Earlier this year, Vince McMahon decided to make one of the boldest moves in the history of sports. With his great earnings from the wrestling industry, he decided to start up his own football league. The XFL was formed, and it was intended to be a separate operation from the NFL, who was the dominant force in the football market. The NFL has cracked down on any rival leagues that have joined them, or they have at least forced mergers or buy outs of the leagues. If the XFL's intentions are to compete with the NFL, many questions come up if they will survive or not.
But before we take a look at if the XFL will survive or not, let's ask why Vince McMahon is attempting to start this league up. The demand for football has never been higher. Fans crave football, and they are suffering when the Superbowl ends. The NFL generates millions each year, and they have lucrative television contracts from the networks for seemingly ridiculous amounts of money. From television revenues and the high demand for football, each franchise, whether they admit it or not, are very profitable. They wouldn't be selling these days for $800 million if they weren't.
Also, the NFL is the football powerhouse of the United States. They have a stronghold on all of the best football talent out there, and they receive the best players out of College. With that being said, the NFL has no true competition right now. You do have leagues like Arena Football, the Canadian League, and the World League, but those are considered to be leagues that do not compete with the NFL. They are more like minor leagues or just separate entities of their own. NFL has NO true competition to deal with from other leagues, therefore, they are what we call a monopoly. Demand for NFL football is very high, and when it's high, you expand, right? Besides the Browns last year, does the NFL have any plans to expand their league for more teams to meet this strong demand? No.
Since they are the dominant market, or monopoly, all profits from the demand of football goes straight to them. The NFL is very profitable these days, and that is a good reason why Vince McMahon has made the XFL. He knows that by starting a league up with teams in areas that the NFL refuses to expand to, he can possibly gain profits off his new league. McMahon wants to "eat" into the massive amount of revenue that the NFL generates, and thus have his league to become a success.
Since the NFL is considered a monopoly, or one league satisfying the demand, a few things happen when a rival league enters the market. For one, the rival league could be a major failure in attempting to take away on any NFL profits, especially when they are first starting out. Also, the rival league could pose a threat to the NFL, and that would allow them to finally expand to areas that have a demand for football, whereas without the competing rival league, they wouldn't have thought about it. Finally, the competition could be so fierce that the NFL would decide to form a merger with that rival league. Usually, they would keep a few rival league teams, thus expanding their league, which they should have before.
Let's look at the history of each rival league, because it's important to see what history tells us about early attempts to eat away at the NFL's profits:
In 1920, the NFL was formed by George Halas, and it was a few small market teams with just a few big city teams. It's marquee star then was Red Grange, who alone, drew monster crowds to NFL games.
However, in 1926, the AFL One is formed when a dispute between Red Grange and the owner of his team occurs. Since Grange was the biggest draw then, he asked for a share of the gate(paid attendance) and he wanted one-third ownership of the Chicago Bears, the team he was with. He was turned down, so he went to New York to start his own team up(the Yankees), since that was the biggest city to gain profits. The NFL, however, already had a team in New York(the Giants), and they voted against letting Red Grange's New York expansion team into the NFL. Grange wasn't done though, as he started the AFL One, with his New York Yankees and other teams from big market cities. The Yankees, with Grange, were consistently defeating the NFL's New York Giants for the first year of the AFL One. This forced the NFL to create a merger with the AFL One, and the New York Yankees were allowed to be a part of the NFL, thus expanding the NFL. This competition also allowed the NFL to drop many small market teams and head more towards a larger market league.
In 1936, the AFL Two is started, up, and it's a complete failure! They didn't have what it took to compete with the NFL powerhouse then, so it folded after it's first season. The NFL had no reason to expand since this league wasn't a threat.
Then, in 1940, the AFL Three is formed, and it decides that it will deal will small markets only(smaller cities). The NFL, by now, has moved towards larger markets, therefore, this league is now considered a minor league to the NFL. Attendance was down for the AFL Three, and it also folded after its first season, due to it not being a threat to the NFL. No expansion, again, was enforced because it was weak competition.
However, in 1960, the AFL Four is formed. Unlike the three previous AFLs, this one is good competition. The baby booming generation and the revolution of television enable for this league to become very successful. The attendance could be down, but the invention of the television contracts helped this AFL survive, and in time, helped it expand. The NFL was also gaining off television contracts, and since they noticed the competition, they expanded their league as well to remain the top league. The AFL Four is a major success though. They were a great substitute against the NFL because they had more flashy plays than the NFL did. The AFL Four had the long ball passes, and at times, was considered a better watch than the NFL. The NFL knew that the AFL was satisfying the demand that they should have covered, so they merged with the AFL, and agreed to have a championship between the two leagues(now called AFC and NFC, and together they were the NFL) called the Superbowl.
This new NFL eventually grows to become a force in the football market, and with the addition of many teams from the AFL and the addition of the Superbowl, it has been strong ever since. The first World Football League of football is then formed in 1974 to try to compete with the newly popular NFL. It was a complete market failure, which the NFL really laughed at. The league folded after one season, and the NFL kept gaining popularity.
The USFL then came in during the year of 1983, and it could have been a decent contender. First off, the USFL decided to play their games in the Spring, rather than in the fall. The XFL is sort of leaning towards that, with it starting during the end of winter and ending in late Spring. The first year was not bad, as the demand for football then allowed them to sign an early decent television contract. However, in it's second year, the USFL decided to expand their league to try to gain more profits and to meet any kinds of demand needed for any city wanting football. When you expand your league, more teams will share television revenues. When that happens, teams will now get less revenue from the league. That caused many USFL leagues to fold up after the 1984 season, and that failure carried on to the 1985 season where they folded afterwards because they expanded against the demand of football.
So here we are...the year 2000. It's been a good 14 years since anyone even dared to go up against the NFL. Since the 1980s, the NFL has slowly grew into a financial powerhouse. Their attendance, franchise values, and television contracts have exploded in size, and the NFL has become the biggest sports industry around. With all of that, they are very profitable. So it's only reasonable that another league would attempt to satisfy more demand for football and to take some of the huge profits that the NFL has, right?
Well, looking at history, we can see that only one league has been successful, and I'd suggest that it came at a perfect time of the rise of television and the baby booming generation of that time. However, the demand for football has never been higher than it is today. The XFL is set to meet that demand needed, and with some help, who knows, it could become successful.
Since the NFL is such a powerful force, when Vince McMahon announced that he was forming a possible rival league, he was laughed at. In fact, the WWFE stock was dumped on its head on the day it was announced because nobody thought, then, that it could compete with the NFL. However, a few things have went in favor of the WWF becoming remotely successful.
For instance, the NBC deal with the XFL. Since CBS outbid NBC for the rights to AFC games, NBC wanted some kind of football other than college. So they negotiated with the WWF, and they bought half of the XFL and agreed to television a good chunk of the games. NBC is one of the top networks for sports, and they could help establish the XFL as a great force in the football market.
Also, with the Viacom deal, UPN and possibly TNN will now also air XFL games, giving them a whole lot more exposure. Also with the Viacom deal, the WWF made a cool $100 Million and will be making more off each wrestling broadcast, therefore, financially backing the XFL with some extra cash. That's a big part of the Viacom deal and it could help the XFL survive for a while.
The rules and the style of the XFL are said to be different than the NFL. Remember with the AFL Four, they had a different kind of style that was appealing to television viewers, which helped make them a success. Who knows, the XFL could attempt to play football games the way that many fans have wanted the NFL to do for years, and thus making them a force.
I'm interested on how the XFL will get their talent. Will they chase after top college talent? Will they just take the NFL leftovers? The talent will be a big part to whether the XFL will sink or swim. For the USFL, they signed some top stars out of college(like Steve Young), but the rest of the league suffered. If they have just whoever is leftover from the draft or those who can't cut it in the NFL, then it could struggle like Arena Football somewhat does.
The time of the XFL is rather interesting. They plan on starting in February 2001, which is weeks after the NFL puts on the great Superbowl. Will they catch the hungry football fans wanting more or will they just flood the market with football, and bore fans after a while? This is a big factor, as ratings will now be a part of how the XFL generates revenue from advertisers or any network willing to spend money to get the XFL's television rights.
Then again, the XFL might not be actual competition for the NFL, but it could be just a separate league like the international World League, Arena Football, and Canadian football. However, those aren't remotely profitable like the NFL, and the XFL wants the profits that the NFL generates.
To wrap this up, to figure out if the XFL will be a success you must look at a few factors. Is there enough demand for football that viewers will want to watch the XFL just after the NFL ends? Will it be a success for television, as television contracts can be now very lucrative? If successful, what effects will it do to the NFL? Those are interesting questions to ask, and we can only answer them when seeing how the XFL will effect the football market. Who knows, maybe it will force the NFL to expand or merge with the XFL due to great competition? We'll only see in time.
Thanks for Reading,
-Mr. Tito
Note: Information on the other rival leagues came from "Pay Dirt: The Business of Professional Team Sports" by James Quirk and Rodney D. Fort, © 1992-1997 Princeton University Press
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