just like any situation, and we have those in other leagues now who have been around forever. We anticipate that everyone is going to work together and make this work. We’ll play the role of mediator, but also the role of regulator to make sure that happens.”

On the logistics of the new league:
SG: “Let me be very clear, because I’ve seen reports from today that there are two leagues with interplay. That’s not what we have. What we have is one Division 2 league that U.S. Soccer will operate. There is full intraplay, so from the conference point of view, all these teams will play against each other. We’re not quite ready to announce a schedule yet, but we think it will be between 28 and 32 games. There are a few things we’re trying to work through on available dates, but that will come out quickly. Everyone will play everyone.”

On how this deal is good for the USL:
AP: “The most important goal that we have at this point in time is to allow the USL and Division 2 soccer to play in 2010. Our goal right now is to make sure that the teams have a platform and a place to play for 2010, so that we can go forward with the USL business plan down the road.”

On how this changes the long-term business plan of the USL:
SG: “I think that we really want to focus on this next year, and we’ve asked both groups just to focus on this year. They obviously have some things that they might talk about in the future, but we’re really focusing today on 2010 and we’ll give them the ability to talk about their long term plans starting next week or 20 minutes after this call.”

On the general atmosphere and mood of the discussions between both leagues:
SG: “I can only speak for myself, we’ve tried to be very open, as has Dan Flynn, who as U.S. Soccer’s CEO has played a critical role in this, and I think the two sides have been open. They’ve been maybe more open when they’re talking with us individually than with each other, and I don’t mean about not being truthful, but we’re probably more colorful when we’re not talking to a group that we’re trying to reach a deal with. In the last seven days, we have talked everyday including New Year’s Day morning, New Year’s eve, had a meeting a couple of days ago, so I think everybody’s been pretty honest both about what they’d like to see happen here, and what they had wanted to see at the start of the process. They had to compromise, pretty clearly, and I think in the process everyone’s understood the regulatory role of U.S. Soccer and wanted to make sure that they fit in under the role and frankly, put aside some of their own concerns for what they thought was in their best short-term interest to make Division 2 soccer work next year.”

JC: “I would describe the meetings as cordial and I think we were able to work through a lot of the issues, and at the end of the day the good news is we all had the same goal which is getting on the field. Thanks go out to the USSF for facilitating the entire process, it’s obviously been a long process but it’s a fair resolution for USSF, for the teams, for the players and most importantly for the fans.”

AP: “I feel the same way.”

On the reasons teams in New York and Atlanta aren’t joining the league this year, as well as concerns that people have for Tampa’s team:
SG: “In terms of New York and Atlanta, it was less about us deciding that they weren’t ready than the local ownership groups, deciding in conjunction with their investors, that they weren’t ready to go, and we weren’t forcing anybody to try to get to a magic number. So in those two cases we didn’t say “No, we don’t think you’re ready.” The first criteria has to be that the person putting up the money can run a stable organization, is willing to take on the risks associated with it, and we’re making a judgment after that. In the case of New York and Atlanta, we never had to make that judgment. In the case of Tampa, Tampa’s been at this for quite a bit longer, obviously Tampa was announced some time ago. I think they’ll have a lot of things to say over the weeks to come, but it’s January 7th and we haven’t announced the schedule yet and until today, we hadn’t announced that we had a league. So I think we need to give Tampa and everybody else a little time to figure out a bunch of things as we go forward. But if we look around the league, we have a number of teams who already have players under contract, coaches picked, that do have stadiums. So I think in the next few days and certainly over the next few weeks, you’re going to be seeing a number of announcements from the teams and from U.S. Soccer.”

On whether the league has a name yet:
SG: “Right now we’re referring to it as USSF D-2, but based on this call, if we get a corporate partner that wants to partner with us for the year we’d be happy to rename it. I think it’s important to note that we’re not trying to come up with a brand that is going to be around for very long, that’s less critical to us. We’re looking for an umbrella corporation as it’s a holding situation to allow us to have a league this year and get things stabilized.”

On the role U.S. Soccer will have beyond the next year, or whether MLS will ever step in to partner with Division 2 soccer:
SG: “On the first part the answer is no, I don’t see U.S. Soccer continuing to be involved at the level we’re going to be this year. We’re involved in all of our professional leagues up to a point, most clearly in the regulatory area and in the case of officials and referees. But I don’t see us going beyond those and maybe a couple of other roles with Division 2 or anyone else beyond this year. We’ve had discussions with MLS, some of the teams and some of the leadership of the groups we’ve been talking about had their own independent discussions prior to all these processes starting with MLS. They talked about working together and potentially partnering, having MLS handle some of the functions and developmental relationships. There was a longstanding relationship early on between MLS and the USL on player development and players moving up and down. All of that is possible, and we certainly encourage everyone to try and do things in an efficient way financially. If there is an economy to be had, or a player development scheme that makes sense, then terrific. We’ve already seen some of that integration happen where you’ve got teams for example that play in the U.S. Development Academy that have affiliations either indirectly or are owned by a second division team, or an MLS team, or are sponsored by those teams. As we continue to develop this model and look for further stability, you’re going to see natural synergies come into place that make sense financially to try and get everyone on sound footing both on and off the field.”

On the expected length of the season and whether it will break for the 2010 FIFA World Cup in June:
SG: “I think the season would start roughly when D-2 seasons have started in the past, so we’re probably looking at late March to mid-April, I can’t specify an exact date because we’re still trying to work out a schedule, with a championship game that would follow similar patterns we’ve had in the past, so you’re looking into October or November. There are some unanswered questions about Open Cup dates, so we can’t specify all of that. Until yesterday, we weren’t quite sure how many teams we were going to have. At this time, I don’t see a complete break during the World Cup, but I think there’s a possibility that the schedule will be lighter during the World Cup, in the way that MLS has done. There’s certainly not going to be a five-week break during the World Cup, or a 31-day break, but I think especially in the first round of the tournament, when there are 48 games in South Africa, the schedule might be a little lighter but frankly that’s not something we’ve had a chance to discuss with the 12 teams and the board.”

On how the USSF will measure benchmarks to determine a team’s success or viability and whether there will be quantitative measurements teams will have to demonstrate to continue to participate:
SG: “Yes, we’ve got some very specific targets in our regulations and we intend to put in more of those. Whether they apply to financial stability, what staffing levels look like, etc. To give you an example, our regulations have minimum standards on size of stadiums, a full-time operation for P.R. Director and CEO and so on and so forth. We think we need to put some more meat behind those in order to make sure that the teams that are part of a Division 2, or Division 1 for that matter, meet a certain standard and most importantly can meet that standard year in and year out and improve. We can’t have this constant issue that bedevils a number of sports, that the offseason is spent primarily to make sure that you can come back the following season. That you’re looking for expansion teams not because it makes long-term sense to build the game and the league, but because you need an expansion fee. We had that issue 25 years ago in our league, and we want to make sure that we’re able to avoid that so that expansion is done in a systematic way. U.S. Soccer is not going to be the one deciding that, but if people coming in the door want to be part of Division 2, they need to understand that this is a long-term play and that there are going to be some significant investments early on and aren’t counting on expansion proceeds in a year or two to reduce capital costs. The philosophy we’ve discussed with the leaders of these teams seems to be in line with that. People understand that for us the most important thing is stability, growth is right after that. But you can’t have growth without stability.”

On his reaction to the amount of attention second division soccer has received in the U.S.:
SG: “I’m less surprised by the overall interest because we’ve had many teams in important U.S. markets for a number of years. We have lots of players who are currently playing in our national team that have come to play in parts of their careers on teams that we are talking about, which is also the case for the Canadian national team. The interest is not a surprise. But, the fact that it’s continued to build is obviously a plus and it’s partly a reflection of where the sport is and how the sport is getting better. When we get the sort of interest that we do on player transfers for national team players, that interest is higher. The interest we got over the summer for the Confederations Cup was higher. Part of it is the rising tide for the sport. Part of it is that there has been a little bit of negativity and that always seems to pick up some news. I’m pleased we’ve had this level of interest. We joked about it a little before the call, with Jeff and Alec, that we’d prefer not to get the level interest up with this sort of last two weeks every year, and we’re not going to do that. But, frankly, the number of people that we’ve got on the call, which is well over a hundred, in such a short amount of time is a very positive not to us and we’re very pleased about that.”

On the ramifications of teams breaking away from USL:
SG: “There was a difference in some structural questions. Certain teams were having discussions and some teams that had been in the USL for years had been continuing to have those discussions and decided that they’d like to approach things differently and there was a dispute about that. We got through that and in the end, everyone wanted to have a Division 2 team or a Division 2 league. I think we’ve accomplished that and I think some of those discussions will continue to take place among those members and among some of those people on the call. But what were absolutely desperate to do, and got done, was make sure we had a Division 2 in place at the start of the season, in a World Cup year and in a situation where the sport is building, it would be crazy not to be able to get that done. I think Jeff and Alec and their groups and their individual teams realized that. There was a lot of impetus to get it done and it was just a question of how we could get it done and with what sort of structure we could do it. There was some negativity. I don’t use words like “breakaway leagues” or anything else. We’ve got a solution for the year and beyond that we’ll see how it goes but we think it’s a good solution for 2010.”

On the main purpose of a Division 2 league in the U.S.:
SG: “It comes down to the philosophy of the individual teams. We’ve had this sort of discussion for many years. If I can use the example of when MLS started, there was a group over in Rochester that was operating at one level and you had some teams operating at a different level with a different philosophy. So there will continue to be some of those sorts of issues within leagues – that exists all over the world. There are four teams in the English Premiership that believe they are going to finish at the top every year and there are some who are just trying to stay up. There are other teams who are in the player development game when there are others who are trying to break into the Champions League or the Copa Libertadores. So I think we’re going to have a mix of that. If you look at the teams that are in this, you’ve already seen that. Vancouver, which has had a great set up for a number of years and will be a new member of MLS, has a very viable youth program. Their group has also had a terrific women’s program. We can look at similar examples in the U.S. for some of the other teams. It’s going to be a mix of those things. The U.S. is 320 million people. Add another big group in Canada and MLS is in 15 markets with two in Los Angeles and one in Toronto. There are a lot of very big American cities and a number of large Canadian cities that could certainly sustain a viable Division 2 setup. [Success] is being able to do that in some of those markets, and whatever cooperative agreement between MLS and the Division 2 league is really up to the participants. In the absence of a promotion and relegation system, it’s hard to exactly pinpoint an answer to that question.”

On the status of television rights for the upcoming season:
SG: “There have already been discussions that have taken place. There are some marketing companies which are available to help. So I think there will be some quick discussions but it’s also difficult to have those discussions until you definitely know you’re going to have a league and how many teams are going to be playing in it, what time zones they are going to be in, what the schedule looks like and whether you are going to be in one country or two. All of that will be known quickly and all but the schedule is known now. So I think there will be some quick discussions with one partner, which has already started, and potentially another about programming.”

On if the teams had to pay a fee to bond with the league:
SG: “They are going to have to pay a fee and a bond to U.S. Soccer since we are going to be the umbrella on this. There is a regular set of dues that is payable by all our members, whether they are a youth soccer player or a professional team and its obviously escalated the higher up the spectrum you are. There are a couple of different payments that are made. Team payments, player registration payments and, in this case, there will be a bond that will be paid by all teams and any unused portion of that will be returned. The bond would also be used against certain expenditures that U.S. Soccer will take on this year that it wouldn’t in normal situations. For example, if we were to hire someone or a third party to do X, Y or Z or do that internally on a cost basis, the 12 teams would be paying that cost and that would come out of those fees. That structure is actually outlined quite well without having to discuss it much further.”

On any plans to integrate a reserve league with Division 2 and MLS:
SG: “In the short term, the answer is no because this is just the 2010 situation. I think in the long term, you are going to see some things happen, whether it’s between youth structures in our professional teams or between the national leagues themselves. When the U.S. Soccer Federation introduced the Development Academy, it produced some ripples throughout the system. Whether it was for the PDL or whether for players participating in other leagues, MLS started then to field their own Development Academy teams. We’ll see some cooperation that makes a lot of sense and MLS, right now, doesn’t have reserve teams. So is there going to be a model where a Division 2 or Division 3 has a direct relationship a la the baseball model? Sure, that’s quite possible. Obviously in the baseball model where the teams are paying the contracts of the AAA or AA players, it’s a bit different. But all of that is possible and it’s all really up to the participants. The most critical part of this will be the investors in these teams. We are happy to play a continual role given our mandate and our charge and we are critically interested in player development. On that note, I should mention that there will be a developmental element to this Division 2 structure. There are a number of countries around the world where teams agree to an association mandate that they are going to have X amount of young players on their rosters. And without us needing to say that we are going to mandate that, we’ve had a great reaction from the leadership of the two leagues. So we think we will have a bit of that, especially in our developmental model. So in a Division 2 or Division 3 we may have a rule that says you need to have four Under-23 players on the roster or something to that effect. In principal though, the teams have agreed to it and we think that’s a huge positive.”