Column: NFL overestimates Los Angeles market, again
'Beyond the Lines'
Greed can motivate human beings to do things they might regret upon hindsight. NFL owners, despite being billionaires, are no different from ordinary folks in that regard. Their decision to storm back into the Los Angeles market last year after a 22-year absence was motivated by greed. As so often happens in such instances, the league and some team owners may be experiencing a severe case of buyer’s remorse.
In 1995, the Los Angeles Rams bolted LA for a new, state of the art stadium in Saint Louis. Along with an array of revenue streams and fancy suites, perhaps the best part of their deal was a clause in the lease that required St. Louis to guarantee the stadium would always be one of the top-ten in the league. If at any time the stadium was deemed to fall below that standard, the team would be free to move. Two decades later, the inevitable came to pass and Rams’ owner Stan Kroenke printed business cards that read, “NFL team available for the best deal.”
The greed in the NFL-L.A. equation is readily apparent, beginning with Kroenke. The sports magnate, whose financial assets include an assist from his wife’s inheritance as a Walmart heir, had been drooling over the LA market for years. After intense lobbying among the owners, Kroenke out-maneuvered both the Oakland Raiders and the San Diego Chargers for first dibs in LA
Part of the incentive for his fellow owners to anoint Kroenke as the league’s standard bearer was his commitment to self-finance the construction of a $2.6 billion stadium in Englewood. The development potential to a nearly 300-acre parcel Kroenke owns will create a steady stream of revenue 365 days of the year, justifying the exorbitant cost of the stadium. In addition, Kroenke agreed to pay the league a $550 million relocation fee.
The league also mandated that Kroenke accommodate a second team in his new stadium, which is scheduled to be completed in 2020. The Chargers “won” that contest, which netted the league another $550 million relocation fee. Rather than playing as a lame duck for four years in San Diego, the team immediately moved to L.A., in the process forsaking a rabid and loyal fan base. The move cost the Chargers tens-of-millions in moving expenses and lost revenue. So far, the team may be having second thoughts, at least privately.
Early evidence suggests that the NFL clearly overestimated the demand for professional football in the LA market, which is another way of saying greed trumped objectivity.
Until they become a tenant of the Rams, the Chargers are playing at the 27,000-seat StubHub Center in LA, by far the smallest facility in the league. The Rams are using the LA Coliseum, a 94,000-seat relic, as their temporary home. The teams’ combined attendance for home games has been less than that of the University of Southern California, which also plays at the Coliseum, suggesting that LA may not be quite ready for NFL prime time.
Perhaps the move was merely premature. Moving a team into a market without a fancy new stadium is always risky. Fans today demand and expect modern amenities, which neither the Rams nor the Chargers will be able to provide for at least three more years.
Those who view the glass as half-full claim interest and attendance will rise significantly when Kroenke’s new Taj Mahal is completed. Others add that the teams must improve on the field, where they have been consistently horrible.
There have been recent reports, officially denied by the NFL, that the league is seriously considering forcing the Chargers to move back to San Diego. Such a move would be unprecedented and the details — including the disposition of the relocation fee — are anyone’s guess.
After spending more than 20 years trying to put a team back in LA, could it be possible the league may end up moving one out? If that happens, common sense will have prevailed over greed.
Jordan Kobritz is a former attorney, CPA, Minor League Baseball team owner and current investor in MiLB teams. He is a Professor in and Chair of the Sport Management Department at SUNY Cortland and maintains the blog: http://sportsbeyondthelines.com. The opinions contained in this column are the author’s. Jordan can be reached at firstname.lastname@example.org.