The Raiders in Las Vegas? Bet on It.

Background

Looking for a new stadium, and with no current options in Oakland, the Oakland Raiders recently teamed up with Sheldon Adelson and his Las Vegas Sands Corporation, Majestic Realty Co. and Las Vegas city officials to propose a new stadium in Las Vegas for the Raiders. A plan was presented to the Southern Nevada Tourism Infrastructure Committee for a $1.4 billion, 65,000 seat domed stadium. The Raiders would provide $500 million in funds ($200 million of which would be proceeds from a loan from the NFL), the Sands-Majestic Realty partnership would add $150 million and the remaining $750 million would be raised via by increasing the Las Vegas city hotel tax .

When the Raiders proposal was made several weeks ago, the media questioned whether other NFL owners would agree to the Raiders relocation to Las Vegas. The short answer is – yes, they will. Las Vegas would be a great market for the NFL. The bigger challenge will be for the Raiders to get the additional $750 million in financing they are currently seeking from the Tourism Committee.

Let’s delve into the supposed roadblocks that have been mentioned regarding whether Las Vegas is a sustainable long-term home for an NFL franchise.

Market is too small

Arthur Blank, owner of the Atlanta Falcons has already gone on record questioning whether Las Vegas is a large enough market for an NFL team. Profootballtalk.com noted that using Nielsen’s listing of Designated Market Area (DMA) metrics Las Vegas would be the NFL’s fifth-smallest market if it had a team.

However, Nielsen DMA listing chops up the US into many small pieces. As a result, metropolitan areas can appear smaller than they really are. For example, its divides West Palm Beach and Miami/Fort Lauderdale into two separate markets. For Las Vegas, it does not include its neighboring cities Henderson and Paradise which are within a half-an-hour of The Strip. Furthermore, Nielsen’s metric is incomplete as it does not incorporate out-of-home viewing such as people watching in hotels and bars. Thus, Las Vegas, which has approximately 150,000 hotel rooms, used by 42.3 million visitors in 2015 is short-changed in this listing.

A better data source to use is the United States Census Bureau. According to its latest estimate (July 1, 2015), Las Vegas, with over 2.1 million residents would have the 23rd largest metropolitan area out of the 31 NFL cities (only 31 because the Jets and Giants share NY/NJ), beating out Kansas City, Cleveland, Indianapolis, Nashville (Tennessee Titans), Jacksonville, New Orleans, Buffalo and Green Bay. Furthermore, Las Vegas’ population is growing at a 2.2% annually, second only to Houston for NFL cities. Based on its growth rate, Vegas is projected to pass Cincinnati and Pittsburgh within the next five years in total population, which would then place them 21st out of 31 NFL cities in total population. So Vegas is certainly large enough to be an NFL city.

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Las Vegas is Not a Sports Town

In its recent past, Las Vegas has had local teams playing minor league hockey, minor league baseball and arena football league all of whom had below-average attendance. However this should not be surprising, as Vegas as so many entertainment options competing for the public’s attention and dollars as compared to other cities who have more limited options.

While Vegas might not be a hard-core sports town, it is definitely an event town. In 2015, an estimated 325,000 tourists poured into Vegas to enjoy atmosphere surrounding the Floyd Mayweather- Manny Pacquiao fight. With an NFL team in Vegas, every Sunday, would have fans flocking from all over the country to enjoy the combination of watching football, gambling and Las Vegas. One can only imagine the electric atmosphere in the city if the Raiders ever hosted a playoff game, or better yet, a Super Bowl.

The Raiders would be able to draw from a wide circle of football fans to sell tickets. In addition to the local population which is substantial, Raiders fans who still follow them from their Los Angeles days would be just a four hour drive from Vegas. In fact, 25% of Las Vegas visitors come from Southern California. Fans of visiting teams playing a road game in Las Vegas would be enticed make a trip to Vegas to watch their favorite team play. In 2015, there were 21,000 conventions attended by almost six million people. Many of these people who find themselves in Las Vegas for their convention would certainly take up the opportunity to go to an NFL game while in town. The 42 million total visitors who visit Las Vegas every year are all candidates to attend NFL games.

One issue that has been mentioned is that many of its residents work in the casino industry (according to the US Bureau of Labor Statistics 30% of non-farm workers in Las Vegas work in the leisure and hospitality industry), whose prime working days are Friday-Monday. However, one must remember that an NFL home team has only eight regular season home games a year. Even these workers who typically work on the weekends could probably finagle a personal day or two a year to attend these home games. Additionally, home games on Thursday and Monday nights would easier for these individuals to attend.

Gambling

One thing that hasn’t been issue for NFL owners in their public statements about Las Vegas has been its’ association with gambling. This could be attributed to a general shift in the attitudes of gambling amongst professional leagues and the general public. In 2014, Adam Silver, Commissioner of the NBA, penned an op-ed calling for the legalization and regulation of the gambling throughout the United States. The NFL is keen to the fact that much of its audience is driven by people betting on games and participating fantasy leagues. In fact NFL owners Jerry Jones (Dallas Cowboys) and Robert Kraft (New England Patriots) and Major League Baseball all have equity stakes in Draft Kings, one of the two prominent daily fantasy betting sites (FanDuel is other). A combined 28 NFL teams and the NFL Players Union (NFLPA) have sponsorship partnerships with these two companies.

So it should come as now no surprise that both Robert Kraft and Jerry Jones made public statements supporting the Raiders relocation to Las Vegas. Mark Davis, owner of the Raiders, said that when discussing the proposal informally with the owners at their quarterly meeting last week, nobody raised any objections to the Las Vegas proposal.

Financing

The biggest challenge to the relocation will be securing the $750 million in public funds that the current proposal is suggesting. The history of securing public funding for professional sports teams suggests that the first proposal will probably not be accepted and may take some time until an acceptable agreement can be crafted. The Raiders and the NFL might need to pony up some more money or scale back on the budgeted costs of $1.4 billion for the proposed stadium. The mayor of Las Vegas was part of the delegation that proposed the stadium deal to the Southern Nevada Tourism Infrastructure Committee. She vocally supported the deal and said “the Raiders will come if Nevada handles this properly”. In the weeks since the deal has been announced she has back-tracked slightly, questioning this past week whether Las Vegas can afford an increase to the hotel tax without seeing a decrease in tourism.

As this only occurred after the media reported that the NFL owners have been privately very supportive of the Raiders moving to Las Vegas, I interpret her comments as simply a negotiating tactic to wrest more money out of the private partners (the Raiders and NFL, Sands, Majestic Realty) and reduce the burden on the Las Vegas tax payers.

Anti-Trust

When covering this story, the media has consistently reported that in order for the Raiders to move to Las Vegas they need 24 of the 32 owners to approve the move. However, this is not accurate. The media either does not understand or does not wish to report is that legally the Raiders do not require the other NFL owners’ permission to move to Las Vegas.

The Sherman Antitrust Act was passed by Congress in 1890 and prohibits certain business activities, including monopolistic ventures that are defined as anti-competitive. Because of this law, each NFL team is considered a considered independently owned, and independently managed business. Left alone, the anti-trust law would allow each team to individually negotiate their own TV contract and disallow the pooled TV deals that the NFL makes for all 32 teams with FOX, NBC, CBS and ESPN. If the Dallas Cowboys or New England Patriots wanted to negotiate their own separate TV deals they would be able to do so. However, Congress passed the Sports broadcasting Act of 1961 which provides sports leagues with a specific exemption to the anti-trust law regarding the sale of the national broadcasting rights relating to sporting events, allowing the leagues to pool all their games together into one package for sale to the networks. This exemption is specific to national broadcasting contracts and does not have any other applications. As recently as 2010, the NFL’s attempted to claim they had a broad anti-trust exemption. However, the Supreme Court shot that down in a unanimous 9-0 verdict. Because the NFL is subject to the antitrust law, and each NFL team is legally considered an independent company, should the Raiders decide it is in their best interest to move to Las Vegas, they do not need the approval of the other 31 teams and can move their without any penalty or restriction.

The one sports league which has a full antitrust exemption is Major League Baseball. In the 1922 case, the Federal Baseball Club v. National League (Federal Baseball), the Supreme Court ruled that baseball is not involved in interstate commerce or trade as defined by the Antitrust Act. The Supreme Court subsequently refused to apply the Federal Baseball logic to other professional sports leagues. However, it also refused to overturn the Federal Baseball ruling. In Toolson v. New York Yankees, the Court decided to let the existing ruling stand because baseball had built its business under the impression that it was not covered by antitrust law and suddenly applying it would be unfair.

A result of these divergent applications of the anti-trust law to professional sports leagues is the differing histories of franchise relocations. MLB has had only one team relocation since 1972. This occurred in 2005, when MLB themselves purchased the Montreal Expos from their owner and moved them to Washington to become the Nationals. MLB held onto the team for a few years before selling them to Ted Lerner. In this same time period, the NFL has seen eight relocations of franchises from one city to another, including the moving of both the Raiders and Rams twice.

Interestingly enough, it was Al Davis, the late, fiery owner of the Raiders (his son Mark took over the team after his father’s death in 2011) who took the NFL to court, and first proved that a team can legally relocate without the approval of the other NFL teams. In 1980 he attempted to move the Raiders from Oakland to Los Angeles but the NFL was successful in obtaining a court injunction to block their move. Davis responded by filing an anti-trust lawsuit against the NFL and in June 1982 a federal district court ruled in Davis’ favor and the team officially relocated to Los Angeles for the 1982 NFL season. (In 1995, Davis decided to move Raiders back to Oakland. As the NFL had never recognized the Raiders’ initial move to Los Angeles, they could not disapprove of the move or request a relocation fee.)

If an agreement can be made with Las Vegas, and the NFL owners would disapprove of it, legally Mark Davis can move the team anyways. However, Mark Davis doesn’t have the combative personality of his father and the NFL seems to have a favorable view of the relocation to Vegas anyways, so it doesn’t seem like a contested move to Las Vegas is in the cards.

Summary

Las Vegas is ready for major league sports and can support an NFL team. The Raiders in Sin City is a match made in heaven (or hell?). Roger Goodell’s NFL has been increasingly driven by the bottom-line and the owners don’t seem to mind being associated with Las Vegas. The combination of the bad-boy image of the Raiders and the glamour of Las Vegas appears to be a bet that NFL is willing to make. The most challenging aspect will be working out the financing of the proposed $1.4 billion stadium.

 

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