RTAB #138: A Postmortem of the AAF
Hi, it's Jamie, progressive's number one number two employee. Leave a message at the hey, Jamie. It's me, Jamie. This is your daily pep talk. I know it's been rough going ever since people found out about your Capella group mad harmony, but you will bounce back. I mean, you're the guy always helping people find coverage options with the name your price tool. It should be you giving me the pep talk. Now get out there, hit that high note, and take mad harmony all the way to nationals this year. Sorry, it's pitchy. Progressive casualty insurance company and affiliates. Price and coverage match limited by state law. Gone drags salary caps. Why do I were favorite teams make some of the moves? They do. It's usually the money. It's time for the business of sports with Andrew brand. Hey, there boys and girls. Welcome to another dish in the business of sports with Andrew Brandt, as you know, we're presented by bet. Online at AG there. Your online sportsbook experts, of course, exclusive partner of the podcast one sports net. Use promo code podcast one you receive that fifty percent sign of bonus. As soon as you sign up bed, online dot AG or sportsbook experts. Do something different here on the business of sports podcast as anyone following the business of sports knows the lions of American football has ceased operations as of this week as of Tuesday, April second players were sent home sent packing finding a way home on their own. And it turns out the league that was supposed to go ten weeks. Plus playoffs has ceased after eight weeks. It really is a dramatic shift compared to what was planned for the af and the early reviews which were so positive and nowhere. Did you hear? More about the potential of the league for its success than here on this business of sports podcast with myself because in February we had the two principles. We had Charlie ever saw the co founder of the league, you know, him as dick Ebersol son royalty in the world of sports television. And of course, we had the funder of the league that came in after week one. His name is Tom Dondon made million hundreds of millions of dollars in the subprime loan business in the car industry and then bought the Carolina Hurricanes. And now is was we'll be we'll see the chairman of the alliance of American football. He pulled the plug allegedly reportedly against the wishes of ever saw. And also co founder Bill Polian, who of course, has tremendous NFL routes. So the Lee has ceased operation it's a stunning turn of events. And what's? Running is the comparison of what just happened to what they said here on this podcast. So what I'm gonna do is play some clips I from Charlie ever saw an early February as the league kicked off the week after the Super Bowl and then from Tom Dunton who joined the league early in the season, perhaps even to make payroll in week two. And then, of course, talk about his investment. So that's what we'll do. We'll have some fun. We'll find out what it is that they said and talk about the way it went. We'll start with Charlie ever saw. And what Charlie talked about on this podcast was so much. He's a salesman of the house. What the business model was and how the investment was gonna work. So here's our first clip from Charlie Ebersol about the business model that they developed. We developed a business that was. A interesting business model if you focus not just dump abo-, but on technology, and if you could build something larger than just something football, and then I went to my father. And I said, look, the only thing that matters is quality football. You can have all you're going the best business model in the world. But if you don't have probably football, as this matter is interesting that he talked about two things their technology, and football technology seems to be an issue with this league. And we'll get back to that. When we hear about their Eappen their proprietary data gambling app, which seems to be in the in the mix here as to why they failed. But you know, the business model is interesting because they do talk about the football quality that seemed like it was pretty good and sort of the way they paid players in the way, they got on players in terms of contracts. He talked about that here every player in the league signs of three or contract with two hundred and fifty thousand dollars seventy thousand the first year eighty second one hundred third in addition to that contract, they signed a commercial license. Agreement which affords them the ability to earn bonuses for on field performance. If you're an offensive player in the offense scored a touchdown. And you get a bonus. If your team wins, you get a bonus. If you do charity work, you get a bonus. If you your team sells a jersey, you get a bonus. So on top of the non-guaranteed seventy thousand dollar contract this year, you probably and on top of that we give you a one year scholarship for every year. You plan our league to post secondary education. So we look at this as being a financial adventitious you make the most money in our league of any available turnip league. It's in the marketplace right now. So you see the model there? It was a three year contracts. Seventy eighty one hundred of course, they're not going to get to even the seventy because players played seven weeks, and we're paid seven thousand a week. That's what it comes out to. So each player's gonna end up with forty nine thousand dollars. He talked about these bonuses. If you score touchdown. Those kind of things team says jersey get a bonus on up that I get a scholarship. I never heard any of that stuff. And I. Told an agent, and he said, what are you talking about? So I'm not sure they made any of those things. And as I said, Charlie upper sauce, quite a salesman is this league kicked off you talked about this sort of on the top money beyond the seventy thousand they played week eight and no one expects to get paid for week. Eight people were told to fly Hong or draw find a way home so forty nine thousand gross comes out to whatever it is thirty to thirty five thousand net. These players have made for their seven weeks in the af there is no year to eighty thousand. There is no years three and one hundred thousand totaling two hundred fifty thousand so that three or contract for players on the roster all year ended up being forty nine thousand dollars instead of two hundred and fifty thousand dollars. So there's the reality would come out with again, the bonus on top for offense performance, the bonus for selling jerseys. The they one year scholarship post-secondary education. I don't think so it was all sales job speaking of sales job, then dick Ebersol. I'm sorry. Charlie herself talked about his relationships and how he's going to look into the technology and gaming part of it. Here's where he talks about as relationships around the world of sports might set of relationships, particularly at the league, you know, Commissioner level the Roger Goodell's and Adam silver's, etc. With helpful in helping technologists understand how that relationship between us and those league ultimately would prevail because we're not just looking for consumer adoption of our technology. We're looking for proven our technology for commercial relationships for the league's you'd be able to buy David set like them. Jim did an invest in the way that I'm Jim did. Yeah. It's interesting that he brings up his relationship with Roger Goodell, and Adam silver, I on Goodell. There was kind of a tentative relationship with the NFL here, which I thought was interesting mainly the NFL media NFL network showing these games. But did so. Seem to be hands off. Let's be clear. This was not a developmental league for the NFL in any official terms. And we hear about all these disputes with the NFL PA, whether we're gonna Lau players to go back and forth and players sign with the af could they play for the NFL all those kind of things, you know, to me the relationship with Goodell was strong, obviously dick Ebersol close with the NFL from all the years of covering it for NBC sports. But you know, I think it was kind of a hands off relationship as to Adam silver there, you get into the MGM and the gambling app and again more questions than answers about what the af was doing with its app and with gambling. He referenced the deals between the af. And I'm sorry between the NBA NFL with MGM seemed like that was a goal to sort of get aligned with the casino get aligned with a name brand. In Vegas in gambling. But that never happened to which kind of leads me to the real issue about the af. And listen, the real issue, and we'll get to Dondon in a minute. But this last clip from ever saw the real issue is funding. Forget about gambling app. Forget about NFL PA getting involved or not getting involved or approving contract transfers or not it's all about the money, and in this clip, which is really the money quotes here. Ebersol talks about having the funding Silicon Valley athletes, Shaquille O'Neal, all of that. And NFL managed at former NFL management for info players and that sounded like, hey, they got the cash so listen to this clip from Charlie oversall about the funding mechanisms for the af back in February. We also raised our money over the course of several rounds. So that we could diversify the type of investor. So we started with Silicon Valley we added onto so combined with investors like MGM we brought on high net. Investors we brought on current and former team owners from multiple different leagues we brought on athletes. You know, Shaquille O'Neal being a great example of one of our bigger names celebrity investors that was all by design because as the company grew like any technology companies evaluation. The company went up when we're able to sell significantly larger state, excuse me, smaller sticks to company for larger sums of money. And look this is a massive investment. You're talking about in hundreds of millions of dollars over the first five or six years ago this business out, and so you have to show them multiple ways in which they can get their money out of this. Because obviously people have attempted to do is run football have not succeeded in the past. And so how do you create that environment where they feel like they're gonna succeed the technology to media development, all the things were building. Which? All on by the parent company. They're investing in it least gives them some level of comfort. Okay. So Charlie oversaw talking about Silicon Valley investment talking about former athletes Shaquille O'Neal, talking about former NFL players management all the above and hundreds of millions of dollars and lo and behold this league needed a cash infusion to remember, they were there were all kinds of reports coming out, and of course, fuel by agents whose players were uncertain about getting paid in week two. This is where I have to look at ever saw as a great salesman talking about all this investment. But it didn't work. You know, I always worried about this league. Because of so, many, investors and investors have different priorities. Some wanna make money someone to be developmentally for the NFL. Some are all about the app and the gambling some are all about, you know, developing football in different markets and seeing of San Antonio can work or or Salt Lake. This is the problem with. Multiple investors. So we transitioned to one investor the white Knight arrives in early February. Tom Dondon, owner of the Carolina Hurricanes made hundreds of millions of dollars in the car loan business. And here he is. I had him on the podcast the new chairman of the alliance of American football. And he talks here first about why? And how he got involved in week two season. I seen this idea. And you know, for me, it wasn't investable because of the risk associated with sorting league. And we'll people like it, and we can get the quality and football to get viewers. And so that's not a it doesn't meet my risk tolerance. And then week one happened, and it was pretty impressive. What these guys accomplish? And so I got to see some things, and you know, they had a may. I think you know, they had commitments that for whatever reason. Whatever they were dealing with creating opportunity where someone like me could come in and take away their need to have to worry about capital anymore and just focus on, you know, continuing to improve the product which we've had a really good start. So that's how Tom gun got involved looked at it. He wasn't investable to begin with. But he looked at the metrics after week one, which we're very impressive. Remember back in week one Twitter. Love everyone loved it. It was withdraw from the Super Bowl. Nothing else. Going on spiked ratings at least relatively and this was taking off and lo and behold, they needed a cash infusion for whatever reason as I said, there was questions about the investment that was sold at least to me on this podcast in terms of being in robust and substantial but Dunton's in. So then I got into Dondon in terms of what his control what's his factor. Now is he the man, and he was very clear about that. In terms of who's in charge. In this really sort of broke down as we saw this week founders verse funder, the funder always wins. Let's hear done in about that. I've got control now in terms of, you know, I'm the I have final say on everything, you know, I have the capital that. Can take this things, you know, forward in a way that depending on how much we want to grow and how much we wanna innovate will determine how much of that capital is needed. But you know, it's it's the way I explained it's like any other business, right? As long as there's demand. You know, no reason to talk about there's no reason talk about the capital anymore because I don't need to raise it. You know, it's the it's in my Bank. So we're we're in really good shape. And now, it's going back and cleaning up everything. These guys did I have control of the majority control of the league. And I have the funding I've committed to the funding of the league. So as long as as long as. The league's performing there's there's unlimited amount of capital. We have more I have more capital than league needs. The money is literally the last issue on the table. Now. It's now about how do we keep people engaged with this brand and keep growing it? I think that's as clear as clear can be Tom Dondon took funnel control of the league. He put the money in the Bank. He became the chairman. And then the talk about a two hundred fifty million investment, which he wouldn't address. But like any investment, it's piecemeal? It's not going to be two hundred fifty million right away. That was never the issue. So what was interesting there is Tom Dunton talked about money being the last issue as full control, the guy's worth substantial funds. His unlimited resources money was not the issue. The issue was more the underperforming word to use. So he just kind of made it sound like as long as it's going the way it was in week one when he jumped in and saw the metrics, no problem. But obviously. Things change what we saw through the winter and early spring as everyone knows is you have competition, and that you four you of week one people turned away other things going on. You know, the NFL free agency came up myself. I'm a big football fan, but I turned away to sort of cover NFL free agency. And then, of course, the last three weekends March madness, which of course, the af had to intimidate. But maybe they thought they have enough momentum that people wouldn't turn away, you know? And I think lie I'm like a lot of people flip around on a Sunday night. Maybe saw the game watch for a few plays and checked out. What else was on? So I think that's what happen, and then this whole idea of underperforming again in this next and final clip will play from Dondon. He talked about no reason for this league to cease to exist. He had the money in the Bank. But then there are a little more morpheus words like underperforming and keeping up with where it was. So let's hear this last clip from Dondon about whether there would be a chance this league would not continue to exist. I don't think we're any different than any other business in the world as long as there's a reason to be in business. We're going to be in business, right? No, I don't make sense. But no narrative around it is just confusing for me. Because once I put my name on it and put my money in it. It's mine. It's like, why would it not exist? Does he? It's confusing for me because why would I not build a business that I owned so there it is Tom Dunn insane. Why would I not continue to build this business? Why would it cease to exist? Well, here we are the af has ceased to exist. Now, there's talk about some skeleton staff hanging around that's not going to happen. They're not going to reboot and Bill Polian has been out there saying it shut down. No one's here. He's very upset about it. Again, founders verse funder as I said on Twitter funder always wins. Tom Dunton, the funder who has not spoken. I tried to get him on the pod again. He's just he pulled. And I can only say that he pulled because of underperformance as he mentioned as he kept asking during the podcast. Why would I not do this? Well, the reports are did it to the tune of about seventy million of the reported two hundred fifty million that he had pledged that's a lot of money, but to him, you know, to keep it going. Whatever value. He got out of seven weeks. You know, so it's ten million a week that he funded. We'll see, you know. We'll see how he comes out looking after that. And what about the assets? Listen, these things are messy there. You know, my saying they're going to be lawyers and lawsuits coming out of this. I don't think a lawsuit will come out with the eighth week pay for players. Listen players were paid seven weeks. They're not paid for week eight their ascent home, find their way home. Good luck. If a player wants to sue the league for their seven thousand dollars in week eight, you know, spend two three thousand of it for a lawyer. That's not going to happen perhaps a class action about we eight we can sort of see that as a possibility. But I don't think the lawsuits will come for bigger picture items. What about hotels that had the teams had committed for three or four more weeks? What about transportation services? What about food services one about dealing with facilities and the stadiums? You know, this is a big operation, and maybe the alliance needed more time speak in a witch XFL. They have more time they announced about the same time as the alliance they're not starting till twenty twenty. In fact, their name is XFL twenty twenty. I've said this from the beginning. And I say it now, and I'm not a told you so here, but I'm saying it, again, they have always had a better chance of succeeding, the primary reason I talked about was investment, the so many divergent investors in the af that actually resulted in one investor kind of pushing aside the rest was never a model that could work very seamlessly. The advantage the XFL one investor one investor who has substantial resources his name is Vicks Vince McMahon the. W WWE money and low behold on the day. The af folded he reportedly cashed out McMahon about two hundred seventy million dollars the same investment of Dondon of is WWE stock that could easily fund the league for a couple years. We don't know their model. We don't know who they're going to sign if they're going to sign players under the three year rule of the NFL like Lawrence kit. Trevor Lawrence Clemson is going to be available. We can expect names again like Johnny Menzel. Maybe a Colin Kaepernick, you know, bigger names. We'll see what the funding is. We'll see what the salary cap is. If there's one we'll see if they allow player teams or not teams, but the league to spend more in certain players, I can tell you this good friend of mine is now to Commissioner, Oliver luck known to you, probably better Andrew's father, and he left basically the number two position at the NCAA. I would think deemed to be number one. When Mark Emmett retires. For this position. And I have heard his salary's north of ten million dollars. So this league is serious. This league is serious. I do give them a chance. I know everyone out there thinking any league that competes with the NFL not competes. I'm sorry that starts up beyond. The NFL is is deemed I'm sorry doomed from the start. Maybe I did think that about the af even though they had NFL royalty like Polian and television Royal to like ever saw. But I I think the XFL has got a real chance because they've got funding. It's all about the money. I always say that forget all this other stuff. They've got the money, and they'll make the TV deals, and they'll make the player deals, and they got a year to go and Oliver Lux been paid this big salary for couple years just to get this going, and they will have success. So that's my thoughts. We now. Put a post mortem on the af we look forward to the XFL. I'll have Oliver on the podcast at some point soon. And what a ride for eight weeks. Hope you enjoyed listening to those two different clip by podcast clips from the founder of the now defunct af Charlie oversaw and the funder of the now defunct af Tom Dunton finally a word from our sponsor that online we're in March madness. Now, you know that too big games of the year coming up on Saturday night. So get your sports net bracket challenge. In is presented by Ben online dot AG, March madness down to the final four this Saturday getting on all the action. Don't forget to use that promo code podcast. One bet online dot AG. Your online supports book experts. Fifty percent, welcome bonus through podcast one. Now, it's time to hear from you take questions every week. I've got one this week from my friend in Canada. Dan wa so let's hear from Denmark. Love to listen to your show when I'm walking or running my dog like I do. Now question about the owners meeting much spouting slash recruiting slash evaluating is going on of on the part of the personnel. When you have all the exact send their teams at these needing. How much is? Next year. I'm gonna look furnace in GM anex XYZ on next ABC last year, maybe forgiving the call. So. I don't know about their appreciate it. Thank you. Thank you didn't while you, and I really like the you're listening to me while walking and running with your dogs because that's when I listened by casts when unlocking my dogs or running I listen all kinds of podcasts. I tend to like some sports podcasts. Obviously Bill Simmons for my basketball fix enjoy him. But I listen to a lot of podcasts kind of about business self help those kind of things I was in the Tim Ferriss rish role. I really enjoy Gary the disorder about, you know, doing things getting better than I know. It sounds a little hokey a little out there while while will, but I do a cement and some fitness podcast with Ben greenfield ah, listen to some running podcasts on runner, so all of those things purple purple patch. I think it's called. But anyway, you didn't ask what podcast? Guests listen to. Yes. About the owners meetings. And yes, they just finished up in. Yes. Could good question about what goes on in there? And so many people talk about you know, the Rooney role in wasted network. Well, this is where it happens we have gatherings like the owners meetings with all the gyms and scouts and big big contingents from each team. And this is where he's sort of rub elbows. And this is where people call up at when there's hiring changes in their staff turnover. Like, yeah, you know, I spent time with him at the owners make good guy got along. Well, seem to think the same way you're exactly right done while this is how it happens where people will make changes in you know, where else are you going to spend time together with league personnel now. Yeah. On the scouting trail people run in new. There's there at Ohio State pro day or Miami pro day or Florida pro day in they see each other. And they talk or the hang out in the hotel or have breakfast before the scouts. But listen, this is something that does happen. And I always talk about the way the deals get done. Even try. Trade front is through relationships. And now you've got a collegial group of GM's around the league that know each other that came up through college scouting together. I think about the ones that I worked with in Green Bay alone. You know, you've got reg McKenzie's not in Oakland anymore. But he's in Miami Susan fluency in what they do. You got Dorsey in Cleveland, that's been everywhere. Everyone knows John Dorsey. He's along with Alonzo Heisman Elliott Wolff Green Bay south. They're all the Packer connections. And of course, John Schneider is in Seattle knows everyone league. Howie Roseman very connected throughout the league night. Got Bob Quinn in Detroit, Scott, the New England connections, and knowing the people there, so all these end, you know, Mickey Loomis in New Orleans has been around for ever Spillman in Minnesota been around for ever, these people know each other they've been doing business. With each other. So you're always gonna have these kind of deals happening, and what Greece's the skids, obviously is face to face collegial atmosphere. Sun-soaked locations by the pool by the bar it the built more in Arizona last week. So that's always going to be part of it. So it's a great question. And yes, absolutely. It does happen. And it happened last week at the NFL owners meetings. Great question than what good to hear from my friends in Canada. Always a pleasure to talk to them. That'll do it for this. Week's addition the branch ransom edition about the af of businesses sports podcast. Really? Appreciate all of the owes who leave comments on apple podcasts. Any ranking any kind of comments? Really appreciate it. Precisely follow me on Twitter, Andrew Brandt, and I will be back with my producer extraordinaire, Brian Neal next week for another dish in the business of sports with Andrew Brandt. Thanks for listening to the busy. Sports with Andrew brand, make sure to subscribe to this podcast. So you never miss an episode. You can also get additional insider insight by listening to the Ross Tucker football podcast fantasy feast even money in college draft podcast, all at Ross Tucker dot com or wherever podcasts are found. Hi, I'm Jay Farner, CEO of Quicken Loans. Thirty percent of Americans who are planning home improvements of five thousand dollars or more. 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