Some interesting news continues to come out about the collapse of the Alliance of American Football, which suspended football operations near the start of April and declared bankruptcy not long afterwards. That move came quite suddenly, with majority owner Tom Dundon (also the owner of the NHL’s Carolina Hurricanes) deciding to stop funding the league and it quickly folding up shop afterwards. Two of the big remaining questions around the AAF are why the league needed to bring Dundon in after just their first week of play (and if that was to make payroll or not), and why Dundon decided to suddenly stop funding the league. And a couple of pieces published Thursday provide some insight there.
First, there’s Darren Rovell’s Action Network breakdown of the criminal charges filed this week against Reggie Fowler, the league’s initial main investor. Here’s the key part of Rovell’s piece:
The original main investor in the Alliance of American Football, Reggie Fowler, was arrested Tuesday and charged by the U.S. Attorney’s Office in the Southern District of New York, the FBI and the IRS with committing bank fraud and operating an unlicensed money transmitting business.
The government entities allege that Fowler, and his partner Ravid Yosef, between February and October of 2018, moved hundreds of millions of dollars through banks for a cryptocurrency business under the guise of what they said were real estate holdings. If convicted, Fowler, 60, could face a maximum of 70 years in prison.
When the AAF was raising money, Fowler raised his hand to commit the lion’s share. Sources said he agreed to fund the league with up to $170 million of his own money. Sources say the banks that are named in the fraud charges affirmed Fowler’s liquidity, but if the charges are true, the money represented as Fowler’s at the time was never actually his.
Sources said Fowler had actually ponied up $28 million and had never said he was done funding, but the money was coming in too slowly. That caused the league to have to raise money quickly to avoid going out of business.
So that helps explains why the league had to reach out to Dundon, and had to give him so much control in exchange for funding (including making him chairman of the board and removing CEO Charlie Ebersol and his father Dick from voting seats on that board). But it’s still remarkable that the league trusted Fowler in the first place; yes, he’d previously been a part-owner of the NFL’s Minnesota Vikings, but a whole lot had gone badly for him since then. Consider this 2013 Arizona Republic story on him, titled “Debt, defaults tackle NFL team co-owner“:
Reggie Fowler, a Chandler entrepreneur who made national headlines when he bid in 2005 to become the first African-American lead owner of a National Football League team, has defaulted on financial obligations, faces tens of millions of dollars in unpaid debts and has lost control of his companies as a lawsuit lingers against him.
…The 54-year-old entrepreneur is one of six partners in a group that owns the Vikings. He joined the ownership group after bidding unsuccessfully to buy the franchise for more than $600 million eight years ago.
…Fowler and his companies have been sued on many occasions, and he has had income-tax problems.
…After Fowler made his much-publicized bid for the Vikings in February 2005, questions soon arose about the accuracy of facts in his biography. Within days, following sleuthing by journalists in Minnesota, he apologized for a release issued by his public-relations firm that appeared to exaggerate or misstate aspects of his athletic, educational and business career — even indicating that he didn’t play for a Tucson team in the Little League World Series, as was initially asserted.
Yeah, that all seems bad. Speaking of that Little League World Series claim, Fowler defended that to Minneapolis Public Radio in 2005 by saying…he played in something else called the “world series.”
Fowler says when he was a kid, the baseball team he played for in Arizona won the state championship. He says that enabled them to play in a tournament in California which they referred to as “the world series.” Fowler says it was not the same Little League World Series, which is held each year in Pennsylvania.
And the falsified bio went beyond that, including claims that Foster played for NFL, CFL and USFL teams, which he later amended to trying out for those teams, and claims he had a business degree, which was really a degree in social work (and he said his resume was wrong because it was “presented in a way to make him look better to possible employers”). Even just a quick Googling of this guy suggests you probably don’t want him as your primary investor, but maybe the AAF didn’t do that, or maybe they were desperate from a lack of interest elsewhere.
And they certainly seemed pretty desperate when they turned to Dundon, handing over almost total control to him with no guarantees. That let him pull the plug later and seemingly avoid having to pay for the league’s various debts, which were listed as $48.3 million in a bankruptcy filing against $11.3 million in assets and $536,161 in cash. The debts are so bad that original AAF parent company Legendary Field Exhibitions made a filing Tuesday telling creditors they don’t have any money. But why did Dundon invest in this league and wind up putting in about $70 million before suddenly shutting it down? Part of the answer to that might be in a detailed feature on the AAF from Conor Orr at Sports Illustrated‘s The MMQB, and it might have to do with TV:
It may have been due diligence on the television front, however, that eventually helped inform Dundon’s decision to shut it all down before his investment reached nine figures. According to a high-level sports exec from one of the four major networks, Dundon called to ask about the Alliance’s TV future. What he learned: While it wouldn’t necessarily always be this way, the AAF would have to continue paying to be on the air for the foreseeable future. The Alliance would remain an underdog fighting for TV time in a crowded sports marketplace.
That’s interesting on a couple of fronts. First, it’s full proof not only that the AAF’s TV arrangements were pay-to-air (that had been speculated, but not widely reported), but that they were likely to have to stick with a pay-to-air setup going forward despite their ratings. And that’s a notable subplot of this; while AAF ratings obviously weren’t close to the NFL, their lone CBS game that did air drew 2.9 million viewers, while a TNT game drew a million, and even some of their NFL Network games drew over 400,000 viewers and beat plenty of nationally-televised NBA, women’s NCAA tournament, NHL, MLS, EPL and golf events.
Granted, those NBA and NHL games that did lose to the AAF were regular-season games that were only a small part of those leagues’ overall rights deals (which have a lot to do with marquee matchups and the postseason), but from a viewership perspective, it felt like there might have been enough there to make the AAF worth paying at least a little bit for for someone. And maybe Dundon thought so too, and saw that as a path to profitability even with bad news on the attendance front. Perhaps network executives’ reluctance to pay for AAF rights any time in the near future was what finally convinced him to walk away.
All in all, the deeper stories that have emerged on the AAF illustrate a few key lessons for any further startup league, including the XFL and its planned comeback next year. For one, it seems to be worth taking a look at just who’s behind your funding. Beyond that, it seems worth it getting the cash up front rather than in payments over the course of the season. (This, at least, shouldn’t be a problem at first for the XFL; Vince McMahon is funding that, and he got $272 million for that purpose from a sale of WWE stock in March.) And some of the issues here might have come from the AAF’s need to rush to try and beat the XFL to market.
But even beyond that, even decent ratings that beat out some paid-for content don’t seem to be enough to get established channels to pay for a start-up league’s content right now. And if you don’t buy airtime and instead go to emerging streaming services that might pay you a rights fee, you run the risk of getting much less attention. The TV situation looks to be an important part of the puzzle for any future start-up football leagues, given that much of the appeal here is “football you can watch when it’s not NFL season,” but these AAF reports suggest networks didn’t value the product all that highly in their case. We’ll see if that changes with the XFL.