Franchises
Low-priced SSLs will cost Chargers
The team is offering stadium seat licenses for as low as $100 as it struggles to build a fan base in its past and current home city of Los Angeles.
The Chargers and Rams will share a 70,240-seat stadium that is under construction in Inglewood, Calif.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.
