What LAFC's new stadium means for the LA Galaxy

Today MLS expansion franchise LAFC announced their intentions to build a soccer specific stadium in Exposition Park, on the former site of the Los Angeles Sports Arena. At a cost of $250 million dollars, it will have a capacity of 22,000 seats. At its completion it will be the first open air stadium built within the city of Los Angeles since Dodger Stadium. Permitting and construction will take more than two years, pushing LAFC’s entry into the league back to 2018.

The point about construction in the city of Los Angeles isn’t just public relations. Since Dodger Stadium was built, many teams have played within the city of Los Angeles only to leave for a stadium somewhere else.

Los Angeles Angels left for Anaheim, Los Angeles Chargers left for San Diego after only a year, Los Angeles Rams left for St. Louis, and the Los Angeles Raiders went back to Oakland. The Los Angeles Galaxy leapfrogged over the city going from Pasadena to their own stadium in Carson. UCLA ditched the Coliseum for the Rose Bowl. The Dodgers own their stadium and USC has nowhere to go, so until now they’ve been the only open-air sports teams inside the borders of the city of LA.

The Los Angeles Sports Arena that LAFC will replace with their soccer-specific stadium had its own experience with the flakiness of LA sports. Jack Kent Cooke built the Fabulous Forum in 1967 for his recently purchased expansion Kings, moving the Lakers out of the Sports Arena in the process.

This cost the Sports Arena its hockey tennant, the WHL Blades (who didn’t draw very well anyhow). They’d try again with the Los Angeles Sharks of WHA, which lasted two years. It’s ABA tennant the Stars moved in after the Lakers left and lasted two years. The Clippers came in the mid-80s, but were a doormat until they moved into the Staples Center. UCLA and USC both called the Sports Arena home at one point, but both opted instead for on campus arenas.

AEG worked some magic building the Staples Center Downtown, but they chose to build their soccer stadium in Carson. Built on the site of a 1984 Olympic cycling venue, the now StubHub Center serves not only the LA Galaxy but US Soccer, the US Tennis Association, and up until this season a second MLS tennant in Chivas USA.

In that way it’s quite similar to Staples Center which houses the Lakers, Clippers, Kings, Sparks, and at one point even an arena football team. For indoor arenas, which have lower capacities but year round functionality, sharing is the norm. Conversion from one sport to the other can be done in an afternoon.

Ultimately my thoughts on LAFC’s stadium are filtered through the Galaxy’s needs, specifically, is LAFC’s stadium a legitimate salvo in a battle which hasn’t even officially begun? In trying to organize my feelings I read a bunch of economics articles which used math I couldn’t understand. Outside of the math, what they’re dealing with is supply and demand.

	Attendance Per Game	Capacity	A/C%
LA Galaxy 2014	21,258	27,000	79%
2013	22,152		82.04%
2012	23,136		85.69%
2011	23,335		86.43%
2010	21,437		79.40%

The StubHub! Center is built at a greater capacity than there is demand for Galaxy tickets. It was built at well above the average attendance the Galaxy saw in the cavernous Rose Bowl. This has kept ticket prices relatively stable over the history of the complex, but it has also dampened the demand for season tickets. Getting Galaxy season tickets comes down to preference for a specific seat, as getting in day of game is rarely an issue.

This hurts the secondary market value of tickets. It’s common practice for season ticket holders to subsidize the tickets by selling off extra seats for high demand games, but outside of Fourth of July there just isn’t a guaranteed Galaxy sellout.  

	Games at less than 1/3 Capacity	Games at 1/3 - 2/3 Capacity	Games at 2/3 Capacity and Above	Games at 90% Capacity and Above
LA Galaxy 2014	0.00%	17.65%	82.35%	23.53%

While the Galaxy don’t sell out, attendance is incredibly stable. Referring to a chart in a CIT Social Science paper from 1974, while the percentage of games at 90% capacity is below an average ABA franchise in 1974, the games at ⅔ capacity or better rival the NFL of that time. Factor in the fact that the games below ⅔ were all weekday games, which carry their own restraints at the StubHub! Center, and you see just how consistent the Galaxy draw is.

I’d conclude that the 27k capacity of the StubHub! Center wasn’t done with the Galaxy in mind. It was done for the national teams, to host World Cup qualifiers, Gold Cup games, Olympic qualifying tournaments, and friendlies.

Which returns me to my original question, is LAFC’s stadium going to impact the gate for the LA Galaxy. We know Chivas USA didn’t have much of an effect on Galaxy attendance, but that was a franchise which required the exact same effort to follow as the Galaxy.

Another paper I read from UNC uses the example of two competing restaurants across from each other, each serving seafood. One is at capacity every day during peak hours and doesn’t take reservations, while another offers comparable food and service at a slightly higher price but has many empty seats. In this example, why doesn’t the popular restaurant raise its prices slightly higher?

This paper, long before Yelp existed, argues that demand for some goods is dependant on the demands of other consumers. Think about how crazy some restaurant owners go over their Yelp reviews. Emotional attachment is harder for economists to quantify, but what if some goods are in high demand because other people want them and not because of price or quantity?

In the case of the Galaxy and Chivas, while the community around LA has held steady and kept the same group coming back year after year, once popular opinion turned on Chivas they literally couldn’t give tickets away. The product didn’t matter, they had a bad reputation.

This might explain some of the scorched earth policy LAFC has had with elements of Chivas USA. While LAFC has been taken to task for allowing a talented youth program to get absorbed by the Galaxy when they could have claimed it as their own, the very brand aware folk at the center want nothing that will be a callback to the former MLS club.

So what is the identity of this brand new club? Thus far, what they are is not-the-Galaxy. Galaxy are blue, they are red. Galaxy are suburban, they’re building in the city. It’s the same strategy NYCFC has employed. They too came in without building a youth structure, because their entire hook boiled down to being blue while they were red. Why take the time to go out to New Jersey? We’re a soccer team in New York.

The Galaxy base isn’t at risk. For that some-20k strong core, the investment is in the Galaxy. LAFC is going after that other 7k, who show up for fireworks or when LA plays the Sounders, or for a national team friendly. Don’t drive from Echo Park, Santa Monica, Burbank, Pasadena, the Valley, down to see the Galaxy. We’re so much closer, and we’re way cooler. We’ll have food trucks and show outdoor movies, and all the things you young kids and your new families like.

That’s where that 22k capacity comes in. They aren’t building for the occasional national team game, or the possibility of landing a bowl game. It’s opening up in a completely different part of town, and they’re going to look for a different core, and they’ll work hard to keep it.

LAFC isn’t the restaurant across the street. That was Chivas USA, and economics took its course. LAFC is the restaurant across town, which with the right yelp reviews will take away the folk who were willing to drive out of their way just to have the experience you offered.

How does the StubHub! Center compete? Go all-seater, reduce capacity. Make it an in-demand ticket more than twice a year. Make it something people need to plan ahead for. There’s going to be a bump with Steven Gerrard comes over, but how do you keep those people? They didn’t stick around with Beckham. After that initial full year, it went right back to that core. Do something to make life better for that core, instead of chasing the capacity which is too big for the club anyhow and always has been.