The Kroenke Bombshell: A Method in the Madness?

Stan Kroenke: No longer content with minority owner status?

Stan Kroenke, on the verge of announcing his intentions vis a vis the Rams, had a bombshell dropped in his lap: a 16% share of the Arsenal soccer club (long pursued by Kroenke) was put up for sale by a Lady Bracewell-Smith. His response? A bombshell of his own.

Kroenke waited until the dinner hour, then announced his bid to put aside his budding relationship with Shahid Khan, opting instead to compete with him head-to-head for the remaining 60% of the Rams franchise.

What is he thinking? Is this a moustachioed battle royale? Or is there method in his madness?

Here’s my take: it’s all about dollars and sense. The Rams were valued at nearly 1 billion dollars last year by Forbes — yes, below average for the league, but still quite a lot of money. But now, little more than a year later, Kroenke can take full ownership for 60% of $750 million, plus his original $200 million investment made in 1995. It’s a perfect buyer’s market — the owners have to sell, and thanks to a grinding recession, the list price has dropped significantly even if the inherent value of the franchise has not. Spending money to make money.

The math is simple. The economy will rebound (not “if” but “when”), and economic signs around the city are stable — we were far from the hardest hit cities during the recession. Even if the players strike in 2011, the owners will be extremely likely to emerge unscathed from this forthcoming labor impasse, given the player-unfriendly nature of the NFL’s bargaining history. The Rams are young and well-positioned to rebound behind a new face of the franchise, building popularity between now and 2015, when the Rams’ stadium deal expires. At that time, as the sole owner, Kroenke would have tremendous bargaining leverage with the city of St Louis to negotiate significant stadium improvements — or a whole new facility.

Forbes’ financial analysis is clear: the NFL has a money-making bed of TV contracts and merchandise like no other sport in the country — a pot which all team share more or less equally. The big differentiator in franchise values comes not from player salaries, from star power or even Super Bowl rings: it comes from those gaudy new buildings that teams are coercing from their surrounding taxpayers. It’s why Dallas and Washington, winners of “diddly” and “squat” respectively in the last decade, rank above the Patriots and far ahead of the Steelers and Colts in total franchise value.

Kroenke sees big opportunity, with a relatively small roadblock in his way — the NFL’s rules against cross-ownership.

While the league under Roger Goodell has shown a stern and disciplinarian face to the world, all of the hard-line stances that the NFL has taken have been well-grounded on a moral high ground. Any time the league has been able to punish bad behavior, it has done so with a vengeance — creating spectacles out of cases involving Michael Vick, Pacman Jones, and others. The NFL under Goodell is far more concerned with appearances than with justice.

But in cases where there is little moral high ground to be found, such as the “traditionalism” argument against changing overtime rules, the league has been much more flexible. In fact, they have been extremely willing to embrace change when it can be spun into a positive story, such as the new overtime policy and the “Tom Brady rule.”

The final sign is also clear: Adam Schefter, the mystic sage who has been guiding the fate of the Rams all offseason, has been loudly whispering that the Shahid Khan bid is in serious financial trouble with the league. Okay, maybe “whispering” isn’t the right word for going on the radio and telling the world.

If Kroenke’s bid represents the most feasible way to keep the Rams in St Louis, and to coerce another shiny bauble of a stadium to showcase the game, then you can bet Goodell will find a sensible pretext to abandon his hard-line stance on cross-ownership. Bank on it.