http://m.utsandiego.com/news/2015/may/02/nfl-stadium-kroenke-rams-chargers
Kroenke still controls L.A. stadium clock
Pay no attention to the NFL draft that wrapped up Saturday. The most dangerous man in football this year will continue to be Stan Kroenke, the reclusive billionaire who owns the St. Louis Rams.
His plan to spend nearly $2 billion on a two-team stadium in Inglewood, just 10 miles south of downtown Los Angeles, has profoundly upset the balance inside the world’s most lucrative sports league.
Chargers president Dean Spanos, who says he wants to stay in San Diego, now must place a huge bet on moving to Carson, with or without the Raiders. San Diego Mayor Kevin Faulconer, who was elected thinking he had time to build a political consensus for keeping the team, is now a man in a hurry.
The dynamic is roughly the same in Oakland and St. Louis. How can one man create so much drama? Because the NFL is, above all, a business.
Los Angeles, the nation’s second largest broadcasting market, has been without an NFL team for two decades.
Turning it into a thriving football town is part of Commissioner Roger Goodell’s plan to grow annual league revenues to $25 billion from its present $10 billion or so.
If executed well, taking sole possession of this fabulous market could triple the value of the Rams (or the Chargers), from roughly $1 billion now to $3 billion, sports economists estimate.
Kroenke is perfect for the job; a genuine sports mogul. He owns six professional franchises, including the NBA Denver Nuggets, NHL Colorado Avalanche and the fabled Arsenal soccer club in London.
And he believes in maximizing value through vertical integration. In Denver, Kroenke Sports & Entertainment owns his teams’ arena, regional broadcast network and ticket company (technically, his son controls the operation to comply with NFL cross-ownership rules). Forbes puts Kroenke’s net worth at $6 billion.
It’s hard to imagine a more formidable threat to Spanos.
For perspective, the Chargers say 25 percent of their season tickets are sold to fans living in the metropolitan L.A. area. They could learn to love the Rams.
So Spanos must either beat them into L.A., join them, or seal a deal with San Diego and rebuild his season ticket base. If Kroenke gets there alone and first, Spanos loses leverage with San Diego, and his lease at Qualcomm expires in 2020.
Yet the Chargers president has a key advantage.
Three quarters of the NFL’s 32 owners must approve relocation. One requirement is that a team moving to L.A. must show it was unable to secure a deal for public subsidies from the jilted city.
Spanos can credibly say he’s come up empty in San Diego for more than a decade. This could tilt other owners toward his Carson proposal, for a $1.7 billion privately funded stadium in partnership with the Raiders.
Kroenke has been talking to St. Louis for about five years. But now city and state officials are offering free land and $400 million in direct subsidies toward a $1 billion stadium.
The NFL would chip in $200 million under its G4 loan program, and local officials assume fans will raise $150 million in “personal seat licenses,” which convey rights to season tickets, according to recent reports.
This leaves the Rams to contribute merely $250 million to get a new stadium — and a big boost in annual revenues. Sports economist John Vrooman estimates the team value would surge to $1.5 billion. Not a bad payday for Kroenke.
Here’s a conspicuous notion for San Diego: A similar deal at Qualcomm would greatly undercut the Spanos case with fellow owners, especially if the Raiders drop out.
And NFL owners pay close attention to whether a stadium deal is financially viable.
Without the Raiders, picking Kroenke over Spanos would seem a safer bet. Nobody wants a struggling team, and either must build a new market in Los Angeles while recovering well north of $1 billion in construction costs, after the sale of seat licenses and NFL funds.
Even if the Chargers-Raiders collaboration survives, owners must decide whether L.A. is really ready for two teams, notwithstanding Goodell’s grandiosity. Seeing how one performs for a few years is a safer bet.
At least one owner, Jerry Jones of the Dallas Cowboys, seems happy to let Kroenke decide the matter by moving the Rams without permission, as the late Raiders owner Al Davis famously did in 1982 after winning an antitrust lawsuit against the NFL.
Not so fast. Kroenke would have a much harder time of it, says Marc Ganis, a consultant who advised the Rams and Raiders when they moved out of L.A. in the mid-1990s.
NFL legal ties bind much tighter these days. In 2007, the league won a suit against Davis over whether the Raiders or the NFL “owned” the L.A. market.
Incidentally, that fight was over the same site Kroenke now controls. The NFL wanted Davis to share a new stadium with another team, so he sued to block a competitor.
More to the point, the NFL controls vastly more money today. The league could sack a maverick by holding back his piece of broadcast revenue, which hit $6 billion last year, along with other shared sources that typically make up 80 percent of a team’s revenue.
Such power flows from the NFL’s monopoly structure. One way to understand this is to think of owners as operating, but not fully owning, their individual teams. Instead, they own a 1/32 share of an association, Ganis said. That’s why the NFL, as a collective, is reluctant to pass up $400 million in free public money in St. Louis, or see the Chargers facing stagnant local revenue in San Diego.
Voluntary contracts of association are hard to break. An exception might be if the NFL keeps Kroenke waiting too long.
Legally, he could argue that the Rams duly followed the prescribed process, invested millions in a new site, and yet the NFL refused to render a decision while San Diego, Oakland and St. Louis pursued lengthy political processes to raise public funds.
Although this particular game of chicken seems unlikely, it could explain why Goodell recently said owners may decide the L.A. question this fall, instead of waiting for their annual meeting in March.
Thus the Kroenke clock forces Spanos to move full speed ahead in Carson.
If San Diego can’t place hard cash on the table by November, the Chargers face a future battling for fans with a local competitor, while their Qualcomm lease expires in 2020. In this context, St. Louis may even start to look good to a panicking Spanos family.
Some people, particularly boosters of Qualcomm redevelopment, say Spanos is just bluffing in Carson. Maybe. But Kroenke? I wouldn’t bet on it.