Why the Los Angeles Rams Are Worth $2 Billion More Than Los Angeles Chargers

Los Angeles is experiencing an $800 million shortfall, due to a shortfall between their revenue and expenses from National Football League team Los Angeles Rams (No. CNBC’s Official 2024 NFL Team Valuations list ranks them second at $8 billion while Los Angeles Chargers come in 26th with $5.83 billion. Although Rams have won multiple Super Bowl championships while Chargers do not, differences in values go well beyond team performance alone. At its heart lies stadium economics: both teams use SoFi Stadium financed by Stanley Kroenke for over $5 billion by financing it himself as the owner/operator. The Chargers, owned by the Spanos family, are tenants.The Rams receive about 88% of stadium revenues through luxury suite rentals and sponsorship agreements as well as from non-NFL events according to an expert in stadium operations. That leaves them with only 15% of suite and sponsorship revenue — no money from non-NFL events like pop star Taylor Swift selling out six nights at SoFi Stadium as part of her Eras Tour last August, leaving no piece for them or other NFL teams who benefited. It proved profitable nonetheless for several NFL clubs last season. CNBC reports that one stop on the Eras Tour generated $4 million per show for its host stadium – making stadium economics one of the key factors when valuing NFL franchises, since 67% or $13.68 billion out of their $20.47 billion annual revenue pooled evenly among 32 franchises in 2023. Most of that $13.68 billion comes from media rights acquisition and sponsorship deals, sponsorship agreements, licensing deals and licensing deals with national media providers. But team owners do not share revenue generated from stadium suite rentals, hospitality services and sponsorship deals with each franchise – which allows certain franchises to increase in value over time. In addition to Swift concerts at SoFi Stadium last year, performances by Beyonce, Ed Sheeran Metallica and Pink were all held there too! The Rams would retain all revenue generated from that transaction and SoFi stadium’s 20-year stadium naming rights, worth $625 Million over their 20-year lifespan through 2039 season, under an innovative revenue share structure in NFL. CNBC sources report that New York Giants and Jets split stadium revenue evenly; both franchises’ franchise values differ by approximately $500 million on CNBC’s 2024 List. That margin was much narrower for LA teams. Last season, the Rams finished second only to Dallas Cowboys for sponsorship revenue in the NFL. CNBC has named them No.1 overall on its 2024 list and are approaching $250 million in sponsorship revenue, according to sources familiar with their finances. Meanwhile, sponsorship for Los Angeles Rams fell below $200 million last year according to sources familiar with those finances. Of course, building your own stadium comes with inherent risk. SoFi Stadium cost over $5 billion — more than any stadium ever constructed — while its owner, Stan Kroenke, had $3.5 billion of debt when they took on SoFi Stadium’s construction risk in 2010. When Kroenke first acquired St. Louis Rams for $750 million back then, all their players resided there. But this gamble has seemingly paid off handsomely as SoFi is now home for both franchises. Kroenke relocated the Rams from St. Louis to Los Angeles for 2016, at an immense financial cost: He paid both an NFL relocation fee of $550 million and settlement costs related to lawsuits filed by St. Louis over his decision. Still, including this total investment fee total of over $1.12 billion his return has more than quadrupled since taking control. Since moving to Los Angeles in 1999, the Rams have reached the playoffs five times and twice advanced all the way to the Super Bowl – winning Lombardi Trophy both times! As for their Los Angeles rivals – Chargers moved in in 2017 but only made two trips since; never making it past divisional round competition; although Spanos family have done quite well. Alex Spanos purchased the then-San Diego Chargers for $72 million in 1984. Following in the Rams footsteps, they too must pay relocation fee of $550 million; since August 1984 however, team value has appreciated by an amazing 81 fold while S&P 500 index index rose 53 fold during this same timeframe. From an investment point of view think of these teams like growth stocks with different objectives than dividend plays: Rams being growth stocks while Chargers offering dividend returns.