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Jeff Luhnow: The Next Chapter

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From Liga Mx to Sportstek Acquisition Corp

MLB: Arizona Diamondbacks at Houston Astros Erik Williams-USA TODAY Sports

More than a year has passed since the news of the scandal broke. Since then Hinch, Cora, and the players are all gainfully employed within the MLB.For Jeff Luhnow, that has not been the case, as he’s still on the outside looking in. The fact that A-Rod consulted Luhnow was rumored by news outlets to be somewhat of a death blow in his acquisition pursuit of the Mets. But that may be changing quickly, as there are rumblings of Luhnow’s next steps.

Roughly a month ago, the news broke that Luhnow was looking to acquire a soccer team within the Liga Mx. He is rumored to be partnering with Netflix, and their show Club de Cuervos.

For those of you who aren’t soccer fans, Liga Mx is the Professional Soccer league of Mexico. While soccer is obviously a major transition, the logic behind Liga Mx makes a lot of sense. Why? Well, Luhnow was born in Mexico City, and grew up with a love for Soccer. The other main reason is that the cost of acquiring a club in Mexico is much lower than that of an MLS team, with their valuation being very closely tied to revenue.

For those of you that aren’t familiar, Soccer is different as the popularity worldwide blows baseball out of the water, and has professional leagues in nearly every country. Admittedly, I’m not a huge soccer fan, but generally the Premier league (England), La Liga (Spain), Bundesliga (Germany), and Serie A (Italy) are considered the top tier, with Liga Mx ranking highly world wide - and while rankings vary by source, generally seem to rank in the 10-20 range. A step below the true “elite” leagues.

While Luhnow is still a controversial figure for a number of reasons, no one can deny the impact he’s had on baseball. He was one of the greatest minds to pass through the sport, and admittedly, changed the way I enjoy watching baseball. The analytical approach that he took revolutionized not just the way I look at it, but elements of the sport itself. And while it’s easy to say Luhnow just hired the right people, the counter argument is just as easy. Brent Strom was cleaning dingleberries off dog’s butt’s after being fired by the Cardinals due to his radical ideas before Luhnow brought him back into baseball.

Since I had never been a soccer fan, I enlisted the help of my friend who has been a diehard Man City fan, who I’ve transitioned to loving the Astros. (Though back to back losses of his favorite players in Tyler White and George Springer hurts). It was interesting as his first response is that he did not believe Luhnow would have the impact that he had in baseball. The sport was different. Soccer honors the “art” and “beauty”, even as I began to read about soccer there is an elitism of the “right way” of doing things.

Now for any of you who followed the analytical approach that the Astros evolved into using, I’m sure all of this sounds eerily familiar and echoes the sentiments of why many believed Luhnow would not be successful in baseball. He faced the “Harry Potter” and Nerd Cave type commentary from traditionalists for years before being embraced after the proven success.

Soccer as a whole, has not embraced analytics. Of all of the major sports, there’s a legitimate argument that soccer is trailing all other sports by a large margin. There has been some teams who have started to embrace it, and have had significant success. Admittedly, analytics themselves will be a slightly more difficult process as the sport is far more dynamic and continuously moving compared to a static repeatable approach in baseball. Some of the elements that have been identified (creation of fields that look like weather maps showing the flow of balls, analyzing effectiveness of corners or different approaches, offside traps, etc) but analytics are very much still in their infancy.

But I’ll be honest, the larger opportunity for Luhnow to work his magic is on the financial side. Contracts in soccer are very different than baseball. While player for player trades do occur, most transfers are a purely monetary transaction. With teams essentially buying and selling the rights of players, which subsequent contract negotiations occur with the player themselves.

In soccer, teams are buying and selling the rights to players constantly. The contracts themselves are structured very differently, though there are some traditional components negotiated with the player with the normal aspects such as weekly wage (how it’s measured instead of annually), sign on bonuses, bonuses for on field performance (clean sheets, goals, etc). One of the biggest difference is the addition of release clauses. A release clause is essentially a pre-negotiated price for the player to be bought. This essentially takes away the clubs ability to say “No” to the transaction if another team is willing to meet that cost. (Not every player has this clause listed.) Additionally, there are also sell-on clauses. In simple terms, if a sell-on clause is added, and the team that acquires the player sells that player, a pre-negotiated percentage is returned to the first team.

So for ease of explanation, let’s run through an imaginary scenario. Let’s say Luhnow, now a proud owner of his new Liga Mx team, decides he wants to make a splash, and sign a huge name to bring fans to the stands and reinforce his team.

Pulling off the deal requires two things, money and being able to convince the player to join the team.

Want the Mike Trout of soccer? For a mere 700 Million Euros, you can buy out Lionel Messi’s release clause and negotiate a contract with him today.

So you pay the $700 to Barca, sit down with Messi and come to an agreement for him to come to Liga Mx for 20% more than he’s being paid now (there was a recent contract leak showing that he could earn up to $167.5 Million per year).

Unfortunately, I can’t imagine that Messi would accept moving to Liga Mx, so the deal would break down since the players have the option to reject.

Regardless, the ability to purchase players, particularly young prospects and utilize the system to maximize value of players is Luhnow’s specialty. He has always found a way to make the most within financial systems. It’s easy to think back to aspects such as the Correa/McCullers draft as an example of Luhnow’s ability to use use strategic financial approaches to gain an advantage.

It will be interesting to watch Luhnow’s next steps, as I really do believe that he will not only fundamentally change soccer through implementing new analytics, but I honestly believe he will be able to use his scouting/talent acquisition and monetary ability to a degree that soccer has never seen before.

In addition to the potential Liga Mx team, Luhnow is partnered with Formula 1 promoter Tavo Hellmund and former player/scout (and now banker) Tim Clark have created a SPAC called SportsTek Acquisition Corp. The company will be focused on acquiring sports franchises and related businesses - and implementing leading data analytics, media, and technology for sports markets. It has not been clear if the Liga Mx team would be separate or part of this SPAC.

It will be interesting to see if MLB teams would be willing to utilize Luhnow’s expertise as a consultant within his new organization.

Regardless, I know that Luhnow is a controversial figure in the industry, but it will be intriguing to watch the impact he has on sports in general and in his new ventures.