A Look Back to Chivas USA … A Failed Brand Extension in a Really Good MLS Market
Introduction
On December 17, 2019 Major League Soccer announced it’s coming to Charlotte, North Carolina. In what is likely the last franchise to be added to the fold, I couldn’t help but smile at how far the MLS had come. The Charlotte franchise will be the league’s 30th team, and over the league’s 26 year history only three teams have ceased operations:
Tampa Bay Mutiny (1996 – 2001)
Miami Fusion (1998 – 2001)
Chivas USA (2005 – 2014)
At the same time though, most of the teams in the MLS are losing money, and one insider I know says the whole entire league is bootstrapped together compared to other big-time leagues like the NFL and NBA. With valuations of MLS clubs soaring to record levels in anticipation of the 2023 renegotiation of TV rights, and overall gains in popularity, now is as good a time as ever to look back at the one team on the list of three that didn’t make it but should have… Chivas USA.
On Paper, Demographics Were Favorable
Los Angeles is a city with a deep sporting tradition. Between the Lakers, Dodgers, Kings, Bruins, and Trojans, the City of Angels fields professional and collegiate teams that historically have won a number of Championships. So in the summer of 2004 when the MLS agreed to a second team in LA, the expectations were high. In the shadows of the established LA Galaxy, Chivas USA was born.
Source of Picture: https://www.pewresearch.org/hispanic/2013/08/29/mapping-the-latino-population-by-state-county-and-city/
The lead investor, Jorge Vergara, was a Mexican businessman, film producer, and owner of football club Chivas de Guadalajara of the Mexican 1st division. With his support, Chivas USA modeled itself after its parent club, Chivas de Guadalajara, and set out to build a team in direct contrast to the bourgeois Galaxy across town.
Things Started Relatively Well But Consistency Soon Became a Problem
I used to live in LA around the time Chivas USA was started. In stark contrast to the “posh-wine drinking” LA Galaxy experience, Chivas USA games had real energy and were so dope in the beginning. On average, you had about 15,000 fans at most home games and were treated to scenes like this:
Source of Picture: Kirby Lee-USA TODAY Sports
In the inaugural 2005 season, Chivas USA drew 273,284 over 16 home matches and a franchise record 317,432 in Year 2. A deeper look into attendance by year reveals the Chivas USA average attendance in the early years were on par or above the league average.
From 2005 to 2009, Chivas USA made the playoffs four out of five years. But it’s on the field performance quickly dropped off from 2010 onward as the club missed the playoffs every year since 2010. By the final three years of its existence, Chivas USA were bottom of the league in average attendance and bottom of the league in performance.
To put it in more quantifiable terms, of the 320 regular season games played over their 10 year existence, Chivas USA lost 47% of them and drew 25% collecting on average only 36 of the available 96 points each season. Ultimately their tepid on the field performances caught up with them and their fans stopped showing up. Fans simply don’t like to support losing teams, especially fans in Los Angeles.
The US Version of Chivas was a Cheap Substitute for the Real Thing
Following the 2014 season, it was determined that the extension of Chivas de Guadalajara was unsuccessful, and Chivas USA was reacquired by the MLS for $70 million. And while there are numerous on the field reasons for its failure, Chivas USA’s ultimate failure came down to its poorly executed branding plan.
When you say the word “Chivas” in the soccer world without a doubt everyone thinks of Chivas de Guadalajara, arguably the best and most popular club in Mexico. Chivas USA tried everything in its power to match its parent club right down to the Chivas badge and red-and-white-stripped kits. Jorge Vergara even once stated that he intended to hire and field Mexican players only, something that Chivas de Guadalajara actually does.
Source: Chivas USA 2014/15 Kits
Source: Chivas de Guadalajara 2014/15 Kits
Quite simply the concept was to take a team that represented the hopes and dreams of Mexican soccer fans both in Mexico and the United States, and try to capitalize on the Hispanic heritage within Los Angeles and ultimately beyond.
Attempting to leverage the branding success of its parent club was a smart strategic decision, but the execution of this marketing strategy left a lot to be desired. The truth of the matter is Jorge Vergara simply didn’t want to do the hard work. He didn’t put the financial investment behind Chivas USA because he believed he could easily extend one of soccer’s most venerable brands into the United States. The market was the right fit; his execution was wrong.
By 2014, the Chivas USA experiment hadn’t captured the hearts and minds of the Hispanic populace in Los Angeles, and when the poor on the field results continued, it ultimately all came to a head.
Bad Marketing + Bad Results = Poor Financial Stability
No fan likes supporting a team that consistently loses especially if there aren’t strong ties to that team. Chivas USA’s failure on the marketing/branding side to drive strong ties with Los Angeles fans didn’t give it much room for error on the field.
Throughout its 10-year existence in MLS, Chivas USA’s single-game tickets were moderately priced between $12 to $31. Season tickets ranged from $162 – $1,296 which was on the lower end of the spectrum compared to other teams in the league.
Just considering single-game tickets only, at these prices, the best Chivas USA was able to generate close to $7.0M annually on home-match gate revenue (assuming 16 home matches). By its final two seasons, this had dropped down to under $3.0M annually. Below you see the graphical representation of this precipitous drop.
Revenue sources for a soccer club are more than just gate revenue, but this -8.5% compound annual drop over 10 years didn’t bode well for Chivas USA’s long-term aspirations. Once you start losing on the pitch and losing revenue, it’s hard to turn that ship around. Couple this with the lack of consistent investment from owner Jorge Vergara, and it was curtains.
Bad marketing/branding plus bad on-the-field results led to consistent poor financials. As losses mounted, so did the pressure on Jorge Vergara wallet, and he ultimately left with no choice but to sell the club back to the MLS.
Out of the Ashes Rises LAFC
With the Chivas USA experiment officially done, the MLS turned its attention to reestablishing a second team in Los Angeles. Commissioner Don Garber was convinced that two teams could work in L.A. under the right ownership group; an ownership group that was willing to invest in the club and build from the ground up.
All-in-all Chivas USA suffered from years of mismanagement, subpar branding, and poor results which ultimately ended after the 2014 MLS season when they ceased operations. Jorge Vergara didn’t put forth the right amount of financial resources and effort to really build the US version of Chivas de Guadalajara.
The death of the Chivas USA franchise was a blessing for MLS because out of the ashes rose one of the current best run clubs in all of the league. LAFC is currently achieving something that Chivas USA never did: finding a mainstream fan base and consistently winning on the field.
