Rams Head Back to Los Angeles, Making NFL Even Richer

Rams to Return to Los Angeles, Making NFL Even Richer
  • NFL returns to No. 2 U.S. market for first time since 1995
  • Chargers have a year to decide to join Rams in Inglewood

The National Football League voted Tuesday to allow the St. Louis Rams to return to Los Angeles next season, giving the league a presence in America’s second-biggest city for the first time in more than two decades and unlocking billions of dollars for what is already the richest and most-watched North American sport.

The Rams in 2019 will move into a new $1.9 billion stadium in Inglewood that billionaire team owner Stan Kroenke envisions as the NFL’s de facto West Coast home. "This decision is about what is in the best long-term interests of the Rams organization and the National Football League," he said in a statement. "We look forward to returning to Los Angeles and building a world-class entertainment district in Inglewood."

Whether he will ultimately share the cost of those facilities and the revenue they generate is still unsettled. The Chargers were given one year to either work out a new stadium plan in San Diego or join the Rams in an Inglewood facility loaded with luxury suites and premium seats. If the Chargers, owned by Dean Spanos, ultimately decide to stay put, the Raiders, owned by Mark Davis, will have a year to decide if they want to move.

The outcome is a victory for Kroenke, who gets the stadium he wanted on the land he owns.

“It’s a sweet deal -- that’s S-U-I-T-E,” said Andy Dolich, who previously ran business operations for the NFL’s San Francisco 49ers. “You wake up tomorrow, no matter what you do -- 0-16 or 16-0 -- and you’re richer.”

Fans of the St. Louis Rams hold a "Los Angeles Rams" sign during an NFL Game in November 2014.
Fans of the St. Louis Rams hold a "Los Angeles Rams" sign during an NFL Game in November 2014.
Photographer: Donald Miralle/Getty Images

In this case, much richer. For Kroenke’s proposed new stadium the naming rights alone could command about $25 million annually, according to Apex Marketing Group, more than triple what the Rams would get had they stayed in St. Louis.

That’s money Kroenke won’t split with other owners. The same is true of the revenue created by the new facility’s 274 luxury boxes and 16,300 premium seats, local sponsorships, radio and pre-season television broadcast money or game day sales, concessions and parking. In total, Apex estimates the Rams could generate more than $192 million a year from sponsors and premium seats if they’re the sole team in the stadium.

"There must be a tremendous appeal to Stan to be the only team in the city," said Amy Trask, former chief executive of the Raiders. "That said, if he shares the stadium, he also shares the cost. So, is his preference to foot only half of the bill for a $1 billion-plus building and share it, or to have it and the city alone?"

Moving Costs

Artists’ renderings of the 80,000-seat football stadium Kroenke plans to build in Inglewood.
Artists’ renderings of the 80,000-seat football stadium Kroenke plans to build in Inglewood.
Source: HKS, Inc.

For the privilege of calling L.A. home, Kroenke -- and perhaps, eventually Spanos or Davis -- will pay the NFL $650 million in relocation fees over the next 10 years, according to a person with knowledge of the agreement. Leagues typically levy fees on owners who want to move their teams, in part to discourage frequent moves and also to compensate the other owners for losing out on a valuable market.

Most recently, the Houston Oilers in 1997 paid a $29 million fee to move the franchise to Tennessee. Since then, football has grown, TV contracts have exploded and teams have become more valuable. L.A. is also the country’s second-most lucrative market after New York.

While the price tag for Kroenke is estimated around 5 percent of the league’s total annual revenue, many experts consider it a bargain. Not long ago, when basketball’s Sacramento Kings were considering a move to Anaheim, the owners were told the relocation fee would be about $600 million.

“I thought [the NFL relocation fee] would be more,” said Joe Maloof, one of the Kings’ former owners. “The population base is huge, and it’s still growing.”

NFL revenue and franchise values are also rising. Goodell has set a revenue goal of $25 billion by 2027, up from $12 billion last season. Roughly 61 percent of that was shared among the owners, for about $226 million per team, according to the most recent financial data released by the Green Bay Packers. (The Packers, the only publicly owned franchise in major North American sports, provide a rare look at the books of an NFL team through their annual financial disclosures.)

Even with the gaudy numbers, the move is expensive. In addition to the relocation fee, which is paid out over time, an owner must be able to pay debt on the stadium. Even if revenue projections fall short, they’re still responsible for the debt service on the building. That’s less of an issue for Kroenke, who has a net worth of $5.5 billion, according to the Bloomberg Billionaires Index.

"We’re all looking for long-term solutions, we are looking for stadiums that will be suitable for our teams," Goodell said Tuesday. "Today, I think we took a big step."

(Corrects estimated revenue for Rams' Inglewood stadium.)
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