Will the NFL come to Los Angeles?

March 8, 2013

In previous posts over the last few years, there has been discussion on this blog about whether the NFL would finally place a franchise in Los Angeles.  Things seemed to be getting close in the last year, as Anschutz Entertainment Group (AEG) supposedly secure most of the backing and agreements needed to build Farmers Field in downtown L.A., next to the Staples Center (another AEG owned facility).  The picture grew a little more cloudy when AEG said that they were going to sell off their Los Angeles based organization, allowing another investor to take over.  Now there is downright chaos as it seems more conditions are on the plate for AEG, and there is also question of whether AEG has been following the proper timeline.

Amongst the discussion, is the NFL wanting a team to come to L.A. before Farmers Field is built.  That would mean a franchise would need to relocate first, and then attempt to build a new facility.  What this creates is the situation where a lot of cities may try to keep their teams by offering upgraded/new facilities where they are currently located.  In this way, the team would be guaranteed at least a new stadium.  The move to L.A. no longer seems to make a new stadium a certain thing.  St. Louis and Buffalo had been two franchises that had been considered on the hot seat in regards to having their franchises pulled away to the West Coast.  Now with this news, it may be that the Rams will try to leverage a potential move to get the $700 million in upgrades that St. Louis has supposedly been offering for their stadium.  In this, there is certainly the question of which franchise would move to L.A., or if the NFL wants to keep it open, to continue to pull public subsidies from other cities across the country with the simple threat of “if you don’t give us a stadium, we will move to L.A.”

The second part of the most recent drama is the council that had approved the project had set a timeline two years ago for the Farmers Field project to move ahead.  Currently, it would seem that the project is well off track and may not be allowed to happen at this point.  Part of this deal is that AEG must finish its work on the downtown convention center it is building in L.A. before it can move forward with Farmers Field.  This project is suppose to finish in the Fall of this year, but that is not certain to happen anymore.

Finally, as noted in this article from Yahoo, the NFL doesn’t believe the economics of the stadium will work for AEG.

“The numbers just don’t work, no matter how you look at the deal,” a league source said in February. “It’s either too hard for AEG to make money [and pay the debt on the stadium] or too hard for the team. I just can’t see a way for it to work.”

Officially, a league spokesman said Monday that the NFL is still tracking what AEG is trying to do.

“We continue to monitor the AEG situation and remain interested in multiple sites in the Los Angeles area,” NFL spokesman Brian McCarthy said in a statement.

Sounds to me like an NFL franchise is a long way from calling downtown Los Angeles home.

Hat-tip(H/T) to my students in my sports economics class who brought up this news during our discussion on stadium subsidies today.

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

September 29, 2012

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.


Where are the fans going in Minnesota?

August 16, 2012

The University of Minnesota once shared the Metrodome with the Minnesota Vikings of the National Football League (NFL).  As the stadium fell into disrepair, the University decided on a new stadium plan for their college football team, which lead the construction of TCF Bank Stadium, where the Golden Gophers now play their home games.  The stadium has just under 51,000 capacity, and was touted as a more friendly environment to watch college football than the Metrodome.

A new article in the Star Tribune notes that student season ticket sales for Minnesota football games have been on the decline.  In the first year in the stadium they were at 10,000 student ticket sales.  Year two was less than 8,000, year three was less than 6,000, and as it stands as of this moment, there is around 2,000 student season tickets which have been sold for games this year.  This drop has been very drastic, and people are starting to wonder what is going on.  Well team quality has not helped, as the Golden Gophers have been rather inept on the field in the past few years, and many are saying that this is driving people away.

There is also the novelty effect which should be considered.  In the sports economics research it is noted that new stadium often help boost attendance for about 5 years, after which attendance will return to the mean.  In this case, the stadium’s novelty really seems to be wearing off, and with poor performance of the team, it will be interesting to see how sales progress in the future.

Minnesota is in the opposite bag of the University of Missouri, which has sold out football student season tickets for the first time in their history.  The athletic department at Mizzou has said that around 46,500 season tickets have been sold, as the team and university prepare for their first year in the SEC.  People seem very excited about the great ticket sales numbers, but I would caution everyone to think that this will mean giant gains in attendance, as we could be dealing with a novelty effect of the team playing in the most dominant football conference in the country.  It also helps that Mizzou has a home game against Alabama, the defending national champions.

Hat-tip to Professor Tyler Hack in my department who alerted me to this article about Minnesota football attendance.


Vikings one step closer to a new stadium

May 11, 2011

The Minnesota Vikings, in need of a new stadium for many years now moved one step closer towards getting a new stadium today by hosting a press conference about a new potential stadium deal.  Ramsey County and the Vikings came to an agreement for a new billion dollar stadium, of which the Vikings would contribute $407 million of the costs.  If the deal is passed, the new stadium will be built ten miles north of Minneapolis.  The big issue is whether the deal will actually get full approval from the Minnesota Legislature to get the other $600 million dollars from public funding.  Pro Football Talk notes that the press conference to announce this new deal was a bit awkward, but is a big step closer towards a new stadium for the Vikings.  It is said the Vikings would be ready to play in the new facility three years from now if the Minnesota legislature passes the bill soon.

I wonder if having the roof cave in because of excess snow during this last football season will help convince people that the Vikings need a new stadium

H/T (Hat Tip) to Shawn for the heads up on this.


Tottenham suing for a stadium, and Fulham’s owner message to fans…

April 8, 2011

In the new this week around the Premier League this past week, Tottenham has gone forward with their lawsuit over the 2012 London Olympics Stadium which was awarded to West Ham United.  I had discussed the two proposed plans that both of these clubs had for the Olympic Stadiums and their bids in a previous post.  After West Ham United’s bid was chosen as the winner, Tottenham had been considering about whether it would be worth the risk of paying around $1 million in legal fees to launch a lawsuit.  As this article notes, Tottenham has begun their legal proceedings and have claimed there were issues with the process in which the winning bid was chosen.  As the stadium is said to be worth around $777 million U.S. dollars, it is not surprising that Tottenham was quite unhappy with this decision.  While their bid required them to put money into the project, it was much less than the cost of having to build a brand new facility, especially a state of the art one like that which is being built for the Olympics.  Clearly, Tottenham believes the $1 million in legal fees is a small risk, when the potential payoff is a three-quarter of a billion dollar brand new facility.

It’ll be curious to see how this plays out, however the Olympic group which is in charge of the stadium have already come out and said they believe that their decision to award the bid of converting the Olympic Stadium into a stadium for West Ham and other events will be vindicated in the courts. It is interesting to note that if the season ended today, Tottenham would be playing in the Europa League next season, while West Ham United would be relegated down to the nPower Championship League.

In one other piece of strange news… Fulham’s owner Mohamed Al Fayed decided to erect a statue of Michael Jackson in front of the clubs stadium.  Mr. Al Fayed who was a good friend of the late King of Pop did have some curious words for any Fulham fans who questioned his decision to put up the statue:

“I don’t want them to be fans. If they don’t understand and don’t believe in things I believe in, they can go to Chelsea, they can go to anywhere else.”

I checked the iTV site which has attendance numbers, and Fulham are at about 94.2% capacity in their 26,000 capacity stadium this season… while Chelsea are around 98% in their 42,000 seating stadium.  It seems to me that there is a higher demand for Chelsea, and another of the other clubs in London based on both percentage of capacity and total number of fans going to the games of other clubs.  Furthermore, Fulham is in the bottom quarter of the league in regards to average attendance.  I don’t why Mr. Al Fayed would even think of suggesting that fans go to other clubs, especially ones like Chelsea who are battling near the top of the table, while Fulham hovers at mid-table with no chance of playing in Europe.  If I was Fulham I would be worry about bringing fans into the games, not putting up statues for individuals who haven’t even really affected the Premier League on or off the field.


Will professional ice hockey leave Atlanta again?

February 18, 2011

Back in the days of the WHA in the 1970’s Atlanta had a hockey team (the Atlanta Flames) which were a somewhat successful franchise, especially consider the combination of Atlanta and a sport played on frozen ice.  This franchise eventually left Atlanta, and became the National Hockey League (NHL) franchise we currently know as the Calgary Flames.  The Atlanta Thrashers, the more recent hockey franchise to choose Atlanta as home has been around since the 1999-2000 season, when they were on of several expansion teams added in a flurry of expansion and relocation by the league away from Canada towards warmer climates in the U.S.  Now it looks like the Thrashers may be in dire straits, as the Atlanta Spirit LLC, owner of both the Thrashers and the Hawks (of the NBA) announced that they would need a new investor to potentially keep the team in town.

Michael Gearon who is a current co-owner of the Spirit LLC noted that the team was losing about $20 million, and that they are at the point where they can not really take any more financial loss.  Furthermore, the Atlanta Journal Constitution also reported in the article linked about that according to recently released court documents, that the Atlanta Spirit LLC had been trying to sell the Thrashers for about six years, or pretty much the entire time they have been the owners of the franchise.  Now these documents came to light as the Spirit filed a malpractice suit against an Atlanta law firm for supposed severe flaws in a contract with Steve Belkin, a previous co-owner of the Spirit LLC.  In this, a five-year lawsuit was launched by the Spirit against Belkin who actually held control over trades of franchises.  Because of the five-year lawsuit, the Spirit were unable to sell the Thrashers which the Spirit claim lead to $130 million in losses caused by the Thrashers, as shown in this court document (warning it is 40 pages long, and 3.26MB download).

Currently, the Spirit LLC is suing the law firm for around $200 million for the errors in the contract leading to all of these losses.  Additionally, the Thrashers are currently 2nd lowest in the NHL both in regards to attendance as well as Forbes estimated value.  Now rumors are flying around that the Canadian cities of Hamilton, Quebec, and Winnipeg are primary potential relocation sites for the team.  As discussed in a prior post on this blog, Quebec is planning to build an arena to attract the team, and cities such as Kansas City have the Sprint Center ready and waiting for a professional sport tenant.


NFL Owners walk away from the bargaining table. Is a lockout on the way? Plus some other NFL news…

February 11, 2011

NFL Owners walked away from the bargaining table on Wednesday and immediately canceled the second day of meetings with the NFL Players Association (NFLPA) on Thursday, as well as canceling an owners meeting which was scheduled for next week.  This means that after two years the owners and players still have not come to any agreement about a new contract, and thus moved one step closer to the lockout which many are dreading.  Gary Roberts, editor-in-chief of “The Sports Lawyer told USA  Today that with the current way things are going, as well as the standard of such labor disputes, that the owners and the players will probably not come to an agreement till September.  So what’s the big issue that is causing the problems?  Well as stated earlier here on the blog, the NFL wants to take back an additional $1 billion a year from the players (bringing the amount they take from one to two billion), the players want more financial transparency from all of the teams.  Some other issues on the table include: Revenue Sharing, Drug Testing, Rookie Wage Scale, an Expanded schedule to 18 games, better benefits for retired players, a new salary cap agreement, and international play.  I think some of these issues like international play could probably be easily agreed upon, but the expanded schedule and new salary cap agreement are probably going to be quite difficult to negotiate.

We are exactly three weeks away from March 3rd, the day when the current Collective Bargaining Agreement (CBA) expires.  In a league which has become some powerful from a financial standpoint, the owners and players both have a lot to lose if there is no agreement until September (or possibly later).  Projections are that the league would be out about $1 billion if they do not get going until September, and thus miss the preseason.  If a new CBA takes longer, the league would lose out on a lot of ticket, concession, and other revenue which goes along with the playing of regular season games.  The players also would lose out on a lot.  The issue isn’t just one about losing potential earnings and not having paychecks worth a good deal of money, but come March 4th, the players will lose their insurance coverage.  Really both sides stand to lose quite a bit if the lockout continues for a long time.

The owners do have a bit of insurance though.  Through various television deals, the NFL owners have guaranteed themselves $4.5 billion even if there is a lockout (that’s about $140 million per team).  The players tried to block the owners from getting this money, which they dubbed “lockout insurance”, however courts ruled that this money belongs to the owner and will not block them from getting it.

In a final piece of NFL news Anschutz Entertainment Group (AEG) owners of the Staples Center and the aforementioned Sprint Center in Kansas City have signed a deal with Farmer’s Insurance giving the insurance company naming rights for the new stadium they are planning to build in Los Angeles to hopefully attract an NFL franchise.  The deal is rumored to be worth around $700 million and would be a 30 year naming deal if the stadium was built.  Current estimates have the stadium construction costs at around $1 billion, thus these naming rights would cover 70% of these estimated costs.  While the NFL owners complain to players that they don’t have the money to build new stadiums because of the poor economy and the high salaries of players, AEG has gone out and shown the NFL that in some markets, the demand is high enough for a stadium project to potentially be worth private investment.

Probably the best moment of all of this lockout stuff in the last two weeks?  When Chad Johnson (Ochocinco) pictured above appeared at the State of the NFL address as a member of the media (he started his own media company, the Ochochinco News Network) and proceeded to try to grill NFL Commissioner Goodell about the lockout demanding that Goodell give an honest answer when this deal would get done.  Goodell of course dodged the question with an answer that really didn’t give a true answer.

All signs point to no deal anytime soon.  If the NBA goes to a lockout as well, the NHL may be the only major professional sport league playing in the winter next year in North America.