L.A. Flips The Script On The NFL, Holds The Bargaining Power
In the typical drama between a city and an NFL team, the city kisses the NFL ring, makes gestures of submission, and opens their checkbook to entice the team to locate in their city. It looks like a strong possibility that either the St. Louis Rams or Oakland Raiders and San Diego Chargers will be playing in Los Angeles before too long. While the deals struck are beneficial to the teams, these deals reflect a stronger desire of the teams to be in the L.A. area than the L.A. area’s desire to have a team.
The nation’s second largest metro area with 18 million people has been without a local teams since the 1994 while cities like Jacksonville and New Orleans, with 1.5 million host teams. Since the Rams and Raiders departed, the NFL has granted new franchises to Cleveland (3.5 million) and Houston (6.3 million). The USC Trojans have become the de facto professional football team in L.A. How have the NFL and individual franchise owners been willing to leave money on the table? With apologies to fans in St. Louis, Oakland, and San Diego, the interesting economic question is why has it taken so long?
It’s a combination of NFL hubris along with the limitations of public relations and the NFL’s league-team arrangement. On hubris, the NFL as a league and its owners usually hold a strong bargaining position vis-a-vis cities desiring to attract or hold on to teams. Typically, they can extract and hold out for generous stadium inducements. With great weather, abundant beaches, and many other leisure and entertainment options, L.A. hasn’t played by the NFL’s script by offering a sweetheart deal. For much of the past twenty years, the NFL acted as if L.A. would come crawling to them, as have many other cities, but it didn’t happen.
Back to the Future for the L.A. Rams?
The NFL has also been constrained by its own concern with public relations regarding team movements and location. In a narrow financial sense, starting up a franchise in L.A. would seem to take precedence over Cleveland and Houston, but with both of those teams losing franchises to other places based on stadium deals, the NFL was willing to bypass L.A. in favor of these jilted cities. Ironically, those cities were willing to structure stadium deals that would have likely kept their original teams in place. Moving a team out of New Orleans and to L.A. represents an even bigger public relations hurdle than these in the post-Katrina world of the last decade.
The other limiting element is the NFL’s league-franchise arrangement. From a league perspective, it would make more sense for a team to move from 1.5 million Jacksonville to L.A. rather than from metro areas of around 3 million like St. Louis or San Diego. However, the NFL is not a “single entity” like NASCAR. Owners of teams call the shots on location, at least within certain bounds of league approval. Some owners are more committed to staying put than others, so the league doesn’t really get to tab a franchise to move.
While any move of an existing team will stir passions of fans and media in impacted cities, from a purely analytical perspective, the Rams move makes a lot of sense. By re-purposing the land on which an existing, large sports venue sits, it doesn’t have to carve out an existing area from a congested metro location and all of the political issues raised by those problems. (A report about the location being at increased risk of terrorism seems a real stretch.) They have a long history in the area. While the Rams didn’t start as a franchise in L.A., they resided in the metro area from 1946 to 1994. They already play in the NFC West so there isn’t a geographic misfit.