April 10 was payday at the XFL. Kurt Hunzeker hadn’t slept. As the St. Louis BattleHawks’ president, his job was to shepherd the team into a presumptive 2021 season. Kickoff to that second season was at least 10 months away — and because of the deepening coronavirus pandemic, maybe longer. COVID-19 deaths in America would top 2,000 for the first time that day. The sports world was frozen, and many among the league’s 400 staffers wondered if owner Vince McMahon would continue funding the operation.
Alarm bells started ringing. Staff reductions or furloughs seemed possible. XFL president and chief operating officer Jeffrey Pollack was a no-show for a regularly scheduled conference call of team executives on April 8. Staffers began calling their bosses. Bosses called their bosses. Hunzeker even called commissioner Oliver Luck. No one had answers.
As he lay awake the night before, Hunzeker vowed to look at his bank account first thing in the morning. He knew how corporate America sometimes handles layoffs. One day, you get a check that combines your salary and accumulated vacation time. It’s your final check and your last day at work.
“And then we all woke up that day,” Hunzeker said. “And that’s exactly what happened. There was a very different entry in our bank accounts. And we’re like, ‘Oh, crap.’ Even before they told us, I knew what was going to happen.”
Hunzeker had been living apart from his wife and two children, who had remained in Tampa, Florida, to finish the school year after the XFL hired him in 2019. Once the XFL issued a work-from-home order in March, he rejoined the family in Tampa. When the end came, they had just started packing the house for the pending move to St. Louis, where Hunzeker and his wife grew up and were eager to return.
“It was just a dream job,” Hunzeker said. “And what sucks is that it was working. This league was an asset. We were on our way.”
Over in Houston, Roughnecks general manager Randy Mueller was awakened by a text message from the team’s equipment manager. “What’s this email about?” the staffer asked. Mueller had no idea what he was talking about. He checked his inbox and found an alert. An all-company conference call had been scheduled for noon ET.
“I was totally caught off guard,” Mueller said. “On the football side, we had no inkling about what was going on.”
The call was brief. As the entire XFL workforce listened in from around the country, Pollack confirmed the news: All of them had been terminated. Pollack read from a prepared statement, attributing the decision to the pandemic, and took no questions. Luck, who had been fired the day before, did not participate. The final blow arrived three days later, when the XFL filed for Chapter 11 bankruptcy, dumping it into the trash heap of every other alternative football league during the past 50 years (including the first iteration of the XFL, played in 2001).
This one had seemed different. McMahon poured more than $200 million into its startup, a process that took two full years, and had committed repeatedly to a multiyear window for proof of concept that would have cost him at least $500 million through three seasons of play. He hired experienced executives in the league office and in each local market, giving them guaranteed multiyear contracts with mid-six-figure salaries and an extensive bonus structure.
Internal planning meetings routinely included projections not only for a 2021 season but one in 2022, as well. And even after the pandemic cut the inaugural season at its midpoint, five weeks into a 10-week campaign, McMahon authorized full-scale preparations for next year. Luck’s staff, charged with nothing less than reimagining the game of football, dove in with a fanatical belief in the product and a fierce loyalty toward the commissioner, who was known for his calm demeanor and the occasional memes he sent via text message. Luck’s stature as a former NFL quarterback, college athletic director and NCAA executive — and the guaranteed $35 million contract it took to lure him — was the most important symbol of McMahon’s commitment to building a serious, long-term enterprise.
“I’m not a gimmicky person,” Luck said last fall.
The league averaged 1.9 million television viewers per game and generated nearly $20 million in gross revenues in 2020, according to court filings. It had projected $46 million in gross revenues for the 10-game season, each data point exceeding internal expectations, according to sources.
“The end was frustrating but mostly because it was like, ‘Damn it, this was going to work,'” said Eric Galko, the XFL’s former director of player personnel. “That’s what I think most everyone felt throughout the league. If you talked to anybody in the XFL, they would be shocked to know that we weren’t going to do this for a long time. Not because we were misled by anyone, but because the evidence was there.”
The ensuing weeks have been a jumble of legal disputes and plot twists. Luck filed a wrongful termination lawsuit, claiming McMahon owes him $23.8 million. McMahon, who declined ESPN’s interview request, was accused by the bankruptcy’s unsecured creditors committee of rigging the process to retain ownership. (In a deposition, McMahon denied the accusation.) Although many staffers consider the league as they knew it to be shuttered, given the uncertainty of the short-term economy McMahon has put the brand up for sale, and there are strong indications that it will be sold and relaunched under new ownership within a year or two.
“I have no doubt that had we completed the full 2020 season, we would have proved that spring football — more professional football — can work,” Pollack said. “We were on track to be the most successful launch of a new sports league in decades, if not ever, and we are hopeful the XFL can resume that trajectory with a new owner, for the fans and players and for the love of football.”
It’s fair, though, to probe deeper into some fundamental questions. The XFL’s local attendance varied widely per team, and television ratings, despite the respectable average, dropped every week of the season. Did the XFL really prove its concept? Was its demise caused solely by the pandemic? Or was it accelerated by a significant period of unrest at World Wrestling Entertainment Inc. (WWE), McMahon’s primary venture? Could a new iteration of the XFL survive? And in a larger sense, did it demonstrate enough to disabuse the prevailing notion that alternative football leagues — under the XFL brand or any other — are doomed to fail?
Ending at a turning point
The first time he saw the XFL’s proposed kickoff alignment, with everyone but the kicker and returner required to stand still for the first three seconds of the play, Greg Gabriel shook his head.
“I was like, what the hell is this?” said Gabriel, a veteran NFL evaluator who had been hired as the DC Defenders’ personnel director.
The kickoff, like every other XFL rule tweak, was a product of two years’ worth of work among the league’s innovation committee. Director of football operations Sam Schwartzstein headed the project, utilizing focus groups to understand how much change fans would tolerate and where they most wanted to see adjustments. At one point, Luck said last year, a sampling of American fans recoiled when they were shown video of games in the CFL, where receivers are allowed to run toward the line of scrimmage before the snap. At that moment, Luck and Schwartzstein understood their limits.
But once Gabriel watched the kickoff in action, and realized it all but guaranteed a return while minimizing high-speed collisions, he was relieved and impressed. Assimilation of the XFL’s other innovations followed a similar path. After five weeks, players, coaches and fans had grown accustomed to a three-tiered option structure after touchdowns. They had come to expect in-game sideline interviews and live broadcast of replay decisions, among other attempts to add access to television production, and they appreciated a quicker pace that carved about 15 minutes off the average NFL game without sacrificing the number of plays. Locals were beginning to develop their own traditions, most notably at the Defenders’ Audi Field, where fans attached plastic cups into a “beer snake” that even drew the participation of Luck in the team’s final home game on March 8.
“We started off trying to reimagine the game of football,” Schwartzstein said. “But I think what Oliver and I and the rest of us ended up doing was to reengineer it. What we realized is that you don’t want to change too much, and then have fans look at our game and say, ‘That’s not football.'”
The midseason numbers were a mix of modest achievement and mild disappointments. Teams averaged an unexceptional 20.5 points per game, and from a gambling perspective, 12 of 20 games fell under the total. Television ratings dropped from a high of 3.3 million average viewers per game in Week 1, roughly the same average as the 2019 Liberty Bowl, to 1.2 million in Week 5, equivalent to the 2019 First Responder Bowl. Those numbers were slightly ahead of the Alliance of American Football (AAF) in 2019. Average attendance remained flat at 18,600 fans per game. The XFL’s two biggest-market teams, the Los Angeles Wildcats and New York Guardians, actually drew the lowest average attendance figures at 13,124 and 14,875, respectively.
On the other hand, there were legitimate reasons to project optimism for the second half of the season. Of the XFL’s final 16 regular-season games, 12 would have been broadcast on ABC or Fox as opposed to cable — raising the possibility of a ratings rebound. A handful of teams were catching fire in their local markets, most notably St. Louis, where the BattleHawks averaged 28,541 fans per game and had already sold 36,000 tickets for their next home date on March 21 against the Wildcats.
The actual crowd likely would have been larger, Hunzeker said. When the XFL initially suspended its season March 12, the BattleHawks were selling 6,000 tickets per day. Their ticket office was projecting attendance of at least 45,000. By that point, the BattleHawks had taken in $6 million in local revenue, well exceeding their fiscal goal for the entire season ($4.7 million).
Meanwhile, coaches were beginning to grasp the new math imposed by the XFL’s point-after options, veering away from one-point plays from the 2-yard line (37% of the time) in favor of two points from the 5 (47%) and the occasional three-point attempt from the 10.
It had taken some time after the league hired eight head coaches from traditional and conventional football backgrounds, headlined by former Oklahoma coach Bob Stoops in Dallas. Three former NFL head coaches — Jim Zorn in Seattle, Kevin Gilbride in New York and Marc Trestman in Tampa Bay — acknowledged the steep learning curve during the season. Former NFL assistants Winston Moss (Los Angeles), Pep Hamilton (DC) and Jonathan Hayes (St. Louis) were adjusting to their first head-coaching jobs. Only June Jones (Houston), with experience as a head coach in both the USFL and the CFL, seemed unfazed by the transition.
And in what turned out to be the XFL’s final game, the Wildcats and Tampa Bay Vipers produced the kind of event league executives had been dreaming about. The Wildcats won 41-34 in a game that featured a combined 136 offensive plays and, despite being delayed by a serious injury that required an air cast, was completed in 3 hours, 3 minutes — shorter than the average NFL game in 2019.
“I really think that last game of the season showed what the rest of the year would have looked like,” Schwartzstein said. “Because every one of our players were essentially rookies. We were getting better every week, and it was going to get exciting, just like the NFL gets exciting, toward the end of the season. We had really just scratched the surface. We were playing at a level that was equivalent of the highest level of college football. Maybe not LSU against Clemson in the national championship-type level, but still really high-level football with some really cool innovations. I was pleased with it.”
For its debut season, the XFL mostly pursued players who had been released from NFL training camps or rosters within the past year. It signed one player, St. Louis safety Kenny Robinson, who still had college eligibility remaining and was subsequently drafted by the NFL’s Carolina Panthers. The Wildcats’ Josh Johnson and Dallas Renegades’ Landry Jones, both longtime NFL backup quarterbacks, were the most recognizable names in the league. Jones was lured in part by a contract that paid him near $500,000, a bit more than the average No. 3 quarterback in the NFL.
But the best team was the 5-0 Houston Roughnecks, led by June Jones and featuring quarterback P.J. Walker. Once a member of the Indianapolis Colts‘ practice squad, Walker received a recommendation from former Colts starter Andrew Luck, Oliver’s son.
“If you stack up Houston against any other team,” Galko said, “in any other league, I think only an NFL team would beat them. That includes the CFL.”
The Houston Roughnecks rally from an early 14-0 deficit to defeat the Seattle Dragons 32-23, improving to 5-0 on the season.
In fact, given a few years, Mueller said, the XFL could have developed a handful of teams that would be competitive in the NFL.
“There is enough talent out there,” Mueller said, “and the XFL was providing the structure to build a USFL-, ABA-type of league. I would have liked to have had a run at that over the next two or three years. Building from scratch is an easier and quicker way to top-notch competitiveness than taking over an NFL team and being stuck with 70% of your cap and roster.”
Walker parlayed his XFL performance into a backup job with the Panthers. The BattleHawks’ Jordan Ta’amu, meanwhile, signed with the Kansas City Chiefs. Overall, however, the XFL recognized a need to adjust its quarterback-recruitment strategy. Veterans, such as Landry Jones and the Guardians’ Matt McGloin, who were signed in part because of their familiarity with coaches, largely flopped.
In 2021, Galko said, the league planned to pursue younger and higher-profile NFL quarterbacks who had been lost in the shuffle.
“We wanted to go to a Josh Rosen, for example,” Galko said, “and say, ‘Hey, we know you have talent. You got screwed by circumstances in two different spots. You’re going to get cut by the Dolphins. Don’t go be a backup for the Seattle Seahawks. Come show teams how many players you are better than.’
“Quarterbacks need to play or else their value is going to be greatly diminished. Who knows what would have happened, but that was our plan.”
So was it only the pandemic?
Those 2021 plans went into full development after the XFL suspended its season, along with the rest of the sports world. Its office in Stamford, Connecticut, across the street from WWE headquarters, closed two days later on March 15. Employees began working at home.
Oliver Luck, who did not respond to an interview request for this story, retreated to his family home in Indiana. The season was officially canceled March 20. According to a source, McMahon himself approved the language of the announcement, which read in part: “We look forward to playing full seasons for you — and with you — in 2021.”
As they look back on the three weeks that followed, some former staffers have found reason to question whether that claim was genuine. Luck submitted budgets for the 2021 season. He did not receive a response. Team communication staffs were instructed to cancel scheduled interviews designed to reinforce the league’s plan to resume play next year.
Between March 10 and April 10, according to bankruptcy filings, the XFL — through its parent company, Alpha Entertainment — made four substantial payments totaling about $2.05 million to the WWE for shared services, bills that would have made the WWE an unpaid creditor after the April 13 bankruptcy filing.
Parallel to those payments, which were unknown to most XFL employees at the time, 2021 planning continued. Schwartzstein submitted a proposal for the league to play as a single-site entity, much as the NBA has planned for the remainder of its 2020 season, that would shave millions of dollars from the budget and account for the possibility that fans would not be allowed into games for safety reasons.
Despite the national economic unease, many XFL employees remained convinced that McMahon’s financial commitment would protect the league from making a short-term decision. Mueller, a former NFL general manager who also had worked for the bankrupt AAF in 2019, considered himself savvy in the corporate side of game. He never considered the possibility that McMahon would walk away from the $200 million he had already spent.
“We knew the AAF was smoke and mirrors,” Mueller said. “We knew there was issues there. We knew that wasn’t being portrayed upfront the way it actually was behind the scenes. But we thought the XFL was very upfront. You knew Vince McMahon had the money.”
Even so, McMahon was dealing with financial challenges on multiple fronts. In late January — before the pandemic, and a week before the XFL season began — he ousted two longtime WWE executives. The company’s stock immediately dropped 20% on Jan. 30, a consequence that Luck noted with some concern to a handful of XFL employees.
The XFL’s shared services agreement with the WWE also had raised eyebrows within the XFL offices, which were regularly interacting with WWE counterparts. In December 2019, the Oklahoma Firefighters Pension and Retirement System filed a shareholders lawsuit seeking information about the exact nature of the relationship between WWE and the XFL, and whether McMahon or other senior officers might have diminished the WWE by diverting some of its resources to the XFL. The suit was dropped this spring.
The WWE managed to resume content production amid the pandemic, airing a fanless but well-received WrestleMania 36 on April 4-5. McMahon was already working on plans for a series of WWE layoffs, furloughs and other cost-cutting moves designed to stabilize the company for an extended period of lower revenues. They were announced April 15. And according to Forbes magazine, McMahon’s net worth has dropped by $1 billion, from $2.9 billion to $1.9 billion, in the past year.
McMahon turned his attention to the XFL. At the time, Luck was warning people internally that the NFL and/or college football seasons could be pushed back in a way that would overlap with the XFL’s proposed February 2021 kickoff.
“We had been treating that time as an extended offseason,” Hunzeker said. “What I’m gleaning happened — and I was not part of any conversation, but as someone following along — is when you can’t guarantee when the next season is going to start or be played, that becomes a new variable in the equation that wasn’t there on the 12th of March when the season was first suspended.”
In a court filing, McMahon’s attorneys blamed the coronavirus for the decision to shutter the league. “[W]ere it not for the COVID-19 pandemic,” they wrote, “the XFL would not be available for sale in the first place.”
While that might be true, the state of the WWE can’t be ignored when considering McMahon’s willingness to continue subsidizing the XFL amid the pandemic.
“I consider the end of the XFL as we knew it to be tangentially pandemic,” said an XFL employee who requested anonymity in order to be candid. “It wasn’t necessarily the national economy but our owner’s economy that played into it. The WWE stock dropped, there were some executives that left and you start getting worried a little bit. And then the pandemic hit the WWE stock, as well.”
Kevin Seifert says former XFL commissioner Oliver Luck has sued owner Vince McMahon for wrongful termination after the league filed for bankruptcy.
David Carter — a leading sports industry analyst, principal of The Sports Business Group and an associate professor of sports business at USC — agreed.
“It would be lazy to dismiss the XFL’s failure just to the pandemic,” Carter said, “because many businesses, you could argue, have used the pandemic to accelerate whatever their eventualities were going to be. It’s pretty easy to hide a failure in a pandemic. I’m not saying that’s what they’re doing. But we’ve seen businesses that have said, ‘But for the pandemic, our share price would have been fine, and we wouldn’t have gone bankrupt.'”
Is there a still future for spring football?
If a league funded by a committed and capable billionaire couldn’t make it, what could? After the successive demises of the AAF and XFL, admittedly for different reasons, industry analysts are split on the future of alternative football leagues.
“We still don’t know that spring football works in this country,” said Andrew Kline, founder of the investment bank Park Lane, which specializes in sports investments. “Football season is so intense, and it’s just associated with the fall season. You wonder if part of the cycle is that people need to come down from it for a while.”
Any future forays, Schwartzstein said, must be guided by clear guardrails.
“I don’t think it’s impossible,” he said. “But you have to be focused on what you want to be, and not be too disparate in what you’re trying to do. Are you trying to serve the average fan? The hyper-passionate fan? Are you trying to serve the local fan? Are you trying to make it a streaming product? Do you even want fans at the games?”
The most obvious model in terms of market demand is a large-scale developmental league geared toward serving the NFL, something the football ecosystem has lacked since NFL Europe was shuttered in 2007. Dramatic cuts in NFL offseason work for players and coaches, starting with the 2011 collective bargaining agreement, has slashed developmental time for quarterbacks and offensive linemen, especially. NFL Europe, many will recall, helped develop a long list of quarterbacks, including Kurt Warner, Brad Johnson, Jon Kitna and Jake Delhomme.
The XFL explicitly avoided that association, but it’s worth noting that nearly three dozen of its players have signed NFL contracts this spring. Nine of them went to the Pittsburgh Steelers, who noted that they preferred players with recent pro-level experience and tape over the uncertainties of undrafted rookies — especially amid the limitations of the pandemic.
Brian Woods, the CEO of The Spring League, has managed to sustain his alternative league for four years based on a tightly maintained developmental model, offering players an opportunity to draw attention from NFL and CFL scouts in exchange for a $2,000 fee.
“There is ultimately a need for that kind of platform,” Woods said. “The business model of the XFL and the AAF have showed us that their structure is very difficult to sustain. I think the way we do things, where we are in every sense of the word a true developmental league, and we have a structure that has mitigated the higher costs, is the way to self-sustain. I don’t think that the demise of both of those leagues is a mandate that there is no need for spring football. I just think those business models were not realistic.”
The AAF/XFL model almost certainly required a national television contract to reach profitability. The AAF paid for airtime on CBS. The XFL’s agreements with ABC/ESPN and Fox covered production costs but did not provide a rights fee.
“The money made from media was always going to be the game,” Hunzeker said.
Woods, however, questioned whether broadcasters would find value in a football league that marketed an impersonal on-field product rather than certifiably star players.
“I think the biggest issue with the AAF and the XFL,” Woods said, “was the idea that somehow, in some way, shape or form, they could get to a TV contract that would sustain them with what I felt was developmental or marginal talent.”
Indeed, Hunzeker’s experience in St. Louis suggested that a market model based on Triple-A baseball might work better than doubling up in NFL cities. Attendance at high school football games had increased 20% in St. Louis after the Rams’ 2016 departure to Los Angeles, he said. The BattleHawks catered to fans who had no other professional football team root for, and they were validated at the ticket office. Overall, nearly a third of the XFL’s 2020 gross revenue came from St. Louis.
Make your bids … the XFL is for sale
In the short term, of course, that analysis is irrelevant. In its sales pitch, the XFL has marketed a 12-week “made-for-TV” tournament structure for 2021, modeled after Schwartzstein’s original plan, before returning to a more traditional arrangement in 2022 and beyond. The games and teams would be held in a central location without fans, similar to the XFL’s 2020 training camp in Houston, and in essence provide a live television show with a heavy sports gambling tie-in. Sports as a broadcast/streaming product, without the pretense of local fan interest — and the overhead necessary to cultivate it — might be the most efficient way to operate in the current economy.
McMahon admitted in a deposition that he considered bidding on the company himself during the bankruptcy process. But complaints from the unsecured creditors committee, who accused him of rigging the process to encourage the acceptance of a low bid, prompted him to move on.
“I do hope that someone will pay a lot of money for it,” McMahon said in the deposition, “and I do hope that it will survive.”
Kevin Seifert details why league owner Vince McMahon has decided not to buy back the XFL after the league filed for bankruptcy.
According to sources familiar with the process, more than 30 vetted parties have signed nondisclosure agreements with Houlihan Lokey, the brokerage firm hired to handle the sale, that allow them to examine the XFL’s internal financial reports.
Pollack remains with the league to navigate the transition — and possibly beyond. But the rest of the XFL workforce was laid off, and players are no longer under contract. New owners would be buying the brand name, intellectual property and, in theory, the benefits of risk reduction afforded by McMahon’s initial investment and product testing.
Initial proposals are due Monday. Per sources, Houlihan is marketing McMahon’s $200 million expenditure as seed capital that would minimize the risk of the next owner. McMahon is unlikely to recoup the full value of his investment, but ultimately, the market will make that determination. A bankruptcy judge has set a July 29 deadline for formal bids and an Aug. 3 court auction, meaning the XFL could have new owners before the end of summer.
Circumstances at that time will dictate whether they will try to play in 2021. Carter, the sports industry analyst, said he would be shocked if they could scale up quickly and well enough to put a good product on the field in 2021. He also said he wasn’t sure whether he would advise owners to buy the XFL or just start their own league from scratch. The XFL, after all, didn’t make it to a second season after its 2001 or 2020 incarnations.
“How many times do you have to have that happen,” Carter said, “before the marketplace says, ‘You know what, we’ll try to build a better mousetrap ourselves [rather] than rescale some of these dormant assets’?”
The bankruptcy stinger
Like millions of other Americans, Hunzeker found himself suddenly unemployed when the coronavirus hit and the XFL shuttered. He understands and accepts the unprecedented nature of the pandemic and the XFL’s inability to maintain full operations through it.
But McMahon’s decision to declare bankruptcy, rather than fund the league’s prior commitments with money he had set aside for future operations, imposed an additional level of pain. Many employees, Hunzeker included, had insisted on guaranteed multiyear contracts to leave stable jobs and join what amounted to a start-up company. Hundreds of former XFL staffers, at all levels, remain unemployed. They were offered COBRA insurance benefits, but vision and dental were cut off in early June, according to sources. As a group, they are in line with hundreds of other creditors in bankruptcy court, hoping to recover some part of what remained on their contracts after April 10.
“If you can’t guarantee that next season is going to happen, anyone with a pragmatic business sense would understand that it’s tough to keep that many people employed,” Hunzeker said. “The bankruptcy filing was a stinger, for sure. That has a lot of long-term effect on a lot of people, including myself. It eliminated the parachute.
“Candidly, spring football’s batting average is still its batting average. It’s still zero. So you have to protect your family, you have to protect everything. Having a guarantee is something that quite a few people fought pretty hard for. For that to be wiped out [in bankruptcy], that was a kick.”
Hunzeker has remained in Tampa, awaiting the reopening of a job market that has been largely dormant during the pandemic. His wife and teenage children await his next job offer. He said he would consider rejoining the XFL under new ownership, but “there would have to be a conversation about structure.” He added: “There is a lot of institutional knowledge that all of us could bring under new ownership, but that means we know there are also some things that wouldn’t work.”
McMahon’s dispute with Luck also has disheartened former XFL employees. Court filings revealed that McMahon fired Luck for, among other reasons, making personal use of a company-issued iPhone, a seemingly petty point for an owner who claimed to be building a serious and long-lasting sports league. (McMahon’s other reasons for firing Luck, according to the court filings, were “gross negligence” of the job after the pandemic began, as well as the decision to sign free-agent wide receiver Antonio Callaway, whose problematic background was counter to McMahon’s intent to avoid such players.) Luck’s attorneys have disputed each accusation and called the entire episode “a weak and pretextual attempt to avoid the lawful contractual obligations.”
The late-game enmity, however, has not clouded the larger experience. Hunzeker joined every former employee interviewed for this story in using the word “fun” to describe the work of building the XFL. They departed knowing they might never find that kind of professional fun again, even if they join the new owners on XFL 3.0.
It was, the Defenders’ Gabriel said, “the right thing — just at the wrong time.”
Published at Tue, 16 Jun 2020 20:12:58 +0000