Follow the Bouncing Dollar

Greg3 takes a look at the LA situation and ponders the question of who should move, and in particular the situation in Arizona.

Follow the bouncing dollar…


The possibility of an NFL team moving to Los Angeles is flaring up again, as it has several times since the Rams and Raiders left in 1995.  And, let's make it clear – this has nothing to do with the thrills NFL football will bring to LA – it has to do with business – and leverage on struggling NFL franchise cities.


The NFL is on a serious cash roll now, especially since signing the most recent television contract which guaranteed each team an average of about $73-75 million per season until 2005 (* this number may be slightly smaller due to the addition of the Houston franchise).  As recently as 1994, that number was ‘only' $34 million per team.  Let's give credit where it's due – via national TV revenues, the salary cap, and the flurry of new stadiums around the league, the NFL is beating the stuffing out of Major League Baseball and the NBA in maximizing the power of their dollar.  Selling the product is what the NFL does best.


Even the return of the Browns in 2000 is an important lesson about the NFL master plan – high dollar, fan/taxpayer supported, stadiums (PSLs, luxury boxes, parking, concessions, apparel, advertising, etc.) for the team owners, and an exceptionally lucrative TV contract, makes for exceptional franchise costs for new teams.  Yes, there was a huge fan base and outrage when Cleveland lost their NFL team.  But, I think it is clear that, at the bottom line, a new "owner friendly" stadium and a huge expansion team fee brought the NFL back to Cleveland.


Currently the system is a runaway train.  Consider this - Jerry Jones paid $180 million for the Cowboys in 1989.  The Houston Texans franchise fee was $700 million in 1999 (not including the new stadium, which was an additional $300+ million, primarily public financed).  Each time franchise fees go up, every owner benefits, both with their cut of the franchise fee (equally divided) and by raising the value of their own franchise.


            The money game is difficult to decipher.  The 2002 salary cap is $71.1 million, which basically eats up the entire team share of television money.  But, since the 2002 salary cap equals only 64% of the ticket, television, and merchandise revenues that all teams share, each team still earns about $40 million dollars.  This money goes to pay all other costs of running the team – travel, all non-player salaries and benefits, taxes, equipment, etc.  But, when teams struggle to carry their load in the sharing system, they look for new locations and better stadium deals.


And, that's why LA is the sweetheart of the NFL – the 2nd biggest city in the U.S. doesn't have an NFL team.


As a quick aside, the Browns have a direct, and particularly relevant historical link to this topic. Way back in 1946 the Cleveland Rams made the first NFL jump to LA.  The reason?  You got it - business.  Even though they had just won the Championship game, the Rams moved to LA due to waning attendance and competition with the new Browns.


Why the odds are currently against LA…


(As you read this, please keep in mind the NFL is already maxed out at 32 teams.  Thus, an expansion team is not viable at this time.)


1)  Despite LA's status as the #2 city in population and television market size, the presence of a team in LA isn't likely to improve the TV contract.  When the LA teams existed, the mediocre attendance of the Rams and Raiders, combined with the NFL's "sell out" blackout rules, severely limited the number of NFL games shown in LA.  Thus, during the absence of teams from LA, fans in LA actually saw more football telecasts.  And more televised games means more advertising dollars for the networks.  And more advertising dollars for the networks means…well, I think you know where this is going.  Remember also - NFL local radio and television money is comparatively miniscule – thus, the size of the market is insignificant in these terms.


Additionally, the NFL knows population and television market size don't always equal franchise success.  The top ten teams for attendance in 2001 were (population, market size follow):


NYG, NYJ      (1,1)

Washington      (21,8)

Kansas City      (36,31)

Detroit (10,10)

Denver             (25,18)

Miami               (47,15)

Cleveland         (33,17)

Carolina           (26,27)

New Orleans    (31,43)


2)  Currently, LA has no viable location for a franchise to play and earn the kind of jack needed to survive in today's NFL.  The Coliseum, the only viable venue in place, has the capacity to hold about 92,000 fans.  But, despite its storied history, it also has three significant draw backs - 1) it's owned by the Los Angeles Coliseum Commission; 2) it was built in 1923, with some improvements over the years, but ZERO luxury suites; and 3) it's capacity is too high to avoid consistent television black outs in the LA area.  Thus, it isn't a sound financial opportunity for any owner thinking of moving there.  What a new  LA team would need is a facility with a capacity in the neighborhood of 65,000 – the average NFL attendance last year.


3)  So, you and I say, "Why not go the recent route of many teams – squeeze the local community for a NEW stadium with high priced luxury suites and PSLs for all?"  In the first place, in the State of California, where the state motto should be "Taxes?  We don't need no stinkin' taxes", public support to build a public funded facility is, at best, minimal.  And, keep this in mind - the NFL will only assist with new stadium building costs when public funding pays for a portion of the new facility.  No public funding, no NFL loan.


Second, an existing owner could agree to move a team to LA.  But, it would be unlikely that an owner would do this without LA community support (i.e. a new stadium promise) already in place.  Done out in the open, this move is risky, as the owner would then alienate his current community (a la Modell). 


If an owner relied on a source other than public money, perhaps an individual or group who offer to pony up for the new stadium, the owner would have to give up some level of controlling interest or revenues from the new stadium.  This certainly presents a significant hurdle.  And, it is unlikely an individual or group would step up to build a new stadium without a pre-existing guarantee of a team moving to LA.  St. Petersburg, FLA is the only city I know of that pulled this off – but they didn't get a baseball team for five years after Tropicana Field opened, and even then it was an expansion team.  It's a tough catch-22 – teams won't commit without a new stadium promise, and the stadium won't show up unless a team commits.


4)  Al Davis wants to return to LA.  I was tempted to just say "enough said."  But primarily, if you were a LA Raider fan from 1982 to 1995, would you want to back this guy?  Given his track record, what guarantee is there that he wouldn't move the Raiders anywhere he could make another dollar?


In my opinion, the above reasons are more than enough to demonstrate why LA is poor choice for franchise movement.  Other than market size, there really aren't many positives.  With all of these negatives in place, I think it clear that LA is being used for leverage in several "struggling" NFL cities.


Current possibilities for a move to LA…


An examination of the 2001 NFL attendance figures puts Arizona football on the chopping block.  Arizona's average attendance of 38, 414 per game is considerably less than #30, Atlanta, at 54, 251 per game.  The average 2001 NFL ticket cost $53.64.  Thus, a rough estimate would be that Arizona's season attendance revenues were $12 million less than the average NFL team (65,782), and they brought in roughly $17 million less than the top gate draw, the NY Football Giants.  The main point here is that the NFL's balance is reached by an exceptional level of sharing, including gate receipts, television contract money, and franchise fees paid by new teams.  As mentioned above, when one of the teams isn't pulling their weight, the league office and owners are certainly paying attention.


In an effort to save the Cards, the Arizona Tourism and Sports Authority is attempting to secure public financing for a $335 million stadium to open in 2004.  But, to put it lightly, things are not going well.  Check out this link to see a barrage of problems and opposition:  "".  So, if they can't get a new stadium soon, maybe LA is the spot.


San Diego is the most recent mention to back up the moving van in the middle of the night.  Déjà vu all over again – the Chargers of the AFL started in LA in 1960 – and of course, they played their first game in the LA Coliseum.  Despite the recent new stadium rush, the Chargers have, remarkably, been at Qualcomm Stadium, a.k.a. Jack Murphy Stadium, a.k.a. San Diego Stadium since 1967.  That, of course, is the reason their owner says he "can't compete" in today's NFL and needs a new "state of the art" (translation = public financed) stadium.  Then, in order to gain a little leverage, he talked to a group from LA, even though the Chargers can't leave until after the 2003 season – just call him A.M., and I don't mean ante meridian.


From the figures I could find, the Chargers have consistently averaged about 82-84% capacity each season since the early 1990s.  They have a ton of luxury suites.  They are the 7th most populous city in the U.S.  Why they need a new city to play in is beyond my limited mental capabilities – but, then again, I don't own any multi-million dollar assets.


My conclusion?  For all the articles I reviewed to prepare this article (about 50 total), not a single one referred to an overlooked clamor by Los Angeles football FANS as the reason to put a team back in Los Angeles.  Each mention is about a team that is unhappy or unsuccessful in making money in their current location.


Maybe a team will appear in LA, but, they won't be the Rams; they won't be the Raiders.  Let's just call them the Los Angeles Levers.



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