Team relocations keep the NFL moving up financially

By Ken Belson, New York Times News Service

Saturday, Jan. 14, 2017 | 2 a.m.

In the depths of the Great Recession several years ago, NFL Commissioner Roger Goodell made an audacious pledge to the owners of its 32 teams: The league would hit $25 billion in revenue by 2027.

To reach the number, the league, whose value now is $13 billion, would have to grow by about $1 billion a year, no easy task in a crowded sports landscape. But the league’s broadcast contracts were skyrocketing in value, teams were starting to sell for 10-figure amounts, and the NFL was finding new ways to attract more fans, through video games and fantasy football; by adding more games on Thursday nights; and by playing games overseas.

Bankers were willing to lend huge sums to owners to help them build big, modern stadiums with luxury suites and other income-generating features.

A winding road could be paved from Goodell’s pronouncement that day to the decision, announced Thursday, that the San Diego Chargers will move to Los Angeles and will ultimately play in a $2.6 billion sports palace the Rams, who moved to Los Angeles from St. Louis last year, are building.

The Chargers’ move is expected to presage another, with the Oakland Raiders gearing up to abandon their home in the coming weeks and bring NFL football to Las Vegas for the first time.

These moves will ultimately help the league meet its financial target, even at the expense of medium-size cities like San Diego and St. Louis, and possibly Oakland, left without the prestige of football teams.

Although the pressure of the recession has eased, the NFL is facing other uncertainties — including fans’ apprehension over the violence of the game and its toll on players’ health, an oversaturation of games and changing viewer habits — that make it increasingly amenable to the disruption of these moves.

“Concussions, mothers turned off to football, the health of the players, these are all real issues,” said Bob Boland, who teaches sports law at Ohio University. “The issue of oversaturation of television is real, even if ratings rose after the election.”

For the league, moving a team tends to reap a financial reward.

In the case of St. Louis, the league was trading the country’s 21st-largest market for its second-largest. Before they even took the field in Los Angeles, the Rams doubled in value to $2.9 billion, sixth-highest in the league, according to Forbes — largely because of the prospect of naming rights, sponsorships, ticket sales and other revenue the new stadium was expected to generate. The move helped increase the value of all franchises 19 percent, and the owners would all receive a share of the $650 million relocation fee that the owner E. Stanley Kroenke has to pay.

Still, the NFL may be a victim of its own success: For the first time, ratings for every one of the league’s major television partners declined this season.

Although the league blamed the distraction of the presidential election, analysts see deeper cracks in the league’s business model. Fantasy football, in which participants cobble together and bet on virtual teams through websites, has made younger fans more interested in individual player performances and less loyal to specific teams, and a lot less likely to sit for three hours in front of a television watching one game.

They certainly have a lot of options, maybe too many. The NFL has media deals with CBS, NBC, ESPN, FOX, DirecTV, Verizon and on and on.

Whatever the crosswinds, where before the NFL might have taken its time weighing a team move, nowadays it seems more willing to give the green light simply if the move gives a sizable financial boon to the league, as was the case with the Los Angeles stadium.

“Getting to LA was a clear objective of the league,'’ said Irwin Raij, a lawyer at Foley & Lardner in New York who specializes in stadium deals. “Now they’ll have two teams instead of one and hope it drives revenue.”

For years, the Chargers’ owner, Dean Spanos, failed to persuade lawmakers and residents in San Diego to provide hundreds of millions of dollars to help him build a new stadium to replace aging Qualcomm Stadium.

In November, voters rejected a ballot measure that would have steered hotel bed taxes to the team for a new downtown stadium, leaving Spanos little choice but to leave, and the other team owners — aware that the Chargers would also soar in value — were not going to stop him.

In Oakland, Mayor Libby Schaaf has been clear that her city cannot afford to subsidize a new stadium to replace the aging and decrepit Oakland Alameda County Coliseum. That is why the Raiders’ owner, Mark Davis, is expected to apply to move to Las Vegas, where lawmakers have said they would give him $750 million in hotel taxes to build a stadium.

Despite their trepidation about a team leaving Northern California and moving to a city where sports gambling is legal, the league owners are likely to approve the move if only because the Raiders — and the rest of the NFL — will increase in value.

Down the road, the owners may also move a team, presumably from a smaller market like Jacksonville, Florida, to London, to help fulfill the NFL’s plans to add fans outside the United States.

There is a cost, though, that Spanos alluded to in his letter to fans in San Diego: loyalty.

“L.A. is a remarkable place, and while we played our first season there in 1960 and have had fans there ever since, our entire organization knows that we have a tremendous amount of work to do,” he wrote.

The Chargers had a small but loyal following in San Diego, but now Spanos has to persuade fickle fans in Los Angeles — where football teams at UCLA and USC have strong followings — to pay thousands of dollars for season tickets and licenses that give the holder the right to buy them. Companies, which already can advertise with the Dodgers, the Lakers, the Rams and a host of other teams, will need to be persuaded to spend millions of dollars on sponsorships with a team that has a lukewarm following in Los Angeles.

Although some Chargers fans in San Diego reacted with anger, many others were resigned to the move, though not committing to regularly trek three hours or longer by car to see games in Los Angeles.

“We will be long-distance members now,” Cheryl Riess, president of Chargers Backers and a four-year season-ticket holder. “We’re still going to be die-hard Chargers fans, no matter where they are.'’