Why Buy an NFL Team and Move Them to Los Angeles?
Note: This article was written in 2004, when discussions included the option of moving the Minnesota Vikings to Los Angeles. Due to the statements of key Minnesota officials, repeated in the book Stadium Games, Minneapolis could not support four main professional league teams, and one had to go — the Vikings. However, the Vikings have since signed, in October 2013, a 30 year commitment to play in a new stadium in Minneapolis. Nonetheless, as long as Los Angeles has no NFL team, this article remains relevant and illuminating in this current and future markets. For more insights from Stadium Games author, Jay Weiner: Excerpt from Stadium Games: From Seattle to Houston, Minneapolis puts $1 billion, tax-filled, politically volatile stadium plan on Vikings table, and Can anyone solve the Vikings stadium puzzle?.
Beacon on the Hill Sports Marketing answers the question: Why buy an NFL team and move the team to Los Angeles to play in the renovated Memorial Coliseum? The example given here is the Minnesota Vikings; moving the team was a consideration, as Red McCombs said May 20, 2002: "Options will include but not be limited to relocation or a sale." Even in 2013, this article is still relevant for any team in a similar situation, whether NFL or UCFL; for example, this article could just as easily apply to the Tennessee Titans, Cleveland Browns, Oakland Raiders, Buffalo Bills, San Diego Chargers, New Orleans Saints, Atlanta Falcons, etc.
To develop and market the premier sports-entertainment-development business, Always be in contention, and focus winning the Super Bowl and the “profit bowl.”
- “NFL FOOTBALL TEAMS: GOLD MINES WITH DIAMONDS IN THE MOTHER LODE: The New Piggy Banks for Financial Wizards,”headline in San Antonio Express-News,August 8, 2002.
- Teams rarely are up for sale. The Vikings are. This is a once in a lifetime opportunity for fun, wealth and legacy.
- The team can be bought with little or no out of pocket dollars, as the previous two sets of owners did, and then all costs thereafter are expensed.
- Unlimited opportunity to generate wealth with a move to Los Angeles
- It has long been understood that the team would leave. The question has been when. There has been no refutation of this despite many articles and books saying so.
- Much can be done “for no money down” (see reason #3).
- Participating in the #1 sport with the team with the potential to be the #1 team
- A consulting team is available to help guide and physically man the transition, the move, initial operations, temporary venue and work with the Coliseum for final renovation/remodeling
Here are eight reasons why!
Reason #1: “NFL FOOTBALL TEAMS: GOLD MINES WITH DIAMONDS IN THE MOTHER LODE: The New Piggy Banks for Financial Wizards,” headline in San Antonio Express-News, August 8, 2002
- The NFL is the goose that lays the golden eggs. Even the lowest revenue teams are profitable. Vikings in Mn: 31st in local revenue, 26th in overall revenue.
- Vikings in LA: local revenue would quintuple to over $100 million
- Vikings in LA: valuation of team (8-10 times capitalization rules) means team would jump in value to $800 million to $1 billion.
- Vikings in LA: no stadium cost: NFL has bid to build it.
- Vikings in L. A. could sustain stadium costs (but now won’t have to):
- Quote from San Antonio Express-News: "Done right, with a new stadium in the proper location -- even a stadium with zero public funding -- an NFL franchise in Los Angeles has the chance to be a gold mine for its owner."
- " Experts say a privately financed NFL facility can be built and prosper in Los Angeles. "There are enough funding tools," said Coliseum general manager Lynch."
- 2002: “... a relocated NFL owner can quickly accumulate capital to pay for a stadium and its debt. InL.A.it won’t have to as the NFL has pledged to help finance an L. A. stadium Conservatively speaking, suites could generate another $20 million a year. Club seats could bring in $20 million a year more. Naming rights on a stadium could mean another $7 million to $10 million a year.
- 2003: Merrill Lynch study: L. A. local revenues: $100 million and grow from there
- The NFL, as part of its desire to move back to L. A., will promise multiple Super Bowls to the region. With that perk, an owner would be expected to sell private seat licenses (PSLs) that give customers the right to buy Super Bowl tickets, along with their season tickets. [Note: San Diego claims $250 million in city wide revenue for each Super Bowl]
- “TV ratings for NFL games in Los Angeles were actually higher last season than for NFL games in New York, and they far outdo ratings for the Lakers or Dodgers.”
- “Compared with the Los Angeles metropolitan area, the Twin Cites metro area is a sports-business Mayberry.”
- The NFL guaranteeing stability and profits is no accident. The NFL:
- Has the best TV contract in all sports,
- Has the beset satellite EV package in all sports,
- Has a hard salary cap,
- Shares TV, broadcast, ticket, concession, and merchandise revenues,
- Has a G-3 dollar category for helping teams build new stadiums and increase revenue sharing,
- Labor peace,
- #1 rating in TV viewing.
Reason #2: Once in a lifetime opportunity for fun, wealth and legacy — grabbing not just the brass ring, but the gold and diamond rings too!
- Only 32 NFL teams; very few teams come up for sale; many are passed on for generations
- NFL structured for profitability, unlike NBA, MLB, and NHL.
- Opportunity to participate in re-development of Watts, South Central L. A., etc. It provides an opportunity to explore using L. A.’s “Urban Model” as seen in the experimental high density housing in the development of Playa Vista, which can be seen in detail in the October 18, 2003 LAT article at http://www.latimes.com/news/local/la-fi-playa18oct18,1,3056026.story?coll=la-home-headlines
- An example of this is the new recreation complex built in 2003 next to the Coliseum at Exposition Park, a $30-million project that includes a three-story recreation center, a family pool, a 50-meter competition pool and an outdoor amphitheater, and will also will have centers for children and seniors. Sporting News,9-18-99: a football team brings $1 billion/year in direct and indirect benefits to a team’s community. If a team worked with the community to generate revenue streams together, it would add significantly to its revenue.
- The stadium and surrounding complex becomes a destination and gathering place for fans, visitors, tourists, consumers, and sports/entertainment/real estate/business people, for it will serve as a business/real estate/communications hub, generating profits in the near term and long term, year round.
Reason #3: The team can be bought with collateralized dollars and thus with little or none out of pocket dollars, with all after sale costs expensed.
- Red Mc Combs, using Clear Channel shares as collateral, bought the Vikings in 1998, through J.P. Morgan, from a group of Minnesota business owners for about $200 million and the assumption of $45 million in existing debt.
- Half of this,$100 million, was loaned to Mc Combs by the NFL and another $100 million from J.P. Morgan Chase Bank against the collateralized stock (USA Today,August 6, 2002).
- Mc Combs sale of the Clear Channel stock was not immediate. Instead, it's a complex hedge transaction known asa "variable prepaid forward"that allows Mc Combs to receive cash up front, but not actually deliver the shares to the buyer for several years.
- That means Mc Combs still will be able to vote the shares in any decision put before Clear Channel shareholders, yet he can defer taxes until the shares go to the buyer.
- The pact also protects Mc Combs from any continued depression in the stock price and allows him to make money if the stock price climbs in the next few years.
- "Suddenly, the owner … isn't paying much out of his own pocket for the stadium. And the value of his franchise soars in the new facility in the nation's second-largest and most glamorous market."
- In addition to the “funding tools” identified by Pat Lynch, we have identified 8, including the DreamWorks investment model that would garner far more investment dollars than needed to both purchase a team and remodel the L. A. coliseum. Run like a business and not an extension of the taxpayer’s vending machine, the team and its real estate sports entertainment development complex can be profitable from the start.
- LA will put up $100 million for development in the Figueroa Corridor between the Coliseum and Staples Center.
- Beginning from the Staples end of the Figueroa was reported approved7-12-04.
Reason #4: Unlimited opportunity to generate wealth with a move to L. A.
- Los Angeles is the center of the sports entertainment universe. With the NFL, it will be the KING of all sports cities. Both the NY Giants and NY Jets play in New Jersey, which limits both teams.
- An NFL team is in the wider industry that sports. It is in the sports-entertainment-tourism-hospitality-development business. A stadium is a real estate development anchor. The renovated/remodeled Coliseum and surrounding area, including the Figueroa Corridor, make up a mixed use sports/entertainment/tourism/hospitality/real estate development enterprise, meaning constantly developing new businesses from the mixed use elements, while the stadium anchors ongoing present time commercial and high end residential condos and hotels as well as year round arena activities.
- As the NFL expands overseas and around the globe, even greater revenues and profits will ensue.
- In addition to the $100 million in shared revenue that each team gets, the team inL.A.will better the $20 million currently earned in local revenues by $80 million, generating, according to a Merrill Lynch study, over $100 million in local revenue. The 40 ways to generate revenue in 26 categories that we have identified could add yet another $50 – 100 million. Tax deductions can be maximized, tax liabilities minimized, and revenues sheltered. A wide range of depreciations, write-offs, deferrals, amortization, are available, some of which can be charged against income, etc.
- The team in the Coliseum will be open to not only becoming a sports/entertainment leader, but, with the other businesses that can be placed under its brand umbrella, it will enable revenues not available to other teams.
- Staying with the status quo in Minnesota is the equivalent of turning down the dynamism ofL.A.and experiencing the equivalent of tens of millions in losses.
- If half of the fans didn’t come because of anger at the move, loss would only be $12 million
- Staying = loss of $80 million in L. A. local revenue ($400 million over 5 years)
- Loss of at least one Super Bowl per decade ($250 million each)
Reason #5: It has long been understood that the team would leave. The question has been when. There has been no refutation of this despite the various times it has been said.
- Former Metropolitan Sports Facility Commission chairman Henry Savelkoul, mid-1990s: frequently trumpeted the line that there were too many professional teams, stating that four teams could not “flourish.” The key to this is the business community’s refusal to buy four sets of suites. It is not accidental that area major corporations sponsor the Twins, Timber Wolves, and Wild, but view sponsor the Vikings.
- The cities have backed this up with their actions:
- St Paul supports the Excell Center for the Wild
- Minneapolis supports the Target Center for the Timber Wolves
- There is no zoning passed anywhere for a new stadium
- No changes have been made in TIF (tax increment financing) to allow tax breaks; instead: narrowed to exclude stadiums
- Environmental concerns could prevent construction for at least a decade (a loss of nearly one billion in local revenues if in L. A. during the same period)
- The Sports Commission management of the Metrodome favors the 81 some home games of the Twins over the 8 home games of the Vikings
- Despite this 8 – 81 ratio, as the book Stadium Games (2000) reports, The Vikings paid more than $4 million in rent, covering 65% of the Metrodome yearly operating expenses; the Twins paid no rent. In June 2004, the Commission refused to change the imbalanced lease structure, stating it needed the Viking’s revenue to support their operations (some definition of fairness)
- The Twins also get the lion’s share of concessions
- For the same 81 not 8 home games reasons the tourist industry favors the Twins over the Vikings
- The University will build a new football stadium on campus and does not want potential attendance siphoned off by the Vikings
- Despite the steady drum beat of articles and books on the Vikings leaving, no official has raised a protest and no official has refuted the claim
- The roll call of build or leave has not been refuted nor objected to:
- 1995: NFL Commissioner Paul Tagliabue in his statement before the Advisory Task Force on Professional Sports in Minnesota,September 25, 1995: did no stadium, no stay.
- 1996: Owners, in their presentation before the Sports Facility Commission in December 19, 1996, echoed the commissioner: no stadium, no stay.
- 1997: Former Vikings Chairman John Skoglund hinted in 1997 that the team would be forced to move without a new stadium (Pioneer Press, April 10, 1997).
- 1997: September 16, 1997, Minnesota Business Partnership banquet (membership includes CEOs of the 104 largest companies in the state: 500 of the most influential business chiefs, political leaders and lobbyists attended, “laughed uncontrollably at the whole stadium debate,” and showed a humorous video based on the Ben Hur chariot race.” All understood that “a stadium was to be built” was “pure myth.”
- 1997: May 5, 1997, Henry Savakoul, Chairman of the Sports Facility Commission, “This is not’ Cuba; we don’t get to tell people what to do with their property unless we own it.”
- 1997: May 8, 1997, “Vikings are Going, Going, Gone!”Minnesota Spokesman-Recorder
- 1997: The league [wants] resolve their stadium uncertainty. The team contends it cannot survive financially in the Metrodome and needs more revenue through renovation, renegotiated leases or both or it could move elsewhere (10-28-97).
- 1997: In No Room For Crybabies,Dennis Green outlines how the team could be bought by a local buyer to prevent it from being sold to an outsider. The owners initially deny the team is for sale but then 'fess up that they are seeking a buyer
- 1998: former owner Roger Headrick, was outbid by the fake Clancy bid, said he would have kept the team in Minnesota forever. So the NFL loans Red Mc Combs $100 million to outbid him. Why? To minimize the fuss when he moves the team. When Headick appealed to the NFL they denied him and, thus, a local owner.
- 1998: October 1998, Henry Savakoul, Chairman of the Sports Facility Commission, in speech entitled “The Viability of Four Major Sports Teams in Minnesota,” gives what Jay Weiner (book “Stadium Games,” 2000) calls “the most chilling” speech heard by anyone who cares about sports in Minnesota, when he said he didn’t see any statewide solution to the pro sports puzzle, that the state was only prepared to support three pro sports, in baseball, basketball and hockey. He said companies were not willing to pay for four sets of luxury boxes and/or suites, and thus doubted 3 teams could be supported.
- 1999: August 31, 1999: Red Mc Combs, at the Dunkers breakfast: no stadium, no stay.
- 2000: before Weiner’s book came out: former Vikings president Roger Headrick said, “We operated under that assumption pretty much all along, that it would be choosing between the Twins and us.”
- 2000:Book Stadium Games confirms the above: “In the end, I believe we in Minnesota can’t truly afford four major-league teams (p. 467). Weiner says the business community and legislators identify the Vikings as the odd team out. He suggests that the super leagues of the future will be for major cities leaving lower level leagues for smaller cities (p. 483).
- 2000: Jay Weiner’s book “Stadium Games,” outlines the rationale by businessmen and legislators for the Vikings to leave.
- 2000: August: 2000: proposal to Vikings and Twins on how to build new stadiums without having to raise new taxes; copy submitted to Minnesota legislature (speaker of the House; leader of the Senate, key legislators; and Governor as well). Response: none. .
- 2001: Mike Kelly, Vikings VP, March 5, 2001, in letter to Gary Woods (with CC to Red Mc Combs), wrote, re selling and moving. I also have in mind a potential future sale of the franchise or relocation. Our goal is to position the Club … for … increase [in] franchise value and makes us appear reasonable in the event we need to relocate. ... we [can say we] made a full and honest attempt, which will help in relocating.
- 2001 and 2002: This sequence (Vikings out, Twins in renovated Metrodome, Gophers new stadium) written about specifically in columns by sportswriter Larry Fitzgerald in Minneapolis(in the Spokesman-Recorder,July 12-18, 2001,July 25, 2002,August 27, 2002).
- 2002: Few major corporate sponsors or holders of a luxury box or suite: The September 1, 2002 Fortune magazine asked “Why aren’t the Fortune 500 of the Twin Cities supporting the areas #1 team as sponsors, which would ensure the success of the stadium project?”
- 2002: separately, the U of Minn. and the Vikings reject a joint stadium, as each goes its own way to seek their own.
- 2002: The book “The Minneapolis Story,” Chapter 15, outlines this entire departure scenario.
- 2002: Nov 26, 2002, Star Tribune: ‘Mc Combs has hired the investment bank J.P. Morgan to explore his options for selling or moving the team” (begun in spring).
- 2003: On May 23, 2003, Sid Hartman wrote of the May 2003 NFL annual meeting of owners in Philadelphia, they discussed team relocations, a team in L. A., probably one moving, and offered sympathy for Red Mc Combs for not getting a stadium. At 31st in revenue, they all “lose” because he can’t make more. The league also had “more concern about getting one or possibly two teams in Los Angeles than worrying about Minnesota, which hasn't made a strong effort to build a new football stadium.” Hartman went on to write: “Like one owner told me last week, "Any city with an old stadium that doesn't allow the extra ticket income that a new stadium does should be nervous about relocation. If you want to be sure to keep your team, get a stadium built." This year, everybody in the NFC North Division except the Vikings will have an upgraded stadium. Thus, he writes, “There might be reason to start worrying about losing this franchise. Mc Combs is talking about relocation all of the time and seems confident that he can win a court battle to break the lease.”
- Staying in Minnesota without a new s stadium keeps the Vikings in he bottom 5 teams in revenue. The top five average $196.2 million (with the range being from $174 - $227 million). The bottom five average $133.6 million (with a range of $126 to $137 million). Thus, moving to Los Angeles would catapult the Vikings from $135 million to over $200 million, and be 2nd in revenues on its way to 1st
- In L. A., the Vikings would have local revenue from sponsorships, suite receipts, parking, concessions, etc., that I doesn’t get or does so only minimally. All would be retained. In Minnesota there are few sponsorships, suites have no bathrooms and are among the lowest priced in the league. There are only 100 parking spaces, and most concession revenue does not go to the Vikings.
Reason #6: Much can be done “for no money down”
- For no money, Red got the 5-year tax depreciation write down.
- For no money, Red got the 5-year tax write offs.
- For no money, Red received the federally mandated 90% of stadium revenue
- For no money, Red sold stock to pay off the loans without having to truly give up the stock.
- For no money, Red gets to keep the stock sold to cover the loan and thus hang onto the voting rights of the stock “sold.”
- For no money, Red uses the stock sold to cover the loans in a “variable prepaid forward” that protects him from any further depression in the stock and allows him to make more money if the stock price climbs in the next few years.
- For no money, he bought an NFL team, had a grand time, and then was able to sell stock that has reduced in value 80% and freezing any further drop in value yet allowing profit if the stock later rises.
- For no money he took in the $26 million in profit generated in Minnesota
- For no money he received over $80 million/year from the NFL in shared TV, merchandising, and other shared revenues.
- For no money, an owner gets the loan interest payment tax write offs.
- For no money, a new NFL owner or ownership group gets a team that is very much a “value added” commodity for the owners in the same way it is a “value added” entity for the fans in community terms.
- For no money, a new NFL owner or ownership group can purchase an NFL team as a straight upside investment, as no hedge transactions required as no downside is seen: it is all up side when played financially in this manner.
- For no money, a new NFL owner or ownership group purchases a solid investment with NO downsides.
- For no money down a new NFL owner or ownership group purchase an economically dynamic entity geared to generate profits (even though, when brilliantly engaging every possible aspect of the tax code, the write offs and write downs suggest small profits after the accounting dust settles).
- For no money down, Red had no incentive nor need to think creatively about how to generate profits, as this lowest revenue team in the NFL was/is still a great money maker.
- For no money down, and with a money machine, Red had no incentive to go beyond the traditional game day revenues and NFL revenue sharing.
- For no money down, using an NFL team as an anchor, a new NFL owner or ownership group of the Vikings could make 4-5 times or more profits in L. A. than is currently made by the Vikings in Minnesota.
Reason #7: Participating in the #1 sport with the team with the potential to be the #1 team, with these lime light players:
- Daunte Culpepper, 27, 2 Pro Bowls, Best Deep Passer in the NFL
- Randy Moss, 27, 5 Pro Bowls, Best Deep Receiver in the NFL
- Michael Bennett, 26, RB, 2 Pro Bowls, Fastest Player in the NFL
- Matt Birk, 28, Center, 3 Pro Bowls, Smartest Player in the NFL
Reason #8: A team is available to help guide and physically man the transition, the move, initial operations, temporary venue and work with the Coliseum for final renovation/remodeling.
- Beacon On The Hill Sports Marketing utilizes the “The SEMAD Approach” (Sports Entertainment Marketing And Development). Beacon brings individuals with significant NFL experience as well as experience in planning for stadium and local revenue developing projects, as well as in communications and business development experience and expertise to serve any would step up to put the money down needed to put bring this project to fruition. Just as the Olympics were used 2,500 years ago and in 2004 to put Athenson the map, so will the Vikings put their new owner “on the map.”
- Beacon On The Hill Sports Marketing is available to potential owners to customize relevant plans from past experience in such areas as:
- Exec Briefing on Stadium Mixed Use Model (2002);
- Models for Operations and 40 in 26 Categories of Revenue (2000);
- 12 Models for Stadium/Team Operations, plus Twins 13th Model (2001)
- 12 Categories for Player Compensation Golden Handcuffs (2001)
- List of ways to deal with Legislature (2000)
- PR/Communications Model (2001)
- PR Campaign (2002
- PR: Fan Plan (2004)
- PR Campaign to Beat the Blame Game (2003)
- Key Qs re L. A.–Minn: Reality of Two Cities, NFL Partnership in Coliseum (2003)
- Reality Check List (2003)
- Reasons for a Stadium Complex with Stadium as Anchor (2003)
Investment Analysis Assumptions
Assumption #1: All participants will be exercising a desire or dream that transcends traditional business models and traditional ways of doing business. Only investors (as business partners) with a passion for a great football team will be invited to invest. It will be profitable.
Assumption #2: Team will play in a renovated Coliseum: the L. A. Mustangs will be unique: one of the few teams playing in a building with significant history, historic events, and a tradition of sports-entertainment-patriotism unmatched in the country and which will strengthen the Mustang Brand all the more.
Assumption #3: The NFL wantsL.A.and recognizes Carson and Rose Bowl won’t, in the final analysis, be satisfactory venues. The Commissioner in 1999, said the Coliseum would be the home of the next NFL team. Despite flirtations with other venues, being up and running is more important than where to the NFL. The L. A. business community wants the Coliseum. Key to this switch to the Coliseum are the public announcements of the bid and keeping the public informed and the investors involved from both the deep pocket and politically connected circles.
Assumption #4: No major return (2-3%)will be paid on the investors’ investment until the 5th year (8-12%), although there will be significant cash flow and profitability from the beginning. It is imperative that from the start, all monies be focused on what is best for the team and the community, such that the team is not handicapped by any payback rules even before it has a chance to earn a profit even though it anticipates staying out of the “red” even the first year. The team’s value will double upon reaching LA and double again in 5 years.
Assumption #5: The business is “sports-entertainment” and football business (avoiding the mistake of the train industry that didn’t realize it was in the transportation business). The NFL has a business model that works differently from other business models as the sports-entertainment models includes numerous additional revenue streams to build on top of the guaranteed revenue stream (NFL shared TV revenue money plus local retained stadium revenue from suites, sponsorships, tickets, parking, concessions, etc.).
Assumption #6: That the key is to create a super brand name (Mustangs) as an umbrella brand for other emerging brands of the multiple revenue streams of the mixed use sports-entertainment real estate development model.
Assumption #7: The key is a catalyst familiar with both the NFL and investments to lead the charge to success: Beacon on the Hill Sports Marketing.
Assumption #8: The financial funding and operational tools are in place. Pat Lynch has said they have more tools. There are models galore to choose from to help ensure profitable success.
Assumption #9: On the revenue side, using the team and stadium as an anchor means using a business growth model rather than a government subsidy model. We have identified at least 40 different ways in 26 different categories to generate significant revenue.
Assumption #10: The project will generate hundreds of millions for government jurisdictions as well as for other corporations who become part of the development and investment aspects of the Coliseum and surrounds as part of a “smart growth” policy generating jobs, revenue, city economic growth.
Page content written / posted: 12/2004, 10-15-13