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RSL staff cuts could be the beginning of a murky financial future

(Francisco Kjolseth | The Salt Lake Tribune) Real Salt Lake Chief Financial Officer Andy Carroll, shown here on Thursday, March 5, 2020, says there are several significant updates to Rio Tinto Stadium coming not only this season, but also in the near future, that will enhance fan experience.

Real Salt Lake was the first team in Major League Soccer to announce staff and salary reductions due to the league being suspended until at least June 8 to help slow the spread of COVID-19. And it stands to reason that it won’t be the last.

But laying off and furloughing employees, as well as reducing the salary of some by as much as 40%, could be just the beginning of the financial struggles for an RSL franchise that has a sole owner, operates multiple soccer clubs and resides in a small market.

“This isn’t a one-year problem,” said Andy Carroll, chief business officer of RSL, who said he took a 20% pay cut on his base salary and a cut of more than 50% of his total compensation. “This is a two-year problem.”

The financial impact the coronavirus pandemic is having on sports is significant, and it continues to evolve. Just last week, NBA players — some of the highest paid athletes in one of the most lucrative sports leagues in the world — agreed to a reduction in pay. MLS and the league’s players association have recently discussed pay cuts as high as 50% for many players.

The organization’s coaches have been affected as well. Every coach for RSL, the Utah Royals FC the Real Monarchs and the RSL Academy agreed to a pay cut, a club spokesperson said Monday, adding that they did not know the percentage of the cut.

At the MLS league offices in New York, many high level executives already received a pay cut of 25%, including Commissioner Don Garber.

But salary reductions are only one piece of the financial puzzle. MLS doesn’t have the type of television rights deal that leagues like the NBA, NFL and MLB have. So the bulk of the revenue made for North American soccer clubs comes on game days, when they can sell tickets, concessions and merchandise, as well as give exposure to corporate sponsors.

With no games happening currently, none of that revenue is coming in for teams. And the longer the suspension lasts, the more realistic it becomes that the remaining 32 games on the schedule won’t all be played. MLS announced recently that playing out the rest of the season is starting to look “extremely unlikely.”

How this fits in with RSL comes mainly with tickets and sponsorships. Currently, season ticket holders’ monthly payments are still being debited from their bank accounts because games have only been postponed, not canceled. Atlanta United has taken the same approach. Other clubs, like Minnesota United, have postponed season ticket payments.

Carroll said RSL’s policy is to credit any lost games from 2020 for games in 2021. So for example, if the club loses five games this season, season ticket holders will effectively be paying for five less games next season. That situation reduces revenue for RSL in 2021.

When it comes to sponsorships, companies pay the club for exposure throughout Rio Tinto Stadium in Sandy and the Zions Bank Stadium in Herriman. fewer games leads to less exposure, however, which could adversely affect RSL’s bottom line if games end up being canceled.

While Carroll did not say whether any sponsors have backed out, he did intimate that some were struggling.

“I would say that we have partners that are having financial challenges,” Carroll said.

Part of the reason RSL’s financial situation seems difficult in the near future has to do with expenses. All players across RSL, the Royals and the Monarchs are, for the moment, being paid in full. That could change on the MLS side depending on the outcome of league’s talks with the MLSPA. Additionally, all the team facilities are still getting upkeep from grounds workers who tend to the fields, as well as other staff.

All those expenses will end up costing owner Dell Loy Hansen between $10-$12 million of his own money this year, Carroll said. That, coupled with the investments Hansen has made over the past several years to grow soccer in Utah, is why Carroll believes the criticism Hansen has recently received over staff layoffs and furloughs is “unfair” and “not based in fact.”

Fans were quick to turn their ire toward Hansen when the club announced it would cut staff. The hashtag #DLHOut circulated on Twitter. Many fans drew attention to Hansen’s collection of rare coins — he bought a dime last year for north of $1.3 million — and said that type of money could have been used to save people’s jobs.

But Carroll did offer some positives about RSL’s current situation. He said he is not worried about what the current and potential financial losses of the club could mean for the future viability of the franchise. He is also confident the MLS season will resume in 2020.

“Because of the way he’s [Hansen] operated the club and because of the way he’s invested so selflessly and because we’ve had great corporate partners and a great fan base,” Carroll said, “this is not an existential threat for us.”

Carroll acknowledged, however, that the possibility exists for the financial reality to be very different when games resume. Some jobs lost might be able to return, at least in the short term.

That’s why while Carroll holds some confidence, he’s still monitoring the situation closely.

“It’ll be very interesting to see what happens when the dust settles,” Carroll said.

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