Investing in the XFL
There’s no question at this point about XFL owner Vince McMahon’s financial investment in XFL 2020. In 2018 alone, McMahon invested 123 million dollars to start up and fund the reborn league, by selling off shares of his company, the WWE. McMahon also laid the foundation of the league by investing huge money into insurance and workers compensation. This was done before the league’s relaunch was announced in January of 2018. A huge hurdle, and a must for any sports league.
On March 28th of this year, Vince McMahon sold 272 million dollars of WWE stock to fund the XFL even further. A fact that many mainstream sports outlets picked up on after the AAF folded on April 2nd. It made for a fun narrative, the idea that McMahon saw the AAF folding and then decided to cash out a large sum of money. The funder of the XFL is the league’s founder, a big factor in any league’s chance for survival and success. Vince McMahon is fully invested in a league that was his original idea, a league that folded against his wishes, and a league that he has thought of bringing back for years. Think of XFL2020 as the final item on Vince McMahon’s bucket list. The 73-year-old, who is worth over 3 billion dollars, is taking one last giant gamble. McMahon is emotionally and financially invested in what could very well be his last big project. The capital investment can’t be questioned. It’s the investment of other entities that will help decide the reborn XFL’s long term viability.
Getting fans and the sports viewing public to invest in the XFL, will be extremely difficult, for various reasons. It starts with changing the perception of the league, which is tainted by its 2001 existence. That’s an uphill battle, in and of itself. The folding of the AAF hasn’t helped matters at all. While many will point to the demise of that league, as being a positive for the XFL’s chances, simply because the league is now positioned to have the marketplace all to itself. The AAF’s existence and disintegration has poisoned the waters. The marketplace for spring pro football leagues has proven to not be fertile ground in the past. The sad tale of the AAF reinforced that notion. They have made the market an absolute wasteland. After what just transpired with the Alliance, how can the sports viewing public trust another league? There are a lot of sports fans who don’t believe in the idea of spring pro football to begin with, let alone the fans who actually do or in this case… did.
There are a lot of fans who truly believed in the Alliance. Many bought into the notion that the AAF would finally be the league that made it. The league positioned themselves as potential partners of the NFL. It was sold as a league that wasn’t trying to pollute the football ecosystem, but to enhance it. While the naysayers will mock the AAF’s level of popularity, based on poor attendance or the followings in small non-NFL cities like Salt Lake, Memphis etc. An example of this would be, the last Salt Lake primetime game on the NFL Network didn’t even crack the top 150 rated shows on cable. Despite the failings of some of the weak markets, the AAF had a lot of believers. Not just the players, coaches and football people who bought in, but most importantly the fans.
The fans can make or break any sports league or entertainment property. You could strongly argue that the AAF hurt the chances of another spring league earning the trust and faith of football fans. The Alliance’s founder Charlie Ebersol wrote a lot of checks with his grand promises that the league couldn’t cash. How can you trust another football league, when the AAF couldn’t even finish one season? Why should football fans invest all their time and energy on a non-NFL league? The Alliance burned a lot of its supporters faith. The now bankrupt league let them down. It’s only fair to assume that it will be that much harder for any new league to earn these fans trust again. Why buy in to the XFL or waste any time or energy on it, when the end result could end up being the same? The Alliance ended up being a league with false promises that will forever leave their supporters feeling cheated. An incomplete season from a league that was born from an incomplete idea, and operated with an incomplete business model.
The XFL is going to have its work cut out for it, to undo the damage done by the AAF towards football fans and believers in the concept of an alternative pro-football league. The XFL has eight strong football and tv markets. This will help in their exposure and in their upcoming TV rights deal with their broadcast partners. While spring pro-football is designed to fill the void of no NCAA or NFL football. There will still be competition to gain the interest and attention of football fans and the viewing public.
This past week, the XFL announced two more coaching hires. One in New York with former two-time Superbowl Champion Kevin Gilbride, and one in St. Louis, with virtually unknown but respected long time NFL player and assistant coach Jonathan Hayes. While New York has always been a tough town to earn respect, it’s the hiring of Hayes in STL that has raised eyebrows and drawn some criticism. To this point, the XFL following in Saint Louis has been its strongest. The league’s decision to hire Hayes rather than someone with ties to STL football past, has not exactly lit a fire or moved the needle in that market. Of all the potential fan bases and team locations in the reborn XFL. St. Louis has the most to prove to the football world. It appears that the XFL and Hayes were in talks long before the AAF folded, which negated the possibility of a familiar face from Saint Louis past like Mike Martz strolling in to run the franchise. Winning is a cure all, but the league getting St. Louis to make a larger investment in the league didn’t soar after this week’s hire. The market has a chance to be the XFL’s strongest. Will STL buy in? Will the XFL’s other markets and fans invest their time and energy into the league, like AAF supporters did? Time will tell. It’s up to the league to earn their trust and support.
Lost in the criticism of some of the XFL’s coaching hires, is how difficult it is to even get football coaches to commit to an upstart football league. Signing on to be the Head Coach/GM of the XFL is a risk, and anyone that signs on with the XFL is taking a gamble. In their most honest of moments, employees of the XFL will admit that they don’t know if the league is going to work or last. The odds and history are against it. This level of risk and feeling is multiplied by the coaches that buy into the XFL. Uprooting families is a part of being a coach. As a head coach, you have to convince at least a dozen other coaches to do the same and take the plunge along with you.
Kevin Gilbride is going to ask people he knows and that he has worked with in the past, to take a leap of faith and move their families to New York, to join his staff. All the while, he has to be thinking “I really hope this league doesn’t fold.” If you listen to all the top executives in the AAF, talk about that league folding. Their biggest regret is how many people they convinced to take on a job that only lasted a few months. Many of the top execs will land on their feet or have already had fruitful careers. It’s the people who took risks and left stable jobs to join the AAF operations teams and staffs, that were hit the hardest. CBS Sports writer Ben Kercheval recently revealed on Twitter, that a potential lawsuit could be coming on behalf of the AAF’s assistant coaches, many of whom are struggling to find jobs because this time period isn’t traditionally hiring season for football coaches. Hundreds of coaches left in a lurch, because they were sold a bill of goods.
Getting coaches to invest in an upstart league will be tough after what happened with the AAF. These coaches won’t be easy to convince. Credit to the current group of XFL coaches, who have decided to buy in and invest themselves in the league and what it aims to be.
This covers a lot of ground. From the league’s broadcast partners to local vendors, venues and businesses. After what just happened with the AAF, as revealed in their recent bankruptcy filing, some vendors and businesses are going to expect the XFL to pay them upfront. Can you really blame them?
If you are looking to open up a nightclub on Main Street, and the last nightclub that was there, had crime issues and burned down the neighborhood, you are going to have a hard time convincing the land owners and community that your nightclub can be trusted. The XFL is going to need sponsors far and wide to invest their time and energy into partnering with them. They have to be sold that it’s a solid long-term investment and that it will be beneficial to all parties.
The XFL’s broadcast partners also need to be fully invested in the long game. The original XFL got burned by its broadcast partners. NBC bailed on the league and took it’s contractually obligated 50 million dollars in year two with them. Vince McMahon did not pursue the funding that was legally owed to him and his league. He very easily could have fought it and won, but his relationship with Dick Ebersol played a factor in McMahon not pushing the issue. When NBC bailed on the original XFL, the league’s remaining broadcast partners UPN and TNN tried to leverage their broadcast deals with the WWE in exchange for a second season of the XFL. McMahon was forced to choose, and with no major funding or national exposure, Vince had to begrudgingly close up shop. It’s extremely important that the XFL’s current broadcast partners are fully on board with the vision of the league, and they have bought into the concept of building the league from the ground up, rather than expecting a quick return on all the time and money invested. The league in return, has to prove that they are viable for the long haul. The business and football infrastructure has to run like a well-oiled machine from day one.
This is always the easiest and most dependable area to get an investment from. Especially when it comes to the greater good of pro-football in the United States. As chronicled here last week in my “Keeping the dream alive for all football players” article, football players need a pro-league like the XFL to exist. There will be thousands upon thousands of draft eligible college football players that will not be drafted this coming Thursday by the NFL. Ninety-eight percent of the over 16,000 draft eligible players won’t even make it to the NFL or have the opportunity to become pro football players.
There will be some veteran players that will be skeptical about signing on with the XFL. Some will hold out hope for another shot in the NFL, and some will debate whether the XFL is worth all their time, energy and focus, despite what the league will be paying. For example, twenty-eight-year-old veterans like defensive back Charles James, who has been with seven NFL teams, and has been cut seven times. He took a chance to continue playing pro-football in the states with the AAF, only to see that league fold eight games in. Veterans like James have to be convinced that investing themselves in the XFL will be worth it.
Warren Buffett, the business magnate, is considered to be one of the best and most successful investors in the world. He has a funny quote when it comes to investing: “If past history was all there was to the game, the richest people would be librarians.” In short, this quote warns us that things change with time. It warns us that caution is an important part of success. It also implies a lot of other things, mostly that everything changes, and only what has happened in the past is written in stone. This may very well be so, but in order for a stock or a business to grow, it all starts with the investment of faith and trust. Something the XFL has to earn.