In early 2000, while at Fox, I had a meeting with then commissioner Paul Tagliabue and his second in command, Roger Goodell, to discuss the NFL’s ratings performance. My idea to boost performance was to have a team in Los Angeles. Paul felt that L.A. should have a team eventually. But, he said, not having a team was better for many. Because of the TV blackout rule when a local team doesn’t sell out its stadium for a game, the entire NFL is blacked out in that city. The L.A. options for stadiums are the largest in seating capacity and the most difficult to sell out. Consequently, the NFL would have been blacked out in L.A. on many Sundays if L.A. had a team. Further, not having a team meant L.A. would see the best national games every week. I told Paul he was about to lose an entire generation of L.A.-based NFL fans. He disagreed. Turns out he was right. Why?
The NFL is TV’s best sporting event. L.A. fans know the players on many teams because they knew them when they played in college. The NFL has a done a great job creating stars such as Tom Brady, Peyton Manning and more. People tune in to see stars. The quality of TV viewing of games and surrounding programming has gotten better with hi-def, better graphics and so on. Fantasy football has grown exponentially. The Madden NFL video games have made gamers into NFL fans. The rise and 10-year run of USC under Pete Carroll was like no other. L.A. is full of transplants that follow the NFL team in the city they came from.
So why will the NFL be back in L.A? The reason is the recent sale of the Clippers for $2 billion and the sale of the Dodgers for $2 billion plus. These sales reminded the NFL how lucrative the L.A. market is despite itself. The Clippers are especially interesting because they don’t own an arena. They are only the second-best basketball franchise in L.A. The deepest they have gone in the playoffs is the quarterfinals. “We are number 7 or 8” is not a cheer to which any L.A. team aspires. Yet they sold for $2 billion, assuming the deal goes through.
Basketball is nowhere near the moneymaker the NFL is. The NFL almost doubles the NBA and MLB in revenue and has much larger profit margins. So one of the NFL franchises on a year-to-year lease, like Oakland, San Diego or St. Louis, whose current city won’t give them funding for a new stadium might rather be playing in the second-largest media market. Monetization opportunities are significantly better in L.A. Further, NFL teams in mild financial distress would be fixed overnight with a move to L.A. One scenario could be for a team to move to L.A. and play in a historic venue such as the Coliseum or Rose Bowl while looking around for the best site for a new stadium. Sort of a “if you come, they will build it” theory.
There are plenty of places for new stadiums such as Ed Roski’s City of Industry location (it really isn’t that far from the West Side, especially on a Sunday; do you have any idea how far Arlington is from Dallas?), Santa Anita, Dodger Stadium, Hollywood Park, StubHub Center, Downtown Farmers Field (full disclosure: my brother is an executive).
Also, L.A. has created a huge amount of value for the NFL by being the stalking horse for other cities desiring an NFL expansion franchise. Nobody is buying London as the next NFL city rather than L.A. If the NFL wants to continue the charade, it can always put one NFL team in L.A. and threaten to add another. L.A. is one of the few cities that could support two NFL teams, one in the AFC and one in the NFC.
While L.A. doesn’t have money to subsidize a stadium, the city isn’t in a position to stand in the way of a team utilizing one of the existing venues. With double the national unemployment rate, L.A. needs the jobs and tax revenues an NFL team would bring. If the City gets its financial act together, the team that comes will have an insurmountable first mover advantage for any future stadium construction subsidies. In the meantime and most importantly, the Clippers have proven a team doesn’t need to own the building to create tremendous value with a sports franchise in L.A. NFL teams need to think long-term and strategically, and this strategic move is so obvious I am surprised a team hasn’t already done it.
Brian Mulligan is currently the CEO of Brooknol Advisors, a Media, Entertainment and Sports Advisory Company. Mr. Mulligan has held CEO, Chairman, COO or CFO position of virtually every media/entertainment vertical for majors over a 30 year career, from Co-Chairman of Universal Pictures, CEO of Universal Television, Chairman of FOX Broadcasting and Cable, EVP/CFO of a Fortune 50 Company, SVP of MCA INC, EVP of Strategic Planning and Corporate Development Universal, Senior Executive Advisor Boston Consulting, Vice Chairman of Media/Telecom of a Money Center Bank, and worked extensively in/with private equity. Instrumental in over $175 billion of media and entertainment transactions.