PFT: Merged USFL-XFL apparently plans to sell franchises

[4th&long]

https://www.nbcsports.com/nfl/profootba ... franchises
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>> The USFL and XFL are merging. If/when the deal is finalized, the combined spring leagues will pivot toward spreading equity beyond those who currently own the two operations.

Via Ben Fischer of Sports Business Journal, former Fox Sports executive vice president Larry Jones (who still serves a consultant to Fox) mentioned during a Columbia sports management conference that, in three years, the unified spring league will “go out to sell teams.”

[johnnyangryfuzzball]

Isn't that always the plan? It usually doesn't get that far, though. Who wants to buy a money pit?

[4th&long]

Isn't that always the plan? It usually doesn't get that far, though. Who wants to buy a money pit?

The XFL stand alone may have been a money pit. The USFL with its reduced cost structure and direct access to ad revenue may not have been a money maker but wasn't producing the losses the XFL 2023 had.

Clearly RBC sees a combination with Fox as a better bet to achieve a profit on spring FB. Conversely Fox sees RBC as the investor they need and likely their success and presence in mostly large markets (DC, Dallas, StL and Houston) is attractive.

Both leagues have a good foundation. With one league there's much less football overload/fatigue. Outside investors don't need to bet on which league to buy into and that makes it more likely they can attract them.

MLS had (has) losses for years, WNBA too yet attract investors. The USXFL is looking to do same for the biggest sport in USA. Expensive as it is to run, this looks like a very solid path forward.

[Sounder]

Is it easier to sell when a buyer has a clear idea what he's getting into? I guess that's why Dixon sought to enlist his whales first. Because like the L.A. Express back in the old USFL .....every potential ownership group did see ....and quickly backed off.

[GDAWG]

Isn't that always the plan? It usually doesn't get that far, though. Who wants to buy a money pit?

The XFL stand alone may have been a money pit. The USFL with its reduced cost structure and direct access to ad revenue may not have been a money maker but wasn't producing the losses the XFL 2023 had.

Clearly RBC sees a combination with Fox as a better bet to achieve a profit on spring FB. Conversely Fox sees RBC as the investor they need and likely their success and presence in mostly large markets (DC, Dallas, StL and Houston) is attractive.

Both leagues have a good foundation. With one league there's much less football overload/fatigue. Outside investors don't need to bet on which league to buy into and that makes it more likely they can attract them.

MLS had (has) losses for years, WNBA too yet attract investors. The USXFL is looking to do same for the biggest sport in USA. Expensive as it is to run, this looks like a very solid path forward.

The WNBA just added a team in the San Francisco Bay Area, to be owned by the Golden State Warriors.

[Rmbay]

From what I recall selling franchises has always been the goal. The USFL hoped to have potential owners in place to move all of their teams into their cities around year 3 (i.e. this year). I'm sure the XFL has never been much different although publicly they claimed to be playing a bit longer game. But both leagues have found it increasingly more difficult with another league to threaten the perilous space they're treading on. The XFL appears to have lost more money than they anticipated (although relative to what earlier spring incarnations lost it's not like they were hemorrhaging money) and the USFL admitted they weren't happy with the ratings and attendance in Year 2 (when theoretically they both should have gone up). Redbird, being an investor, saw the writing on the wall. Fox most likely saw it also. So you strip it down a bit and make one hopefully solid entity that can attract ownership groups the way the MLS and other leagues have done.

[GregParks]

I've mentioned this on social media, in podcasts, and probably on this board previously, but I've yet to see an adequate answer to this:

How is this league going to sell franchises out of a hub model? How can a potential owner possibly know the value of a franchise, much less how much to pay for one, when some of them don't even play in their home markets? You have no idea how much the local fans will support the team, how much merch they'll buy, how many fans will attend games, or even where those games could potentially be played. Maybe an owner buys the Philadelphia Stars and just moves them to a different city, but you run into the same problem: You have no idea whether that market will support a team of a league like this. You're also taking a big risk that the league will even be around in a few years given the history of spring football. A big reason most people buy pro sports teams is how quickly they appreciate in value; there's no evidence that would happen with any of these teams.

For the NFL, the two biggest revenue streams for individual teams are the boffo TV rights fees and live attendance and everything associated with it (parking, concessions, merch, etc.). In a hub, with a league owned by Fox and airing on their network (assuming reports are true and games for this new league air on Fox), you don't have either of those for many franchises. Vince McMahon brought back the XFL in the hopes that he could cash in on the rights fees explosion for live sports. But so long as Fox owns and airs the league, those major rights fees won't be on the table.

The most common response to all of the above is, "well, they'll sell franchises AFTER they move away from the hub into home cities." All I can say is, I'll believe it when I see it. As mentioned above, the hub was supposed to be short-term for the USFL and here they are still planning on utilizing it in year three with no end in sight. So...when will ownership decide to move out of the hub? What business metrics will they have to hit in order to decide it's worth the increased money they'd have to pump into the league to make that happen? What if they never do? I don't see how this league makes enough money for them to view moving out of the hubs as viable, knowing the cost associated with such a move. Fox certainly isn't short on cash but they clearly aren't ready to invest any further into this league. Maybe with the merger it'll be different. But again, you'd have to play in-market, and do so long enough to have a track record in those cities that will attract investors willing to put significant money down on this.

The bottom line is any of the best-case scenarios above (moving out of hubs, getting TV rights fees maybe from an NBC or ESPN/ABC so long as Fox is willing to share programming) is WAY down the line. Years four, five, six. How long is Fox (and maybe RedBird, depending on their role moving forward) willing to bankroll this project?

I don't know, maybe I'm missing something here, but I don't see "we'll sell franchises!" as the cure-all for ownership's money woes.

[4th&long]

From what I recall selling franchises has always been the goal. The USFL hoped to have potential owners in place to move all of their teams into their cities around year 3 (i.e. this year). I'm sure the XFL has never been much different although publicly they claimed to be playing a bit longer game. But both leagues have found it increasingly more difficult with another league to threaten the perilous space they're treading on. The XFL appears to have lost more money than they anticipated (although relative to what earlier spring incarnations lost it's not like they were hemorrhaging money) and the USFL admitted they weren't happy with the ratings and attendance in Year 2 (when theoretically they both should have gone up). Redbird, being an investor, saw the writing on the wall. Fox most likely saw it also. So you strip it down a bit and make one hopefully solid entity that can attract ownership groups the way the MLS and other leagues have done.

Lots of good here. Yes USFL strategy was always to get potential investors to move the teams out. Memphis and Mich are leaning (hence the TB rebrand to Memphis). The main issue for the USFL was the arrival of the XFL in 2023... IMO they never should have launched that late (s/h/b 2021 or 2022 at latest) and rather should have invested (meaning RBC) in USFL. The main issue for the XFL is they came to market too late and were asking for too much TV money upfront. The issue for both is the presence of the other.
With that going away a larger (than uni-league) USXFL will backed by a major sports investor the leagues are where they s/b in 2024.

[Firecop]

It seems to me, that there has never been a shortage of “whales” who are egocentric enough to want to own a sports team and have more money than sense. Some undoubtedly will consider it an acceptable financial risk, others an opportunity to play GM/coach by proxy, and another one or two an interesting challenge. Still others will get in over their heads if not properly vetted and committed. In any event, they must be in it for the long haul as it is going to be a marathon and not a sprint.

[4th&long]

I've mentioned this on social media, in podcasts, and probably on this board previously, but I've yet to see an adequate answer to this:

How is this league going to sell franchises out of a hub model? How can a potential owner possibly know the value of a franchise, much less how much to pay for one, when some of them don't even play in their home markets? You have no idea how much the local fans will support the team, how much merch they'll buy, how many fans will attend games, or even where those games could potentially be played. Maybe an owner buys the Philadelphia Stars and just moves them to a different city, but you run into the same problem: You have no idea whether that market will support a team of a league like this. You're also taking a big risk that the league will even be around in a few years given the history of spring football. A big reason most people buy pro sports teams is how quickly they appreciate in value; there's no evidence that would happen with any of these teams.

For the NFL, the two biggest revenue streams for individual teams are the boffo TV rights fees and live attendance and everything associated with it (parking, concessions, merch, etc.). In a hub, with a league owned by Fox and airing on their network (assuming reports are true and games for this new league air on Fox), you don't have either of those for many franchises. Vince McMahon brought back the XFL in the hopes that he could cash in on the rights fees explosion for live sports. But so long as Fox owns and airs the league, those major rights fees won't be on the table.

The most common response to all of the above is, "well, they'll sell franchises AFTER they move away from the hub into home cities." All I can say is, I'll believe it when I see it. As mentioned above, the hub was supposed to be short-term for the USFL and here they are still planning on utilizing it in year three with no end in sight. So...when will ownership decide to move out of the hub? What business metrics will they have to hit in order to decide it's worth the increased money they'd have to pump into the league to make that happen? What if they never do? I don't see how this league makes enough money for them to view moving out of the hubs as viable, knowing the cost associated with such a move. Fox certainly isn't short on cash but they clearly aren't ready to invest any further into this league. Maybe with the merger it'll be different. But again, you'd have to play in-market, and do so long enough to have a track record in those cities that will attract investors willing to put significant money down on this.

The bottom line is any of the best-case scenarios above (moving out of hubs, getting TV rights fees maybe from an NBC or ESPN/ABC so long as Fox is willing to share programming) is WAY down the line. Years four, five, six. How long is Fox (and maybe RedBird, depending on their role moving forward) willing to bankroll this project?

I don't know, maybe I'm missing something here, but I don't see "we'll sell franchises!" as the cure-all for ownership's money woes.

GP,

Couple of points - the XFL model itself was 5 years to sell franchises. That's how long they said they were financed. Not that I was buying that but that's the line they were selling. Their TV deal isn't high paying despite the spin, and they can side step that with a merged league with a TV partner.

The USFL said they were looking to get teams to hubs by year 4. In year 1 - 1 hub, yr 2 - 4 hubs. How is that not progress? The issue there is the markets are small for TV (Birm/Memphis).

It's all about TV, 2 leagues is too much FB viewing - despite that the USFL/XFL both individually averaged 631-634k fans over 86 games/20 weeks.

Investors are waiting to see which is the league to take a risk on. The guessing game is over. That was a real hold up IMO.

XFL has some good TV markets in Dallas, DC and the Houston overlap. StL is attendance king. SA has promise. USFL smaller markets, lower costs but Mich is a solid market and should they remain there a plus. Philly and NJ is needed if not both then one at least.

The launch of the XFL drove up costs for all spring FB. That's likely going to be hard to recover, salaries likely alone $5-8mm more than would need to be.

Bottomline - its about stomaching the losses, if they give it 2/3 more years, on broadcast only as rumored, can we expect 825-950k ratings? Yes based on 3 years of XFL 3.0/USFL. (2023 ABC 8gms-1132k, NBC 11gms-932k, FOX 18 gms-733k). Plus eliminate the game overlaps and 30+ games - should be no problem. Also some flexing around monster NBA playoff games wouldn't hurt.

I'm not getting hung up on the particulars...the name AAF/XFL/TSL/USFL etc... spring FB has now played 5 straight years. Partial hubs for a while... what ever it takes. Its proven a core fan base and a uni-league is only chance. RBC and Fox IMO is a strong combo.