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Volume 22 No. 19

Franchises

The Chargers and Rams will share a 70,240-seat stadium that is under construction in Inglewood, Calif.
Photo: Getty Images

The Los Angeles Chargers will bring in less money from the under-construction stadium they will share with the Rams than they originally estimated, banking and other sources said, because of the team’s decision to sell low-priced stadium seat licenses. Those seat licenses are a one-time fee that gives the buyer the right to purchase season tickets. The stadium is scheduled to open in 2020.

 

Last month the Chargers announced seat license prices for most of their seats that range from $100 to $3,000, far below the industry norm, especially considering the Los Angeles market. There are 26,000 seat licenses priced at $100. The lowest seat license price the Rams are charging is $1,000.

 

As part of the 2017 agreement between the Rams and the Chargers to build the stadium, the clubs each get 18.75 percent of the jointly sold luxury suite and sponsorship revenue; the remaining 62.5 percent goes to build the stadium. But because the Chargers decided to price their seat licenses so low, the agreement specifies that their take of this revenue is cut by a few percentage points. This will result in an annual decline of low-seven-figures of the Chargers’ share of the pooled stadium revenue during the 20-year lease.

 

The teams also get to keep 18.75 percent of their seat license revenue. According to reports, the Chargers have reduced their projected seat license revenue amount from $400 million to $150 million. While projections are just that, that cut suggests the team is losing roughly $45 million from its potential seat license haul (18.75 percent of $250 million). This number, of course, assumes the Chargers could have sold $400 million of seat licenses, which many in the market doubt.

 

The Chargers declined to comment. But the team is believed to have made a calculated decision that offering cheap seat licenses to a thus far tepid fan base in Los Angeles is critical toward building a brand in the long term, the lost revenue notwithstanding.

 

One year after the Rams moved to Los Angeles from St. Louis in 2016, the Chargers joined them from San Diego, and they have found it difficult to build a sizable base. The Chargers play at the 27,000-seat StubHub Center in Carson, Calif., which is often filled with fans of the opposing team.

 

The new stadium, which is being built in Inglewood and will seat 70,240 people, is largely controlled by the Rams and their owner, Stan Kroenke. He owns the majority of the stadium operating company and the right to develop the adjacent property. He is also responsible for most of the construction costs, which exceed $4 billion. The Chargers are providing $200 million in league stadium funding, as well as the seat license money.

 

Meanwhile, while the Chargers are putting in far less in seat license money than anticipated, the banks providing the $2.25 billion loan to the project are unconcerned because the Rams are in charge of the stadium. One banker noted that to lend $2.25 billion would require at the very least $4.5 billion in projected revenue from the stadium.

 

“I don’t think there is really any cause for concern,” said another banker. A third banker noted that large loans like these have built-in reserves, and that Kroenke is a billionaire who is guaranteeing project completion.

 

The loan is led by JPMorgan Chase. The bank declined to comment.

 

The Rams, the banking sources said, are expected to generate over $800 million in seat license sales. The team declined to comment.

 

Legends Global Sales is selling the seat licenses, suites and sponsorships for the stadium on behalf of the two teams.

The team has been seeking a naming-rights deal for Red Bull Arena, in New Jersey, for the past three years.
Photo: Getty Images

The New York Red Bulls are in conversation with sports betting companies regarding sponsorship deals that could include their stadium naming rights, as the club looks to capitalize on what has become a hot category for its fellow New Jersey-based teams.

 

“If we can find a partner or partners that can help us enhance our fan experience through gambling, we’re willing to have a conversation,” said general manager Marc de Grandpre, who declined to comment on which companies the club has talked with.

 

In October 2015 the Red Bulls started shopping the naming rights to their 25,000-seat stadium in Harrison, N.J. It has been called Red Bull Arena since it opened in 2010. In February 2017, it retained both Leverage Agency and MP & Silva to sell the rights. However, that agreement has since ended, and the club now works with Fenway Sports Management on selling the naming rights, a relationship that began this season. The club is not disclosing the details of its deal with Fenway.

 

While MLS has stated that sponsorships with companies within the sports betting industry are currently prohibited, the league is reviewing its policies with the expectation that such deals will be allowed starting with the 2019 season. The league’s board of governors and committees have discussed the topic in recent meetings, and there is an expectation that there will be an official ratification of a policy change at its next meeting, slated for Dec. 13 in New York City. The league is also looking at modifying its policies as it relates to league-level partnerships with sports betting companies, which could open the door for deals akin to what the NBA and NHL have recently signed. The Red Bulls are the only MLS team that operates in a state that has legalized sports betting.

 

The league is supportive of all conversations the club is having with sports betting companies regarding sponsorships, de Grandpre said. In addition to potentially doing a deal that could include naming rights to their stadium, the Red Bulls also may consider club branding within the stadium, as the New Jersey Devils have agreed to do with their new partners Caesars Entertainment and William Hill. Last week the Devils secured their third such deal in the category with FanDuel, while the New York Jets have signed deals with both MGM and gambling company 888.com. The New York Giants do not yet have a partner in the sports betting category.

 

While de Grandpre said a deal also could include branding on the sleeve of the team’s jersey, an asset that MLS recently approved for testing by teams in 2020, the Red Bulls would not consider a jersey front sponsorship, which has featured the energy drink company since it acquired the team in 2006.

 

Industry sources said the naming rights to Red Bull Arena could be worth more than $4 million per year, which would put it in the upper third across MLS. De Grandpre declined to comment on the financial terms that the club is seeking but said, “We think there is a lot of value for a brand that wants to raise awareness.”