Chargers +/- $350 Million Short of Initial PSL Sales Target

JohnWallStreet

The Los Angeles Chargers are struggling mightily to sell personal seat licenses at their new home in Inglewood (slated to open in ’20). One high ranking team executive said that Dean Spanos’ organization is +/- $350 million short of their initial $400 million target. Rams owner Stan Kroenke is understandably upset about his tenant’s inability to move PSLs. Those revenues along with a $200 million NFL G-6 loan are supposed to go towards the new venues’ constructions costs (+/- $5 billion) and he’s is responsible for the difference.

Howie Long-Short: The Rams have long history in the L.A. basin (’46-’94) and Kroenke spearheaded the league’s return to the city, so the Chargers status as both a newcomer and as second class citizens in the market has made it difficult for them to sell high priced products. The club is learning the hard way that there’s a finite amount of time and money that people are willing to spend on pro football. Remember, the Rams also have the better on-field product and Los Angeles is a town that craves star power. Chargers PSLs are a tough sale.

It’s not uncommon for projections on a large-scale construction project to be slightly off, but by nearly 87.5% is an abnormally wide miss. The initial study conducted by Conventions, Sports & Leisure International (a Legends subsidiary) suggested that the market could support $1 billion worth of PSL sales (Rams: $600 million, Chargers: $400 million). When the Chargers stumbled out of the gate with CSL’s suggested pricing, a second study was done and the team’s sales target was lowered to $150 million. But Spanos’ club isn’t even close to reaching that number. Our source said that while the Rams are pushing $500 million in PSL sales, the Chargers have sold just +/- $50 million worth. Executives at the league’s highest levels are said to be concerned.

The Chargers aren’t responsible for picking up the short-fall in PSL sales (if there is one) and are entitled to keep all game day revenues, so one can understand why some believe Spanos “got a sweetheart deal.” But if the club continues to struggle to sell tickets and suites, it’s not certain that his franchise is any more valuable in Los Angeles than it was in San Diego. Remember, this isn’t baseball where the teams control local media rights. There are no local rights in the NFL – the league maintains national TV deals and each franchise is entitled to 1/32 of the revenue. Just moving from a small market to a big market will not – on its own – boost team revenues.

The size of and money in Los Angeles (along with the CSL study) likely convinced Kroenke, Spanos and the league that demand for NFL football in the market was greater than it is. Of course, the Rams owner won’t have an issue paying down the debt if the Chargers come up short by a few hundred million dollars; he’s estimated to be worth $9.7 billion.

If the market continues to reject the club it’s worth wondering if a return to San Diego could be in the team’s future. The team executive we spoke to said that was unlikely. While the Chargers are contractually obligated to play at SoFi Stadium long-term, it’s believed that Kroenke – already upset that the number pledged to cover the debt was cut – would be willing to negotiate an early exit. The problem is, San Diego isn’t taking a Dean Spanos owned team back; a Chargers return to the city would be contingent upon the franchise being sold.

The Chargers’ decision to leave San Diego never made much sense. Sure, the team was unable to get a new publicly funded stadium there, but the city has just one other pro sports team and it plays during the spring and summer months. There are no other teams to compete with for sponsorship dollars (or eyeballs) in the fall and winter.

To be clear, no one (not the Rams, Chargers or the league) is discussing relocation. In fact, the individual we spoke to that is tied to the stadium deal believe it’s premature for anyone to even begin to panic. “As the building comes up out of the ground more people will see that it’s real and sign-up [for tickets].” In the meantime, all the team can do is “market harder and play better.”

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