Oakland Raiders owner Mark Davis has agreed to a new lease at the Oakland Coliseum for the 2016 season, and for anyone hoping the Oakland-Alameda Coliseum Authority would drive a hard bargain with Davis since he has nowhere else to play this year, nope, that didn’t happen: It’s just a one-year lease with two one-year team options, meaning the Raiders can leave anytime after 2016 that they want to, but can also stay put if they so choose without having to renegotiate. The authority did manage to get an (undisclosed) rent increase, but otherwise public officials pretty much gave up any leverage they had over the team, presumably hoping the resulting warm fuzzies will encourage Davis to build a new stadium with several hundred million dollars he conjures into existence with a wave of his hand.
The lease deal, which still needs to be ratified by the Oakland city council and Alameda County board of supervisors, at least accomplished one thing: Davis has stopped complaining about Oakland again, and is now back to blaming his lack of a new stadium on his other favorite nemesis, A’s owner Lew Wolff:
“There’s an elephant in the room, and that’s the Oakland A’s,” Davis said after Thursday’s press conference. “They have to make a commitment to what they want to do.”…
“They signed a 10-year lease while we were negotiating with Oakland officials), and it kind of put somebody right in the middle of things,” Davis said. “There isn’t much you can do. They’ve tied our hands behind our back.
“Now it’s up to the A’s to make a declaration of what they want to do. If they don’t do that, I don’t see how we can make a deal.”
Signing a 10-year lease seems a pretty strong commitment, but presumably what Davis means is “Hey, Oakland, make Lew Wolff pick one side of the room and stay there, and we’ll build a stadium on the other side, if there’s room, and if we find money somewhere, maybe.”
Realistically, nothing is getting built in Oakland anytime soon, and probably not at all until either Wolff or Davis can force the other out of town, thus clearing the way to control all the Coliseum property themselves. Since it’s far easier to find viable NFL sites than MLB ones — thanks to that whole thing about local cable revenues, and hence local cable market size, not mattering for the NFL — it’s likely to be the Raiders who blink first and end up in San Antonio or Las Vegas or Kankakee or even sharing digs with the Rams in Los Angeles, if San Diego Chargers owner Dean Spanos succeeds in getting stadium cash out of his city and forgoes the right to move to L.A. Tune back in around November, and in the meantime, try not to stare too hard at the tea leaves, you’ll strain your eyes.
Oakland city council and Alameda County board of supervisors are the winners here, even if they only got an (up to) three year extension. They keep both teams for (up to) three years without having to spend much additional money. That they got a (who knows how much) rent increase to help pay for mistakes made 20 years ago is gravy.
I have to believe Oakland / Alameda Country both know they can’t afford a single new ballpark / stadium. If that’s the case, then keeping the status quo is the best strategy, despite having to say how much you want to help the teams build new facilities. Even if they could afford one, a new stadium / ballpark means losing the other team.
Now, if someone would invent one of them multipurpose stadiums that allows both teams to keep all of the non-event day revenue, then there might be a way out. That the seating would be suitable for both sports is not as important as the money. It’s also why neither team would ever agree to two stadiums on the same site even if there was plenty of room.
Those people in Kansas City who planned Arrowhead / Kauffman in the early 1970s seem smarter all of the time.
Those tea leafs are too enticing. It’s like Mark Davis is trying to tell us: “After the Chargers announce they’re going to Inglewood; he’ll enjoy his “free” stadium in Las Vegas, minus relocation fees, if they’re really going to build the stadium for UNLV either way.”
I think it’s way premature to assume anything other than “Davis says, ‘Fuck it, I gotta play somewhere this year, now I can kick the can down the road another season at least.’ “
“Since it’s far easier to find viable NFL sites than MLB ones…”
I’ve read some spacey presumptions in my day, but this one’s up there.
An MLB stadium can be slapped in just about any area because parking is no longer a requirement. NFL fans tailgate, so far more space is needed.
Even in Oakland — the city that is the subject of THIS STORY — there are at least three suitable MLB stadium sites, but only one for the NFL.
Also, we need to dispense with this fiction that NFL teams are less reliant on local revenues than MLB teams. NFL teams are just as reliant on local revenues as MLB teams. If we estimate shared national revenues at $120 million for MLB (granted, it’s tough to get an accurate number because there is no team like the Packers that shares their numbers publicly), then local revenues ranged from $68 million for the Rays to $388 million for the Yankees. The NFL distributed $226 million in national revenues, so that means that the bottom team (Raiders) drew $59 million locally and the top team (Cowboys) drew $394 million locally. And it’s not like you can claim that the Cowboys are outliers, because their lead over #2 is almost identical to the Yankees’ lead over #2 in MLB. The modern reality is that market strength is just as important in the NFL as it is in MLB.
Ben,
I think the better question on local revenues is, “important for whom.”
If the goal of the NFL owner is on winning games through payments to the right set of players, local revenues matter less because of the harder salary cap and the relationship to national payments. Dallas’s $394 million certainly hasn’t really bought a lot of “winning” lately. A solid local revenue base can help with that goal–particularly through the ability to pay strong assistant coaches and give a lot of attractive creature comforts to prospective players. However, I highly doubt that the Cowboys spend $200 million more on assistant coaches than the Raiders do.
If, as seems to be the case for some of the owners, that profit maximization is more important–then of course local revenues matter a lot.
A lot of smaller MLB teams these days appear to be above water only because of local TV deals–which I think was the point of the post–that MLB teams need to be in places where a local cable deal is possible. Not where exactly the stadium would be.
“…we need to dispense with this fiction that NFL teams are less reliant on local revenues than MLB teams.”
Assuming your numbers are correct, that $106M difference in national revenues means that MLB teams still are more reliant – in terms of the percentage of their revenue coming from local sources – on local than NFL teams. i.e. a team with $220M total revenue is more reliant on $100M local than a team with $320M total revenue.
As for tailgating, I’d say that actually makes it easier to find a spot. Football stadiums work far better out in the middle of a cornfield than baseball stadiums.
Ben: Sorry, that should have said more viable NFL *cities* than MLB, not sites. The point being that you could legitimately put an NFL team in a place like Las Vegas (maybe), but for MLB it would be insane.
As for local revenues, I’d like to see your specific numbers — in addition to Keith’s point about $300m being worth more to an MLB team than an NFL team, you need to take into account revenue sharing, which works very differently in each sport. It’s not as simple as saying “The Cowboys make $300m more than the Raiders and the Yankees make $300m more than the Rays, so an MLB team could just as easily move to a small market as an NFL team could.”
IMO, they key element was summed up by Neil:
“Realistically, nothing is getting built in Oakland anytime soon, and probably not at all until either Wolff or Davis can force the other out of town, thus clearing the way to control all the Coliseum property themselves.”
This missing party in that statement is Oakland–they have a conspiracy role in this Game of Thrones.
I believe Wolff AND Oakland are intending on standing pat, digging in and waiting it out, forcing Davis to get frustrated and either give up on his “Ingress, Egress and Tailgating” motto or get out town.
Unless I am missing something. I actually don’t think Oakland has lost leverage. Signing rolling one-year deals doesn’t lose them much except the opportunity cost of the development of the property (which is no small $ value). But Oakland has been fairly unwavering on what they can contribute–even in the face of losing the Raiders to LA. I (hope I) don’t see that changing. And in the end, they would be better off if the Raiders left.
The only pressure on Lew Wolff is unhappy fans who are tiring of his philosophy of churning through Moneyball low-rent players. (I hear them on sports-talk radio, but I am not sure that it is showing up in attendance: http://oakland.athletics.mlb.com/oak/history/year_by_year_results.jsp)
Re: Local revenue and the Cowboys, it’s important to remember the Cowboys’ have a special deal with the NFL. All other NFL teams split not just TV revenues but a bunch of other revenues, including ticket sales, merchandise, etc.
The Cowboys are the only NFL team that doesn’t split merchandise sales. When people watch those “Football is Family” commercials and buy some stuff they all get an equal cut of the take, unless it’s Cowboys gear, in which case it goes straight into Jerry Jones’ pocket.
Therefore, any numbers for local revenue for the NFL should be based off the #2 team by revenue, the Patriots, because no matter where he moves Mark Davis isn’t going to negotiate Jerry’s sweetheart deal with the league.
At this point, from what I’ve read the last few months it feels like we are seeing a gigantic flip from all the other stadium battles; for once, the league wants a team to stay where they are (mainly as an FU to the late Al Davis, though there are some other reasons), but the city actually kind of wants them to leave. I’m thinking, like others here, that Oaklands plan is to try to get some extra cash so they can more easily pay for a new A’s stadium and for the refurbishing of the Oakland arena after the Warriors leave (ala the recent LA Forum and upcoming Nassau Coliseum renos)
Where would Oakland get extra cash from?
On the subject of leverage, Oakland lost the chance to leverage the Raiders’ current homelessness into a longer lease, so they don’t have to go through this all again next year. They still have the leverage of saying, “Yeah, we don’t care if you leave, you’re still not getting any city money,” agreed.
I think it is quite an overstatement to say Oakland “actually kind of wants them to leave.”
Oakland, and most of the Bay Area in general and to a lesser extent the whole of California, is opposed to public subsidies for sports stadiums which is very different that saying anyone actively wants any team to leave.
The public needs to realize that professional sports franchises are a for profit corporations and being loved by the community means very little to the owners of any organization. The primary obligation of the owners is to maximize their return on investment. Can that be achieved in Oakland?
“Obligation”? It’s not like they have shareholders. Who exactly do they have that obligation to?
“Maximize return on investment”? What investment did Mark Davis make? It’s not like he bought the team–he inherited it.
I think that may be the way some owners see themselves–as hard-bitten CEOs with an obligation to the “shareholders” (themselves, and the family members that hang on them) to make their team as rich of a source of profits as possible.
Could the Raiders win a championship in their current city? Of course they could–they made the Super Bowl not that long ago. But can they “deliver” boatloads of cash? Probably not.
I think it’s fair to say all the NFL franchises deliver boatloads of cash. It’s just a question of how big of a boat.
The Oakland Raiders have nine business partners. Mark Davis is the Managing General Partner. He isn’t the sole owner of the team.
Does anyone know exactly how much of the team belongs to Mark and how much belongs to Al’s wife, Carol?
When she passes, the estate tax kicks in. That’s an awfully large chunk of change to pay the. I think that will have some effect on the ownership % of the outstanding shares. That said, do any of you think this is an issue for the Mark Davis hunt for a free stadium and operating subsidies? Is he a lame duck owner right off the start?
*pay the IRS*
It seems no one quite knows what Mark owns and what Carol owns.
There has been speculation that the tax bill could cause a sale:
http://www.forbes.com/sites/trialandheirs/2011/10/10/will-estate-taxes-force-al-davis-family-to-sell-the-oakland-raiders/
However, it seems the NFL has now allowed teams to be put into trusts to avoid the tax bill:
http://www.sportsbusinessdaily.com/Journal/Issues/2015/05/25/Leagues-and-Governing-Bodies/NFL-trust.aspx
I’m no estate tax lawyer, so beats me but it seems more likely than not if Mark Davis doesn’t want to sell, and the federal government doesn’t change the law, he can probably hold onto the team.
This will place Mark Davis in a Catch-22. Either he will have to pay the inheritance tax or he risks a structure that will be under control of a trustee. Also, what would the additional partners of the Raiders be inclined to due when one of the heirs dies and they attempt to dissolve the trust?
jcpardell: Yes, a trustee, Mark Davis.
To my understanding, the trustee of an irrevocable trust has to be independent and cannot be one of the beneficiaries.
jcparnell: Not sure where you got that idea.
http://info.legalzoom.com/can-beneficiary-become-trustee-irrevocable-trust-20387.html
“A trust’s owner may name a beneficiary—a person who receives income and assets from the trust—as trustee or successor trustee in the agreement.”
Given the implications, I see a huge legal battle between Mark Davis and the other business partners in the Raiders organization.
As I say I’m not a lawyer, but I don’t quite understand why you think there would be a “huge” legal battle in the even of Carol Davis dying if there was no legal battle after the death of Al Davis.
The fact that the owners with majority voting rights are using a legal structure to avoid payment of taxes is perhaps a concern for the IRS or even elected officials, but hardly constitutes grounds for the other business partners. In fact, they almost certainly would want to defend their right to pass on ownership in the same manner when they pass.
Perhaps. If Mark Davis is the sole beneficiary of the trust, he has little to worry about when it comes to his 47% stake in the Raiders organization. Now, if there are other beneficiaries named in the trust, and he misuses the trust for any purpose, they can revolt and seek his removal.
Now, I don’t know who has 53% in the Oakland Raiders. However, I’m certain they will have questions as to the structure of the trust and how its managed. Just because its an irrevocable trust, it doesn’t mean it can’t be sued.
Considering the trust doesn’t exist yet and was against NFL rules but now supposedly will be set up by Carol and Mark Davis for the tax benefit of the Davis family, I’m not sure who these mystery “other beneficiaries” might be.
Perhaps the other beneficiaries are hanging out in Sacramento with the magical $500M you suggested was going to materialize from thin air in another thread.
When did I suggest someone was holding $500 million for a move to Sacramento?
If you’re a partner in a business, wouldn’t you have questions if the managing partner was considering placing his/her stake of the organization into an irrevocable trust? Like you, I don’t know who owns the remaining 53% stake in the Raiders organization.
I might have questions which is very different than having legal standing to challenge it.
In California? You can sue for just about anything.
Neil,
I’m using Forbes’ yearly revenue numbers, the Packers’ reported numbers for national NFL revenues and a combination of reported MLB revenue sharing numbers, BAM estimates and reported national TV numbers to take a guess at MLB’s national shared revenues.
You may have a point on needing larger cities for MLB. But in the modern age both an NFL team and a MLB team can operate with relatively little in the way of local revenues.
The MLB dependence on regional sports networks (as opposed to the generally free-to-broadcast NFL) is a big difference.
Since smaller-market teams have been buttressed both by revenue sharing and by regional TV rights deals, it will be interesting to see the impact on these teams if cord-cutting causes problems for regional sports networks to pay off their long-term contracts (often contracts negotiated by the team with a channel owned by the team itself!). This would seem to have an impact on revenue sharing as well.
I think it was in Germany where the main soccer league bid rights to a satellite provider, who went broke when the number of subscribers needed failed to materialize. Half the league’s teams were in serious financial peril thereafter.
Mark Davis is right that Lew Wolff is stalling and not cooperating in the least bit.
Wolff wants the Coliseum site to himself so he can build his stadium privately and a development on top to make extra coin in a burgeoning market. He has said he does not want to compete for corporate and premium seating dollars with the Raiders on the same site.
Mark Davis has said publicly let’s build two stadiums at the same time, leave and come back. Wolff says the opposite “I want to build next door and play in the current coliseum” when he knows full well all the utilities run under the current site and it would cost Oakland double to run those same utilities next door while he continues to play at the current spot. What does this tell you?
Then Wolff after Davis calls him out says “we are studying our options are in month 6 of a 6-8 month process”. This is horse shit, he has 227 pages of info he provided to the BRC on why the East Bay is not feasible outside of the Coliseum site.
Here is the kicker…..then Wolff also says in his lease the Raiders if they come to an accord with Oakland the A’s can leave at that time.
You know why he said that? It is because he knows damn well Oakland will not kick him out in favor of the Raiders or vice versa because of political backlash. It is one thing if a team leaves a city but has any city ever kicked out a pro team in favor of another pro team? Think about that one for a minute
Davis wants the entire site to bridge his funding gap with some development and is willing to leave room for an A’s stadium. Wolff refuses to sit at the table and find a solution with Davis and Oakland because he is greedy and wants the entire site to himself.
This is why he signed a 10 year lease and not year to year like Davis did trying to leverage Oakland. But as long as Wolff is a jackass and won’t move, Davis cannot cut a deal with Oakland.
That is Wolff’s end game, he wants Davis and the Warriors to leave so he can control the entire site. The Warriors are gone in 3 years and he almost won with Davis but the NFL wouldn’t oblige.
I bet Wolff must hate the NFL right about now but he deserves the Raiders sitting on his head.
I used to be a Wolff sympathizer and rip on Davis but now after analyzing Davis’ comments it all makes sense to me. Wolff is using Oakland’s refusal to kick him out in favor of the Raiders against Davis in hopes of Davis throwing his hands up and leaving….which he just tried to do and failed.
Wolff needs to force MLB to keep in on revenue sharing and sit down with Davis and Oakland for a two stadium solution at the Coliseum site and stop stalling. Davis for the first time is right, I cannot believe I am siding with him right now.
Forget the fact Wolff and Fisher are so rich combined they can sniff and build a stadium no problem, more so than Davis.
So who needs the land on the site more for development? It is the Raiders and Davis.
Wolff can always tell MLB to keep him on revenue sharing and he and Fisher can still turn a profit in a much bigger way than they are now.
Wolff’s greed is appalling