This Is the Next Major Decision for the NFL

January 15, 2016, 3:37 PM UTC
APTOPIX Relocation-Rams Football
Football fans hug after the announcement of the return of the Rams to Los Angeles on the site of the old Hollywood Park racetrack in Inglewood, Calif., Tuesday, Jan. 12, 2016. NFL owners voted Tuesday night, to allow the St. Louis Rams to move to a new stadium at the site just outside Los Angeles, and the San Diego Chargers will have an option to share the facility. The Rams, based in the LA area from 1946-94, will play in a temporary facility, probably the Los Angeles Coliseum, until the new stadium is ready for the 2019 season. (AP Photo/Damian Dovarganes)
Photograph by Damian Dovarganes — AP

The National Football League’s decision this week on Los Angeles relocations ended one long-running drama but started another.

The league approved the St. Louis Rams’ move to L.A. but only gave conditional approval for the Chargers to join them. But that won’t happen unless the teams can cut a stadium-sharing deal.

The unique dynamic sets up a fresh round of brinkmanship involving the Rams, the Chargers and San Diego that could drag on another year.

Will the Chargers get a better deal from Rams owner Stan Kroenke, or from public officials in San Diego? And does Kroenke want to share his dramatic new stadium – and the coveted Los Angeles market?

“It’s certainly not over,” said Roger Noll, a Stanford University economist who studies the business of sports.

The decision follows years of contentious talks between three cities and their teams: the Rams, the Chargers, and the Oakland Raiders. All three applied to be the first Los Angeles NFL team since 1995.

The Rams and Chargers – if they can come to terms—would both play at a stadium that could cost as much as $2 billion in Inglewood, a suburb southwest of Los Angeles.

Should the Rams-Chargers talks fail, the Raiders could then try to work out their own deal with Kroenke and the Rams.

Mark Fabiani, special counsel to the Chargers, said the team and its chief executive, Dean Spanos, were “working with the NFL and the Rams on a potential deal framework.”

The League gave the Chargers and Rams until January 2017 to make a deal.

In the NFL, only MetLife stadium in New Jersey pairs two teams—the New York Giants and the New York Jets. The teams worked together to privately finance the stadium.

By contrast, the Rams and Chargers, until now, have been rivals with competing L.A. stadium plans. The Chargers had proposed to share a stadium with the Oakland Raiders in Carson, another suburb.

That and other factors complicate the negotiations ahead.

For the Rams, the obvious advantage to sharing the stadium is splitting the costs—in this case, the cost of the most expensive stadium in league history. The Chargers, for their part, would get to play in a better venue in a bigger market.

But the talks could get sticky from there. Kroenke’s plans include much more than a stadium.

His development company, the Kroenke Group, will have a major stake in the ambitious real estate project and entertainment complex surrounding the proposed stadium. The company is partnering with Stockbridge Capital Group, which was developing the site before Kroenke planned to move his team there.

The glass-roofed, 80,000-seat stadium would be surrounded by a 6,000-seat performance venue, 890,000 square feet of retail space, 780,000 square feet of office space, 2,500 residences, a 300-room hotel and 25 acres of parks and open spaces, according to Stockbridge.

Kroenke will invest more than $800 million in the Inglewood project, according to documents filed by the Rams to the NFL earlier this month.

The Kroenke Group and Stockbridge declined to comment. The Rams did not respond to requests for comment.

A key question is how such sprawling plans will play into the talks between the Chargers and the Rams.

“If you’re the Chargers, you don’t want to pay a full half of the money to build the stadium without getting half of the benefits from the development deal,” said Victor Matheson, an economics professor who studies sports business at College of the Holy Cross in Massachusetts.

The Inglewood stadium project will be privately financed, making it a steep buy-in for the Chargers.

Kroenke chose to spend his own money in L.A. instead of accepting a proposed $400 million public contribution for a new St. Louis stadium. But the Chargers face a tougher calculation.

“The Chargers don’t have as much money, and they’re not participating in this grander development,” said Noll. “So their willingness to pay for the stadium cost in Inglewood is much less than the Rams.”

According to Forbes, Chargers owner Alex Spanos and family have a net worth of $1.69 billion – compared to $7.4 billion for Kroenke.

A move to Los Angeles could nearly double the value of the Chargers, from about $1.5 billion in San Diego to more than $3 billion over time, said Marc Ganis, president of Sportscorp Ltd., a Chicago-based sports business consulting form.

“There’s a high location premium for Los Angeles,” Ganis said.

And high upfront costs: The team would also have to pay the league a $550 million relocation fee.

“I can’t imagine that Dean Spanos would pay half of a $2 billion stadium,” plus the league fee, said Andrew Zimbalist, a Smith College sports economist.

Even if Spanos wanted to split the costs, it’s questionable whether Kroenke would want to split the stadium, its revenues and the L.A. market – where the NFL hasn’t tested fan enthusiasm in two decades.

The league may have to apply pressure or offer incentives to get the Rams owner on board, said Neil deMause, editor of Field of Schemes, a website that tracks stadium subsidies.

“Kroenke has pretty much no motivation to allow a second team into Inglewood,” deMause said.

Asked whether the league had any preference for two teams over one, NFL spokesman Brian McCarthy said: “That is up to the 32 owners. We’ve said all along that any stadium development should be prepared to accommodate two teams.”

The other pivotal question is whether the league’s conditional approval gives the Chargers new leverage to wring more public money out of San Diego – where stadium talks have already dragged on for 14 years.

The current offer on the table calls for the city and the county to contribute $350 million toward a new $1.1 billion stadium. San Diego voters would need to approve that subsidy in an election yet to be scheduled.

San Diego Mayor Kevin Faulconer spoke of a fresh start during a Wednesday news conference.

“Now we’re waiting to hear from the Chargers,” said San Diego County Board of Supervisors Chairman Ron Roberts.

The city’s plan for a new, 67,500-seat stadium calls for the Chargers to pay $363 million, a fraction of their potential share of Kroenke’s planned L.A. stadium. The NFL would contribute $200 million, and the team would raise another $187 million from the sale of personal seat licenses.

Of course, the Chargers could also stay in their current home, Qualcomm Stadium, Matheson said.

“It’s not as if their stadium is obsolete,” he said. “It just isn’t as fancy as some of these others – and they have a case of stadium envy.”