Some of the most skilled marketers, media executives and football lifers have attempted to start spring football leagues and failed. Now comes a new class of entrepreneurs headlined by Charlie Ebersol, Vince McMahon and Don Yee, all highly accomplished, trying to tackle one of the greatest challenges in sports.
Each of them believes that with economic tailwinds, an expanding digital media landscape and a friendly attitude toward fantasy and legalized gambling, they have the code to start another pro football league in the face of precedent that says otherwise.
While startup leagues come and go practically every year, never before has such a collection of wealthy and well-known sports business titans gone to market at the same time with their version of an alternative or complementary league to fill the NFL’s offseason.
Each of the startups has its own approach.
Ebersol, a 35-year-old producer and director with one of the most famous last names in television, has assembled a strong cast of football experts starting with co-founder Bill Polian as well as in-house teams for live events and TV production. He plans to launch the Alliance of American Football in February 2019, the week after Super Bowl LIII.
McMahon, the billionaire wrestling impresario, is back for Round 2 of the XFL, taking what he learned from the first failed attempt to start a new league in 2020.
Yee, an NFL super-agent whose star client is Tom Brady, is going after college-age players looking for a path to the NFL that doesn’t include an 8 a.m. macroeconomics class, sort of an NBA G League for the NFL. Yee’s Pacific Pro Football intends to play in July 2019.
Two other startups are looking to attract fans who want to call their own plays from an app.
Add them up, along with a couple others, and there’s no fewer than six pro football leagues on whiteboards across America (see related directory), all looking for players, coaches, stadiums, media distribution and, most importantly, funding.
Like countless others before them, Ebersol, McMahon, Yee and the others see the de facto monopoly that the NFL has, along with its absolute lock on American media and pop culture. Inevitably, they all come to the same conclusion: “If I could only get X percent of the NFL’s audience …”
That’s the allure that keeps wide-eyed entrepreneurs coming back, thinking they have the answer for an alternative league that could quench the perceived thirst for football during the NFL’s offseason. That’s even after all the flops, which include a handful of forgotten women’s pro football leagues and another half-dozen indoor leagues.
“The NFL has the most fans but the fewest games,” said Jeff Lewis, a former Guggenheim Partners senior managing director, who last year started the American Flag Football League. “That’s produced a math that is apparently irresistible.”
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But why now? What makes anyone think they can succeed where so many others have failed?
If there is a reason why conditions are favorable, it largely has to do with a flourishing media environment, unprecedented asset appreciation by many sports properties, a surfeit of available capital, and a market for a new kind of fan-friendly football with simpler rules and shorter games.
“Someday, we’re going to look back at this as one of the most dynamic points at the intersection of sports, media and technology,” said Howard Handler, the former NFL and MLS marketing executive, who is project lead for a dozen employees at McMahon’s Alpha Entertainment, the business established to run the XFL. “And the economy is good, too.”
Countered an investment banker who has seen financial plans from four of the new leagues: “The irony is that there are so many interested in new leagues when football is having problems with head trauma and youth participation.”
Vince McMahon, shown in 2000, is back with a new XFL after the league’s first version failed.getty images
This crowded class of football startups points to unlimited digital distribution and the ever-growing need for content to feed it. The games are one piece of the content, but the potential for reality TV that documents the journey of these NFL wannabes presents another opportunity. The leagues also are an ideal platform for emerging technologies, whether it’s virtual reality, legal gambling, real-time fantasy football or some yet-uninvited combination of all three.
Will those trends help the leagues generate enough capital when history shows that their money always runs out?
Jim Steeg, a veteran of three decades in the NFL, has been involved with three startups that all followed the same script. He’d volunteer his time for several months and when it came time to establish a budget, he’d face the same shortcomings.
“Here’s the business model and here’s how much money you’ll need,” Steeg would say. “Every time I was told, ‘You’ve got to cut the budget.’ It always gets down to who’s going to come up with the money.”
CBS Sports Chairman Sean McManus, who is backing Ebersol’s Alliance of American Football, said spring leagues have come and gone almost annually since the USFL went out of business in the 1980s. They’re almost always underfunded and without a long-term strategy.
“They don’t have the money, they don’t have personnel signed, and they don’t have a plan for three years, much less 10 years,” McManus said of the typical challenges facing football startups. “I don’t know why there’d be more [leagues] launching now, except that people do understand there’s a market out there, if you can put on a good product. But of all the people we have ever talked to, I like the [Alliance’s] chances the best.”
The history of pro football startups is not convincing for some predictably skeptical venture capitalists and other money managers looking for rapid return on investment.
“My investors don’t like to lose money, and you have to be prepared to lose money for three to five years,” said one fund manager who saw Ebersol’s pitch.
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Of the three highest-profile startups, all of which are single-entity leagues, Ebersol’s Alliance of American Football plans to launch first — six days after Super Bowl LIII next February. Ebersol, who grew up in the media business as his father, Dick, chaired NBC Sports, introduced the Alliance in March with NFL luminaries such as former executives Polian and J.K. McKay, and ex-players Troy Polamalu, Justin Tuck and Jared Allen by his side.
“We’re building a very serious business,” Ebersol said. “It’s a media business, it’s a football business, it’s an interactive platform, and to do that we needed to hire the very best people.”
Ebersol revealed some of his investors in March, including Peter Thiel’s Founders Fund, The Chernin Group, Slow Ventures and venture capitalist Keith Rabois, but the Alliance has not said how much money it has raised so far. Meanwhile, Ebersol is moving forward as the fundraising continues. Of the Alliance’s eight planned teams, it has announced five — Atlanta, Memphis, Orlando, Phoenix and Salt Lake City — an indication that the league is prepared to launch on schedule in February.
Ebersol did not reveal specifics about fundraising or how long it would take the league to reach profitability.
“We have a very conservative, very reasonable plan,” he said, “but we’re funded for worst-case scenarios.”
Don Yee’s Pacific Pro Football hopes to offer younger players an alternative to college.pacific pro football
The games will feature fewer special teams and real-time fantasy gaming on the league’s app. A unique set of rules are intended to keep the action moving. For example, there won’t be TV timeouts.
CBS Sports will broadcast the first game and the championship game of the Alliance’s inaugural season. The deal is believed to be a revenue-share model between the Alliance and CBS that offers minimal risk for the network, not a traditional rights fee. Other games will be on CBS Sports Network and perhaps other cable channels, as well as the Alliance’s app.
“Charlie came to us with enough money to fund themselves for five years and Bill Polian, one of the most respected NFL personnel execs, is their commissioner,” McManus said. “The more we listened to Charlie’s vision, the more we thought it was worth taking a flyer on. The risk for us is minimal; we have very limited financial exposure. … But I do think there’s an appetite for spring football.”
Later in the summer of 2019, Yee plans to launch Pacific Pro Football, a developmental league for college-age players who are not yet NFL draft-eligible.
Yee, whose advisory board includes Steeg, ex-coach Mike Shanahan and Fox Sports officiating analyst Mike Pereira, will start with a more modest business plan that includes four teams playing in small college or junior college stadiums in the Los Angeles area with a particular emphasis on preparing players for NFL-style football.
“The trend we see is a real misalignment between the college game and NFL,” Yee said. “It’s certainly not the job of the college coaches to get players ready for the NFL. How the game is presented and how players are trained is very different in college compared to what they need to succeed at the NFL level. That’s what we’re offering. This will be an option for players who don’t want to go to college.”
Adidas is on board as a founding partner, meaning it will supply uniforms, gear and marketing advice, but sources indicate that the ongoing fundraising for Pac Pro hasn’t yet reached a point where the league has a green light for 2019.
In the spring of 2020, McMahon’s new XFL is expected to be ready with all of the pro football and fewer of the gimmicks that defined the league in 2001, its only season during its first iteration.
When McMahon announced the XFL’s return in January, the World Wrestling Entertainment chairman and CEO said it would take more than $100 million to get the league off the ground. He has sold $100 million in WWE stock so far to fund the XFL.
McMahon, now seeking an XFL chief executive, is taking the additional year before launching in 2020 to work on stadium deals and media rights. Sources say The Raine Group is working with the league as an adviser.
There also are two startups trying to combine the widespread appeal of EA’s Madden franchise with the massive popularity of fantasy by offering consumers the ability to call plays through an app. Those are the Fan-Controlled Football League and Your Call Football, two leagues trying to meet at the intersection of esports and actual on-the-field competition. So far, the latter is the only one to have held a game.
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Since the AFL/NFL merger in 1970 produced the NFL juggernaut, there has almost always been at least one group trying to replicate the AFL’s success. But a quintet, after so many have failed?
“It’s the sheer numbers the NFL has, combined with the absolute cultural relevance football has in America,” said the XFL’s Handler.
From the World Football League to any of today’s startups, there’s another catalyst: ego.
“There’s a big vanity component,” said Scott Jacobson, a partner at Madrona Venture Group. “People have a passion for sports and sometimes they overpay for access, including owners.”
How much they’re willing — or able — to pay is the question.
Steeg, a veteran of multiple startup efforts, figures the costs at $6 million to $7 million per team, per season, plus an equal amount for the league office, with three years of funding required “to be taken seriously.” For an eight-team league, that amounts to just under $200 million. That might get a league started, but some say much more will be required to make it last.
Charlie Ebersol’s Alliance of American Football has aligned with CBS Sports.alliance of american football
Former NFL consumer products head Frank Vuono was COO of the United Football League, which played four seasons from 2009 to 2012.
“There is room for more football,” Vuono said. “The problem always is money. These [would-be] owners never realize how much it takes.”
Vuono said each UFL team cost around $15 million per six-game season, plus league overhead and TV production costs.
So, what is the appropriate amount of funding?
“If someone said, ‘We’ll do an eight-team league and spend a billion for the first season,’ I’d say they’d have a chance,” Vuono said. “You just can’t do pro football on a minor league baseball budget.”
Bill Daugherty, the former NBA senior vice president of business development who did a brief stint with the NFL-backed World League of American Football and was an executive with the UFL, agreed that $1 billion was the necessary commitment. Other estimates of startup costs ranged from $200 million, according to a former USFL senior executive, to SportsCorp President Marc Ganis saying a new football league would require $250 million to $500 million in capital commitments.
None of the current startups have that much money raised, industry experts say, but some insiders believe the current economy makes this a favorable time.
“You don’t have to have a network deal anymore to be profitable,” Ganis said. “There’s a perception that the NFL is vulnerable and a perception that younger fans want to be able to consume sports in non-traditional ways. And all of this is happening at a time when there happens to be capital available.”
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Almost as important as money is time. It’s questionable if any of the leagues can legitimately promise the kind of long-term plan and financial sustainability from ticket sales, media rights and sponsorship that investors seek. Generational sports affinities aren’t formed as quickly as investors want their money back.
Besides, the new class of startups insist that they don’t see themselves as competition for the NFL. They’re just trying to carve out their own space in the pro football marketplace.
“The best way in the past for rich guys to lose money was to try and compete with the NFL,” said George Colony, a lead investor in Your Call Football and chairman at Forrester, a research and advisory firm. “Launching a league to compete with the NFL is a losing proposition. Ours is essentially a technology and gaming story, which could work in baseball or even politics. Why now? Because the technology is mature enough to enable this.”
The Arena Football League has the most continuity among alternative football leagues. It’s still going after launching in 1987, and it’s been around long enough that it even has its own hall of fame. Former AFL Commissioner David Baker figures he sold more than 50 AFL teams during his dozen years as commissioner.
Consequently, “I probably spent more time thinking about what it takes to emerge as a major [football] league than anyone alive,” he said. “Sure, it takes money, but more than just that, it takes time. Most major leagues took 50-plus years to develop.
“The NFL had 50 teams fail before that 1958 Colts-Giants championship game.”
Added Premier Partnerships President Randy Bernstein: “MLS had no competition and it took years to build that up.”
Not until recent years has there been the asset appreciation that makes those who play the high-stakes world of derivatives envious. In 1993, for example, the Carolina Panthers paid the NFL a $140 million fee to enter the league. Now, Jerry Richardson is selling the Panthers to David Tepper for $2.275 billion, a record amount for an American pro sports franchise.
Even with that kind of appreciation in mind, Baker said startups typically make the same mistake when it comes to expectations. He’s advised close to a dozen new leagues and they all have one thing in common.
“All of them thought the NFL was going to buy them or they would be strong enough to force a merger,” he said. “The chances of that are slim and none, and none is gaining ground.”
Scott Rosner, academic director of Columbia University’s sports management master’s degree program, says the draw to a historically bad business proposition for otherwise successful people like Ebersol, McMahon and Yee is a demonstration of simple economic theory.
“Whenever a monopoly is in place long enough, you expect competitors to arise, looking to steal what seems like excess profit,” said Rosner, a one-time season-ticket holder of the USFL Philadelphia Stars.
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What those failed ventures of the past couldn’t deliver was a solid audience, either on TV or in the stands. The USFL of the 1980s was the exception.
Now, with distribution extending well beyond linear TV, there are many more ways to deliver the product to an audience besides the traditional network deal. That ability to develop a fan following, the leagues hope, will attract sponsors.
“The fragmentation of media channels is nothing but a catalyst for the proliferation of content,” said Elizabeth Lindsey, Wasserman’s managing partner.
Tony Ponturo, former Anheuser-Busch sponsorship and media chief, put some early commercial dollars into both the USFL and the XFL at a time when linear TV had much more of a lock on viewers.
“There are just so many platforms for content now, if one of them can say, ‘We can fill up so many hours at a reasonable rights fee,’ it’s pretty compelling,” Ponturo said. “I remember ESPN building its brand on a 0.3 rating — that was ‘SportsCenter’ when they started.”
Octagon chairman and CEO Rick Dudley estimated he’s seen 30 to 40 failed attempts at new pro football leagues during his nearly four decades in the business, or roughly one a year. Few even got on the field. Dudley, like a lot of industry veterans, shrugs his shoulders at yet another round of startup football leagues.
But the last names and their accomplishments suggest that sports media and marketing power brokers like Ebersol, McMahon and Yee aren’t accustomed to failure, even in a sector like spring football where history has been so unkind.
They can’t all be wrong, can they?
“In a world where content is king, clearly some people think the world is waiting for another football league,” said Dudley, a former NFL marketer. “But four or five leagues simultaneously probably pushes the limits of content being king.”
