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The NFL's Race to Los Angeles

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In the past week and a half, we've seen multiple stories regarding the possibility of three franchises moving to the second-largest media market in the United States. So, who's the favorite to win, and why?

Donald Miralle

All of the hullabaloo started less than 2 weeks ago, when a proposal was floated by the Oakland Raiders that they'd be willing to be co-tenants in a new stadium in Los Angeles. The kicker in the proposal was that Raiders would be willing to switch from the AFC to the NFC to make the arrangement work - and putting teams in Los Angeles in separate conferences, like the Giants and Jets in New York [Editors Note: New Jersey] in New York (Editors Note: New Jersey).

The Raiders' proposal was a revealing statement, and here's why.

  • It means the Raiders are not the current front-runners to move to Los Angeles. The statement smacked of desperation on the part of Raiders' owner Mark Davis, who clearly doesn't want to get frozen out of the chance for a new stadium.
  • The fact that the Raiders offered to switch to the NFC means that "someone" desperately wants to create the idea that the Chargers are legitimately interested in moving to Los Angeles.
  • It means that, at present, the most likely team to move to Los Angeles is, in fact, the St. Louis Rams. Given that they have already said they don't want to "share" Los Angeles, this means...
  • The NFL is the entity desperately trying to create the impression of a two-team race to Los Angeles.
Why is this the case?

Simply, the NFL wants the best possible terms when a team (or teams) moves to Los Angeles. That means creating a competition for the market, which guarantees the best stadium deal, generating two relocation fees instead of one, and then using the presence of two teams in the market as leverage in the next round of television contracts.

As if to clarify these points, the Los Angeles City Council voted this week to extend its agreement with Anschutz Entertainment Group's (AEG) proposal to build Farmers Field, near L.A. Live and the Staples Center in downtown Los Angeles, for an additional six months in the hopes of luring a possible tenant.

In the NFL's perfect world, it would collect a relocation fee from any teams moving, while at the same time owning or co-owning the stadium and collecting revenue from the exorbitant premium seating and advertising revenue, not to mention selling PSL's for League events such as the NFL Draft, or the Super Bowl.

Here's a closer look at all three teams.

St. Louis Rams

As we've discussed before, the Rams' lease in St. Louis will expire in March of 2015, unless the Convention and Visitors Commission of St Louis agrees to $700 million worth of improvements to the Edward Jones Dome. Furthermore, back in February, Rams owner Stan Kroenke purchased 60 acres of land between Hollywood Park and the Forum in Inglewood.

This is why the NFL wants to create a competition for Los Angeles. Kroenke, by owning his own potential stadium land, would be in a position to build his own stadium (never mind his own wealth, Kroenke is married to one of the Wal-Mart heirs) and shut the NFL (and AEG) out of the deal for sharing the revenue. Kroenke also has the business contacts in Los Angeles to make a Rams move to Los Angeles a long-term success.

However, there have been at least preliminary discussions in St. Louis which surfaced this week, regarding the possibility of a new stadium being built along the Mississippi River waterfront. No firm proposals have been made to this point, however, with the Rams' lease expiring soon, there could be more news coming.

Oakland Raiders

As with the Rams, the Raiders lease expires following the 2014 season. And according to owner Mark Davis, there's no movement on a stadium deal in Oakland. Where there has been some movement (conspicuously so) has been with Davis traveling to San Antonio and Los Angeles to meet with local officials.

That said, the NFL is skeptical (to be charitable) of allowing Davis to bring the Raiders back to Los Angeles. If the Raiders move back to Los Angeles, it might have to be with a new owner who has the real estate and marketing experience the NFL desires. I'm speculating here, but that sounds a lot like AEG to me.

Thus, floating the idea of sharing a stadium and the Raiders moving to the NFC, and allowing the Chargers to move to Los Angeles, and freezing the Rams out.

San Diego Chargers

As we've discussed before, the Chargers don't like the AEG deal because the Spanos family doesn't want to sell a controlling interest in the team. But if Davis sold the Raiders to AEG, that part of the problem is solved.

As they did earlier this year, the Chargers have voiced their opposition to any teams moving to Los Angeles. This is because the Chargers stand to lose approximately 25-30% of their premium seating and advertising revenue once an NFL team relocates to Los Angeles. Here's the statement from Dean Spanos (via Chargers.com)
"That is a very important issue to us because over the last 20 years we have spent a lot of time working into the Orange County/LA market, and 25-30% of our business comes from that area" he said.  "So when the Rams and Raiders left 20 years ago, we really worked hard to obtain that business.  So having a team or two teams going there would really be devastating to us right now.  We want to be protective of our business down here, so it would not be in our best interest if a team or two teams went up there." - Dean Spanos
Considering the Chargers would need to gather eight other votes to oppose a team relocating to Los Angeles, the Chargers opposition should be construed as posturing for one of the following situations - reused from my post earlier this year:
  • Secure some sort of a future agreement to split the marketing in the lucrative Orange County region.
  • Secure extra financial rewards for giving up rights to Los Angeles, in exchange for not opposing a move.
  • Sending an unofficial signal that the Chargers are readying a move of their own.
Here's the thing for the Chargers. As of right now, there's no stadium deal coming in San Diego. The Chargers can exit their lease each year, and pay a (rapidly decreasing) exit fee. And if they're faced with a "move it or lose it" proposition with Los Angeles, their leverage in San Diego disappears the moment the Rams or Raiders stake their ground.

In Closing - My Pipe Dream.

There's no chance this happens, but let's go with it anyway. Because I'm a native San Diegan and the idea of the Chargers playing home games in Los Angeles is anathema to me - not even with SoCal Chargers window dressing.

The Chargers' claim on the Los Angeles market could probably be bought off. If it was handled correctly, it could be a major piece of the stadium puzzle in San Diego. If you recall, the stadium price tag is close to $800-900 million for a 62,000 seat outdoor venue. Here's how the funding might work:
  • $200 million from the Chargers.
  • $200 million from the NFL Stadium Loan Program.
  • $150-200 million for naming rights.
  • $150-200 million from the league for giving up current Los Angeles marketing opportunities and not opposing a move.
That adds up to about $750-$800 million. The city isn't faced with selling the Qualcomm and Sports Arena sites, and the public impact would likely be limited to infrastructure. The remaining cost could be handled by a combination of advertising rights, PSL, and other private investments (e.g. restaurants, shops, etc.).

Dean Spanos has always said he wants to keep the team in San Diego. Maybe this is his chance.  It satisfies the no (or extremely limited) public money part of the equation nicely. It's much more likely to pass a public vote.

Lastly, and most importantly (to me) it keeps the Chargers in San Diego.