Fox’s USFL 2.0 Bets on Consumer Demand for Football, Business Model
The USFL returns this weekend after a 37-year hiatus. Well, sort of. A new version of the league (think: same IP, different ownership) debuts tomorrow night. The inaugural game (New Jersey Generals vs. Birmingham Stallions) will air on both Fox and NBC. Patrick Crakes (principal, Crakes Media Consulting) expects the matchup, the first sporting event to be simulcast on competing broadcast networks since Super Bowl I, to draw at least 2 million viewers. History has shown fans will turn out for spring football in Week 1, and airing on “two broadcast networks in primetime, along with one streamer, is a lot of reach.”
But sustaining fan interest over the course of a season and driving the commercial side of the business has proven challenging for upstart football leagues. The AAF and both renditions of the XFL lost tens of millions of dollars and shuttered after a single season. While the USFL believes it has the right formula this time around, many remain skeptical this league will fare any better.
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JWS’ Take: The latest iteration of the USFL is largely a Fox production (there are some other investors, and NBC is a media partner). The company’s investment thesis on spring football is based on two things. “One is consumer appetite for the product, the other is [a differentiated] business model,” said Mike Mulvihill (head of strategy and analytics, Fox Sports).
The appetite argument is a strong one. Mulvihill points out that XFL 2020 had been doing fine before the COVID-19 outbreak halted play. Games were “averaging about 2 million viewers on broadcast.” While that number does not stack up to the NFL or college football broadcasts, “in the first half of the year, there are a lot of [sports] properties [doing] just fine on less than 2 million viewers,” he said, predicting that the USFL would “more than hold their own compared to [properties] like the NHL, MLS and Formula One that are longstanding parts of the calendar at this time of year.”
Brian Woods, formerly CEO of The Spring League (TSL), is the USFL’s president. TSL may not be a household name, but the developmental player showcase operated for four years (shuttering in ’21), longer than any other 21st century spring football league.
The Spring League stuck around because it was disciplined in mitigating expenses. Games were held in a central location, the players paid for the opportunity to participate in the showcase, and since they were classified as “campers” and not employees, insurance requirements were minimal. While TSL was never a huge business, Woods said, it was able to stay afloat.
The USFL will try to replicate the cost constraints TSL perfected. The league will play all of its games during the ’22 regular season in a single city (Birmingham, Ala.), limiting stadium expenses, player housing and travel costs. The league will also be able to enhance the games’ production value. Fox will have as many cameras (57), wireless mics and drones in Protective Stadium as it does for NFL playoff games.
The USFL is also largely being run by Fox employees, “eliminating a lot of the overhead that comes from the need to hire execs, sometimes at pretty high levels of compensation,” Mulvihill noted.
But replicating TSL’s relative success won’t be easy—even for a league with some name recognition (and perhaps some decades-old fan affinity). Traditional pro football leagues are an expensive endeavor. Player salaries (think: 38-man active roster, seven-man practice squad), insurance costs (in part because few insurers are willing to underwrite pro football) and consumer marketing expenses (something TSL did not incur as a B2B service) add up fast.
The traditional pro-football league model does give the USFL an opportunity to generate significantly more revenue than TSL took in. Ticket sales, licensing and sponsorships can all develop into viable revenue streams if the league builds a fan base. But it takes time—and deep-pocketed investors willing to cover losses—for new sports properties to build a following. Fox is reportedly committed to investing $150 million into the league’s operations over a three-year period.
Fox recognizes the league is going to lose money in the short term. The USFL likely will need a broadcast partner to pay significantly more for its media rights (Fox and NBC are paying rights fees), and develop another means of monetization, before it can turn a profit. But Mulvihill explained that as long as the league can demonstrate stronger viewership than other spring sports properties, it can become a big player in the media rights marketplace and a viable long-term business. “That’s where the comparison to other sports properties at this time of year is really important,” he said. “The NHL just went out and got a huge increase. We think that MLS and Formula One are about to do the same. Because of the entrance of the streaming players, the market is escalating in a way that we think we have an opportunity to build this league and benefit from that rising tide of sports rights.”
The league has a built-in marketing advantage that should enable it to outdraw competing sports properties. “We have a huge number of games on over-the-air broadcast networks,” Mulvihill said. “Two thirds of [our] games are going to end up on Fox or NBC. Other than the NFL, there’s not another league that has [that much] of its content on free, over-the-air, major networks.” In a world where content discovery has become problematic, having games on broadly distributed networks makes it easier for fans to find them.
When asked why the network made such a big investment in spring football, in terms of linear windows, NBC Sports executive Jon Miller said the expectation is “the USFL will be a very compelling brand of football” and that from a scheduling perspective, the games fit in ‘extremely well’ with the programming windows available in Q2 ’22.
Playing all the games in its inaugural season in a single city has its advantages, but the centralized location could make it difficult for the league to grow passionate local fan bases in its eight “home” markets, which is why the USFL is planning to move to a more traditional home and away slate in 2023.
Competition is coming, too. The USFL will have this spring to itself, but the XFL is planning to join the mix next year. It is hard to imagine there’s room for two spring football leagues. On a commercial level, the jury remains out on whether there’s room for even one. The risk is that the two leagues operate independently, cannibalize each other and neither succeeds.
Having a one-year head start should give the USFL a leg up in building fan loyalty. But Mulvihill says the biggest advantage the USFL will enjoy over the competing spring league is its relationships with Fox and NBC. “It’s going to be hard for another spring league to find windows on networks that are as broadly distributed as NBC and Fox. There are only so many networks and so many windows to go around.” The XFL has yet to announce a broadcast deal.
