Los Angeles will get a football stadium, but will they get a team?

Los Angeles City Council has given approval for Anschutz Entertainment Group (AEG) to build a $1.2 billion football stadium in downtown LA, next to the Staples Center which is also owned by AEG.  What is interesting in this whole process is that I just discussed about a week or two ago that AEG was selling off all of its Los Angeles based business, and this would surely include the football stadium which will be called “Farmer’s Field”.  This may mean that the price for AEG’s Los Angeles operations just went up by several hundred million (or maybe even more than a billion).  As noted in the article listed above, there were many interested parties at the City Council vote, including individuals from Staples Center with “Farmer’s Field” t-shirts, some fans wearing the colors of the old Los Angeles Rams, and other potential interested parties.

Deadspin notes that the San Diego Chargers could have been the ones to move to LA, if the deal had been done sooner, but that is no longer a possibility.  Likewise, the Oakland Raiders are said to not be favored, as the state would not want to fund such a big project just to move a team from one part of the state to another.  That would indicate that the new stadium will be looking for an NFL team from outside of the state.  The Vikings and Jaguars look to be stuck in their current cities for quite a while, so the next choice falls down to the St. Louis Rams and Buffalo Bills.  Both teams have had troubles drawing fans to games in recent years, and Stanley Kronke (owner of the Rams and Arsenal) would certainly have to consider the possibility of moving the Rams to one of the major markets in the U.S. if St. Louis doesn’t start to helps the Rams out some more.  I’d say Kronke is in a good position to hold St. Louis hostage for some tax money, as he’ll simply just say he will pack the bags and move off to LA if they don’t.

He would not be the first owner to make this threat, and he certainly will not be the last.

I’ve started to get the questions about the economic impact the new stadium will have on Los Angeles.  The answer is a complicated one.  Research shows that facilities don’t necessarily bring big gains to the economies of local regions.  That said, stadiums do bring fans and business to local restaurants, bars, and hotels that are located near a sport facility.  A good discussion of this can be found in the San Jose Mercury News, were professors Roger Noll and Dan Rascher (both very prominent sports economists) discuss the economic impact of the NHL lockout.  Dr. Noll notes that this local business will probably suffer, but not the economy as a whole.  Dr. Rascher adds on that there is some impact for the San Jose with the Sharks not playing, because only 28 percent of those who come to Sharks games live in San Jose.  Considering the size and scope of the Los Angeles area, it is quite possible that you would see similar percentages of out-of-town visitors for Los Angeles NFL games.

So for now, the answer is: we shall see.

Lockouts and Scabs

The NHL lockout claimed more victims today, with “just under 20″ employees of the St. Louis Blues being laid off by the organization.  Additionally, other employees have taken pay cuts or switching to a four day work week.  Layoffs are spreading around the league, the Florida Panthers even have laid off their mascot.  Some are comforted that Bettman is not taking pay while the league is locked out, but it is important to note that he is the lowest paid commissioner in the major North American sports.  Still he took home close to $8 million in salary last year.

There has been some other news in the NHL, and much of it seems to be coming out of Alberta.  First, the Edmonton Oilers are said to be considering Seattle as a potential site for relocation.  While Bettman and the Edmonton mayor have been telling fans to note worry, it is worth noting that the Oilers owner was in Seattle to talk relocation.  Also coming out of Edmonton is the news that the Oilers and the Calgary Flames are trying to have the lockout ruled as being illegal in the province.  The NHL and NHLPA lawyers have congregated in Alberta, where they are currently arguing in front of the Alberta Labour Board as to whether a lockout is legal by the laws of the province.  It would be curious to see how this turns out.  If the lockout were found to be illegal in Alberta, though a similar motion has already been struck down in Quebec courts.

In other lockout news, the NFL referee lockout is still continuing, and the fans are angry.  Last night in a key final play, the replacement referees seem to have made a mistake which changed the outcome of the game away from the Green Bay Packers to the fortune of the Seattle Seahawks.  Individuals across the country now bemoan the “horrid” refereeing in the NFL, yet they continue to watch the game.  Former 49ers QB Steve Young came out and said that if people are really so angry that they don’t like the product with replacement referees, they should stop watching.  That doesn’t seem to be the case, as ESPN’s Sportscenter scored ratings around a 5.0 for their midnight broadcast.  This is about four to five times higher than the normal viewership during this time period.  It seems that the bad refereeing is almost drawing more attention to the league.

New Jersey state senator Stephen Sweeney isn’t amused by the referees.  He has proposed that New Jersey consider banning replacement referees from working games in the state.  Senator Sweeney is naturally a Packers fan.

Yet here we see government now trying to get more involved in sport, should they not be working on more important things than whether your favorite team had proper officials for their game?

More movement in the LA sports scene

Today the Los Angeles Times published an article noting that Anschutz Entertainment Group (AEG), my former employer, headed by billionaire Phil Anschutz, was looking for someone to buy out the rights to their Los Angeles based sport properties.  Included in this are the Los Angeles Kings of the currently locked out National Hockey League (NHL), the Stapes Center where the Los Angeles Lakers and Clippers play (NBA), as well as the Los Angeles Galaxy of Major League Soccer (MLB).  This move came as a surprise to me, as AEG had long been working towards building a football stadium in Los Angeles in order to attract a National Football League (NFL) team.  As the plans have stalled several times and have moved forward and backward several times, it could be that AEG has finally decided to give up on the project, and abandon all their other Los Angeles projects as well.

At the same time, this is not the first time that AEG has sold off sport properties.  The company was one of the main investors along with Lamar Hunt to help get the MLS started in the 1990′s.  AEG once held the three major market teams in the MLS, the Chicago Fire, Los Angeles Galaxy and New York/New Jersey Metrostars.  Since then they sold of the Chicago Fire, as well as the Metrostars.  The Metrostars were purchased by Red Bull for a price reported around $100 million, which many thought was a great deal for AEG to sell off an MLS franchise at such a high price.  Now it seems that AEG is moving away from the MLS and is selling off a lot of their sport properties.  Additionally, it could be a combination of getting out of soccer while they can, selling off a franchise from a locked out league, and the LA football stadium problems that has pushed them in this direction.

In either case, if AEG does sell of the properties it will be a major change in the LA sports landscape.

Quick Update: NHL Lockout Official

Greetings, last night the National Hockey League (NHL) officially locked out players, making this the third lockout of Gary Bettman’s tenure as league boss.  I find it absurd that someone would be allowed to be the commissioner of a league after two lockouts, but now his leadership has presented us with a third one.  Of course, he really works for the owners, so as long as he is keeping the thirty or so super rich individuals across North America happy, he will stay in his job.

On Saturday, Bettman continued in doing his work for the owners when the league told the head of the players’ association (Donald Fehr) to not even bother trying to get a last minute face-to-face meeting to try and bring the sides to a compromise.  Granted, this may have been a waste of time as the sides are still too far apart on any deal happening.  The players had already taken a 24 percent cut in salaries to end the previous lockout in 2005, now the owners want the players to drop the percentage of revenues they share by around 8 to 10 percent.  The players weren’t going to agree to this, the Collective Bargaining Agreement was thus allowed to expire, and thus we are now in a lockout.

In my opinion the league has continued to slash costs, the previous time the league had some good arguments to reduce costs, but this time around it seems as if they just want to slash costs because they can.  The NHL is scheduled to begin play in October, but that seems to be in doubt as there is no way a deal will get done in time to get players to training camp and ready for the season by then… unless those players bolt to Europe.  The exodus has already begun, Evgeni Malkin has already left to play in the KHL in Russia.  The KHL was well prepared and set out rules about the number of players from the NHL a team can sign during a lockout, and that the salaries can’t exceed 75% of what the player makes in the NHL.

Already several players are headed over to play in Europe which makes me think that with other revenue sources for many players readily available, this lockout could last a long time. One wonders if this could be the end of the NHL as we know it.

Is the NFL in trouble for Collusion?

Thursday in a Minneapolis court room, the trial will begin in the case of Reggie White et al., vs NFL which alleges that the NFL owners were colluding to keep salary caps at a certain level, including that the owners had a secret agreement to keep the cap at $123 million a year during 2010 when the league had no salary cap.  The lawsuit alleges that such behavior has existed since the early 1990′s, and argues that owners have been working together to keep salaries low in the league.  The lawsuit indicates that this collusion has cost the players billions of dollars in potential lost revenue over this frame.  People have been discussing that the bounty gate and concussion problems would be the things that really hurt the NFL, but this new lawsuit brings a major issue for the league from a financial standpoint.

MLB owners were found guilty of collusion during parts of the free agency era, and were thus forced to pay back players, so this is not the first time this has potentially happened in North American professional sport.

Sport site Deadspin notes:

The only way to challenge the salary cap punishments now, after they’ve gone through the collectively bargained appeals process, is to “re-interpret” the entire 1993 settlement that allowed for a salary cap in the NFL and punish the owners’ collusion to the tune of $4 billion in damages.

This could mean big problems. NFL owners are probably cringing as the Judge presiding over the trial will be David Doty, a judge who is known for having ruled in favor of the union several times in the past.

You can also read (and download) the lawsuit on another deadspin article here: http://deadspin.com/5912702/

Kansas City teams using taxpayer money to pay for pretty much everything…

It is not unusual for professional sport teams to use taxpayer money for upkeep and maintenance of their sport teams.  Well trouble may be brewing in the state I am based in (Missouri) as WHB 810 Sports Radio in Kansas City broke new yesterday that the Kansas City Royals, the cities Major League Baseball Team, is using only a small portion of the tax money they requested for maintenance and repairs.  This isn’t exactly illegal, but the Royals apparently are using only 9% of the $17 million in taxpayer money earmarked for maintenance and upkeep for stadium repairs.  What are they using the money for?  Well, in 2006 an amendment was added to the lease agreement to both the Kansas City Royals and Chiefs (the National Football League team for the city) which allowed them to use this fund to help pay for “game day operations”.  Well the Royals asked for money from the fund to pay salaries of employees ($4 million) and another $700,000 to pay for their taxes.  Both requests were approved, officially making it so that the Royals were paying their taxes with taxpayer money.  The best part?  The reporter from WHB 810 has actually provided with a list of what the Royals asked for and received from this special fund:

	Security	$287,377
	Telephone	$83,698
	Supplies	$657,838
	Uniforms	$86,301
	Salary, Full-Time Associates	$975,309
	Payroll, Taxes and Benefits-Full Time	$365,176
	Salary, Full-Time Associates	$321,355
	Payroll, Taxes and Benefits-Full Time	$133,617
	Salary, Part-Time Employees	$2,618,568
	Payroll Taxes-Part Time Employees	$200,320
	Security	$236,113
	Telephone	$515,696
	Stadium Services	$691,322
	Professional Services-First Aid	$241,931
	Utilities, Telephone, Cable TV	$2,291,385
	Day of Game Security	$247,528

And the Royals aren’t the only game in town, and it is now being noted from a source that the Kansas City Chiefs are doing similar things with the fund.  The Chiefs asked for $27 million, and used only a third of that amount on stadium repairs and upkeep.  It is noted that none of this tax money is allowed to pay for player salaries, but they are being used to cover other salaries of employees, and pretty much everything else.  The Jackson County Sport Complex Authority which approved these funds just sent re-nomination of their current head to Missouri governor Jay Nixon for approval.  Governor Nixon will need to think twice about this as citizens will clearly not be thrilled by this use of tax money.  This will also not improve Royals owner Dan Glass’ standing with the fans of his team.  They already are unhappy with the way the team is run and will not pay for players, now they find operations are being paid with their tax money, this can not go well.

Man Utd to IPO… in the U.S.

Manchester United, one of the worlds biggest brands and highest valued sport franchises has decided that they will pursue an Initial Public Offering to raise $100 million  in the U.S.  This isn’t probably that strange of a thought, as the team is owned by Americans, the Glazer family to be specific, who also own the Tampa Bay Buccaneers.  However, I can see that many individuals will be quite unhappy in England, as there has already been a lot of backlash against Premier League teams being bought up by foreign investors.  Now with stock being sold on the U.S. stock exchange, I believe that there will be another wave of criticism.

Another question arises in, whether it would be worth the money to buy stock in Manchester United.  Certainly the franchise has a high value, but many football clubs in Europe have been running large debts, and it doesn’t seem like a sure thing that this stock will make quick money for anyone.  As a long-term investment it may make sense.  That said, I already know several people who live in the U.S. who are rather excited, as they love the prospect of being able to own a piece of their favorite club.

The Glazer’s were also hoping to sell of a good chunk of stocks on the Singapore markets as well, however the volatile nature of the Asian markets has caused the $1 billion Singapore IPO to be put on hold for another day.  CNN notes that this comes after Formula One also put a halt to their IPO in Asian markets because of too much uncertainty.

Mets inching closer to major financial issues?

It has been noted that the New York Mets are not in the best of financial situations, especially in regards to their cash flow.

Things got even worse when victims of the Bernie Madoff ponzi scheme filed a $303 million lawsuit against the owners of the Mets who had taken money from Madoff to help support the team.  The Mets lost an important ruling in federal court today, with the judge ruling that the Mets must show that they didn’t know about Madoff’s ponzi scheme.

The above linked story notes that the Mets lost over $70 million last year, were ordered to repay $83.3 million of profit from a fictitious Madoff company, and still face another $303 million if they can’t prove they had “willful blindness” to Madoff’s financial schemes.

I’m sure Bud Selig and the MLB front offices do not like what is going on.  After the Dodgers financial debacle, I’m sure the last thing they want is the Mets also having to go into bankruptcy as well.

The NBA looks like it will be back just in time for Christmas

That’s right, after all the fighting between various groups that was highlighted in several posts here at the blog, the NBA owners and players association has come to a handshake deal after a 15 hour bargaining session lasting Friday and Saturday morning.  If the deal is accepted (they only have a handshake deal at the moment), the league is scheduled to begin play on December 25th, Christmas Day.  Reports coming in are saying that the first game will be a rematch of the finals, with Dallas playing Miami.  I don’t know if it the Holiday season that got the two groups together again to get a deal, but the owners are claiming that it wasn’t time or the calendar which was forcing them to get things done.  Really, it seems that the mounting financial pressures on both sides was what really helped get to the point where they are at now.  As ProBasketballTalk (NBC Sports) notes, the owners were not looking forward to losing an entire season of revenue, and the players were not looking forward to losing an entire season of salary.

So now that it looks like the NBA will be back, there is still the question of how long it will take for fans to get back into the league.  Research shows that attendance and fan interest in professional sport leagues tends to drop off after the league goes through a lockout.  And this was no short lockout, it lasted 149 days, and was the end point of almost two years of negotiations.  The NBA looks to overcome one big hurdle, but the new obstacle which may cause a drop in revenues is the lack of interest from consumers.  I’ll be curious to see how many people show up to games once it starts back up.

NBA losing sponsors

The NBA players association has decided to vote on decertifying.  There are still plenty of discussions about how this process will work out, but things are bleak, and most sport analysts and fans are writing off the entire season.  Lucky for fans of basketball, NCAA basketball has started and there are plenty of prime match-ups all week long.

But as the lockout now looks to be here for the long term (as if the previous few months wasn’t long enough), those who advertise and sponsor the NBA have begun to pull out their sponsorship of the league.  The Milwaukee Journal Sentinel reported that MillerCoors has pulled out its sponsorship of the Milwaukee Bucks during the lockout.  The value of the deal is unknown, but it is known that MillerCoors spends over $100 million a year on sport advertising alone.  As the lockout proceeds, it is most likely that more and more companies will not want to associate itself with the league.  As fan perception of the league, its players, and owners is all down, it makes sense for companies to pull out.

This is probably only the beginning, and the league looks to lose a lot more revenue sources as the lockout extends.