Do the math. After getting a new $250 million commitment this week, the new Alliance of American Football isn’t going away for a while, if it ever leaves.
Just ask the guy who is making that investment – Tom Dundon, the billionaire investor and owner of NHL’s Carolina Hurricanes. Even with the expected bumps that come with a startup pro football league, how much time does that buy?
“Five years, something like that," Dundon told USA TODAY Sports Thursday.
That’s more like a worst-case scenario. But because so many other minor-league pro football ventures have collapsed financially, the dark cloud of history still follows the AAF, whose business model is different than other sports leagues. A recent hiccup with payroll added to the perception that the league was in trouble just a week after it started.
To clarify the long-term outlook of this league, USA TODAY Sports addressed some of these issues here, based on recent interviews. The eight-team AAF enters its third weekend of play Saturday and Sunday, with games televised on the NFL Network and CBS Sports Network.
Was Dundon’s investment a bailout to “meet payroll?”
If the league was in trouble and Dundon merely was trying to keep it operational this year, he would not have invested as much as he did. In fact, using simple math, his $250 million is enough to meet roughly seven years of player payroll. AAF players make an average of $83,333 per year at a minimum. Multiply that by 416 players per year, and the league has about $35 million per year in minimum player payroll expenses. And if Dundon's goal only was to fund the league for a year, that’s not a very smart investment because he’d be throwing away money.
League co-founder Charlie Ebersol told USA TODAY Sports before the season that “you’re going to lose hundreds of millions of dollars before you get to profitability” when launching a new pro football league, because of all the upfront expenses.
"It's going to cost money to get it there, but it's a better investment than most in terms of venture capital,” Dundon said.
Then what about that payroll lapse?
The league gave the following response to USA TODAY Sports:
“We had an administrative issue with the transitioning of our players and coaches to a new payroll system last week,” Ebersol said in a written response. “Paychecks were processed on Friday (Feb. 15), and due to the President’s Day holiday (Feb. 18), funds were not available in many player accounts until (Feb. 19).”
Citing unnamed sources, The Athletic reported earlier this week that the league was running short on cash, threatening its ability to meet payroll Friday, Feb. 15. It said Dundon’s commitment enabled the AAF to meet its obligations.
Dundon said he gave the AAF money on Thursday, Feb. 14. It’s possible that the league could have hit a funding crunch, and payroll might suffered an administrative delay. The AAF is a private startup venture that relies on seed money from investors to build a ramp for a planned takeoff to profit. Such ventures raise money in stages, and sometimes the funding doesn’t come in as planned.
USA TODAY Sports asked the league if planned investors had dropped out. Ebersol didn’t directly answer that but responded in writing, noting that startups traditionally raise money in a series of investment rounds. With Dundon’s commitment, Ebersol said the league is in a position to eliminate the need for fundraising and now “can solely focus on accelerating our growth.”
"It's been a little bit strange that people have focused in on the problem that I already solved," Dundon said. "We have the capital to do whatever we need to do to make this thing successful, and I strongly believe it's going to be successful."
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