LA Rams News: Forbes projects NFL revenue loss with no fans

LA Rams News: Forbes projects NFL revenue loss per team if the 2020 season is played without fans in stadiums

Bad luck comes in threes, or so goes the saying. Perhaps there is a bit of truth to that wives’ tale.  Or so it seems to be with the LA Rams experience so far with the SoFi Stadium construction project. Per Mike Florio of Pro Football Talk NBC Sports, the cost of the original proposal of the SoFi Stadium project was an estimated $1.86 billion. In 2015, the project cost rose to $2.4 billion.  By 2018, so the report asserts, the cost was up to $5 billion, and the risk of construction costs rising even higher remain. Thus, the first bad luck? Rising costs.

Secondly, the SoFi stadium project finance plan depends upon pre-sale of PSLs or Personal Seat License. PSLs are the up-front costs for the right to purchase season tickets for a specific seat in the stadium. The NFL has long wanted to reestablish a team or teams in the Los Angeles market.  With the proposed mega construction, the NFL arranged for both the LA Rams and the LA Chargers to act as co-tenants to the same football stadium.  That would allow the cost of the construction to be spread, in part, over two NFL franchises.

But 2020 soon became a nightmare.  Both the LA Rams and the LA Chargers committed to pre-sell PSLs according to a cash flow plan to ensure that construction cost could be paid  But social distancing has placed the 2020 NFL season into question, making it difficult for each team to sell their PSAs in pace with sales goals. So far, the Chargers have fallen significantly behind their goals, That cash shortfall has forced the Rams to request an additional $500 million loan from the NFL to meet construction cash flow needs.  Thus, the second bad luck?  Cash flow.

Now the third wave of bad luck is about to hit the LA Rams and LA Chargers.  A Forbes report out today estimates the revenue loss of playing NFL games in empty stadiums in 2020. If that occurs, and the likelihood of it happening is definitely within the range of possibilities, Mike Ozanian estimates that the Rams will lose $401 million and the Chargers will lose $375 million. In a normal situation, that is bad news indeed. But in the context of the Rams and Chargers in the midst of a huge construction project,

That revenue is more than money to line the pockets of owners. It’s the lifeblood of debt financing. It’s the debt service, a crucial component to repaying the massive amount of debt needed to construct such a huge project. The third wave of bad luck? No revenue stream.

The LA Rams playing in the new SoFi Stadium complex is a huge opportunity to give fans in attendance a unique experience unlike anywhere in the world. But right now, that project is staring at three strikes.  Hopefully, this will not result in three strikes and they’re out.