Stadium economics play a significant role in determining the value of NFL teams, as highlighted by the $2 billion gap between the Los Angeles Rams and the Los Angeles Chargers. While the Rams are worth $8 billion, the Chargers lag behind at $5.83 billion. However, this discrepancy is not solely due to team performance; it is primarily attributed to the revenue distribution from SoFi Stadium.
SoFi Stadium, valued at over $5 billion, is owned and operated by Rams owner Stanley Kroenke. The Chargers, on the other hand, are tenants in the stadium, owned by the Spanos family. This arrangement means that the Rams receive about 85% of the stadium’s revenue from luxury suites and sponsorships, as well as all the revenue from non-NFL events. In contrast, the Chargers only receive about 15% of suite and sponsorship revenue and do not earn any money from non-NFL events.
This revenue distribution becomes crucial in understanding the disparity in team valuations. For instance, when Taylor Swift sold out six nights at SoFi Stadium during her Eras Tour, the Chargers did not receive any revenue from those shows. The hosting stadium, however, generated $4 million in revenue per show from the tour. This demonstrates how non-NFL events can significantly impact a team’s revenue and value.
The importance of stadium economics is further underscored by the revenue-sharing structure in the NFL. About 67% of the league’s $20.47 billion in revenue was shared equally among the 32 teams in 2023, with the majority coming from national media rights, sponsorships, and licensing deals. However, revenue from stadium suites, hospitality, and sponsorships is not shared, allowing certain franchises to pull ahead in terms of value.
SoFi Stadium has proven to be a lucrative venue for the Rams, hosting not only Taylor Swift but also performances by Beyoncé, Ed Sheeran, Metallica, and Pink. The team retains 100% of the revenue generated from these events, along with the full $625 million from the stadium’s naming rights. These additional revenue streams contribute to the Rams’ higher valuation.
While the Rams have reaped the benefits of their investment in SoFi Stadium, there are risks associated with building one’s own stadium. SoFi Stadium’s construction cost exceeded $5 billion, making it the most expensive stadium in the world. The Rams also hold the highest debt in the NFL, amounting to $3.5 billion. However, despite these risks, owner Stanley Kroenke’s investment has paid off significantly.
Kroenke purchased the Rams for $750 million in 2010 when the team was located in St. Louis. He then relocated the franchise to Los Angeles for the 2016 season, incurring relocation and settlement fees totaling $1.12 billion. Despite these expenses, Kroenke’s investment in the Rams has multiplied more than four-fold since taking control of the team. The Rams’ success on the field, with five playoff appearances and two Super Bowl appearances, including a victory in 2021, has further contributed to their increased value.
In contrast, the Chargers, who also relocated to Los Angeles in 2017, have not achieved the same level of success as the Rams. They have made it to the playoffs only twice since the move and have never advanced beyond the divisional round. Nevertheless, the Spanos family, who purchased the Chargers in 1984 for $72 million, has seen the team’s value increase 81-fold since then. This growth surpasses the performance of the S&P 500, which has only grown 53-fold over the same period.
In summary, the $2 billion gap in value between the Rams and the Chargers is primarily due to the revenue distribution from SoFi Stadium. The Rams’ ownership of the stadium allows them to retain a significant portion of the revenue, while the Chargers, as tenants, receive a smaller share. The success of non-NFL events, such as concerts, further adds to the Rams’ revenue and valuation. Despite the risks associated with building their own stadium, the Rams’ investment has paid off, resulting in a significant increase in value since their relocation to Los Angeles.
