News last month that Carolina Hurricanes owner Tom Dundon had invested a quarter-billion dollars into the Alliance of American Football (AAF) caused veterans of finance and sports to wonder exactly what was going on. As it turned out, Dundon had not simply written a massive check of that size to the week-old league; he had actually bought a majority stake for an unspecified amount and of an unannounced size from founders Charlie Ebersol and Bill Polian.
On Feb. 23, the day the league kicked off its third week of games, Dundon reached out to Sports Business Journal to clarify his investment, explain his vision for the league, and admit he made a mistake in how the news was announced. The interview below is edited for clarity.
Did you invest in the league or did you buy it?
DUNDON: With so much going on I probably made a mistake in how we did the release, but I bought the league. I think $250 [million] is the top end of what it would take to keep this league viable for a long time. I have the money, I have the desire, I have the reputational risk. If no one wants the league to exist in two, three years then — no different from any business — I don’t know why we would keep it open. It doesn’t cost a lot to keep this league open for me.
Tom Dundon (left) bought a majority stake in the AAF last month from co-founders Charlie Ebersol (right) and Bill Polian.getty images
Can you shut down the league at any time?
DUNDON: Every business can shut down any time it wants. By definition if I tell you I have control, then having the money and the commitment to the business, it wouldn’t make any sense — I don’t think — to put my name on it, take control of the business, start building up some of the things we are doing … and you have seen the ratings, so what would be the reason that we wouldn’t have a league? It would be because no one watched the league.
The main message is I have control and I can easily afford to fund the burden of this league and the 250 is the number that I think it takes over time to get this thing to where it can sustain itself without me helping. Part of the reason it costs so much is expansion and adding teams and building technology.
So as long as we get the ratings and the demand then obviously [we will] keep putting in capital, and right now I don’t see a scenario where we wouldn’t keep doing that even at half the ratings.
What is the time period you could invest $250 million? When do you reach profitability?
DUNDON: It depends on how quickly we expand and what the ratings are. I would run it like I would run any business, which is to make good decisions, but there never will be a scenario that we need capital. If we say, “Hey we are happy, we have hit a sweet spot, we like this business, but it’s not 32 teams, its eight or 16 or whatever that number is,” [that] will have a big impact on whatever that [time period] is.
Why the AAF?
DUNDON: I think this thing is a huge opportunity to grow a media asset across what I think is the most intriguing sport in America. So the idea it is not going to be here in a week or a year … I wouldn’t have put my name on it, and I wouldn’t have said I would fund the business.
Having said that, if the ratings go to zero we have no reason to exist. I think enough people are interested in new rules, new technology, new players, new coaches tied to football that that is a really good business. I have a hockey team in North Carolina, so building demand is a challenge for that business. It was work, hard work. Building demand for football is a lot less work.
Are the initial VC firms still in, or did you buy them out?
DUNDON: They are still involved, I just have a control position.
