A Return to the Past?

There is something poetic about NFL teams that once called Los Angeles home flirting with a return.  Not all that different than college sweethearts reuniting after failed first marriages.  It seems this discussion occurs every NFL off-season, and the pattern will continue until a team relocates to LA.  LA racetrack

All three NFL teams that once called LA home have the opportunity to relocate to a new venue following the 2014 season.  The Oakland Raiders have agreed to a 1-year lease to remain at the Oakland Coliseum – now the O.co Coliseum – while the San Diego Chargers, who as a founding member of the AFL were based in Los Angeles, agreed to stay in Qualcomm Stadium for at least the 2014 season. The Chargers have the ability to opt of their current stadium lease between February 1st and May 1st every year.  All the while the original LA team – the St. Louis Rams – can opt out of their current lease following next season if the Edward Jones Dome is not considered one of the elite football facilities in the NFL.  Last year, an arbitrator ruled that to bring the Edward Jones Dome into the upper echelon of NFL venues would require a $700 million capital investment – a figure that has local government officials reportedly balking.

Queue the shrewd and strategic real estate investment that made Rams owner Stan Kroenke wealthy enough to buy the Rams.  The real estate mogul purchased approximately 60 acres of land next to the now defunct Hollywood Park Racetrack in LA.  This has sent the football world into an uproar as the potential for the Rams to move back to LA is that much more realistic.  However, Kroenke’s purchase of the land could be nothing more than a pure real estate investment.  The adjacent property is to be developed into a modern residential community, and Kroenke may just be purchasing what is likely to become highly sought after land for residential development.  After all Stan Kroenke was born and raised in Missouri and was named after two Hall of Fame baseball players for the St. Louis Cardinals – Enos Slaughter and Stan Musial.

But if the land was purchased for the purpose of eventually bringing the Rams back to LA, relocating an NFL franchise isn’t an immediate occurrence nor is it the decision of one NFL owner.  Before Kroenke purchased the Rams in 2010, he had to agree to follow the NFL’s Constitution and Bylaws.  The Constitution mandates that no club can “transfer its franchise or playing site to a different city, either within or outside of its home territory, without prior approval by the affirmative vote of three-fourths of the existing member clubs of the League.”  This requires that 24 of the 32 NFL teams support the relocation of another club.  Even with the Minnesota Vikings recently finalizing their plans for a new domed stadium, several other clubs likely have interest in a possible move to LA given their stadium uncertainty, including the aforementioned teams in California as well as the Buffalo Bills and Jacksonville Jaguars.

With all this speculation surrounding Stan Kroenke’s recent real estate purchase comes one question.  Why hasn’t a team already relocated to Los Angeles? Perhaps it’s understood that unlike all the other major professional sports, LA can only accommodate one professional football team.  Oh that’s right – USC regained its amateur status once Pete Carroll and Reggie Bush left for the NFL.  Ironically, that’s how the Chargers got their name – from the crowd yelling ‘charge’ after the bugle played at the Los Angeles Coliseum for USC Trojan and Dodger games.[i]

Conceivably, one of the main reasons Los Angeles remains without an NFL team is keeping a franchise out of the city is more valuable to the League.  The absence of an NFL team in LA gives leverage to every NFL team looking to build a new stadium.  The threat or even potential threat of relocating to LA has resulted in: a new state-of-the-art stadium become a reality in Minnesota, the Jacksonville Jaguars securing very favorable terms with EverBank Field, and the New Orleans Saints receiving favorable terms in their lease of the Superdome from the State of Louisiana including expanded seating and a naming-rights deal.  Even the Atlanta Falcons have jumped on the new stadium bandwagon despite moving into the Georgia Dome in 1992.  If the Rams or any other team move to LA, it would prevent other teams from leveraging potential relocation to the country’s second most populated city into favorable stadium contracts.  The fact of the matter is that the absence of a team in LA allows NFL franchises to extract favorable stadium deals from cities and states that are terrified of their team bolting for the bright lights and revenue streams of Hollywood – or for Rams fans, Hollywood Park.

In addition, it would be an interesting study to see how many DirecTV customers exist in the LA area and how many subscribe to the NFL Sunday Ticket package.  DirecTV pays the NFL $1 billion annually for the right to broadcast all out of market NFL games played on Sunday afternoon.  If enough households in the greater Los Angeles area subscribe to NFL Sunday Ticket in order to watch their choice of NFL games, a local team might lower the number of subscribers thereby reducing the rights fees the NFL would receive moving forward.

Lastly, as a result of the NFL’s rule giving teams exclusivity to the 75 miles surrounding their home city, if the Rams were to move to LA it would prevent another team from relocating there.[ii]  The enormous growth in earning potential that a team moving to LA would garner would be offset by the loss the NFL would suffer in losing the value presented by LA remaining barren of an NFL franchise.  A club relocating to Los Angeles would allow 1 club to gain an economic advantage to the detriment of the other 31 other teams.

If Stan Kroenke’s land purchase is indeed a precursor to moving the Rams back to LA, it is highly likely that the other 31 owners would demand a hefty relocation fee. Other owners who would miss out on the opportunity to move to LA might also attempt to block such a move unless they received a sizable payout or separate revenue sharing deal for foregoing the lost revenues that may have otherwise been available to them.

If Kroenke’s intentions play out as the football world anticipates but the NFL doesn’t approve, what’s next?  Would Los Angeles once again become the center of litigation between the NFL and an owner similar to the legal drama Al Davis created in the 1980s?  One thing is for certain, if the Rams prodigal return to Los Angeles does occur it won’t be immediate or cheap.

[i] The Dodgers played at the LA Coliseum before their stadium was built in Chavez Ravine.  The Chargers played at the Coliseum before moving to San Diego.

[ii] The Giants/Jets in New York, 49ers/Raiders in the Bay Area, and Ravens/Redskins in the Metro area have special carve-outs in the NFL Constitution granting an exception to this rule.

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