Football Owners Cry ‘Farewell,’ but Mean ‘Welfare’

The war of nerves going on between Southern California and its National Football League teams has all the spectacle and outrage of millionaires looking for welfare.

Al Davis, managing partner of the Los Angeles Raiders, threatened again last week to move the team out of town unless the city handed him hugely profitable luxury boxes at the Coliseum plus other concessions, including free rent.

Meanwhile, in Anaheim, Georgia Frontiere and the Los Angeles Rams were preparing to move to another city, perhaps Baltimore, where Maryland taxpayers are ready with lottery-backed bonds to finance a $165-million stadium with luxury boxes and throw in concessionary terms on rent.

Violins were playing. “It’s tough and unrealistic to move a team, but sometimes you have to do tough things,” Davis said at an NFL owners meeting in Coral Gables, Fla.

But that’s hogwash and hypocrisy. The economic truth is that nothing increases a team’s value as much as a move to a new city that gives it a stadium with luxury boxes--high-priced suites whose rents go to team owners, not the city or taxpayers.

The Rams, for example, are valued right now at $148 million by Financial World magazine, which publishes annual estimates of team values in all professional sports. If they move to Baltimore, “the team could be worth $200 million,” said Paul Much, sports specialist for Houlihan Lokey Howard & Zukin, a Los Angeles investment banking firm.

That’s right, a prospective $50-million increase in value for a team that has been haranguing Anaheim city managers to come up with taxpayer-financed improvements at Anaheim Stadium.

Similarly, when luxury boxes are put in the Coliseum, the Raiders’ value will rise because revenue from such amenities--leases to business groups at $50,000 to $100,000 a season--go to team owners and, unlike television revenue, is not shared with the other 27 teams in the NFL. That kind of kicker makes a franchise more attractive for an eventual sale.

If the Raiders, now valued at $146 million, stay in Los Angeles with luxury boxes and concessions on Coliseum rent, their value could rise over the next few years to $185 million--a price the Philadelphia Eagles fetched in a recent sale.

If they move to another city, their value could rise more quickly.

In any event, Davis knows what smart money people in sports and finance all know these days: that over the next decade, “professional sports team values are going to rise to unthinkable levels.”

That judgment, which appears in Financial World’s latest rankings, is based on the coming of savvy corporate owners to professional sports. Walt Disney Co. owns hockey’s Mighty Ducks and is open to owning franchises in other sports. Wayne Huizenga of Blockbuster Entertainment Corp. owns the Miami Dolphins and baseball’s Florida Marlins, as well as hockey’s Florida Panthers.

Blockbuster is investing heavily, along with Florida taxpayers who finance the infrastructure, in a $1-billion theme park between Miami and Ft. Lauderdale that will feature a baseball stadium and an arena for hockey and basketball. Traditional team owners, whether families or groups of individual investors, couldn’t contemplate $1-billion investments; the sports business is becoming a major industry.

The idea of these entertainment companies, explains Timothy Mueller, a sports valuation expert for the accounting firm KPMG Peat Marwick, is to “integrate entertainment delivery”--sporting events as attractions for television, videos, CD-ROMs, theme parks, resorts.

The possibilities multiply and are based on the public’s demonstrated interest in sports. High ratings for the Winter Olympics this year surprised even CBS; chances are U.S. reception of soccer’s World Cup this summer will be greater than anticipated.

But questions also multiply. If big entertainment corporations are willing to pour money into sports, and franchises are growing in value every year--15% a year, according to one study--why are taxpayers being dunned to support them?

Politics and public appeal. There are more cities than teams, and the competition to be “major league” is intense. Politicians are in a bind: If they lose the local team they are criticized, but if they shell out taxpayer money they are also criticized.

So there are efforts to show that sports teams make a big economic impact. But people who know arithmetic scoff at such studies. “It takes $50,000 of investment to create one job,” said Roger Noll, an economics professor at Stanford University. “By that reckoning, these $200-million stadiums erected at public expense should be creating 4,000 jobs, and they aren’t.”

By that reckoning, the $20 million to $25 million needed to put up luxury boxes in the Coliseum for Al Davis should create 500 jobs. Will it? Not likely. In any case, an industrial park would create more jobs.

But, yes, that’s dull economics, which doesn’t take into account the emotional lift a team brings to a city. Indeed, there’s nothing wrong with sports as a business. When a franchise is well run, it can make money and rally the community. The Los Angeles Dodgers do a great job of marketing, fill their stadium with fans and make a profit. The Lakers fill the Forum, and Disney’s Ducks in their first season brought hockey fans and a winning team to the Anaheim Pond.

But the Raiders and Rams don’t fill the seats at the Coliseum or Anaheim Stadium because the teams’ marketing is poor. Frankly, Davis and Frontiere don’t run their businesses very well. And lately both have taken to blaming the stadiums and even the fans for their lack of support.

Blaming the customer has never been a good business strategy. So maybe Southern California would be better off if both went elsewhere.

What would happen if both Rams and Raiders left? This is the second-largest market in the United States. The National Football League and some savvy corporation would put a team in here double-quick.

However, reality is that the Raiders won’t leave. If the Rams depart, Davis knows he’ll be the only NFL game in an enormous market. His bargaining position will be enhanced; he’ll get the luxury boxes.

But then he should sell the team or stop whining. In fact, a good idea for the Raiders and all sports teams would be to sponsor sandlot teams, especially in poor neighborhoods. Let them really get out and help poor kids--and give something back for the taxpayer dollars that support their luxury boxes.

The Raiders and all sports industry will prosper more surely in Southern California and elsewhere if they’re seen as contributors and not as parasites.