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Wednesday, December 10, 2008
 
The Economy Strikes Again (Sabathia not Worried)

According to the Denver Post, the Arena Football League “faces possible dissolution unless it secures an infusion of money by December 19.” Perhaps they can call CC Sabathia, who is reportedly set to sign a 7 year, $161 million contract with the Yankees.


Given the state of the economy, reports of the AFL’s possible demise are not shocking, but they do raise a few interesting issues. First, this sheds some light on the then-surprising decision of team owner Tom Benson to fold the popular New Orleans VooDoo this past October (as well as Commissioner Baker’s sudden resignation). At the time, VooDoo executives claimed that the franchise folded because of “circumstances surrounding the team and the league,” but some speculated that the end of the VooDoo was an ominous sign for the future of professional sports in New Orleans. Perhaps now—particularly with the Hornets and Saints thriving—we can see Benson’s actions as more of a reflection of the AFL than the city of New Orleans.


Second, the fall of the AFL may be very good news for the rise of the United Football League, which plans to launch in 2009. The UFL will not only have access to a large number of professional football players and coaches looking for jobs, but will also have the ability to slide in to play the role of the NFL’s “feeder league.”


Third, it is interesting to read statements from various executives involved with the AFL. On the AFL website, the league’s official statement is: “Despite rumors and reports to the contrary, all AFL teams are continuing to work towards ArenaBowl XXIII. As it has previously stated, the AFL continues to work on long-term structural improvement options.” Brett Bouchy, the new owner of the Orlando Predators said that he "expects the league's 2009 schedule to be released in the next 2-4 weeks….I will tell you that the overall economy has presented challenges for arena football, just like any other business that's out there, and we are addressing that. We are going to come out of this with the best economic model the arena league has ever had in the next 30 days.” And, Michael Young, the executive vice president of the Colorado Crush stated that “[t]he business model for the league is broken.”


These statements all focus on the economic model of the league and suggest that league owners are working on a new model for the league going forward (and that would allow them to go forward). What model could they employ that might permit them to lower costs, particularly in the form of player salaries? Well, perhaps our old friend the single entity. Stay tuned…

Update (3:20 pm, Eastern). Well, that didn't take long. According to the Kansas City Star, the AFL will cancel its 2009 season. The article quotes Pete Likens, the director of communications for the Kansas City Brigade, as offering up this interesting tidbit: “It’s pretty much a done deal to suspend the 2009 season and work toward a single entity-league,” Likens said. “We plan to start up again in 2010, if the owners vote this way. We’re prepared to play this year, and/or next.”

It will be interesting to see what type of single entity structure the AFL comes up with to immunize itself from a Section 1 attack and how the players respond to the new league structure. Given the Seventh Circuit's "one facet at a time" approach in American Needle, the AFL may have to go to extremes to avoid the risk that a court would conclude that the AFL is a single entity for purposes of the player market.

Update (12-11-08) The Sports Business Daily is reporting that the AFL Board of Directors voted not to suspend operations for the 2009 season. Yet.






4 Comments:

As you're probably aware, the AFL has been thinking about moving toward the single entity structure for some time. The was an SBJ "in-depth" on the AFL in February 2008 that talked about the issue. See A new play of the AFL.

Anonymous David -- 12/10/2008 5:19 PM  


David--

Thank you for including the link. I accidentally excluded the link in my original post to Marc Edelman's discussion of the AFL and the single entity model in the SBJ back in April (where he discussed the 2/08 article you linked to in your comment). The post is now fixed. Thanks again,

Blogger Gabe Feldman -- 12/10/2008 5:36 PM  


One thing to note is that the af2, the developmental league for the AFL, will not be affected. It will be interesting to see whether the AFL players flock to the af2 for the 2009 season and how the af2 will be affected by today's news in the future.

Blogger Jeff -- 12/10/2008 6:01 PM  


AFL is a great league and I hope they can keep it together.

While I agree that theoretically this could be beneficial for planned United Football League, the reality is that it is a sign of troubles ahead. I think it illustrates clearly that the current market is oversaturated with football, and sports properties in general. This does not bode well for the UFL. I'm not sure how an upstart league is going to be able to succeed in a time when a reasonably similar and established property is failing.

Matt Breeden (SportsLawGuru.com) is an internationally respected business advisor and attorney based in Indianapolis, IN. His practice is focused on Sports & Entertainment, Intellectual Property, Commercial and Corporate Law. He has represented Sports & Entertainment properties, as well as many other businesses, in a variety of matters, including: Broadcast & Digital Media Agreements, Licensing Agreements, Sponsorship Agreements, Commercial Agreements, Athlete/Driver Contracts, Insurance & Risk Management, Employment Agreements, Litigation Management, Mergers & Acquisitions, Business Formation and Corporate Governance.

OpenID mbreeden -- 12/11/2008 3:03 PM  


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