Is all the relocation in the NFL economically beneficial?

In March the NFL owners decided to allow the Oakland Raiders to move to Las Vegas, in a decisive 31-1 vote. They will continue to play in Oakland for the next two seasons but their brand new $1.9 billion stadium in Nevada will not be ready until 2020 so it is unclear where they will play in 2019. This marks the third NFL team to relocate in the last fourteen months. Last year the Rams moved from St. Louis to Las Angeles and previously in this offseason the Chargers also made the move to Las Angeles but from San Diego. With all these relocations one might wonder exactly why it is appealing for these teams to move.

For years people have been thinking the NFL would want to put a team in Las Angeles because it is one of the biggest markets in the United States. It did not make sense that the most popular American sport did not have a team in one of its biggest markets before the Rams came this past season. However, does this mean that having two teams is a no brainer economically? I do not think so. First off, the NFL is not like other sport leagues so it does not benefit the league as it may others such as the MLB, NBA, and NHL to have a team in a huge market like LA. In those leagues, a lot of money is made through local advertising and broadcast rights. This is not the case in the NFL where a majority of its money comes from nationwide TV contracts. The teams split all of these profits evenly. Also, it could prove to be financially detrimental to the Chargers and Rams to figure out a way to split stadium revenue. While moving teams to such a large market may seem like a no brainer, in reality it might not be as economically beneficial for the teams and NFL as one might expect.

Unlike Las Angeles, Las Vegas is a much smaller market. Some economists have thought that it is a bad idea for the Raiders to move here because there is not much economic room. For instance, sports economist John Vrooman stated, “The Broncos rule the Mountain West. The [Cardinals] now rule the Southwest desert. The 49ers have got [Northern California] locked down, and that leaves the Rams and Bolts to split SoCal. There is no … economic room for the Raiders and the Vegas market doesn’t have the size or depth to carry the club.” In addition, Las Vegas will be the NFL’s fifth-smallest media market. There might not even be enough people in Las Vegas to support the team. The NFL likely believes that tourists visiting Las Vegas will pay lots of money to go to the Raiders’ home games. This might certainly be true but is still a risk. Overall, there are certainly some other positive reasons these teams have had to find a new home but one cannot help but wonder if all this relocation will definitely economically benefit the NFL and its teams.

http://www.latimes.com/sports/nfl/la-sp-raiders-las-vegas-20170327-story.html

http://money.cnn.com/2017/03/27/news/nfl-raiders-las-vegas-move/

https://www.marketplace.org/2017/01/13/life/5-economic-takeaways-about-chargers-move-los-angeles

http://www.cbssports.com/nfl/news/a-sports-economist-says-that-the-raiders-wont-work-in-las-vegas/

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4 thoughts on “Is all the relocation in the NFL economically beneficial?

  1. hmpete18gholycrossedu

    Wow TJ, this was a great post! It seems to me that the economic issues are not being communicated to the public very well, which is leading to a great deal of frustration to the cities in which these teams leave. It would be interesting to see how much these teams that have left have used public money to build their new stadiums or get financing to make their initial purchase. Maybe every new city needs to require some sort of internal rate of return before they agree to be the next city that is disappointed again. The move to Las Vegas seems ironic for a league that prides itself on no gambling to be in a city where gambling is the primary source of economic growth in the area.

    Reply
  2. Victor Matheson

    You really don’t want to get me started on this travesty of a deal. To make the stadium work, Las Vegas is counting on as many at 20,000 visiting fans coming to every home game and dropping a ton of money in the city while they are – as this will go on for decades. No way in a million years this makes economic sense. Good for the voter of Oakland, however, to not bow to the extortion demands of the Raiders and let them go.

    It is even more disgusting that the $750 million taxpayer subsidy in Vegas was spearheaded by Sheldon Adelson, one of the biggest supporters of conservative small-government politicians. A hypocritical jackass.

    Reply
  3. jacknedorostek

    Very interesting post! It seems the Raiders made a very poor decision economically moving from Oakland to Las Vegas, not to mention the fantastic and loyal fan base they will be leaving behind. I wonder how the Las Vegas Golden Knights will fair? If an NFL team cannot be successful, I find it hard that a NHL team will have much success either, especially in this demographic.

    Reply

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