Inside The XFL's Financial Struggles In Season One

Inside The XFL’s Financial Struggles In Season One

The XFL recently completed their inaugural season under new ownership, having successfully made it through the full twelve weeks, crowning a champion.

The Championship game itself was excellent for the league, as the Arlington Renegades took down the DC Defenders in thrilling fashion. It’s airing on ABC garnered 1.4M viewers, which is quite respectable for spring football.

Despite the success of getting through their first season as the XFL 3.0, there are plenty of factors – and losses – to take into consideration. Operating a startup professional football league is no easy task, and takes quite a bit of spending power to accomplish. There’s a reason why the USFL played its first season in only one city.

There have been some accurate – and inaccurate – reports surrounding the league and its finances as of late. In this piece, we’ll be taking a look at a few important stories regarding the XFL and where it sits financially right now.

TV Rights Deal

The XFL established a broadcasting deal with Disney and their networks back in July of 2022. This deal resulted in all 43 games this season being aired on ABC, ESPN, ESPN2, and FX. The TV ratings were hit and miss – but that’s another story.

In today’s professional landscape, leagues thrive – or simply just survive – based on the TV deals they can secure. Generally, long-term profitability comes from having a strong relationship with networks who can be trusted to perform at a high level.

Clearly, ESPN/ABC/Disney are excellent partners. Many high-class sporting events are hosted on those networks, and for good reason. For the XFL to be featured on ABC and ESPN channels is a major win.

The XFL was partnered with FOX and ESPN back in 2020, when Vince McMahon owned the league. In that iteration, there were no rights fees officially in place, as ESPN/FOX only covered production costs.

Under the leadership of Dwayne Johnson, Dany Garcia, and Redbird Capital, the XFL reunited with Disney. Multiple reports have surfaced regarding what the TV deal looks like – with some contrasting each other starkly.

Just a few days ago, Forbes reported that the XFL had lost $60 million in year one. We’ll get to that part a little bit later – but first, Forbes claimed that ESPN was paying the XFL $20 million per year to broadcast their games.

This lines up with what Sportico speculated a few months ago, as their experts estimated that the XFL struck a five year deal worth between $100-150 million with the corporation. ESPN and XFL sources continue to support this story.

However, there seems to be another side to the coin. Andrew Marchand of the New York Post now reports that the league does not have any rights fees associated with their Disney Deal. In fact, John Ourand of Sports Business Journal agrees, further commenting on how the league dug themselves a financial hole in season one.

The XFL is denying these claims, sticking to what Forbes reported originally. League sources have refuted Andrew’s story, according to XFL News Hub’s Mike Mitchell. In addition, Dwayne “The Rock” Johnson himself responded on the topic:

There’s a couple of pieces to note about his response. Firstly, he says that Marchand’s report is “not true”. He then adds that ESPN is a “stakeholder” in the XFL, and is committed as a long term partner – which are all based and logical statements to make.

However, his tweet does not address Marchand’s direct claim about the fees themselves. Andrew has since stood by his report, supporting the notion that the $20 million figure is 100% incorrect. Remember, a “rights deal” and a “rights fee” are two separate commodities. An organization can hold a rights deal, without any fees being associated with said agreement.

Secondly, just because ESPN is a stakeholder does not mean that there is a rights fee in place. The definition of a stakeholder – and a paying TV deal – are not the same thing. The XFL has confirmed that Disney is covering production costs, as they did in 2020. They also continue to claim that what Forbes discovered is accurate.

However, it would make zero sense for Marchand and Ourand to report what they did, without there being some merit to their claims. These are two accomplished journalists in their respective fields. Neither have any affiliation with the XFL – or the USFL for that matter. We can confirm that FOX Sports/USFL had nothing to do with this story.

Something about Dwayne Johnson’s response on Twitter seems off. While fans jumped for joy with his reply, to be quite frank, he didn’t fully address the issue at hand. Dwayne did not mention anything about rights fees, only that ESPN was a stakeholder. The wording he used skated around the original point.

Also, the fact that he responded to a little known Twitter journalist is rather strange. Why even bother interacting, if there wasn’t more to the story? It feels like the league is trying to hide the full truth from the public. Even if that isn’t the case, the actions taken by Johnson in his vague reply don’t paint a confident picture.

It’s also worth noting that Forbes’ reports came straight from the XFL. The entire piece reads like a PR push that came from the league and its executives. Remember, Forbes runs off of a contributor-based model. Professional leagues, and companies in general, will usually alter numbers to make things appear brighter than they are in reality. That’s how business works.

When it comes to fudged numbers, the $60 million lost in year one is an example.

$60 Million…Multiplied?

One has to wonder how accurate public financial statements are, when they’re leaked and/or approved by the organization themselves. Forbes reported based on “industry sources” that they lost around $60 million in year one, which to the average consumer seems like a relatively large number.

For spring football, though, that’s not too shabby. The Alliance Of American Football needed $250 million after week one just to stay afloat, and that inevitably crashed and burned before making it to the postseason.

For the XFL to claim that they lost 60 million basically means that’s the number they’re comfortable with sharing to the public. Both the XFL and Forbes have stood by this report. Is it the true, full figure? Probably not.

Multiple sources close to the situation behind the scenes have indicated that it’s much higher than that. The XFL, while saving on some costs due to a hub model, is still spending a boatload of money by being invested in all eight markets in their first year. $60 million is a conservative number to report, and simply isn’t fully accurate.

The XFL played in a few large and expensive stadiums; such as Lumen Field in Seattle, and The Dome in St. Louis. They also pursued some popular names to fill coaching and personnel positions. For example, Houston Roughnecks HC Wade Phillips is on a contract that earns himself upwards of $1 million per year, per sources. That’s a large piece of change for a spring league, and is one small illustration of where some of this money is going.

Where the league legitimately cut costs was in the marketing department. According to numerous reports, the XFL only spent $120,000 in marketing efforts leading up to the season. This would make sense, considering the inconsistent TV ratings and attendance numbers we saw throughout the year, especially from certain underperforming markets.

If $60 million was the true and final number, then the XFL would be in decent shape for all intents and purposes. Unfortunately, that figure doesn’t tell the full story.

Struggling For Sponsorships

In addition to the money the XFL is blowing through, they’ve reportedly been unable to fully sell to sponsors in the way they had hoped.

For example, the XFL Championship aired nationally on ABC. One would assume that a primetime Saturday night slot would be perfect for advertisers, especially during the biggest game of the season. This was not the case. Angelo Fiouris of Fox Sports New Jersey confirmed that local ABC stations were giving away ad slots for free in certain markets.

These were straight up freebies. Local ABC affiliates could not find buyers for specific slots, which led to those stations giving them out for free to already paying customers. Sources can confirm that participating affiliates were adjacent to the cities/markets that XFL teams were playing in this season.

No matter how one tries to spin this, it’s not an ideal look. The XFL could not sell in-market slots to advertisers during their most important matchup of the year; which was broadcasted on ABC, one of the nation’s strongest TV channels.

As previously stated, TV deals can make or break the future of a professional sports league. The XFL has their work cut out for them, in attempting to build from the ground up. Clearly, everything isn’t going as smoothly as the PR spins would suggest.

Another example of questionable sponsorship would be Progressive Insurance. They had a deal with the XFL in 2020, and reportedly “re-signed” in 2023. However, sources have indicated that this partnership is simply a continuation of the XFL 2.0 iteration, as the XFL had commitments they still owed to Progressive, due to the 2020 season not being completed. Progressive boasted logos on each XFL field, alongside plenty of ad-spots throughout the year.

Disney had a tough time selling ad spots leading up to the season as well. Progressive was one of the major sponsors they could land, with the rest being mostly comprised of Johnson-owned properties (i.e. Teremana, Zoa Energy). Considering Progressive was a carry-over from 2020, it’s tough to look at the overall sponsorship landscape as a positive for the XFL this year.

2023 Layoffs

Multiple reports have surfaced since the XFL ended its season, surrounding layoffs in the company. The XFL cut off a large portion of its marketing team, including Chief Marketing Officer Janet Duch. Dozens of folks were left without a job – and while the XFL seems to claim that some of these are “seasonal cuts”, the situation would suggest otherwise.

John Ourand of Sports Business Journal had this to say:

“The XFL, as reported by Jabari Young at Forbes, lost a significant amount of money. But, for me, it’s less about losing money. Any league in its first year is going to lose a boatload. That was expected. What I was not expecting was the layoffs that occurred there; including two of the top marketing executives at the XFL. I was told that they laid off dozens of employees. That suggests to me that the losses that were incurred are actually much greater than were anticipated. It also suggests that they are going to have a different strategy moving forward against marketing, and more towards sponsorship sales and getting butts in seats. Trying to work on attendance. If you’re starting a league, you need all of those. You can’t cut one and start doing the other…there’s some red flags popping up around that league.”

Layoffs are typically never a good sign. Of course, restructuring is one thing – but, it appears as if the XFL is attempting to overcompensate for some losses they endured in the 2023 season.

Now, the league did make an official statement regarding the layoffs:

As the XFL plans for 2024 and beyond, it has decided to transition into a dual full-time and seasonal-based employment model to improve efficiency and drive sustainable business performance across all markets, given the seasonal nature of the business. The XFL will continue to employ full-time business and football operations functions on both the league and team levels and will scale up hiring each year for pre-season and in-season roles.

When looking at the bigger picture, some of these moves do make sense. What was the XFL lacking in 2023? Proper marketing. Again, this could be an entirely different article – but, the league certainly underperformed in multiple markets, at least according to 2020’s standards. So, if the XFL is heading in a different direction in that regard, that is by no means a bad thing.

The Future Outlook

There are many accomplishments for the XFL to be proud of, looking back on their 2023 season. Spring football leagues have come and gone, but the XFL 3.0 made it through a full calendar year, and now set their sights on 2024 and beyond.

For the XFL to provide so many players, coaches, personnel, etc. with opportunities is a success in and of itself. Spring football is such a special niche, giving people a chance to live out the dreams they thought were over.

Throughout the season, the quality of play was excellent, with exciting matchups week in and week out. From start to finish, fans were treated to plenty of entertainment, whether they watched at home, or attended a game in person. When it comes to the product itself, the XFL is building something unique that is resonating with football fans across the country.

The question remains: how far can they go? To be clear, the point of this piece isn’t to bash the XFL, it’s simply calling readers to analyze the full situation at hand.

If the XFL wants to survive long term, the figures have to make sense on paper. Redbird Capital and their partners are committed to seeing success with the league, but at some point, the numbers will have to improve. Sustainability is something we don’t often see in spring football. The XFL has an opportunity to prove that notion wrong, as long as they take the correct steps.

Their direct competition in the USFL is in their second season, preparing for their upcoming playoffs and Championship in a couple of weeks. The USFL has TV deals with FOX & NBC, as FOX Sports owns the property itself, and NBC has paid for a share of the rights.

The league utilizes a hub model to maintain lower costs as well, as only three of the eight teams are in their home markets currently. So far, things are going smoothly in the USFL’s camp, at least for the most part.

Right now, the picture the XFL is trying to paint is a bit skewed. While the league isn’t necessarily facing a shutdown, per se, there is growing concern around the potential longevity of the organization, as made evident by the points covered in this piece.

On the bright side, the league is projected to see around $100 million in revenue during season two, per Jabari Young and Forbes. If this is indeed the case, that is a remarkable number, and one that is quite encouraging. For comparison, the XFL in 2020 was on pace to bring in around $46 million in overall revenue, with Vince McMahon at the helm.

In addition, XFL ownership states that the league has capital in place for years one through four. Dany Garcia says that the XFL is “extremely well capitalized for the long-term”.

Gerry Cardinale, founder of Redbird Capital, sees the XFL taking a similar path to the MLS – and is projecting it to be cash-flow positive by 2027. He also plans to pass the MLS, making the XFL the fifth-largest sports league in the United States. For this goal to become a reality, the league would have to see some big-time investments, sooner rather than later. Given their current financial state, it’s quite a bold ambition, to say the least.

Final Thoughts

Ultimately, the XFL is well on their way to a second season, which is great news for spring football. As the league continues to work through the cobwebs of being a startup, hopefully the bumps in the road iron themselves out, especially financially.

When it comes to the product itself, the XFL seemingly passed with flying colors, as fans were engaged throughout the entire year. Now, we wait and see what the XFL plans to do long-term, given the large amounts of money they’ve blown through already.

What are your thoughts on the XFL’s financial situation? What would you like to see the league do moving forward to improve? Let us know down in the comments below, or join the conversation on Discord!