Posted by John Vrooman on Tuesday, January 5, 2016 in National Football League.

Interview with NBC.

What addressable market does Los Angeles have for NFL football, both in terms of viewership and attendance?

Attachments: Market size. Alternative futures.

LA is obviously valuable as the second largest TV market in North America, but TV ratings and viewership for sporting events is typically lower in LA compared to other mega-markets even if an LA team is involved in the game. When the Raiders and Rams both occupied LA/Anaheim before 1996 their games were rarely sold out and were therefore blacked out on local TV, and so the size of the media market was irrelevant if not detrimental to national TV ratings. Ironically it is entirely possible the empty LA market has been more valuable to the NFL as the 3^rd leg in a stadium funding extortion triangle over the last 20 years than would have been the case if it had been occupied since the Rams and Raiders relocated in 1995.

Since past teams (the Rams and Raiders previously) have moved out of LA, is there anything fundamentally weak about it as a football market?

LA is a good market for local college football (which is more of a complement than a substitute), but the overall sports entertainment dollar is competitive in So Cal. It’s not only TV market size that matters but also fan intensity. For a different sports example, in MLB’s recent National League Division Series the beloved LA Dodgers average TV ratings were about one-half of the New York Mets, one-third of the Chicago Cubs and only one-fourth of the relative viewers of the St. Louis Cardinals. LA’s TV market size should be therefore tempered for is coolness particularly after being abandoned an manipulated (in the 2002 NFL retro-expansion into Houston) by the NFL cartel.

What is the past precedent for three teams in the same sport in one city?

Almost none. Monopoly cartel sports leagues almost always prefer single-team monopoly markets to 2-team or multiple team markets, This is because two monopoly markets are always more valuable than one duopoly market regardless of market size or market share. Multiple team markets are always a negative sum move for the League overall. Almost all of the existing multiple team markets (NY and SF-OAK) are vestiges of rival league mergers in the past.

 As a notable exception, there are multiple team markets is European Football (6 English Premier League Clubs in London) but those Leagues are open and membership is populated through a natural process of promotion and relegation based on performance. In the Big 4 North American Leagues membership scarcity is artificially limited and closed to internally maximize franchise value and enhance the credibility of relocation extortion threats.

As a result the internal league profit optimum is maximized at the expense of the external social welfare optimum, which could easily be advanced with an NFL expansion team in LA and probably a half-dozen other viable professional markets.

In the minds of the NFL owners the relocation rights of an empty LA market still belong to them even if the LA market is was twice abandoned two decades ago. Given the major difference between the values of the franchises under alternative scenarios playing in a variety of stadium configurations in different markets, the appropriate relocation fee for the other owners would tax away almost all of the potential gains from relocation.

If the relocation fee is higher than the relocation gains then the Chargers/Rams/Raiders would not make the move and if the fee is lower, then the difference would disproportionately accrue to the relocating club.

 According to analyses I have previously done for the local press in each market, the net gain in franchise value from relocation to LA for each of the 3 candidates would be about $1.1 billion. If the gains were split evenly between the relocating club and the League then the relocation fee could approach $550 million as reportedly being entertained by the rest of the NFL owners.

If the other owners settle for the visiting team share of gate revenues the hypothetical relocation fee would be set at 34% of $1.1 billion or about $375 million. Based on past performance it would also be possible for each of the 31 other owners to settle for a cool $10 million each for a total fee of $310 million. Here is a quick rough analysis of the potential scenarios for all 3 clubs comparing their current status with a new stadium in their current home and LA.

 Is there any possible benefit from fan bases in Oakland, San Diego and St. Louis continuing to give them a viewership boost in LA?

Almost none, with the exception being the Raiders. Franchise relocation is like the one-sided breakup of a bad relationship. It is personal  and it can last for decades. Ask erstwhile Bud Adams fans in Houston, Art Modell fans in Cleveland and even Georgia Frontiere and Al Davis fans in LA. The NFL is not automatic in an jilted and jaded LA, ironically thrice scorned by the 3 clubs that now seek retro-location  and reconciliation.

Ultimately, how do you think relocation will end up, and how many teams do you think will move?

The actualization of the Raiders-Chargers joint venture ultimately depends on the pretzel logic of the wider NFL venue extortion game being simultaneously played out in Oakland, San Diego, St . Louis and LA (Carson and Inglewood/Hollywood Park).

 It is very unlikely that the other NFL owners will allow a double/joint relocation of 2 franchises to the LA market, not to mention three clubs, regardless of how well connected the Carson venture is to Disney (ABC/ESPN).  This is because the League always prefers several monopoly markets to one duopoly (two-team) market regardless of market size. Ironically the gains from two clubs splitting a $1.8 billion stadium would almost completely be negated by the reduction in present value of net cash flow. This is why the league cartel avoids two team markets, except in the past merger of rival leagues (Jets/Giants) and (49ers/Raiders). This leads to the obvious conclusion that only one team will relocate to LA.

 Existing duplicate team markets like SF 49ers and Oakland Raiders the Bay area are vestiges of rival league mergers in the past like the AFL and NFL merger in 1967. Following the same cartel monopoly logic the League also prefers the relocation of a dual market team to that of a single market monopoly team, because it would simultaneously increase the values of both the Raiders in LA and the 49ers in Santa Clara.

This leads to the simple conclusion that the League would prefer the single relocation of the Oakland Raiders to LA instead of either the San Diego Chargers or St. Louis Rams. This would simultaneously create monopoly markets in the Bay area (Santa Clara) and LA, while leaving the Chargers alone in San Diego and the Rams in St. Louis.

In the end relocation-extortion game all four clubs (including the 49ers) would then monopolize their respective single-team markets in state of the art luxury venues like Levis Stadium where half of the fans are effectively being charged twice as much.

Abstract theories don’t always work in the real world of stadium finance where the relocation odds are still probably favor Stan Kroenke moving the Rams to a $1.8 billion luxury Hollywood Park stadium synergistically linked to his wider economic development project. I

n the end there is just not enough economic pop in the Carson project to justify the coexistence of two competing clubs. The private cost of the $2 billion venue in LA should tilt the odds in favor of the only owner who can use the stadium as an anchor for a more comprehensive project.  Advantage: Stan Kroenke’s Rams.

 Ironically St. Louis currently has the most fully developed City/State stadium plan of the three markets now being pressured by the League threats of relocation, followed by San Diego with Oakland not even out of the gate. St. Louis could then become the relocation target of another wayward NFL club, even the Raiders. It’s a longshot but this is exactly what happened in 1995. 

As fate would have it, the 4 frustrated finalists in the Carolina Panthers/Jacksonville Jaguars expansion derby of 1995 were St. Louis, Baltimore, Oakland and Memphis/Nashville and each immediately became the relocation target of opportunistic NFL franchises in Houston, Cleveland and LA. The NFL then retro-expanded into Cleveland 1998 and Houston 2002 leaving the LA market as an empty example of what happens when a major city ends up on the short end of the shell game of the NFL cartel.