Why the Raiders' Stadium Deal May Hinge on the Team's on-Field Success

Christopher Hansen@ChrisHansenNFLNFL AnalystJuly 17, 2013

Image courtesy JRDV/City of Oakland.
Image courtesy JRDV/City of Oakland.Brian Bahr/Getty Images

The Oakland Raiders are trying to get a new stadium in Oakland. According to a report from Matthew Artz of the Oakland Tribune, they are eyeing the smallest stadium in the NFL (just 56,500 seats) at the current site of O.co Coliseum.

The original report said the Raiders were eyeing a stadium of just 50,000 seats, but missed 6,000 club seats and 400-600 loge seats that were part of the Oakland-Alameda County Coliseum Authority’s presentation.

Don’t be misled; there isn’t a proposal on the table to build such a small stadium in Oakland, and it’s highly unlikely there will ever be such a small football stadium built in Oakland. Improvement of the on-field product to increase demand is one of the keys to a stadium project, because a small stadium is going to have severe funding challenges.

The Coliseum Authority actually lists this as the first opportunity, which means that it would be the most helpful in achieving the desired objective—to build a stadium.

The numbers reported by the Oakland Tribune were based on a team-commissioned study about the anticipated market demand. This market demand is consistent with the Raiders putting a tarp on portions of the upper deck to lower the capacity of O.co to 53,250—the smallest in the league.  

The Raiders also shared with the Coliseum Authority that there is “little corporate support in the market” and that a “PSL (personal seat license) program could potentially generate approximately $100 million”. Translation: There aren’t going to be a lot of corporate dollars coming in, and the appetite for PSLs, while larger than anticipated, is still pretty small.

According to Vic Tafur of the San Francisco Chronicle, league and city sources said the numbers were “premature and inaccurate.” This is almost definitely true for many reasons.

The report by the Oakland Tribune said the Raiders would contribute $300 million (including $100 million in PSLs) and could get $200 million from the NFL’s G-4 stadium loan program, leaving an estimated $300 million shortfall.

NFL money is loaned to the teams on a case-by-case basis, and one of the ways the NFL recoups its costs is from the difference in gate receipts between the old stadium and the new stadium, according U-T San Diego. Obviously, the smaller the stadium, the longer it will take the NFL to recoup their costs.

Unless the stadium is expandable to 70,000, there’s very little chance of getting a $200 million loan from the league. Teams getting money from the G-4 loan program also usually get to host a Super Bowl, because the league can recoup some of their costs that way. For example, the NFL demands financial concessions from the Super Bowl host city.

Can you connect the dots?

The Raiders need to increase demand for tickets in Oakland from 56,500 to closer to 70,000 in order to get $200 million in funding from the league. The league has not had a Super Bowl with fewer than 63,000 seats in its history, and the average attendance for the last 10 Super Bowls is 75,000.

Without the $200 million from the league, the Raiders' chances of getting a stadium deal in Oakland are probably nil. As it was reported, the stadium would cost approximately $800 million and would need $300 million from other sources (likely public money).

Considering the outstanding coliseum debt from the Raiders' move back to Oakland in 1995 is still costing the city $10 million a year until 2025 (roughly $130 million over the next 12 years), according to Tafur, getting any type of public money is going to be a tough sell unless the new stadium deal accounts for it—pushing costs to roughly $930 million.

Keep in mind that Levi’s Stadium just down the road in Santa Clara is going to cost $1.3 billion, but was originally estimated to cost $937 million. The 49ers' PSLs are also selling like hot cakes to pay for the stadium, even though they are risky investments.

Demand couldn’t be higher for 49ers tickets because they are winning a lot of games and went to the Super Bowl last February. The Raiders are attempting to rebuild from basically nothing and haven’t had a winning season in over a decade.

Raiders’ owner Mark Davis said he wants to keep the team in Oakland, but he doesn’t want to sign a short-term lease without an agreement in place.  If that’s true, don’t be surprised if the deal dies in September and the Raiders start considering relocation or sharing the 49ers' new home in Santa Clara.

If the Raiders on-field product doesn’t improve enough to significantly spike demand, don’t count on a new stadium in Oakland.