NFL could build L.A. stadium itself, charge team owner fees, and wait, how does this solve anything?

Sunday’s L.A. Times had a completely unsourced (unless you count a single quote from New England Patriots owner Robert Kraft) article speculating that the NFL could break the football logjam in Los Angeles by just building a stadium with its own money, then renting it to an NFL team. This could work, writes the Times’ Sam Farmer, in either of two ways:

  • The NFL pays for building the stadium, then earns its money back via a hefty “relocation fee” for whichever team moves in.
  • The NFL pays for building the stadium, then reimburses itself by selling naming rights, PSLs, and other goodies associated with the new building.

I’m sure you see the problem here: In the first case, any owner wishing to move to L.A. would effectively end up paying the cost of the new stadium, just funneled through the NFL. In the second, the owner would get a new stadium more or less free — but without the big revenues associated with a new stadium, which is the whole point of wanting one.

Now, paying for new NFL stadiums with PSL and naming rights revenue can work in certain situations — we’ve seen that with the San Francisco 49ers‘ Santa Clara stadium. But the 49ers had a strong incentive to remain in the Bay Area (since it’s where their fans already are), and the South Bay is an exceptionally lucrative market, and the 49ers are an exceptionally popular team, all of which makes for exceptionally big money from PSL sales. For other team owners, giving up either wads of cash or piles of future revenue streams to move to L.A. isn’t likely to seem too enticing when there’s still a chance of getting significant stadium subsidies out of their current home markets.

Really, NFL financing has the same problem as the developer-led stadium plans: Somebody has to pay the cost of a $1 billion stadium, and there’s only so much money to go around to pay construction costs and boost an owners’ profits. The only way this would be a game-changing option would be if the NFL decided it so wants to have a team in L.A. that it’s willing to take a loss on a stadium in order to get it done — but given that market size doesn’t matter much in football, I wouldn’t hold your breath.

The other possibility, of course, is that somebody leaked this “hey, we could build a stadium!” line to Farmer in an attempt to drum up articles making an L.A. stadium seem more feasible, thus putting perceived teeth into NFL teams’ move threats in order to get stadium cash out of their own cities. But naaaaah. The NFL would never be that Machiavellian, right?

 


26 comments on “NFL could build L.A. stadium itself, charge team owner fees, and wait, how does this solve anything?

  1. What the ‘powers to be’ of every major league sports community should keep in mind are the following:
    There are 492 billionaires in the USA.
    There are 113 Major League (NHL, NBA, NFL, MLB) sports franchises in the USA – currently about 50 of them are owned by billionaires. That leaves 442 USA billionaires who do not own major league franchises.
    There will always be, at the minimum, a handful of jock sniffers (such as Steve Ballmer) among them who will gladly overpay for a franchise. Thus, there is never a need for any public funding of stadia. It is impossible for a major league franchise owner to lose money.

    It will be interesting to see how the Buffalo Bills sale plays out…

  2. How often do you see owners (including billionaires) spend their own money for a stadium without the city/county kicking in a majority of the funds for the stadium? There may not be a need, but owners will not fund the entire stadium without kickbacks from the community.
    Also, there is a reason why no NFL franchise has been in LA for 20 years now. If there isn’t much money to be made there, then owners will not make the investment. It’s ridiculous to think it is impossible to lose money on a franchise, especially if the owner cannot get the financial support from the city/county. In LA, they don’t seem to be interested in providing any public funding, so I can’t imagine an owner jumping at the “opportunity” to buy a franchise there.

  3. Bill L,
    I was not talking about LA specifically, but the landscape in general. It matters no if LA ever gets an NFL franchise again.
    Please name me the last owner that lost money when he/she sold his/her franchise?

  4. This is regarding a separate arena subsidy issue.

    Apparently, I can’t comment on year-old articles, so it’s going here.

    Surprise, surprise, the expected $6.6 million Glendale was supposed to get back from the Coyotes only was $4.4 million. Additionally, the Mayor, who was against the plan, believes a private meeting between pro-Coyote subsidy council members and the team was illegal.

    http://www.azcentral.com/story/news/local/glendale/2014/07/21/glendale-mayor-council-members-violated-open-meeting-law/12956523/

  5. Not only that, ESPN got a half hour out of the largely-unsourced story and had the reporter in question as a guest on the show AND NEVER ASKED HIM ABOUT HIS SOURCES.

  6. Scott Meyers – other than Donald Sterling,who is about to lose $100M? Charles Wang, the majority owner of the Islander, is set to lose tens of millions of dollars.
    Many owners are constantly losing dollars every year, even the Miami Heat, who lost money again this past year.

  7. Bill L.,
    Year-to-year operational losses are round-off error compared to the capital gains the owner makes when he/she sells the franchise.

  8. Bill L.,

    Case in point…
    The Milwaukee Bucks, the worst team in the NBA this past season sold for $550 million. Herb Kohl, the seller, bought the team for $18 million in 1985.
    Kohl also agreed to donate $100 million for a new facility to replace the BMO Harris Bradley Center, the team’s downtown home, which opened in 1988.

  9. I think you may have misread Farmer’s article. The NFL would sell PSLs for Super Bowl tickets and naming rights to cover construction costs. The team would still receive all game day revenues including premium seating, suites, tickets, advertising, and parking.

  10. Nope, Farmer specifically mentions Super Bowl PSLs as a third option, separate from selling regular PSLs and naming rights and using those to fund a stadium. Of course, Super Bowl PSLs, once they’re invented, could also just be poured into the coffers of all 32 NFL teams, so I imagine there would be some resistance if the league said, “Hey, how about we give all the money to whatever team moves to L.A. instead?”

  11. Remember the good old days when shady owners with poorly developed swimming skills who wanted to move to LA would just trade entire franchises with someone else?

    Boy, doze were da days….

    As stadium extortion red herrings go, this idea might be the reddest of them all. The stalemate the league is in is that the only workable stadium plans will require an owner to surrender significant equity (possibly a majority interest) to gain access to the facility. Who wants to give up $100m+ a year in revenue streams just to get to a place that might or might not warm to your team?

    Add to that LA’s reluctance to fire teachers and policemen and close libraries, schools and fire stations just to help the world’s most parasitic non-profit corporation become even wealthier (man, some people just can’t see the big picture…), and it really isn’t surprising that LA is still “empty”.

    It’s not empty, of course. In fact the NFL still makes good money there. And it makes bags and bags of cash off the fact that it can hold up the non-existent LA move threat any time it wishes.

    At some point, the price for anything can be too high. LA might be in that spot now. If you have to pay $2.5bn to get the market and the stadium, and you can’t capitalize on RSN fees, how are you better off than you are in, say, Jacksonville? Sure, your revenues are much lower… but you have all that TV money coming in, and the city is paying you to play in the stadium they modified for you *(or soon will be).

    It’s just hard for me to see LA being worth $200m a year more than another market… and that’s what it looks like its going to take to cover the cost of getting there.

  12. League owned stadium may not be that far fetched. The NFL loses ~$100 million each Super Bowl in the difference between what they sell tickets for and what they’re actually worth. If the NFL could use a PSL sale in LA to make up most or all of that difference, then four or five Super Bowls might close whatever gap exists.

  13. Wait, what? Super Bowl PSL sales wouldn’t have anything to do with a stadium in L.A., except that Farmer is proposing using it to fund one. The idea is that the league could raise a pot of money by requiring PSLs for anyone who wants access to Super Bowl tickets.

    Here’s the full quote from Farmer’s story, since it seems no one is actually clicking through to read it:

    “Is there another potential revenue stream out there, one the league might harness to finance a stadium?”

    “Yes, Super Bowl PSLs. This idea has been floating around for years, and it’s only a matter of time before it happens. If and when the league establishes a regular rotation of Super Bowl sites — and it’s reexamining how it currently awards cities the marquee game — it can start selling seats years in advance. Well, the rights to seats, anyway. For instance, if L.A. were promised four Super Bowls in 20 years, the league could tell fans, “Pay X-thousand dollars now, and you will have the right to buy a face-value ticket for this seat for all four of those Super Bowls.” You may not like it, and it’s going to be pricey, but there’s a good chance that’s eventually going to happen.”

  14. Yes, Super Bowl PSLs could probably pay for a stadium in L.A. But they could also pay for anything else the NFL wants to use them for, including new gold-plated yachts for all the owners and their mistresses. So what’s the incentive for the league to pour this money into an L.A. franchise, exactly?

  15. Unless something drastic happens in the next TV contract renewal, the NFL will not allow any team into the LAX market.

    Two reasons: Ratings, and move threats.

    Right now, Los Angeles has the pick of the litter of the “best” games nationwide, whether it’s Niners-Seahawks or Patriots-Colts, etc. If a crappy team goes into LA, then they are on the must-carry slot for all their road games as well as any home games that are not sold out. If TWO crappy teams go into LA, that problem is doubled, if not worse.

    Toss on top of that the always-dependable move threat that MIN has already recently used, that SD keeps trying to use, and which OAK keeps muttering under its breath, and the NFL can keep the pressure on its cities to pony up for fear of losing their team.

  16. The idea of pledging 4 Super Bowls in 20 years (or 5 in 25) to help pay for a stadium is interesting and something the NFL could not do in any other city. The big game in LA would generate more than other cities, although how much I don’t know.

  17. Incentive is that in LA or NY, PSLs are worth more. Last NOLA Super Bowl had a get-in price ~$900 on StubHub and last year’s game in NY market was around $2,300. Can’t take advantage of that nearly as much until a modern stadium is built in LA.

  18. My other idea would be to allow local sports nets to simulcast local regular season games w/ homer announcers. Obviously CBS/Fox/NBC affils would fight it, but it’d allow big markets to get enough extra revs to overcome the lack of tax $ available to teams.

  19. The Super Bowl in L.A. would be worth more, yes. But also keep in mind that if the NFL pledges a certain number of Super Bowls to one city, it can’t keep demanding ever-richer tax breaks and promotional campaigns in exchange for the game, nor can it use Super Bowls as a carrot to get cities to build new stadiums. So there would be costs as well.

    As for allowing local sports simulcasts, I can’t see where the new revenue would be enough to more than offset what they’d lose in national TV money. Yes, it would shuffle money around to the big markets some, but if the NFL wants to do that it can just write some checks.

  20. “Obviously CBS/Fox/NBC affils would fight it, …”

    Why would that be a problem for the largest markets involved in a multi-billion dollar TV contract? (And where’s the incentive for all the other teams to agree to this?)

  21. The only reason LA doesn’t have a superbowl scheduled is that the NFL has chosen not to schedule one there. There is nothing, I repeat, nothing, stopping the NFL from putting on their corporate schmooze olympics at either the Rose Bowl or the Coliseum. They don’t “need” a new stadium. They just want one, but only if someone else will pay for it.

    Or they could just host it at AEG’s soccer stadium. Imagine what the tickets would go for in a 27,000 seat facility! Why, that could make NY’s first superbowl look like Jacksonville’s!

  22. @John Bladen- You cannot be serious with your last comment?

    First of NFL would never schedule a Super Bowl at the Rose Bowl or Coliseum because they lack premium seating/suites so your theory is out the window. They would sacrifice tens of millions of dollars.

    The NFL knows full well LA isn’t going to publicly fund a stadium period. Look at San Diego and Oakland struggling big time. The 49ers did their privately but have the wealthiest fan base in the league to make it happen.

    That is why they are thinking they build it themselves with league money and re-coup it through programs like PSLs, naming rights, suite sales etc….

    To SierraSpartan’s point above, LA is being held hostage for San Diego, Oakland, and St. Louis. Everyone is watching what will happen with the Rams as they can opt out after next season and their owner owns a boat load of land near Hollywood Park where the NFL approved a stadium for the Raiders several years ago.

    The only way LA gets a team is if the Rams fail in St. Louis where the state/county/city will need pour in 500M in public money to upgrade the current stadium…..I for one believe that is not going to happen.

    In which case, Kroenke develops a plan to build at Hollywood Park and the Chargers jump in (if they fail in SD which is not going well) and now LA has their stadium with 2 teams who are original LA teams that have some fans in the area….especially the Chargers.

  23. If the NFL could fund a stadium in L.A. with PSLs/naming rights/etc. and have enough revenue left over to provide the kind of profits that team owners are accustomed to, why couldn’t a team owner do the same? Conversely, if Davis, Kroenke, et al can’t make an L.A. stadium work on their own dime, why should it be any different with the NFL?

    I’d love to see the Santa Clara model replicated in L.A., don’t get me wrong. But whether it’s the NFL or a team owner writing the checks, any new building still needs to adhere to the formula (new revenue)>=(construction costs)+(owner profits).

  24. L.A. probably won’t get a team to relocate there. Their only hope is if they are awarded an expansion team.

  25. Our real “formula” for L.A. is… lights, camera, action! Our latest release, “Nightmare in the Los Angeles Basin 20: Your Team Name Here!” is an action-packed horror thriller about a terrifying proposed move of some beloved team in some North American city.

    The plot: Fiendish Football Emperor Goodell arrives aboard the NFL Deathstar with his Sith sidekick Art Rooney Jr. to threaten the locals with the hell of football extinction. “If you will not be turned, then you will be destroyed” says Roger, holding his hands up as if to shoot blue lightning bolts at the local city council.

    The team is minutes away from boarding a plane to Los Angeles, never to return. Hideous drawings of the “shovel-ready” stadium site in L.A. decked out in the team’s colors are shown to the local politicians, causing fear, sweating and nausea all around. But in the end the good citizens once again are made to pony up and pay tribute to the NFL to save their football squad and restore order to the galaxy.

    This time-tested formula has worked since 1995 when the NFL’s “Nightmare in L.A.” film series began, spawning 19 exciting sequels with more on the way!

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