The San Diego Chargers have announced that they will relocate to Los Angeles, after failing to come to an agreement with the city of San Diego on either a new stadium or upgrades to their existing stadium, which is one of the oldest in the NFL.
It is assumed that the Chargers will be tenants with the LA Rams at their new stadium in Inglewood CA which is scheduled to open in time for the 2019 season.
In the meantime, it seems that the Chargers intend to play at Stubhub Stadium in 2017 and 2018. This is a very small stadium by NFL standards, with a capacity of only about 30,000.
The move to a smaller stadium in the short term is, however, likely to have only a limited imoact on the overall team revenues. This is because almost 50% of an NFL team’s revenues is from their pro-rated share of the overall NFL television rights revenues. That is a lot of money each year, and it keeps going up. For 2015, the Green Bay Packers, who are the only NFL team to publish annual accounts, because they are owned by the public, reported TV revenues of $222.6m – 54% of their total revenues in what is a small local market compared to many other teams. The national TV revenue number is rumoured to be rising to over $240m in 2017.
The Chargers are in the middle of the pack on total spending on players, as reported here. They are going to have reduced home game revenues, but they will still share away game revenues from full-sized stadium. To put it in math terms, if their seat and other spending revenues from Stubhub are 50% of the revenues from San Diego, that will still equate to only a 25% drop in game-day revenues, since half of their games are road games. Since about 50% of their revenues come from TV income, the overall impact on revnues will be (at most) 12.5% for the next 2 seasons, and if TV revenues keep on rising, that number may be a lot less.
The Chargers are thus accepting a modest short-term reduction in revenues for the chance to earn more money from premium seating and access to the LA market from 2019. They do have the option of selling PSLs and season tickets, so they could extract a lot of one-time revenues starting in 2018. (This article, interestingly, explains that the PSL opportunities in San Diego were judged to be very limited, and PSL sales in other sports markets have not exactly been big sources of revenue recently, so the 49ers may be an anomaly.), However, the 49ers revenue from PSLs has apparently failed to meet forecasts, in part because the recent performance of the team in Levis Stadium has been poor which has led to a slump in the sales of both PSLs and season tickets. The deal between the 49ers and the Stadium Authority is structured such that failure of the PSL sales to meet forecasts could convert Levis Stadium into a financial loser for the city of Santa Clara.
It is not clear to me what the Chargers will be able to do for other sources of revenue once they arrive in Inglewood as tenants instead of stadium owners or sole occupiers. Many other NFL teams have naming rights deals for their stadiums, which bring in a lot of extra money annually. Since Rams owner Stan Kroenke will own the Inglewood stadium, with the Chargers as tenants, if he does have a naming rights deal for the stadium, it seems unlikely that the Chargers will benefit from it. However, given that the existing naming rights deal with Qualcomm in San Diego was only worth just over $1m per year, you can make the argument that the Chargers have little to lose financially by not having a naming rights deal in future.
I hope that the tenancy deal that the Chargers have with the Rams does not vary the costs dependent on the final cost of the new stadium. Stadium projects are notorious for blowing past initial cost and timeframe estimates.
As to whether the LA area can support 2 NFL teams; only time and on-field performance will determine that. However, the relocations of the Rams and Chargers (and the probable move of the Oakland Raiders) are occurring because cities are increasingly unwilling to provide large sums of public money to build new stadiums for professional sports franchises. If the NFL growth stops or reverses, these moves may be seen as the high water mark for NFL ambitions.
UPDATE 1 – This article does a good job of summarizing the teeth-grinding self-serving duplicity that NFL owners engage in as they seek to corral ever more public money for their stadiums and related amenities.
UPDATE 2 – This article explains some of the twisted dynamics behind the final decision by the Chargers to move to LA.. This article explains how the long-standing absence of an NFL team in the LA basin, plus old animosities, has been a major contributor to the current mess. The maximum spin-cycle letter from Roger Goodell looks even more like a zero-credibility pile of BS after you read the article.
UPDATE 3 – This comment from FieldOfSchemes reminds us of why and how the Chargers ended up in San Diego in the first place…