Every few months, a friend of mine asks me to explain the Chargers’ deal in Los Angeles. The move remains a cultural and economic enigma. People can’t stop calling them the San Diego Chargers – just Sunday, the referee managing the game charged a timeout to “San Diego.” This regularly occurring flub inevitably produces insta-takes along the lines of “Wow, the team is still struggling to gain traction in Los Angeles.”
Three years after they moved, “The Chargers” remain more of a theory than a franchise representing a city.
The theory is that these foibles will be distant memories someday after the Spanos family has built a Los Angeles institution, along with unfathomable intergenerational wealth, decades into the future. The theory is that the NFL is more of a media company than it is a football league. The Chargers are just a character in the main show. They don’t need that many live, local customers for now; a bit part in the national show is good enough.
This week, Los Angeles reporter Fred Roggin, reported that the Rams, the Chargers’ partners, are currently very perturbed characters in the show. They may be a better football team with more fans and Super Bowl expectations, but they are really mad at Chargers owner Dean Spanos for not contributing enough financially to their stadium effort. Specifically, the complaint is the Chargers aren’t raising enough revenue from personal seat licenses.
Personal seat licenses, or PSLs, are the things you must buy if you want to purchase season tickets.
This was very amusing to me. When the news of the world and San Diego overwhelms me, this drama pops up like a notification in Netflix that my favorite comedy has just posted a new episode. Yes. Yes, I will watch it. Ashley, beloved wife, did we buy cheese popcorn this week?
When Roggin finally got around to revealing his scoop, there wasn’t much new beyond this: Rams owner Stan Kroenke is frustrated. Sad face. But it probably has more to do with the cost of the stadium he is building in Inglewood, which has now almost doubled to $5 billion.
Five. Billion. Dollars. That’s so much money. And no, that doesn’t include the surrounding development.
The Chargers, much disparaged as future “renters” in the stadium, do not have to worry about exploding stadium costs, though. They can sit back and watch Kroenke try to figure out how to manage it all with some amusement just like you and me.
Here are the nine facts you need to know to properly appreciate the predicament Kroenke faces:
(Hat tip to Nathan Fenno of the Los Angeles Times, for gathering some of these points years ago. I filed them away and update them for just this kind of moment.)
1) The stadium was projected to cost $2.6 billion. Fortunately for Inglewood taxpayers, it’s a private deal so they’re not on the hook. But that also means we don’t know exactly how much it is costing. Reports have it at more than $5 billion.
2) To play there, the Chargers will pay $1 per year as part of a 20-year lease. The lease has TWO 10-year options the Chargers exclusively control. So, 40 years.
3) Both teams keep revenue from the games they host: tickets, parking, sponsorships, concessions, advertising, etc.
4) Each team took out a $200 million loan from the NFL. That $400 million goes to stadium construction.
5) For big-ticket items – naming rights, personal seat licenses, fancy corporate suites – each team gets an 18.75 percent cut. Remainder goes toward construction.
6) Neither team is required to sell PSLs. They can charge whatever they want.
7) Kroenke gets all non-football revenues. The Chargers have no role in the development of the 298 acres around the stadium.
8) The Rams bear all cost overruns with the stadium construction.
9) The NFL relocation fee is $550 million (or $650 million over 10 years) starting this year. With interest rates low, they can refinance some of it.
The fun items in that list are Nos. 4 and 5. The Chargers get 18.75 percent of the money they raise selling PSLs to fans who want to buy season tickets. Check that line again: Neither team is required to sell PSLs and they can charge whatever they want for them if they do.
The Chargers, when they sell PSLs, only get $18.75 for every $100. The other $81.25 goes to stadium costs, which means it goes to Kroenke. Thus, you can see why Kroenke wants the Chargers to sell PSLs.
The Chargers, however, unlike Kroenke, do not care AT ALL about how much the stadium costs to build. They bear none of the risk. So, why would they waste effort selling PSLs at a high price? Every dollar a fan spends on a seat license is a dollar he won’t spend on tickets, of which Spanos gets 100 percent.
Sure enough, last year, we got news they weren’t charging much at all for PSLs.
Kroenke is a mega-billionaire and will be fine but he finds himself in a predicament. Not only has the cost of the palace he’s building soared, but the city and county of St. Louis have been effectively advancing a major lawsuit against him and the NFL for moving the Rams and breaking a lease. Kroenke must pay all the legal bills for the league.
(The Chargers got the city of San Diego to promise never to file a lawsuit like this, and San Diego has dutifully obliged.)
Kroenke will replace San Diego taxpayers as Spanos’ landlords but to a far greater degree. Like a kind of reluctant venture capitalist, he is floating the Spanos’ family enterprise and their multi-decade theory. Kroenke’s stadium is like one of those startup accelerators for the Chargers. Except the accelerator isn’t for an exciting, disruptive new technology conceived by young brainiacs. It’s for the Chargers.
Those are all the reasons Kroenke may be on edge.
We, San Diego taxpayers, should send a card to Kroenke. It could read something like: We feel you. We used to float that family too. Pretty soon, like we did, you’re going find yourself buying thousands of Chargers tickets every week to help them pay the bills and you won’t even really understand how you ended up doing it. When that time comes, we’re here for you.
The Spanos family made a fortune selling bologna sandwiches to migrant workers and then building homes. But they’re making a retirement as legendary tenants.