Fallout from relocations puts NFL, owners on their heels

To put it mildly, the NFL needs the Los Angeles Rams and Chargers’ Inglewood stadium, scheduled to open in 2019, to deliver — and deliver big.

It had better because a seemingly worst-case scenario has unfolded since the league a year ago voted to allow the St. Louis Rams to spurn public funding in St. Louis and relocate to L.A. At the same time, owners turned down the joint Oakland Raiders/then-San Diego Chargers proposed Carson, Calif., development that a six-owner committee recommended after studying the choices laboriously for a year.

What followed is hardly what the NFL wanted:

■ The relocated Rams suffered attendance and ratings drops after an initial burst of enthusiasm.

■ The Chargers flopped in their effort to stay in San Diego and were met with boos, literally, when they relocated to L.A. via the option given to them in the owners’ Inglewood vote.

■ The Raiders asked to relocate from the country’s fifth-largest market, and a booming one at that, to the 40th-sized one that carries unusual risks.

“This was one of the known scenarios, but one thought less probable of San Diego and Oakland failing to keep their teams and I am confident no one really wanted,” said Marc Ganis, a sports consultant with deep ties to the league office and owners. “Everyone would have preferred a stadium solution in San Diego.”

Stephen Ross, the Miami Dolphins owner, told a private gathering Jan. 18 he was not in favor of the recent relocation moves, attendees at the Thuzio Executive Club panel in New York City said. Representatives for the Dolphins did not reply for comment. Ross does not appear to be alone, as recent reports have surfaced that owners are upset about the Chargers move. But like Ross, other owners did not reply, or declined to comment, suggesting the league is less than eager to talk about the repercussions of its vote 55 weeks ago that shocked many by ignoring a committee recommendation.

On to Inglewood

Bob McNair, the Houston Texans owner and an L.A. committee member, said a few months ago of why he voted initially for Carson: “I think the concern on the part of the committee was you have one solution that would take care of two teams, and one solution that would take care of one.”

Owners, however, swooned for the $2.6 billion Inglewood project, so McNair and the committee created the option whereby two teams could play in the new stadium (Rams owner Stan Kroenke will own the venue and the Chargers are his tenant). But that also left the door open to potentially three relocations, and a forced marriage in Inglewood of two teams in a market that hadn’t had one in two decades. 

“It was the right move to have Stan [Kroenke] as the developer. It was one of the better moves they could make because of his wherewithal.” MARC GANIS, Sports consultant Photo by: GETTY IMAGES

“They had a choice between happiness and chasing every penny and they chose the latter,” said a senior banker who has done extensive work in sports and for the Chargers in the past, and who requested anonymity out of fear of publicly criticizing NFL owners. Carson might not have been a financial home run, but it would have solved two team issues and returned the most popular of the three in L.A. — the Raiders.

Another longtime sports banker, who also requested anonymity for the same reasons as the first, all but hissed: “They are mercenaries, that’s all they are, complete mercenaries, by putting two teams in L.A. and abandoning the Bay Area.”

It’s a perception that has filtered down to the local level. Leigh Steinberg, the sports agent who calls L.A. home, said, “There is a feeling that the NFL doesn’t care about fan loyalty and only prioritizes state-of-the-art stadia and franchise value.”

But does it matter to the bottom line when TV dollars rule and the Inglewood venue should gush more cash than all other NFL stadiums?

Clearly, the Inglewood stadium will generate more revenue than the Carson venue would have: It is just 4 miles from the airport rather than distant Orange County, is a much larger project with greater revenue sources including ancillary commercial development, and is financed by the deep pockets of Kroenke. It is envisioned as an iconic venue at which the elite, glitzy Hollywood set will covet being seen, no matter if the play is poor, akin to the Lakers’ star-studded courtside seats.

Lost in that analysis, of course, is passion in the fickle L.A. market. The Rams never once topped the list of the most-searched sports team in L.A., even on the day of the relocation announcement. In the following year plus, interest as measured by Google Trends, online searches for the Rams were swamped by the Los Angeles Dodgers and Lakers and USC Trojans football (see graph below). Similar patterns are in play for the Chargers, who have far less of a history in L.A. than the Rams.

“There are four professional football teams in L.A.; USC and UCLA are first and second, and the Rams and Chargers are third and fourth,” said David Israel, the former president of the Los Angeles Memorial Coliseum Commission, who said he warned owners at a meeting in 2005 that in the 11 years since the NFL left the market they had already lost almost two generations of fans. “Now it is nearly four generations. It is not surprising all these kids care about are the Lakers and Dodgers, maybe the Galaxy [of MLS].

“I once said when I was president of the Coliseum, the NFL has gotten along just fine without L.A. and vice versa,” he added. “There was no longing on the part of our public for their league.”

He described the next few years as “Survivor L.A.,” with the Chargers and Rams battling for L.A. football supremacy. “It is a one-team NFL market,” he insisted, “and it is wide open.”

By now the facts are well-known: The Rams drew fewer TV viewers than for games telecast in L.A. in previous years; while the team sold out all its tickets, fans skipped games in droves toward the end of the season; and the Chargers were mocked for their move and players booed at public gatherings. Winning would help, though it may take years and perhaps championships to win over fans.

“It will take time,” Steinberg said. 

What happens in Vegas …

Does the league face a similar scenario in Las Vegas? Like the Rams in L.A., a groundswell is sure to greet the team, presuming owners agree to let the team leave Oakland. But even given this, the Raiders’ relocation plans are predicated on large numbers of fans traveling from L.A. and Oakland, and a huge contingent of away team fans filling the proposed 65,000-seat stadium. This is necessary because so many people who live in Vegas toil in low-paying casino and other service jobs at off hours. In fact, Las Vegas ranks second to last among markets with pro teams in discretionary household income — $3,438 a year for a median family of four. The only market lower is New York, where the top earners are large enough that the average is immaterial.

Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson has committed $650 million to a new Vegas stadium for the Raiders. Photo by: GETTY IMAGES

Beyond who fills seats and the corporate sponsor base, the league must grapple with how it would handle casino advertising in the new stadium, and whether to accept gambling magnate Sheldon Adelson as a partner. The Las Vegas Sands Corp. chairman and CEO had committed $650 million to the project, but it’s unclear if that money is in the Raiders relocation bid. The team did not reply for comment, and the league said it wanted to brief owners first before talking about the package.

If the team does not work with Adelson, it is expected to borrow from Goldman Sachs, the former employer of Eric Grubman, the NFL executive vice president in charge of the relocation process. He has so far rejected a proposal from Fortress Investments to build a stadium in Oakland, which has given the fund until early February to develop a plan for the current stadium site.

The arguments Grubman and others at the league make against Fortress are that the fund wants too big a profit and is an unnecessary third party between the team and city. How Goldman is materially different in seeking profit or wanting a say in how its loan is allocated is unclear.

The road ahead

The league, if it approves the Raiders’ move at its annual meeting in late March, would thus have a series of grand experiments occurring simultaneously:

■ The Raiders to Vegas, but with plans to play as a lame duck for two years in Oakland, which it can under its lease. A team playing two seasons as a lame duck is unprecedented in sports.

■ During those same two years, the Chargers are playing in a 27,000-seat stadium, the StubHub Center, another strange spectacle for an NFL team, which could play second fiddle to an MLS team.

■ And over the next two years both the Rams and Chargers selling PSLs, sponsorships and suites for a new stadium in a market that went 20 years without a team.

“There is clearly some skepticism in L.A. about two teams in the marketplace,” said Randy Vataha, founder and president of sports investment bank Game Plan, a former NFL wide receiver and an Orange County native who still lives there. “L.A. is going to be a real interesting experiment, and we will never know if they made the right decision.”

Many disagree already, arguing despite the initial stumbles, the owners chose wisely with Inglewood over Carson.

“It was the right move to have Stan as the developer,” said sports consultant Ganis. “It was one of the better moves they could make because of his wherewithal.”

Chargers fans display their disappointment with the team’s decision to move. Photo by: AP IMAGES

Winning would also cure a lot in Los Angeles, a notoriously front-running sports market. Opening a new stadium in L.A., which has not had one, should also help. Amy Trask, the former Oakland Raiders CEO, likes to recall during the team’s L.A. days in the 1980s, more requests for tickets came in after a sellout had been announced, as the game became an event.

All the grumbling also ignores a key point, Ganis added: If a team relocates or wants to, the club is by definition troubled, likely on and off the field. The Rams have been consistently poor on the field under Kroenke, the Chargers not far behind, and few expected the Raiders to turn it around this year and make the playoffs as they did. So whichever way the relocation cookie crumbled, issues would remain.

Still, it is tempting to imagine an alternate universe featuring the winning Raiders playing in L.A. with Walt Disney CEO Bob Iger pulling the marketing strings for the team and the Chargers. Iger had a lead role in the proposed Carson project and would have overseen branding and marketing the teams, not an easy job in a market with scores of entertainment options that had thrived without the NFL.

Putting a major marketing executive in charge is what Carolina Panthers owner Jerry Richardson believed was necessary for success when he personally recruited Iger, and put their names and prestige on the line soliciting for Carson.

In fact, the historic L.A. vote that Jan. 12, 2016, night may not only have doomed football in three cities — Oakland, San Diego and St. Louis — it also apparently ended the power and interest of one of the league’s most influential owners.

Richardson, whose representative did not reply for comment, kept his cherished seat on the owners’ compensation committee, but otherwise removed his counsel from the inner sanctum of NFL power.