There's a $2 billion gap growing in Los Angeles.
The National Football League's Los Angeles Rams, No. 2 on CNBC's official 2024 NFL team valuation list, are worth $8 billion, while the Los Angeles Chargers rank 26th at $5.83 billion.
While the Rams have a recent Super Bowl under their belt and the Chargers do not, the difference in value has to do with much more than team performance. It comes down to stadium economics.
Both teams play at SoFi Stadium, which Rams owner Stanley Kroenke financed with more than $5 billion. Kroenke is the owner and operator of the stadium. The Chargers, owned by the Spanos family, are just tenants.
According to a person familiar with the matter, the Rams get about 85% of the stadium revenue from luxury boxes and sponsorships, plus all revenue from non-NFL events. That leaves about 15% of the revenue from boxes and sponsorships for the Chargers, and no money from non-NFL events.
That means, for example, when pop star Taylor Swift sold out six nights at SoFi Stadium in August 2023 during her Eras Tour, the Chargers didn't get any slice of the pie.
Los Angeles Rams owner Stanley Kroenke speaks during the “Football Meets Football” youth clinic at the Rams' NFL training camp on the campus of Loyola Marymount University in Los Angeles on July 26, 2024.
Patrick T. Fallon | AFP | Getty Images
The mega tour was a boon for several NFL teams last year. A person familiar with the matter told CNBC that one particular stop on the Eras Tour generated $4 million in revenue per show for the host stadium.
Stadium economics loom large in the NFL valuation pecking order, because $13.68 billion, or 67%, of the league’s $20.47 billion in revenue is split evenly among the 32 teams in 2023. The vast majority of that $13.68 billion comes from national media rights, plus sponsorship and licensing deals. But teams don’t share revenue from stadium suites, hospitality and sponsorships, and that’s where some franchises can pull away in value.
In addition to Swift's six concerts, SoFi Stadium last year also hosted performances by Beyoncé, Ed Sheeran, Metallica and Pink. The Rams would keep 100% of those revenues.
The franchise will also be able to keep the entire $625 million From SoFi stadium naming rights, which last for 20 years through the 2039 season.
It’s a revenue-sharing structure unique to the NFL. The only other franchises that share a stadium, the New York Giants and New York Jets, split stadium revenue down the middle, according to CNBC sources, and are within about $500 million of each other in total franchise value, according to CNBC’s 2024 list. That’s a significantly smaller margin than the Los Angeles teams.
Last year, the Rams ranked second in the NFL in sponsorship revenue, behind only the Dallas Cowboys, who are No. 1 in overall value on CNBC’s 2024 list and are quickly approaching $250 million in sponsorship revenue, according to a person familiar with the team’s finances.
The Rams' sponsorship revenue was less than $200 million last year, according to a person familiar with the team.
Of course, building your own stadium isn't without its risks. SoFi Stadium cost more than $5 billion (the most of any stadium in the world) and the Rams are saddled with $3.5 billion in debt, by far the most in the NFL.
But the risk seems to have been worth it.
When Kroenke bought the Rams for $750 million in 2010, the team was based in St. Louis. He moved the franchise to Los Angeles for the 2016 season, at a huge expense: Kroenke had to pay the league a $550 million relocation fee and an additional $571 million settlement fee related to a lawsuit filed by the city of St. Louis over the decision to move to California.
Still, including the $1.12 billion in fees, Kroenke's investment in the Rams has quadrupled since taking control of the franchise. Since moving to Los Angeles, the Rams have made the playoffs five times and been to the Super Bowl twice, earning the Lombardi Trophy in 2021.
The Chargers, who moved to Los Angeles in 2017, have made the playoffs just twice since then and have never advanced beyond the divisional round.
The Spanos family hasn't fared too badly, though. The late Alex Spanos bought the San Diego Chargers in 1984 for $72 million. Like the Rams, the Chargers had to pay a $550 million relocation fee. Including the fee, the team's value has increased 81-fold since August 1984. Over the same period, the S&P 500 has risen 53-fold.
In stock market parlance, think of the Rams as a growth stock and the Chargers as a dividend stock.
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