Revenue Sharing And Personal Seat Licenses In The NFL

The National Football Association (NFL) recently won a ruling by a California State Court of Appeals, when the court declined to grant a new trial to the Oakland Raiders in their $1.2 billion lawsuit against the NFL over the rights to the Los Angeles market, along with revenue sharing disputes, which is the primary focus of this introductory posting.

A lower court judge had granted a new trial on the grounds of juror misconduct, but the State Court of Appeals overturned that decision.  The appeals court also ruled that the Raiders were obligated to share revenue gained from their lease in Oakland.

According to the Los Angeles Times article, "the Raiders had argued that the money generated by the sale of personal-seat licenses was part of their deal to move back to Oakland from L.A. in 1995 and they were not obligated to share that with the rest of the league."

Revenue sharing is a common practice in professional sports organizations.  Teams in the NFL share much of their revenue with one another, the reasoning being that sharing of profits will help maintain a competitive balance amongst the teams.  However, not all revenue is shared.  According to Professor Steve Ross of the University of Illinois College of Law, "stadium revenues remain the only principal source of unshared revenue." Steve Ross, Antitrust: New Economy, New Regime; Second Annual Symposium of the American Antitrust Institute: Antitrust Options to Redress Anticompetitive Restraints and Monopolistic Practices by Professional Sports Leagues, 52 Case W. Res. 133 (2001).

The Oakland Raiders seem to be arguing that the money generated by their lease falls within the exception to revenue sharing.  At first blush, the court ruling appears to be in direct conflict with NFL revenue sharing principles.  However, it seems that NFL bylaws allow teams to keep revenues generated from stadium deals all to themselves.  However, once those deals have been made, revenue generated due to the lease, i.e. ticket sales, jerseys, internet-based revenues, must be shared with other teams.  The question is whether personal seat licenses fall within the type of revenue-generating activities that must be shared with the rest of the league. 

According to "Sportsbiz" blogger Mark Ament, who has posted a comment to this article, "personal-seat licenses grant the holders a right for a fee, to purchase the season ticket associated with the particular seat. Depending on the team and the particular term of the PSL, that right can be renewed annually or be for as long as 20 years. In almost all cases, purchase of the PSL does not include the cost of the ticket. It has become one of the most common methods of partially financing new stadium construction or renovation and has nothing to do with advertising revenue. It is more closely related to private suite revenue." 

Personal seat licenses were a significant point of contest between the NFL and the Los Angeles Rams.  When the Rams made the move to St. Louis, they agreed to share the $17 million worth of revenue generated by the personal seat licenses with the NFL.  St. Louis Convention & Visitor Comm'n v. NFL, 154 F.3d 851, 855 (8th Cir. 1998).  A Journal of Law and Politics article written by Adam Safir suggests that personal seat license revenues are not required to be shared by the NFL.  (13 J.L. & Politics 937).  These sources suggest that although sharing revenue generated by personal seat licenses is not required, it is possible to share revenues due to a deal made between the team and the NFL.

It is unclear whether the Oakland Raiders are bound to share their PSL revenue due to an agreement.  They maintain that they are not, and it will be interesting to see if they appeal the court decision, and if so, what the outcome will be.

Comments

[Jim Ceon]

What professional organization was the first to use PSL?

[Mark]

PSLs grant the holders a right, for a fee, to purchase the season ticket associated with the particular seat. Depending on the team and the particular term of the PSL, that right can be renewed annually or be for as long as 20 years. In almost all cases, purchase of the PSL does not include the cost of the ticket. It has become one of the most common methods of partially financing new stadium construction or renovation and has nothing to do with advertising revenue. It is more closely related to private suite revenue.