NFL Team Valuations: A Stadium's Impact on Franchise Value

The Los Angeles Rams and Chargers are both playing in SoFi Stadium, but their NFL team valuations are vastly different. The Rams are worth $8 billion, ranking second on CNBC's Official 2024 NFL Team Valuations list, while the Chargers are valued at $5.83 billion, placing them 26th.

While the Rams have a recent Super Bowl victory to their credit, the gap in value is primarily attributed to stadium economics, not just team performance.

SoFi Stadium Revenue: Rams' Advantage

• Rams owner Stanley Kroenke financed and owns SoFi Stadium, while the Chargers are tenants.
• The Rams receive about 85% of the stadium's revenue from luxury suites and sponsorships, along with all non-NFL event revenue.
• The Chargers receive only 15% of suite and sponsorship revenue and no revenue from non-NFL events.
• This disparity means the Chargers miss out on lucrative events like Taylor Swift's Eras Tour, which generated substantial income for SoFi Stadium and the Rams.

NFL Revenue Sharing: The Importance of Local Revenue

The NFL's revenue-sharing model ensures that $13.68 billion, or 67%, of the league's $20.47 billion revenue is distributed equally among all 32 teams. This shared revenue primarily comes from national media rights, sponsorships, and licensing deals.

• However, teams do not share revenue from stadium suites, hospitality, and sponsorships. This is where certain franchises, like the Rams, can gain a significant advantage in value.
• The Rams' ownership of SoFi Stadium grants them the entire revenue from concerts, events, and naming rights, further boosting their franchise value.

Beyond SoFi Stadium: Sponsorship Revenue and Franchise Value

The Rams' sponsorship revenue last year was just under $200 million, second only to the Dallas Cowboys. The Cowboys are No. 1 in overall value and generate close to $250 million in sponsorship revenue.

The Financial Risk and Reward of Owning a Stadium

While owning a stadium like SoFi Stadium can be a significant financial advantage, it also comes with risks. The Rams have $3.5 billion in debt, the most in the NFL.

• However, Kroenke's investment in the Rams has paid off handsomely. Since he acquired the team in 2010, the Rams' franchise value has increased more than fourfold.
• The Rams' success on the field, including a Super Bowl victory in 2021, has also contributed to their soaring value.

The Chargers' Perspective: A Dividend Play

The Chargers have seen a considerable increase in value since the Spanos family acquired the team in 1984. Their franchise value has increased 81-fold since then.

While not as dramatic as the Rams' growth, the Chargers have still benefited from the NFL's strong financial position.

• The Chargers' smaller value compared to the Rams can be viewed as a "dividend play" in stock market terms, with a more stable and predictable return on investment.

Conclusion: NFL Team Valuations and the Future

The disparity between the Rams and Chargers' NFL team valuations highlights the impact of stadium economics, ownership structure, and local revenue streams on franchise value. The Rams' strategy of owning and controlling their stadium has paid off handsomely, while the Chargers' approach as tenants has resulted in a smaller value but a more stable financial position.

As the NFL continues to evolve and grow, the value of NFL teams will likely continue to increase. Teams with access to local revenue streams and strong ownership structures are likely to be well-positioned for future success.