• Farmer's Field Fantasy

    Well, it's official. The blockbuster agreement announced four years ago between industry giant AEG and Farmer's Insurance to build a downtown LA stadium to house an NFL franchise, won't happen after all. The deal would have been seen as the biggest agreement in the sports world to date valued at an estimated $700 million  for a 30-year venue naming rights sponsorship deal. The problem? No NFL franchise.

    Two other proposals that include franchises have been floated in the meantime, both of which are located west of downtown and near two airports as well as the ocean. Both became more feasible options due to specifics on which franchises would relocate. One is backed by St. Louis Rams owner Stan Kroenke and is still seen as the most likely option, but a stadium that would be built and shared by money people involved with both the San Diego Chargers and Oakland Raiders is also a possibility. Farmer's and AEG will likely continue their partnership in other ways, and it remains to be seen whether or not Farmer's would be interested in one of these other alternatives, but we do know now that the downtown project  is dead on arrival. No one knows which teams will ultimately relocate to a market that has been NFL-free for 20 years, but something will happen and soon. There is simply too much money on the table.

  • Grocery's Shifting Landscape

    If anyone needs any more more proof that the natural and organic products juggernaut is here to stay, they need look no further than the neighborhood grocery store. Indeed shrinking demand for processed foods from the likes of Heinz, ConAgra, Kraft, and others has created a major shift in mainstream food stores. What's happening?

    Long-established natural products brands like Amy's Kitchen have moved beyond the natural channel (with store formats ranging from small health food shops to "supernaturals" like Whole Foods Markets), and are now major players in mainstream grocery, going up against much larger rivals. The ammunition? Natural and organic ingredients driven by large-scale shifts in tastes among consumers distrustful of food giants and their reliance on synthetic, processed ingredients. Marketing terms like natural, certified organic, and locally-grown have become not merely points of differentiation, but competitive advantages in this new consumer environment. Amy's Kitchen, for example, enjoyed a revenue increase of 24% last year while the frozen food industry as a whole dropped 10.6%. And Amy's isn't alone. The industry as a whole continues to grow at around 9% annually, and we must remember that it is populated almost exclusively by companies that spend a fraction of what the big boys spend on marketing.

    This growth is not at all surprising to analysts who have been following the natural products industry for the past 25 years or more. The rate of growth has been rapid and steady during this entire time, but what has changed is the very recent and rapid migration of mainstream consumers towards these products, specifically among the under 15-50 Gen X and Millennial generations. With artificial flavors, colors, and preservatives on the wane, it is clear that this is no longer your mother's grocery aisle. Tastes have changed and products will change with them.

  • Missy's Millions

    The news that four-time Olympic gold medalist and world champion swimmer, Missy Franklin, has decided to dispense with her rather unprofitable college career at California, and has opted to turn pro instead, should not be a shocker. You will remember that, after the 2012 Games, she famously turned down what would have amounted to at least $5 million in potential endorsements in order to go to college, pursue an education and continue to compete with "other" amateurs. Certainly she must have found the degree of competition at the collegiate level to be somewhat wanting, but it is also possible that she might have taken a business course or two during her short tenure and has decided to build her brand before it's too late. Perhaps she realized that Olympic athletes don't have much longevity, and that endorsement deals are largely based on factors such as success, attractiveness, likability, credibility, and longevity. Swimming is not as popular as tennis or golf, or one of the Big Four sports, and, like curling, doesn't have much cultural application beyond the four-year global competition. For Missy, the all-to-often romantically-portrayed "college experience" probably got old after two years as it does for so many young people, and it became clear that the time to make money is now. She can always finish college at a slower pace, or after her career is over, if she wishes. She will still be quite young, and quite wealthy.

    So, with the 2016 Olympics around the corner, Ms. Franklin has signed with WME/IMG, one of the most influential sports and entertainment empires in the world, and is expected to become one of the more familiar endorsers over the next couple of years and beyond. Much will depend on how she does in the next Games, but for now it looks like the sky is the limit as brands should be lining up to have her represent them. She will probably match the $5 million she left on the table after the 2012 games and add to it. Hopefully she is able to get a few highly lucrative deals rather than a handful of smaller contracts, and after winning several more golds and re-winning millions of hearts she will be able to maintain longevity as a product endorser. And for many professional sports, endorsements are where the money really is. Go Missy!

  • Marketing For The Little Guy

    Young companies need to spend lots of money on marketing, but ironically few have the resources to do so. Indeed it is surprising that so many companies succeed in such an environment. So what are the most effective ways to allocate limited promotion funds? Not surprisingly, blowing your budget on advertising (paid, non-personal communication) is not one of the better strategies. Here are a few ideas: 

    1.  Social Media:  A significant internet presence can be had for not too many dollars. Initial resources should be spent on developing a good brand presence with all of the requisite social media pages in good order. Blog posts and podcasts are a great way to generate content if you have something to say. All of these tactics take time, but won't drain cash flow.

    2.  Trade Events:  If you are selling finished goods, then distribution (place) will be the mot challenging of the Four P's. There's nothing more difficult than getting and maintaining shelf space, and so exhibiting at trade shows, where buyers and sellers congregate one or more times per year, can be a very effective way to get products into stores. This doesn't mean just attending a show and milling around for three days, but actually operating an exhibit booth and offering sales promotions designed to develop distribution channels. These events are not cheap and you must be prepared to give away a lot of product, but each contact made can mean many thousands of dollars in Lifetime Customer Value.

    3.  Figurehead:  Someone, preferably the CEO, needs to be the face of the company. Writing articles, speaking at conferences, and contributing to media stories are just a few of the high impact ways one can generate publicity cheaply.

    4.  Traditional Media:  Broadcast and print advertising, internet advertising, direct mail, signage, sponsorships, etc., may be necessary at some point (and for some business models they may be necessary right away), but a too-limited budget cannot possibly approach the amount of money needed to make these tactics really work. These strategies should be phased in as the budget allows. 

    Really brand building should be a major focus for small businesses in the early stages, and there is obviously no magic formula for how to do this. But no amount of marketing communications will help a noncompetitive good or service, so obviously product, price, and place strategies must be on solid footing in order for any marketing communications program to be effective. And investing limited resources into the brand itself rather than in tactics such as advertising might be the best way to help a small business get off the ground. 

  • Mobile Technology At Levi's Stadium

    To say that the technology installed by the NFL's San Francisco 49ers franchise at Santa Clara's year-old Levi's Stadium is robust would be putting it rather mildly. The facility promises all of the latest and greatest in fan experience-enhancing technology, and nowhere is this more apparent than with regard to concessions-provider Centerplate's in-seat ordering program. Once limited  to club level and certain other high price point sections in the stadium, in-seat ordering of food, beverage, and merchandise, through a mobile app of course, was a big hit with 31,000 transactions from August through December.

    The results? An overall 200% increase in merchandise per person, a 230% increase in food and beverage per person, and an overall increase of 60% in both areas. Those numbers are significant indeed and not much of the dramatic increase can be attributed to the new stadium. because despite moving an hour or so south of San Francisco, the stadium still has the same fans. It would appear that convenience pays, especially at the ballpark.

    How rapidly will other facilities duplicate these efforts? It shouldn't take long to make the transition from vendors carrying trays with limited a selection to runners delivering goods from an app-based menu. Orders are also available for express pick up in addition to the seat delivery option, so there is no good excuse not to eat, drink and buy merchandise at your convenience. The old model has certainly had its day, and of course teams will have to figure out how to add value to the club level and other areas as food delivery becomes a part of the common fan's experience. It will be interesting to see what they come up with.

  • The Unbundling of Television

    Ah, the dreaded "bundle". The formerly-positive marketing term has come to signify having to pay for TV channels that you don't want and would never watch as part of a package. Like MTV for instance. Of course this has been the model of choice for pay television since its inception in the 1970's, but as prices have risen to prohibitively high levels for so many people, and as the internet has gained so much prominence among screen viewers, it looks like the Great Unbundling is finally here.

    Media companies have been long reticent to disrupt their very lucrative business model and have largely chosen solo ventures in the inevitable and slow migration of TV content onto the internet. The future of video does not lie with unseasoned, undifferentiated upstarts like Amazon or Netflix (companies with non-production-oriented core competencies), but with traditional production companies that have decades of content expertise and who are finally being forced to figure out how to make money online. And money they will make. A video screen is indeed a video screen after all, and there is nothing really special about the internet versus satellite or cable, so there is no reason why these TV companies can't just migrate online. And migrate they will. In fact, there have been many recent moves of late, but none quite so potentially impacting as recent news that content providers are engaged in active talks with Apple.

    Not the innovator it once was, Apple sells lots of iPhones and still has massive influence as well as a controlled network that they own and operate. This makes it easy for Apple to offer its popular medium as a platform for cable channels to offer their content. This is great news for consumers, because Apple has lots of influence and is unlikely to be forced to carry the less popular channels (the "skinny package will have 25). And when Apple, a market leader and supply chain captain, makes a major strategic move, others are sure to follow. TV advertising will simply shift to multiple screens and both internet viewers and traditional television viewers would be counted in the audience that advertisers pay to reach. This was always the dream! Yet right now everything is so fragmented, it's tough for anyone to make any advertising money online, unless of course you are Google or Facebook. It looks like things are changing and rapidly so. This could be the beginning of "The Great Unbundling of 2015", and consumers are sure to enjoy a less expensive,  more a la cart, need-oriented approach in the near future.

  • Another Strategy Change At Adidas?

    The news that struggling sportswear-maker Adidas has decided not to renew its sponsorship with the NBA was a bit of a surprise considering that the company not too long ago announced that it wanted to expand its presence in the sport to regain some of the market share it has ceded to competitors like Nike and Under Armour in recent years. The move will almost surely further reduce the brand's market share in the U.S. and perhaps elsewhere, so it is difficult for an analyst to understand the move apart from perhaps a change in thinking at the German apparel company. And perhaps there is good reason to question the value of the sponsorship.

    Sport sponsorship is a great way to stand out from the competition and create opportunities for engagement with the buying public, but it is getting prohibitively expensive at the highest levels of sport. There are many other ways to grow market share and perhaps, rather than giving up, the company has other plans for its marketing resources. And it perhaps helped the decision-making process that the NBA recently contacted Adidas and told them that the league was planning on opening up a bidding process for rights in 2017 in part due to the company's sliding market position in the U.S. Clearly marketers at Adidas have their work cut out for them. Maybe soccer might be a better fit since the brand has always been closely associated withe the sport and its popularity among spectators in the U.S.  is growing. Let's see what happens.

  • Coke's New Strategy: Ignore Reality?

    The carbonated soda segment has been in decline for several years now with consumers shifting to flavored waters, energy drinks, and a myriad of other thirst-quenching substitute products. This comes as no surprise to the CEO of Coca-Cola, however what is surprising is his response to the shift in market tastes. Doubling down on the fizzy stuff.

    Despite data that indicate that 63% of Americans are actively avoiding soda and the amount of soda consumers do drink has been falling for a decade now, CEO Muhtar Kent insists that the mainstay product is still the venerable company's "oxygen" as it currently generates roughly 70% of revenues. But that doesn't look like the future. The company, which has 20 billion-dollar brands (14 of which are beverage-focused), has stepped up advertising spending and is hoping that a new soda fountain concept will revitalize sales of its struggling flagship products. What's wrong with this strategy?

    Mr. Kent also said, "Sparkling beverages have always been a treat, and we have to rediscover that." If by "we" he means "consumers" then he is barking up the wrong tree. Marketers who wisely embrace the Marketing Concept, follow market behavior very closely and adjust product mixes accordingly. They don't try to "create needs". And if consumers "rediscover" anything it is unlikely to be without the help of Coke's advertising budget. Baby Boomers are leaving the category in droves and Millennials have thus far expressed different preferences than their parents. The writing appears to be on the proverbial wall. A wiser strategy for Coke would be to focus on growth categories and get as much as possible out of the declining products before they are eventually deleted far on down the road, a practice called "harvesting". Successfully bucking market trends is a tough thing to accomplish, even for  a giant like Coca-Cola.

  • The Fall of the Face Lift

    It surprised many when Lifestyle Lift, a company that up until recently essentially defined the mass marketing of cosmetic surgery, abruptly shut its doors earlier this month . In an age where record numbers of people are entering their 50's and 60's, one would think that this segment would be doing rather well. Lifestyle Lift, a low-cost provider that at one time spent $1 million per week in advertising, in particular, should be just entering its prime. Not so.

    The number of face lifts actually fell 4% last year at just under 130,000. That's still a lot of lifts, but the drop in sales might actually be indicative of a shift in consumer tastes fueled by the availability of substitutes such as chemical peels, Botox injections, anti-aging serums, and other less invasive goods and services. And the baby boomers have been a rather vain, youthful generation, so it will be interesting to see what attitudes the 36-50 Gen X crowd develops as they enter the market. For the traditional face lift procedure, however, the good times may be over.

  • DirecTV and the FTC

    When marketers make false and misleading statements, as they sometimes do, there are really two things that can happen, and both of these involve suing in court. First, lawyers can file suit on behalf of individuals or entire groups of consumers ( "class action"), a rather common recourse for angry consumers. More uncommon, however, is when the Federal Trade Commission gets involved. As such, the FTC has filed a complaint against the nation's largest satellite TV provider, DirecTV, accusing marketers of misleading millions of its consumers about the cost of its programming. Uh oh. Isn't that what they all do?

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    Well, no. Not really. In this instance, the complaint charges the company with deceptively advertising a discounted 12-month programming package. Apparently the requirement of a two-year contract wasn't disclosed by marketers. Indeed it seems that promotional practices throughout the highly competitive pay TV category have become more ethically and legally questionable over the years, as competition has encouraged marketers to move beyond simple "puffery" (harmless exaggeration) to a decisively greyer legal marketing area, so perhaps the FTC has chosen to make DirectTV an example for other industry players. The verdict could be big news not only for the entire sector, but also related sectors like wireless service providers. Let's see what happens.

  • The Blurring of Music Copyrights

    A jury awarded the family of late R&B artist Marvin Gaye $7.4 million for infringement. The defendants? None other than Pharrell Williams and Robin Thicke, and the offending song, ironically, is 2013's biggest hit song "Blurred Lines". Copyrights are intended for artistic works and aren't registered by the federal government like trademarks are, so this form of intellectual property can be rather difficult to defend, but when a song is blatantly copied without proper credit given to the original artist, the courts get involved.

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    In this case, the song sounded just a bit too much like Gaye's 1977 "Got To Give It Up", and apparently permission was neither requested nor given to mimic elements of the song. A simple royalty-sharing arrangement would probably have saved the courts (and taxpayers) a chunk of change, but the defendants still insist that they wrote the song independently and in no way intended to infringe on anyone's intellectual property. Samplers beware. This case makes for very interesting precedent, and future cases could be more common as a result. Despite the intentions of the two artists, the deed was nevertheless done and now future royalties will probably be due in addition to the cash settlement.

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    The lesson for marketers? If there is even a question about infringement, it might be best to engage the artist directly and work out some form of mutually acceptable strategic alliance. The number of notes and chord progressions in music are limited and so just about everything already been played, recorded, and re-recorded to some degree. Thus, it would seem that infringement cases would be more common. There is a fine line between being influenced by a song or a musical style and infringing on someone's copyright. When this line gets blurry, it is up to the courts to decide and set precedent for future cases. Let's see if this practice becomes more commonplace.

  • Retailers Surprised By Stubborn Slowdown

    I think we are all surprised that a much improved national job picture, rising wealth, lower debt, and cheaper fuel haven't translated to more sales at retailer cash registers this winter. More money in American purses usually translates to more spending, and the low cost of gasoline has saved Americans $10 billion this February compared with last. That's significant. So why is retail sales growth slowing?

    Of course the winter weather, specifically in the heavily populated Northeast region, always takes its toll, but winter weather alone doesn't entirely explain the situation. Online sales do increase during periods of poor weather but not enough to compensate for the lost revenue at brick-and-mortar locations. Clearly, Americans are opting to save more despite near zero interest rates, but it is unclear as to why this is so. Perhaps we are all still a bit gun shy from the uncommonly slow economic recovery, and rather than spend, most people prefer a wait and see approach. Perhaps the holiday buying season, which seems to get longer each year, is finally eating into the sales during non-holiday months. Whatever the cause, it has experts scratching their heads. When will things get better for retailers?

  • Reasons For Flight Cancellations

    Over a 30 year career that has included a good amount of business travel, I have become accustomed to the occasional cancelled flight. Weather, mechanical failures, and staffing issues are all commonly cited as reasons by airlines for these cancellations. And one weather-related cancellation over a recent Christmas resulted in a four-day wait to book a new flight. But there are other reasons why airlines cancel flights, and it might be hard for frequent fliers to believe why some of these excuses don't evoke more regulatory scrutiny.

    Regional jets are three times more likely than long-haul jets to experience a cancellation, but most of the reasons for this are the ones outlined above. Planes are swapped all the time when things go wrong, and whether or not you are on the short end of the deal may depend on such factors as how many people are on the plane, how many high fare business passengers are on the plane, the route itself, and of course the total cost of the cancellation to the airline. A short flight might cost an airline only $1,000 while a trans-Atlantic flight might run over $40,000. Airlines are supposed to pay for hotel rooms when the delays are internally-generated (30% of the total), and they are on the hook for full refunds if the delay is significant. But sometimes the airlines are less than honest about why the delay is happening, and you have to demand this compensation.

    Certainly carriers have every reason to avoid cancellations, but since so many flights are full these days (the industry has reduced its overall capacity in recent years), it has made it more difficult for them to re-book passengers. And with so much media attention placed on weather events before they even happen, it seems that the latest trend is for airlines to anticipate problems and cancel flights in advance. Let's hope this rather dubious practice doesn't go on for too much longer. As for increased regulation? Consider that canceled flights cost consumers $6 billion last year while airlines shelled out only $382 million and enjoyed record profits. In all, nine million passengers were affected, three million of which were the direct fault of the airlines themselves. A hotel room near the airport  is small financial consolation for a ruined trip, and with customer satisfaction at an all-time low, perhaps regulators should be keeping a closer eye on how hard the industry as a whole is working to improve its product.

  • Ericsson's New Product Mix

    From the introduction of its first device in 1892, a tabletop telephone, Ericsson has been selling consumer products to the Western world. Once a dominant player in the cellphone hardware market and in the face of brutal competition from Apple and Samsung, the company in 2010 decided that it could no longer compete, finally deleted its last cellphone handset model and is still in the midst of a major shift with regard to its product mix.

    It takes a lot for a marketer to admit that he/she has been beaten by the competition or that it failed to adequately address technological and market shifts so that the company can move on to greener pastures. Ericsson is still a hardware company (that's its core competency), but it now focuses on a business-to-business model offering cellphone network equipment. After all, consumers are so expensive to reach. Of course it's a long way from the phones to the towers and base stations that enable them to work, but by also making the software, it seems that Ericsson has carved out a nice little niche to defend. Indeed the company is now the world's top network equipment maker and accounts for about one-third of the industry segment's revenue. Perhaps there have been lessons learned from past failures, and if so then Ericsson is in an excellent position. And perhaps this time marketers can maintain it.

  • Growing the Bean

    By this we mean L.L. Bean, the popular, 100 year-old brand best known for selling its signature boots via direct mail catalogs. Of course, the company not only moved beyond boots, expanding its product mix, but also embraced a multi-channel strategy several years ago, integrating its direct mail catalog operations with e-commerce so that the brand could keep up with changing technology and consumer buying habits. And they've done a heck of a job in a challenging marketing environment that has so many other retailers struggling, enjoying revenue gains over each of the past five years. So now what?

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    Brick-and-mortar stores of course! It turns out that despite ridiculous predictions in the 90's about the decline of most physical stores, they are very much alive, and consumers now expect to shop seamlessly whether it be through a catalog, the internet, or a brand's physical location. As such, L.L. Bean has announced that it will effectively triple its number of store locations over the next five years to total about 100. Wow! So a catalog operator has efficiently integrated e-commerce into its business model, and is now doing so successfully with regard to brick-and-mortar retail outlets. Kudos for L.L. Bean, and you can bet that competitors should be thinking about emulating these best practices if the company continues to enjoy this level of success.

  • The Rolex of Smart Watches?

    After much anticipation, Apple fans will finally be able to purchase the latest in wearable technology starting April 24th. There is little doubt that Apple is late to the smart watch party, but the company clearly has enough brand equity built up over the years to grab market share right away. The low end model will sell for $349, which is priced well above competitive products offered by the likes of Samsung, LG, Motorola and others. And this is no surprise since the company has always employed a premium (almost prestige) pricing strategy. It's nice when a brand remains consistent.

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    The interesting thing is that the average model will cost $700, and there is even a gold-plated version for the true fan boy in your family at a reasonable $10k, so the higher end version will be more like a Rolex than existing models. Perhaps the product will be a perfect blend of fashion and functionality. But don't expect any major innovations here. It appears that Apple might not be much of an innovator after all, but rather a brand that takes existing technology, tailors it to Apple users, and makes it look sexier. In this way, Apple is the Nike of the technology sector.

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    Will the product be successful? Of course, but only in the way that all Apple products are successful. The Apple ecosystem demands that you buy and use only Apple products so one might say that the company has a "captive audience" many of whom will likely purchase yet another gadget from the Apple family of gadgets, as they have in the past. And Apple is probably placing its bets on emerging markets around the world rather than the U.S., the former of which being where most of the company's growth comes from these days. But existing products in the category have grossly underperformed (did anyone ask for a computer watch or is it just something developers think is cool?), so one might expect that Apple will quickly become a market leader in a relatively small product category. Apple will leak more details later, so we can take a closer look at the actual product at that time and hopefully be able to make more informed predictions. For now, however, I am underwhelmed.

  • Spirit of Service?

    Customers want value. No one actually asks for low quality goods and services, but we all know that we often get what we pay for...and sometimes less than that. But when a service, such as a passenger airline, decides to essentially throw customer satisfaction out the window in favor of a low price model, one wouldn't expect the company to be around for very long. But the airline industry is funny in that poor service has been the norm for many years. The case of Spirit Airlines is particularly instructive.

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    The incredibly low ticket price at the airline is an attractive incentive to choose Spirit, but the airline asks you to pay for absolutely everything else, including a processing fee if you pay by credit card. Really? Carry-on bags, seat assignments, and even a cup of water will have you reaching for your wallet. And if you think that's a bit much, consider that Spirit has a 40-pound bag limit, so if you are used to the industry standard 50 pound limit and you want to take all of your textbooks with you to Ft. Lauderdale, you will be paying extra at the service counter. Sneaky. It even costs $10 to have an agent print your boarding pass for you.

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    The airline industry embraced the long-awaited a la cart model of airline pricing several years ago, a practice that began with meal and bag fees and has since escalated into whatever it is that Spirit is trying to do. Management says that the ultra high rate of complaints that the airline receives is the trade-off for low prices, but when you consider all of the "extras", flying Spirit doesn't seem so cheap after all. Plus, the airline has grown to the point that it is now on the Department of Transportation's radar, which means that it will now be ranked by such factors as on-time arrivals, baggage handling, bumping passengers, and of course consumer complaints. Management has admitted that it will score poorly on the complaint side of things, but will perform well in other areas. As for customer satisfaction? Can Spirit keep customers with a "hey, at least we got you there safely!" kind of strategy? Or is the market for low-end transportation (Greyhound anyone?) large enough for Spirit to thrive in? Will the ratings system force Spirit to improve its level of customer satisfaction? We shall see.

  • Minor League Soccer Expansion

    The proliferation of lower league professional soccer is yet another indication that the sport is slowly becoming one of the nation's favorite sports.  We have loved our national team for a few decades now, crowding into pubs with names like the Pig and Whistle to cheer on the Americans against places such as Cameroon, and we know that Major League Soccer (MLS) has been steadily expanding in every way since the turn of the century. But minor league soccer?

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    Yes indeed. A growing consumer market combined with higher quality play at all levels in the U.S. over the last few years has left plenty of room in the market for a developmental system for the major league teams such as exists in many other leagues (with the notable exception of the NFL). Both minor leagues, the NASL (11 teams) and USL (24 teams), are adding new franchises this year, and MLS itself plans on expanding from 20 to 24 teams by the end of the decade. Although the English Premier League is still more popular than MLS here in the States, it looks like nothing can stop this juggernaut.

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    It's true that youth participation is down over the past few years across the major sports, but soccer is still a favorite among parents and kids, and it appears that childhood players are finally becoming fans as adults. It certainly has taken a while for the sport to catch on here in the U.S., and there are many reasons for this. Perceived low quality of play, the slow pace of the game, the lack of scoring, the lack of "star power", and the availability of so many substitute sports have all been cited as barriers to widespread adoption of soccer as a spectator sport. Yet, it appears inevitable that soccer will eventually take its place among America's favorite sports. First the stadiums need to be filled. Then come the major sponsors. Then the TV rights. I am certain that it will happen, so the only question for me now is how long it will take.