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After the announcement that The AAF would be ending it’s season, The Spring League posted on Twitter that you can bring your ticket stubs to this weeks Commanders/Express game to this weekends double header at Kelly Reeves Stadium in Austin, TX.

As a reminder, all four of the coaches that have been named by the XFL will be in attendance, as well as CEO and Commissioner Oliver Luck and SVP Doug Whaley. The first game kicks off at 3:30pm CST, with the second starting at 7:30pm CST.

Did you have tickets for the #SanAntonioCommanders vs. #MemphisExpress game at the #AlamoDome this weekend? Bring your ticket stub to #TheSpringLeague doubleheader on 4/6 for free admission and fill your Saturday with football!#TakeCommand #TheAAF pic.twitter.com/1gl7e4ihSI

— The Spring League (@TheSpringLeague) April 2, 2019

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The Alliance of American Football (AAF) just finished up the eighth week of their inaugural season  and we here at XFL2k have come to the realization that the writing is on the wall. The XFL can not compete with the AAF, sorry it had to be said. We are now switching our allegiance to the dynamic duo of Charlie Ebersol and Tom Dundon as they take Spring Football to heights never seen before.

We’ve watched on the sidelines as the AAF has beat the XFL to market. They have maintained great ratings for a start-up league, and it’s already started to attract bigger names in Manziel. Not to mention, the AAF has a partnership with the NFL Network, so we should see NFL caliber players in the AAF any day now. Don’t believe the hype, the AAF is here to stay and we want to jump on the bandwagon.

From here on out we can be found at AAF2k.com. You will still be able to reach the site via XFL2k.com as we make our transition. Let’s kick off April the right way; AAF all day, everyday.

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Vince McMahon established Alpha Entertainment to completely separate the XFL from the WWE, but that doesn’t mean that the two companies weren’t going to work together. This is evident by recent SEC filings. It shows just how much money is going between WWE and Alpha Entertainment/XFL and it also details the arrangement between the two.

“As previously announced, Vincent McMahon organized and owns a majority of Alpha Entertainment, LLC (“Alpha”), which owns and operates the professional football league XFL. Under arrangements made at the time of its organization, WWE received, among other things, an equity interest in Alpha without payment by, or other financial obligation on the part of, WWE; WWE sold certain intellectual property rights relating to XFL to Alpha for a payment in the amount of $1 million; and WWE entered into a support services agreement under which WWE provides Alpha certain administrative support services on a cost-plus margin basis. During the year ended December 31, 2018, Alpha was billed approximately $1,305,000 for services under the administrative support services agreement, of which $474,000 was due at year end and subsequently paid.”

In summary:

• WWE sold intellectual property rights to Alpha for $1 million
• Alpha was billed over $1.3 million for WWE providing administrative support
• Alpha paid WWE $474,000 for that administrative support

While the XFL does have its own Careers page on its website, WWE also has a job posting for an XFL position on its website. This could be part of the services agreement between WWE and Alpha/XFL as the latter gets up and running.

So, even though Alpha Entertainment was created to keep the XFL’s operations separate from WWE, the XFL is still leaning on its big brother named World Wrestling Entertainment.

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Vince McMahon is an incredibly wealthy man. McMahon was featured in this years Forbes’ list of billionaires coming in at #691 with $3.2 billion. Last year Forbes listed McMahon’s net worth at $1.7 billion meaning that The Chairman’s value increased by an impressive $1.5 billion in the last year. This is very interesting as during this time he cashed out $500 Million to re-boot the XFL. I’d say there should be no issues funding the new league with a bank account like this.

You can read Vince McMahon’s description as it appears on the list below.

“Vince McMahon is chairman and CEO of entertainment company World Wrestling Entertainment (WWE), which hauls in nearly $1 billion in annual revenue.

A third generation wrestling promoter, McMahon grew up in a trailer park in North Carolina and joined his father’s small wrestling company in 1972.

McMahon purchased the business 10 years later, then transformed the World Wrestling Federation from a regional operation into a global phenomenon.

WWF (now called WWE) went public in 1999; today its programs are broadcast in roughly 150 countries and more than 30 languages.

His foundation has gifted funds to the Boys & Girls Club of Stamford, CT, and Breast Cancer Alliance.”

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With the Alliance of American Football league starting play in February 2019, this will give the second incarnation of the XFL an opportunity to study carefully before their planned launch in February 2020.

Whoever coined the phrase “less is more”never spoke with the leadership of the XFL and AAF (Alliance of American Football) when it comes to gauging the demand for consuming professional football in the United States.

From a pure strategy perspective, it will be fascinating to watch how these leagues will compete against each other as they vie for the hearts, minds and dollars of football fans at a time of year where we are conditioned to stop watching live football.

Diminishing marginal utility be damned.  First-mover advantages will be tested.  Sequential games of business strategy will ensue.

Ultimately, we’ll see if the XFL’s decision to play mostly in significantly larger markets will trump the AAF’s decision to “start first” (in 2019) while picking markets where there are greater voids in live sporting entertainment for those local fan bases.

Assessing the AAF’s Strategy

To start a sports league from scratch, and especially in a sport where there is considerable coverage and content between August 1st and early February, you have to (1) choose your markets wisely, (2) be innovative with how you produce and deliver the content, and (3) have strong leadership at the league-level…which may include the ability and willingness to infuse significant capital resources.

Upon reviewing the 8 inaugural AAF teams, their site-selection strategy is fairly clear:

– Select markets which currently don’t have an NFL team (to avoid direct local competition for fan and corporate dollars), but have a passion for football (high regional avidity born from college football allegiances);

– Select markets with a paucity of other professional sports teams, thereby further increasing the likelihood of local fan and corporate support.

Indeed, 6 of the teams fit this description (throughout the article I reference census data of the largest Metropolitan Statistical Areas in the United States):

– Birmingham (49th largest MSA with population of 1.15 million) has no professional sports teams, but is smack dab in the heart of college football country;

– Salt Lake City (48th largest MSA with population of 1.20 million) has 2 professional sports teams (NBA’s Jazz and MLS’s Real Salt Lake), is home to the Pac-12’s University of Utah, and of course is only 40 miles from Provo which is home to the legendary BYU football program;

– Memphis (42nd largest MSA with population of 1.35 million) has 1 professional sports team (NBA’s Grizzlies), and with a college football program at the University of Memphis plus being in SEC country (Tennessee), there would appear to be an appetite for spring ball in Memphis;

– San Antonio (24th largest MSA with population of 2.47 million) has 1 professional sports team (NBA’s Spurs), but is located in Texas where the demand for football seems insatiable;

– Orlando (23rd largest MSA with population of 2.51 million) has 2 professional sports teams (NBA’s Magic and MLS’s Orlando City FC), and is also located in a football-crazed state (Florida) and in a city home to America’s current college football darlings from the University of Central Florida;

– San Diego (17th largest MSA with population of 3.34 million) has 1 professional team (MLB’s Padres), and was formerly home to the NFL’s Chargers before they moved to Los Angeles in 2017.  Thus, it’s safe to assume they still have an appetite for professional football.

Thus, the average (median) MSA population for these 6 markets is 2.00 (1.91) million.

The other two markets (Atlanta and Tempe/Phoenix) are obviously much larger in size relative to the rest of the league (9th and 11th in MSA, respectively…with Atlanta at 5.88 million and Phoenix at 4.74 million).  While these markets have significant competition for the sports entertainment discretionary dollar (Atlanta has teams in the NFL, MLB, NBA, NHL, and MLS…while the greater Phoenix area has teams in the NFL, MLB, NBA, and WNBA), they are also located in parts of the country where football is especially popular.

From an innovation standpoint, both leagues realize they need to stand apart from the NFL game without feeling too gimmicky.  With the AAF starting in less than 2 months, they have announced wrinkles they plan on adopting to create product differentiation, including:

    ▪    Telecasts will feature no television timeouts and 60 percent fewer commercials, with the league aiming for an approximate real-time game length of 150 minutes, down from just over 180 in the NFL.

    ▪    All teams must attempt two-point conversions after each touchdown; there will be no extra point kicks.

    ▪    There will be no kickoffs.  Halves, overtime periods and after scores will begin on each team’s own 25-yard line, the same as touchbacks in the NFL and NCAA. In lieu of an onside kick, a team can keep possession of the ball by attempting a scrimmage play from their own 35-yard line and gaining at least 10 yards.

    ▪    The play clock will run only 30 seconds, 10 seconds shorter than in the NFL.

    ▪    Two coach’s challenges per team are the only replays; no challenges in last two minutes of either half nor any overtime period, as they are automatic.

    ▪    Outside organizations will handle head-safety protocols.

From a leadership standpoint, it’s hard to argue against the “brand equity” of the names involved with the AAF.  The co-founders are Charlie Ebersol and Bill Polian.  Ironically, it was Ebersol’s father (Dick) who partnered with Vince McMahon on the original incarnation of the XFL almost 20 years ago in the league’s only season in 2001.  

With Ebersol’s media production expertise coupled with Polian’s football expertise (long-time GM who worked with Buffalo, Carolina, and Indianapolis before being inducted into the football Hall of Fame in 2015), there is certainly knowledgeable leadership for the on-field product and event production.  Furthermore, the league was wise to recruit well-respected former NFL players to play key advisory roles within the league (e.g. Troy Polamalu, Jared Allen, Hines Ward, Justin Tuck).

The other issue of note is one of timing.  AAF starts on February 9th, 2019…one year ahead of the XFL.  The benefits of being a first-mover in this instance is the ability to begin the process of brand building one year ahead of your competitor.

However, and thinking in the context of what game theorists describe as a “sequential game” (not unlike chess), the XFL will have a chance to learn from the AAF’s inaugural year.  What worked, what didn’t work…and then subsequently tweak their marketing, presentation, and on-field strategies to incorporate the AAF’s “best practices” while also learning from the AAF’s first-year missteps.

And with only a one-year lag between the start of each league, this really doesn’t allow the first-mover effects to take the same stranglehold over consumers  and corporations as it would if the gap were longer.

Assessing the XFL’s Strategy

Since the AAF is the first-mover in this pigskin play, I was fascinated to see what approach the XFL would follow from a site-selection process.

Would they, too, place teams predominantly in mid-sized markets devoid of NFL teams and with few other pro sports competitors?

Or would they pave a different path by selecting large markets – irrespective of the presence of other pro sports teams including the NFL – that (a) hopefully have large enough populations of avid football fans to draw from and (b) would likely generate more media revenue from eventually TV packages (given the historical correlation between market size and media value of sports content).

When the XFL announced their 8 markets on Wednesday December 5th, we got our answer.

With teams in New York, Los Angeles, Dallas, Houston, and Washington, the XFL has secured 5 of the largest 6 MSAs in America (only omitting #3, Chicago).  The average (median) MSA population of these markets is 10.84 (7.4) million.

That’s more than 5x of the average, and roughly 4x of the median.

The remaining 3 XFL markets are Seattle, Tampa Bay, and St. Louis:

– Seattle (15th largest MSA with population of 3.57 million) now has professional sports teams in 5 leagues (WNBA’s Storm, MLS’s Sounders, MLB’s Mariners, NFL’s Seahawks, and just received an NHL expansion team), and is home to an NFL team with extremely loyal fans;

– Tampa Bay (18th largest MSA with population of 3.09 million) has 2 professional sports team (MLB’s Rays and NFL’s Bucs), but is positioned in the football-crazed Southeast;

– St. Louis (21st largest MSA with population of 2.81 million) has 2 professional sports teams (MLB’s Cardinals and NHL’s Blues), has twice been home to NFL teams (Cardinals, Rams), and is only 1 of 3 markets inside the nation’s largest 21 MSAs (along with Riverside CA and San Diego) who do not have an NFL team.

Of these remaining teams, the average and median MSA population (3.16 million and 3.09 million, respectively) is more than 50 percent larger than what’s true for 6 of the 8 AAF markets identified earlier.

While the XFL has been relatively silent about specific tweaks they will implement to differentiate themselves from both the NFL and AAF(which is strategically shrewd, as they don’t want the AAF to adopt their ideas…thereby rendering them passe), the XFL website states “We plan to minimize idle time and speed up game time. We will increase on-field action. We are going to create in-game rhythm and flow. And we are going to use tech and insight to improve player safety, wherever possible.”

Again, I believe strongly in this particular instance that the XFL benefits greatly from seeing how the AAF addresses both on-field dynamics as well as off-field business practices. 

Separately, a big reason why the XFL is poised to succeed stems largely from their leadership.  You would be hard-pressed to find a more experienced and respected leader than Oliver Luck.  With McMahon hiring Luck as the XFL’s Commissioner, this alone proved a different tack exhibited by the WWF’s creator relative to the league’s failed efforts in 20o1.  With prior leadership roles in NFL Europe, MLS, major Division I college athletics (AD at West Virginia), and most recently an EVP of Regulatory Affairs at the NCAA, Luck has all the requisite leadership acumen to make me a believer that the XFL will be far more successful than its 2001 incarnation.

Couple Luck’s skill with the resources McMahon is investing in the league, that’s a formidable combination.  ESPN reported in June 2018 that McMahon was prepared to invest $500 million into XFL 2.0 over its first 3 seasons.  To my knowledge, the AAF has not made any such public statements as bold as McMahon’s in terms of capital commitments dedicated to launching their league.

Furthermore, the XFL’s advisory team is also full of well-respected industry veterans, like former coaches Jim Caldwell and John Fox, and former NFL and CFL quarterback Doug Flutie among the headliners.  With others like Josh Kosner, Kevin Guskiewicz, and Bill Squadron contributing their business operations and management insights to the league’s strategic vision, the XFL (like their AAF colleagues) has left no stone unturned on the advisory front.

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Do I think both leagues have a chance of being successful?  I actually do, at least for the first 3 years.  That said, it’s hard for me to believe that, eventually, diminishing marginal utility among football fans/corporations will eventually sink in.

That said, if I had to guess which league would be the “survivor” if only one were to survive, I’d say the XFL…because it’s more likely to generate larger media and corporate dollars given the market sizes of the teams in as compared to the AAF, and because the league’s founder, McMahon, has an estimated net worth of $3.8 billion and is prepared to invest considerable capital into ensuring that XFL 2.0 doesn’t fall flat on its face the way XFL 1.0 did.

However, don’t be surprised if these leagues merge within the next 5 years.  If not a full merger, then an absorption of 3-4 teams while the weaker league folds.

Source: Forbes

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The XFL announced on Tuesday that Oliver Luck will be the first commissioner and chief executive officer of the league.

“I’m thrilled to have this unique opportunity to reimagine the game that has been a constant in my life for 40 years,” Luck told ESPN.

Luck will leave the NCAA, where oversaw the organization’s regulatory functions, including eligibility requirements and academic affairs, and the eligibility center.

Luck will also be relocating from Indianapolis to the XFL headquarters in Stamford, CT.

“Oliver and I share the same vision and passion for reimagining the game of football,” McMahon, the XFL’s founder and chairman, said in a statement. “His experience as both an athlete and executive will ensure the long-term success of the XFL.”

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