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June 13, 2011

3

Los Angeles Examines Potential Teams for Relocation

by awieders

By Alex Wiederspiel

Roger Goodell isn’t hiding his desire to bring football to the second-largest media market on the continent. There have been teams in Los Angeles before, most notably the Raiders and Rams, but neither stayed. Many in Los Angeles still stay loyal to Oakland, but Los Angeles has been a difficult place to place a professional football team because it’s a transient population–much the same reason why there is no professional team of any kind in Austin, Texas. But the NFL is determined that Los Angeles should have a team, and truth be told, I think that this time the attempt is actually going to work. This isn’t an owner who wants to move a team to Los Angeles. Tim Leiweke, the president and CEO of Anschutz Entertainment Group is determined to bring a team to his city. He is preparing to build a venue, and has even offered to cover expiring leases for teams like the Vikings and Chargers, who are both having issues getting new stadiums built.

Tim Leiweke, the man who is vowing to bring football back to Los Angeles. -- Courtesy sportsbusinessdaily.com

Leiweke has met with officials from five teams–the Oakland Raiders, San Diego Chargers, Minnesota Vikings, St. Louis Rams, and Jacksonville Jaguars. Each team would have it’s own reason for a move to Los Angeles, though not all of them would be greeted with open arms. Some have suggested that an expansion team (and I’ve thought about it myself) would be a good fit. When you look at the NFL’s current system, 32 teams seems ideal. The divisions and the conferences are both even. The playoff format is good. 12 teams out of 32 get in (37.5% of the league). That allows for most of the teams to compete for a playoff spot nearly all season, unlike in baseball where half the league or more is out of the race with two months left in the season or hockey and basketball where you can routinely finish under .500 and make the playoffs in a seven or eight spot (whereas in the NFL we just witnessed the first ever 7-9 division winner). The NFL is not keen to change a system that makes them so much money, but they’re definitely keen on adding a wealthy owner who has roots in Los Angeles.

And Leiweke wouldn’t necessarily be the principal owner. Anschutz Entertainment, which he is the CEO and President of, would be the owner. There is unquestionably more then enough money in an international corporation the size of Anschutz to cover a team in Los Angeles. They own three American soccer clubs, the Staples Center, golf venues, and soccer stadiums around the world. The ability to be patient with a Los Angeles team will be important, because the team in question will have to build it’s roots, while competing with the multitude of professional football teams in California. That is Anschutz’s true value. They can afford to be patient until a team in LA starts paying the dividends that it inevitably will. There’s too much money for a Los Angeles team to be unsuccessful, it simply requires patience.

But who is going to be the team that finally makes this move? And for what reason?

Wayne Weaver may not remain in Jacksonville, but the Jaguars will. -- Courtesy Orlando Sentinel

Let’s start with the Jacksonville Jaguars. The Jaguars franchise is owned by Wayne Weaver, who came to his riches through owning shoe corporations like Nine West. Weaver, however, is not among the richer owners in the NFL. He’s not like Paul Allen (Microsoft) or Woody Johnson (Johnson and Johnson/Robert Wood Johnson). Weaver’s Jaguars have not been a financially efficient team. In Forbe’s 2010 rankings, the Jaguars had the lowest overall team value–making them an easy buy for Anschutz. The team’s overall value dropped by a whopping 16% from 2009 to 2010. The big thing, though, is that Wayne Weaver still generally makes a profit. While the Jaguars could be bought for the right price, the team is actually making money for Weaver. The Jags grossed 25.9 million in the black in 2009, and despite their team value going down, much of it has to do with their market.

Jacksonville is surrounded by Atlanta, Miami, and Tampa Bay–Tampa being the closest (about 200 miles away). The other two are 350 miles away, but the big problem is that Jacksonville is probably no more than an hour away from Georgia, and most Georgians are going to be prone to support the Atlanta Falcons. It also hurts that the Jaguars are a relatively new franchise by NFL standards and have little history as a franchise. While the city of Jacksonville may be devastated by the loss of their team, the fans from other areas will turn to other teams like Atlanta, Miami, and Tampa Bay because the Jaguars don’t have a long standing history of NFL success. Sure, they’ve been a nice dark horse team, and have a few players who would probably get their number retired in Jacksonville (like Mark Brunell, Jimmy Smith, Keenan McCardell, and Tony Boselli),  but they aren’t exactly NFL titans and are all, at best, borderline Hall of Fame players. Wayne Weaver’s Jaguars could definitely be on the market for the right price (he is a businessman after all), but he doesn’t necessarily have to sell. Even though the Jaguars don’t have a lot of value, and that value would increase in Los Angeles, they’re still profitable for Weaver and that’s really the bottom line for an owner. As far as media goes, Jacksonville is now a Top 50 Nielsen market, but they’re 29th in the NFL in media market terms. The NFL wouldn’t mind seeing them move to the second most profitable market in the country.

Jacksonville’s move would impact the division alignment as well. The Jaguars would be forced to move to one of the two western divisions, and the AFC West is almost out of the question if the NFL wants to keep the current format AND the inter-division rivalries. The Jaguars would move to the NFC West more than likely, and the Rams could move to the AFC South in their place. Another possibility would be re-aligning the conferences into two divisions (east and west) and that way the Jaguars could move to Los Angeles and remain in the AFC. Another option would be splitting the teams into an Eastern and a Western conference much like in the NHL and NBA, but the NFL’s system is already quite effective and their best bet would be as little change as possible. The NFL may not actually benefit by a Jacksonville move to Los Angeles. In fact, if Jacksonville ever does move, their best bet would easily be San Antonio.

With an increase in season ticket sales, maybe those tarps can go away after all. -- Courtesy Miami Herald

Now the big thing is that while Weaver doesn’t have to sell, after seeing such a huge loss in team value, he might be better off cutting his losses now, before he starts to actually lose money. The Jags bottom line is nice right now, but they won’t be able to compete forever surrounded by professional football teams, rabid college football fan bases, and in one of the least profitable media markets in the NFL. The city of Jacksonville owns EverBank Stadium, but the Jaguars are leased in that stadium for another 19 years. The only way for Jacksonville to get out of their lease would be to have a net earnings loss three years in a row, prove the stadium is not NFL ready (the stadium was renovated 15 years ago and is up to par by NFL standards), or if Anschutz were to buy out the lease, but with 19 years remaining that seems highly unlikely and very costly. In short, the Jaguars seem unlikely to move out of Jacksonville anytime soon. In fact, if anything, after years of decline, the Jaguars financial future may be looking up. The Jags retained 90% of their season ticket holders in 2010 and even added 13,000 new ticket holders. Those tarps may be coming off sooner then you think. Wayne Weaver could sell the team, but the chances of them moving to Los Angeles are, in my estimation, at 500:1.

Next we have the Minnesota Vikings, and boy, do the Vikings need some help. Look, Minnesota has a lot going for it. Mainly, that the franchise has a lot of history surrounding it, a very wealthy owner in Zygi Wilf, makes approximately 200 million a year, and has gone up in value since Wilf took over. I don’t believe Wilf is going to sell to anybody, mainly because he doesn’t need to. But Minnesota has a few problems, and that’s primarily the stadium leasing issue. It’s a disaster. After the Metrodome’s roof collapsed last season, plans for a new stadium in Minnesota have been accelerated, but the funding just isn’t there. The Vikings are said to cover 39% of the total cost of the stadium, but rumor has it that the 1.057 billion dollar stadium is still 175 million dollars short of funding. And even worse, down the road, another 250 million may be needed to renovate the roads surrounding the stadium. If anything is going to push Minnesota into Los Angeles, it will be the stadium. But Wilf doesn’t need to sell, because he has profitable businesses and a profitable Minnesota organization that has roots in Minnesota and a fan base that would do anything to protect it. Minnesota would also complicate the division alignments. Moving to Los Angeles would move them out to the NFC West, and ruin their outstanding rivalries in the NFC North. So, while Minnesota may not play in a new stadium in 2011 (I forsee spending a lot of time outdoors at the college stadium in town), I don’t see them spending any time in Hollywood anytime soon. Put the odds of Minnesota moving to Los Angeles at 75:1.

The St. Louis Rams were ranked as the 29th most valuable franchise in August 2010, and while they turned a decent profit, their owner Stan Kroenke is going to be forced to release his major holdings in Denver (including the Nuggets and Avalanche) because of an NFL rule stating that owners can’t own other sports teams in major media markets. Kroenke is going to be desperate to turn the Rams into the centerpiece of his sports empire with the Nuggets and Avalanche both on their way out by 2014. And speaking of 2014, it just so happens that the Rams can opt out of their lease with the Edward Jones Dome in 2014 if the stadium isn’t ranked within the top eight of NFL Stadiums for modern stadium standards. Edward Jones Dome is currently in the bottom half of the league so it’s unlikely that they’ll meet the needed guidelines. Kroenke is an interesting case, because he could decide to sell to AEG and keep his ownership of the Denver based teams (Kroenke first wanted to purchase the Denver Broncos, but Pat Bowlen would not sell).

Not even 20 years old and the Edward Jones Dome is obsolete. -- Courtesy art.com

But Kroenke could make some serious money by making the Rams the centerpiece of his company as a Los Angeles team. The big problem is that Kroenke has no ties to the Los Angeles area. If things go poorly, what’s to stop him from doing what other LA based teams have done and simply leaving? So, there is a lot to worry about there, and with the city of St. Louis having economic issues and Missouri as a whole having problems, a new stadium in St. Louis is unlikely (even though St. Louis is a top 25 market). The Rams are a possibility to move to San Antonio as well and are just a general candidate because of what’s going on in their city and with their stadium. Kroenke has no ties to these areas though. Kroenke probably doesn’t want to give up the Rams already, but if Leiweke makes him a big offer, it seems foolish for Kroenke to reject. He could maintain the rest of his sports empire and build towards eventually acquiring the Denver Broncos. Much is uncertain about the Rams, but I’d put their odds of a Los Angeles move at 60:1.

The San Diego Chargers are a team with a great plight and much reason to move to Los Angeles. Owner Alex Spanos is 87 years old (though Dean Spanos operates the team) and in poor health. The Chargers problem though is not financing (24.7 million in operating income and 233 million in revenues according to Forbes in August 2010), the team is valued as the 24th most valuable team in the league, and their lease at Qualcomm is going to be coming to an end. The Chargers have been searching for a new stadium for eight years, and the Spanos’ refuse to leave the city. The NFL has already told the city that Qualcomm won’t host another Super Bowl–San Diego must build a new stadium. The current proposal will cost up to 800 million dollars, and the Chargers won’t be able to privately finance it as many first thought. The city will have to find a way to support it, and while former mayor Michael Fabiani is a public supporter of a new Chargers stadium, the Chargers have been unable to come up with the funding, which makes them a great candidate for Los Angeles. It also will require new mayor Jerry Sanders to take up the mantle Fabiani left behind–stadium lobbyist.

It also helps that the Chargers wouldn’t have to change divisions, they’d be moving just a few hours north, and they’d likely maintain almost the entire fan base. It would be bad for the city of San Diego, but for the NFL, the Chargers moving to Los Angeles would be close to ideal. The NFL’s only concern would be the amount of Raiders fans who live in Los Angeles, but that might even fuel the rivalry in the AFC West where every team hates each other. The Spanos’ family has been nothing but supportive of the city of San Diego, but it’s been eight years and eventually the Spanos’ are going to run out of patience. You would think that after eight years of patience then it would seem unlikely that the Spanos’ would all of a sudden give up on the city, but Los Angeles is the alternative, and it’s a very, very lucrative alternative. I would put San Diego’s odds at 30:1.

And then there was one. Another team in a little trouble is the Oakland Raiders. While I firmly believe Al Davis will own this team until he dies, the Raiders meet an awful lot of the qualifications of a team that could move to Los Angeles. For one, their value dropped from 2009 to 2010 by 5%. They grossed 2.2 million dollars, which was among the bottom five in the NFL in 2009 (and one of the teams below Oakland was paying for a brand new stadium) and have been on a general downward slope before a successful 2010 season on the field. But Al Davis has been running the team’s operations for 45 years and has had control of the club since 1972 (though not majority ownership). He is turning 82 this summer, and his health has been deteriorating over the years. He looked particularly awful in a January press conference to announce he was firing Tom Cable. While signing Cable’s pink slip, it looks like the Grim Reaper was equally close to signing Davis’ pink slip. Raiders CEO Amy Trask says that the Raiders are going to stay in Davis’ family, but if the team isn’t making the money it should be (and it’s full potential has been squandered by Davis’ terrible front office work over the past seven years) then I can’t imagine the Davis family keeping the ownership in tact.

Another issue is that Oakland will be leaving McAfee Stadium (Oakland Coliseum) in 2013 when their lease extension expires. Leiweke has already said he’ll pay for a team to finish out their lease. Oakland is a prime candidate, because it gives AEG plenty of time to build a new stadium in Los Angeles while the Raiders finish out their lease. The Raiders would move about four hours south, and honestly, they’d probably keep most of their fan base anyway (which makes them an appealing option). The Raiders have already played in Los Angeles once, and if Al Davis had it his way the Raiders would have stayed in Los Angeles. Now it seems, the NFL wants the Raiders back in LA, but perhaps out of pure spite, Davis isn’t as interested. Either way, with Davis’ health declining and the lease set to expire in just a few years, the Raiders make a great candidate to move to Los Angeles. In fact, they are unquestionably the best. My spread is at 10:1.

The last possibility is that nobody moves to Los Angeles. The NFL wants it to happen very badly, but they can’t force anything. The Raiders are still their best shot, but nothing’s a guarantee–especially if the Davis family is as committed as Al himself. Oakland has plenty of potential in a huge market. If anything, it’s the stadium that will drive the Raiders away from Oakland. Goodell is determined to get a team in Los Angeles, but the time still may not be right. I see 5:2 odds that the NFL fails to move a current team to Los Angeles. It is clear that the NFL wants Los Angeles and Los Angeles wants the NFL, but who will be the middle man in this relationship? Who will wed the NFL and Los Angeles once more?

I guess only time will tell.

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3 Comments Post a comment
  1. Scott LeMire
    Jun 28 2011

    ” Weaver, however, is not among the richer owners in the NFL. He’s not like Paul Allen (Starbucks) or Woody Johnson (Johnson and Johnson/Robert Wood Johnson).”
    Paul Allen has NOTHING to do with Starbucks, lol, that is Howard Shultz. Allen CO-FOUNDED Microsoft with Bill Gates. Also owns half of South Lake Union in Seattle. You should ride the trolley… Originally called the S.L.U.T. (South Lake Union Trolley), it has been changed, but you can still get the S.L.U.T. shirt in tourist shops…

    Reply
  2. Jun 28 2011

    Hm…who am I thinking of that owns Starbucks and owns a sports franchise? Guess I’ll have to go back to the drawing board on that.

    That being said, Allen is absurdly wealthy. If there were no salary cap/shared revenue he could afford to field likely the highest payroll in the NFL by a long shot.

    Reply

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