Business & Economy

The NFL returns to LA: How successful will it be financially?

Deborah Retolaza of Covina celebrate the Rams' return with her grandchildren Maxim, Dean, and Jade.
Deborah Retolaza of Covina celebrate the Rams' return with her grandchildren Maxim, Dean, and Jade.
Brian Watt/ KPCC

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Los Angeles Rams owner Stan Kroenke will address the L.A. media for the first time Friday afternoon, after NFL owners voted Tuesday to send his team – and perhaps the San Diego Chargers or Oakland Raiders – to Inglewood.

Inglewood Mayor James T. Butts Jr. and Kroenke held a community celebration Friday afternoon, welcoming the Rams to L.A. They announced that the waiting list for Rams tickets opens on Monday.

The Rams and Raiders both left L.A. in 1995, after struggling for years to attract the interest of fans. That has some wondering if the NFL’s return to Los Angeles will more successful this time around.

When the team left LA in 1994, it had a dismal record of 4-12, and it was dead last in NFL attendance. Sports Illustrated wrote that fewer people went to the Rams last home game than attended a high school football game played in the same stadium eight days prior.

“Los Angeles is a front-runner market where, if you're winning you can’t charge enough for your tickets, and if you’re not you can’t get people to come to your games," said Marc Ganis, president of the Chicago-based SportsCorp, a sports consulting firm who worked on the Rams and Raiders moves from Los Angeles.

Ganis says yes, L.A. is a big market – second only to New York, but it's also a fickle one.

“There’s a lot of other things that people can get themselves involved with, and other sports to get themselves involved with," said Ganis.

There are eight major professional sports teams in the area; USC and to a lesser extent UCLA football might as well be. A majority of the NFL season is played in the fall, when people in most parts of the country want to be inside. In L.A., those are some of the best beach and hiking days. All this would be a challenge for one pro football team – let alone two.

“There’s a strong case to be made that L.A. is really a one-team market rather than a two-team market,” said Ganis.

But two teams is what L.A. may ultimately get, and it has much more to do with NFL politics than whether two teams can really be successful.

The St. Louis Rams, the San Diego Chargers, and the Oakland Raiders all wanted what they viewed as the big L.A. prize. Any move required three-fourths approval from the NFL team owners, a level of consensus possible only if all three owners got something out of the deal. As a result, the owners decided to give the Chargers an option to share the stadium with the Rams. They have a year to decide whether they want to move north. If they choose not to, that option goes to the Raiders.

“That’s just part of the compromise that had to be achieved,” said Ganis.

A strong market for luxury suites

For evidence that two teams might be able to make it in L.A., Andrew Zimbalist, a sports economist at Smith College, said you only have to look at MetLife stadium in New York.

“The Giants and the Jets pretty much share it equally," said Zimbalist. "Those are two ownership groups that never got along in the past, and now they’re doing quite well.”

A lot of their success comes from a strong market for luxury suites, and it turns out the Jets and Giants haven’t cannibalized each other, according to Scott Spencer, president of Suite Experience Group, a luxury box reseller.

“The Giants have sold more inventory than the Jets, but many companies just bought both," said Spencer. "So it wasn’t about the team. It was more about corporate entertainment.”

Corporate spending drives a lot of NFL teams' financial success these days. When pro football was last played in L.A., premium seats amounted to a small percentage of revenue compared to around 50 percent today, according to Spencer.

Unlike most revenue, the income from luxury boxes isn’t shared among teams. Spencer expects the Rams can make at least twice as much in Inglewood as they did in St Louis.

“The market for premium seating right now in LA is really, really good,” said Spencer.

Last year, for the first time Staples Center sold more than $100 million dollars worth of premium seating. Every single luxury box was sold-out.

However, Spencer says the shiny new NFL stadium may take away some Staples' business when it opens in three years.