XFL rejected merger with AAF, takes lessons from failed league

Birmingham last week clinched a spot in the AAF playoffs that will not take place.getty images

In mid-December 2018, Charlie Ebersol and his nascent Alliance of American Football was two months away from the kickoff of its inaugural season — and it was already running out of money. Ebersol had secured limited funding from venture capital firms when he unveiled the league nine months earlier, but the AAF was on life support.

So Ebersol approached WWE chairman and XFL kingpin Vince McMahon about a merger, a key source said. McMahon, who is relaunching the XFL next year, turned him down, the source said. The XFL declined to comment.

The AAF’s prospective top investor, Reggie Fowler, did come through by Christmas with an investment reportedly worth $28 million that got the league through its first week of games in early February. The money trouble never went away, however, and last week the league suspended operations.

Before the AAF’s season began, Alex Fairly, a highly-sought-after insurance consultant in sports who declined to work with the league, said he “got an exact amount of capital that they had, and it was an outstandingly low number. It wasn’t five percent of what they needed, it wasn’t even close.” Fairly declined to cite the specific figure. 

Despite debuting to some decent crowd sizes and television ratings, the AAF nearly died after week one in early February. Carolina Hurricanes owner Tom Dundon seemed to come to the league’s rescue when he acquired the league days later for no equity and an agreement to cover operating losses (he did not invest $250 million, as had been reported). Dundon’s deal allowed him to pull the plug at any moment, which he did last week over the objections of co-founders Ebersol and Bill Polian, a longtime NFL executive.

Carolina Hurricanes owner Tom Dundon took over the league from Charlie Ebersol (below) and Bill Polian (at bottom) in February just days after it debuted, only to shut it down before it could finish its inaugural season. getty images

“When Mr. Dundon took over, it was the belief of my co-founder, Charlie Ebersol, and myself that we would finish the season, pay our creditors, and make the necessary adjustments to move forward in a manner that made economic sense for all,” Polian said in a statement. “I sincerely regret that many that believed in this project will see their hopes and efforts unrewarded. They gave their best for which I am deeply grateful. Unfortunately, Mr. Dundon has elected this course of action.” 

Dundon did not reply to a request for comment for this story.

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The AAF lost roughly $10 million a week and with little revenue coming in, Dundon clearly didn’t see that changing in the near future. While there was speculation that he was only in it for the technology the league was developing — especially an app meant to integrate sports gambling — he could have ended the AAF far earlier if that was the case.

Ebersol did not reply for comment. An AAF spokeswoman offered to make Ebersol available on background but then did not follow up.

After the league’s demise became official, the question on everyone’s mind was, why did the AAF launch with such weak funding?

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Fairly, who is an adviser to the XFL — which has secured liability and workers compensation insurance coverage that the AAF did not have — said it is because Ebersol wanted to beat the XFL to market. Asked why he declined to work with the AAF, Fairly said, “Number one, we did not think they had enough time to get ready. Vince announced in February 2018 he was going to play in 2020, and we had been involved in those conversations. … The AAF guys came in after that time, so less time than Vince, and they were kind of beating the XFL to the punch if you will.

“It’s a daunting task to pull this off and we just simply did not think they had time. … there were a lot of indications in those conversations that they were scrambling around and everyone’s hair was on fire.”

Oliver Luck, the XFL commissioner, noted that even the two years leading up to his league’s launch is a compressed time frame.

“One thing is pretty clear: You need time to get all your ducks in a row. It is certainly difficult, challenging to start these leagues and sustain them,” he said. “The initial lesson we are taking from the AAF is just the importance of planning, of having the time to plan.”

While Ebersol talked about the AAF as a technology company, the league only had one official sponsorship: Bitty & Beau’s Coffee, based in Wilmington, N.C., which was the official coffee of the AAF. The league also had a sports betting partnership with MGM Resorts and several licensee deals, including ones with Wilson and Riddell. The AAF, before it suspended operations, ignored repeated queries about its local team operations.

The XFL has already announced four team presidents, each of whom have significant sports business backgrounds. There were not hires with similarly deep backgrounds in the AAF, which focused its local spending on head coaches, like the Orlando Apollos hiring legendary Florida coach Steve Spurrier.

The AAF did have some success that could bode well for the XFL. Some of its eight markets — Atlanta; Birmingham; Memphis; Orlando; Salt Lake City; San Antonio; San Diego; and Tempe, Ariz. —- saw healthy attendance, most notably with the San Antonio Commanders averaging 27,720 fans for its four home games. TV viewership for all games averaged 556,000 viewers across CBS, TNT and NFL Network.

The XFL expects to easily exceed those standards when it launches in eight major markets next year, with a significant TV deal imminent, Luck said.