Fran
12-22-2008, 06:36 PM
A scramble to call timeout
The story behind the AFL’s decision to suspend its season
Just two months ago, the Arena Football League thought it had found in Platinum Equity a financial savior that secured its future. But right before the holidays, the deal disappeared, helping drive team owners to suspend their season and leading to questions about whether the AFL will ever return.
Sources close to the league said Platinum Equity’s due diligence, conducted after the firm signed a letter of intent in October to invest up to $100 million in the league, showed heavier than anticipated operating losses in the AFL. At the start of the 2008 season, the AFL said it had a total operating loss of $24 million.
The league’s financial condition stalled Platinum’s interest and helped set off a month of turmoil among the AFL’s 16 teams that ultimately led to the decision to shutter the 22-year-old league for the 2009 season, while also clouding its long-term future.
“The catalyst was that there were a lot of owners who had put their eggs in one basket,” said a senior AFL employee. “They thought that Platinum was going to suck up 100 percent of their losses, and some weren’t prepared to start 2009 without them.”
Interim AFL Commissioner Ed Policy said that any deal with Platinum was never certain, despite the nonbinding letter of intent.
“There is no doubt that we were in discussions with outside investors and we entered into the nonbinding agreement, but the deal was very conceptual,” Policy said. “This suspension is not about outside investment, it’s about giving us time to renovate our own house. Once the renovation is complete, the options will be more plentiful.”
Columbus Destroyers owner Jim Renacci, vice chairman of the AFL’s executive committee, blamed the worsening economy forhurting the league just as it was looking to reinvent itself into a single-entity structure while continuing to play.
“No matter what business you are in, if you look at what has happened with the economy in the last 90 days, it would give pause to anybody,” Renacci said. “We are taking time to retool the league.”
The uncertainty that led to the shutdown peaked during the late afternoon on Dec. 10, when owners gathered for a conference call to decide the fate of the league. The preceding week had been rampant with rumors that the league was about to fold, based in part on the fact that it had put off setting its 2009 schedule.
A vote during the conference call temporarily staved off a decision to fold the league. The 10-7 tally was short of the 12 votes, or two-thirds of the 17 voting members of the AFL ownership group, needed to cancel the season. The voting members were the 16 AFL owners and a group called Gridiron Enterprises, which owns 10 percent of the league. ESPN, which also has an equity stake in the league, did not have a vote, but Leah LaPlaca, ESPN’s AFL representative, was on the call, though she did not participate in the discussion.
Each faction pleaded its case amid discussion led by Renacci, who began taking a strong leadership role after longtime Commissioner David Baker resigned in July.
Renacci, who strongly felt the league needed more time to finalize a centralized structure,was pushing to cancel the season along with the AFL’s biggest hitters, including Dallas Cowboys owner Jerry Jones, owner of the AFL’s Dallas Desperados, and Atlanta Falcons owner Arthur Blank, who owns the AFL Georgia Force. Other high-profile owners, such as John Elway of the Colorado Crush and Jon Bon Jovi of the Philadelphia Soul, were also in favor of suspending the season.
“There were people who weren’t happy, but everyone was in favor of putting together a plan,” Renacci said. “The question was, can we get it done in eight days or 70 days? I was one who said you can’t get it done in eight days.”
Behind the scenes, a power play was under way.
On Dec. 11, the 10 owners who voted to suspend the season held aconference call of their own and decided they would fold their teams, forcing the AFL’s hand by leaving just six teams to play in 2009.
“Following the board meeting on [Dec. 10], I had multiple calls with owners who voted to suspend and with owners who voted not to suspend,” Policy said. “The owners were also talking amongst themselves.”
Against the backdrop of their decision to fold their franchises was the sense that ESPN would not carry a truncated league, though multiple sources said that ESPN never intimated such to league officials or owners. Sources said that ESPN would not have been happy to air the scaled back AFL, but most likely would have done so. ESPN officials would not comment.
Once word reached other teams that members of the 10-team caucus had decided they would fold, votes changed. The Chicago Rush, one of the most successful AFL franchises, switched sides and agreed to suspend the season. So did the Orlando Predators, giving the faction the 12 votes needed to suspend the season.
Votes in hand, the executive committee hurriedly called for another ownership vote. The reckoning day was to be on Dec. 14, at 9 p.m. ET, the earliest time allowed by league rules requiring at least 48 hours notice before an owners meeting.
When the owners met by phone, a source said the tone was businesslike, with a feeling of resignation.
Little discussion was held and Renacci led the voting process. Each of the 12 teams voting to suspend the season did so by proxy, allowing Renacci to voice their decision as a show of solidarity. Voting to fold the 2009 season were the Chicago Rush, Cleveland Gladiators, Colorado Crush, Columbus Destroyers, Dallas Desperados, Georgia Force, Grand Rapids Rampage, Kansas City Brigade, Los Angeles Avengers, Orlando Predators, Philadelphia Soul and Utah Blaze. Voting to play in 2009 were the Arizona Rattlers, Tampa Bay Storm, New York Dragons, San Jose Sabercats and Gridiron Enterprises.
“The decision wasn’t entered into lightly,” Policy said. “The board meetings were very passionate.”
Those that wanted to continue stressed the need to stay in the public eye.
“We believed that more harm is done by not playing than playing, and we felt that even a reduced schedule and mutual sacrifice from the league office down to the team water boys would have kept the game in front of people,” said Bill Niro, president of Gridiron Enterprises.
Surprisingly, business was still happening. From the first meeting on Dec. 10 to the final vote on Dec. 14, Chicago Rush general manager Mike Polisky sold 22 season tickets and had three local sponsorships on his desk waiting to be signed.
“We were trending ahead in both season-ticket sales and corporate partnerships, and we were ready to play,” Polisky said “But we understand the need for the suspension and believe it’s imperative that the league have one voice and one objective to make it sustainable.”
After the vote on Dec. 14, the league scheduled an announcement for the next day.
League employees gathered in conference rooms at the AFL’s New York and Chicago offices that day, waiting to hear their fate just 10 days before Christmas. Policy, who was traveling back to New York from business, addressed all of the employees through a conference call. Not then, nor at any time through press time, were league employees informed about layoffs, severance or even if there would be a continuing league office. Layoffs, Policy said, are inevitable.
The new plan, which will include decreased player costs, a streamlined league office and a centralized business model under which teams will share expenses, is due by March 1.
“This league has always known we had to redo our model,” Renacci said. “We finally decided that this was the best opportunity to retool it.”
AFL not a big moneymaker, but arenas don’t like open dates
The Arena Football League’s decision to cancel the 2009 season means facilities in 16 cities lose prime dates in the summer when business is typically slow for those buildings.
The rent deals AFL teams made with arenas differed by market. Four arena managers indicated they were not getting rich off those agreements, in which, for the most part, their facilities kept concessions and parking revenue but did not share in ticket sales and sponsorship income. Food per caps in those cities — Dallas, Los Angeles, Orlando and Philadelphia — ranged from $8 to $12.
In Dallas, American Airlines Center broke even with arena football, said Dave Brown, general manager for Center Operating Co., the facility operator. Booking two strong concerts next year could “wash out the financial loss” from the absence of eight Desperados games, where average attendance was about 12,000.
“The per-game financials were not the reason we wanted the AFL,” Brown said. “It was diversity of programming for our suite holders and sponsors.”
Losing eight dates is a concern in Los Angeles, where the AFL’s Avengers played the last eight seasons, said Staples Center general manager Lee Zeidman. As it stands now, the concert market looks soft for arenas in 2009, so it could be tough to fill that void, Zeidman said.
“We are scrambling to fill those dates like everybody else,” he said. “We love the sport from the family entertainment standpoint; we were getting 12,000 to 15,000 in the building for every game.”
Because the AFL never confirmed its schedule, Amway Arena in Orlando has 20 dates to fill instead of eight after officials held multiple dates to give the Predators options, Executive Director Allen Johnson said, although the arena did not turn away events because of the holds. The Predators averaged 12,500 fans.
“Anybody who has a successful arena football team is not going to be pleased with this decision,” Johnson said. “Those are eight dates when you really need them in soft times, when they are not competing with the NHL and NBA. No manager is looking to get rid of events.”
The story behind the AFL’s decision to suspend its season
Just two months ago, the Arena Football League thought it had found in Platinum Equity a financial savior that secured its future. But right before the holidays, the deal disappeared, helping drive team owners to suspend their season and leading to questions about whether the AFL will ever return.
Sources close to the league said Platinum Equity’s due diligence, conducted after the firm signed a letter of intent in October to invest up to $100 million in the league, showed heavier than anticipated operating losses in the AFL. At the start of the 2008 season, the AFL said it had a total operating loss of $24 million.
The league’s financial condition stalled Platinum’s interest and helped set off a month of turmoil among the AFL’s 16 teams that ultimately led to the decision to shutter the 22-year-old league for the 2009 season, while also clouding its long-term future.
“The catalyst was that there were a lot of owners who had put their eggs in one basket,” said a senior AFL employee. “They thought that Platinum was going to suck up 100 percent of their losses, and some weren’t prepared to start 2009 without them.”
Interim AFL Commissioner Ed Policy said that any deal with Platinum was never certain, despite the nonbinding letter of intent.
“There is no doubt that we were in discussions with outside investors and we entered into the nonbinding agreement, but the deal was very conceptual,” Policy said. “This suspension is not about outside investment, it’s about giving us time to renovate our own house. Once the renovation is complete, the options will be more plentiful.”
Columbus Destroyers owner Jim Renacci, vice chairman of the AFL’s executive committee, blamed the worsening economy forhurting the league just as it was looking to reinvent itself into a single-entity structure while continuing to play.
“No matter what business you are in, if you look at what has happened with the economy in the last 90 days, it would give pause to anybody,” Renacci said. “We are taking time to retool the league.”
The uncertainty that led to the shutdown peaked during the late afternoon on Dec. 10, when owners gathered for a conference call to decide the fate of the league. The preceding week had been rampant with rumors that the league was about to fold, based in part on the fact that it had put off setting its 2009 schedule.
A vote during the conference call temporarily staved off a decision to fold the league. The 10-7 tally was short of the 12 votes, or two-thirds of the 17 voting members of the AFL ownership group, needed to cancel the season. The voting members were the 16 AFL owners and a group called Gridiron Enterprises, which owns 10 percent of the league. ESPN, which also has an equity stake in the league, did not have a vote, but Leah LaPlaca, ESPN’s AFL representative, was on the call, though she did not participate in the discussion.
Each faction pleaded its case amid discussion led by Renacci, who began taking a strong leadership role after longtime Commissioner David Baker resigned in July.
Renacci, who strongly felt the league needed more time to finalize a centralized structure,was pushing to cancel the season along with the AFL’s biggest hitters, including Dallas Cowboys owner Jerry Jones, owner of the AFL’s Dallas Desperados, and Atlanta Falcons owner Arthur Blank, who owns the AFL Georgia Force. Other high-profile owners, such as John Elway of the Colorado Crush and Jon Bon Jovi of the Philadelphia Soul, were also in favor of suspending the season.
“There were people who weren’t happy, but everyone was in favor of putting together a plan,” Renacci said. “The question was, can we get it done in eight days or 70 days? I was one who said you can’t get it done in eight days.”
Behind the scenes, a power play was under way.
On Dec. 11, the 10 owners who voted to suspend the season held aconference call of their own and decided they would fold their teams, forcing the AFL’s hand by leaving just six teams to play in 2009.
“Following the board meeting on [Dec. 10], I had multiple calls with owners who voted to suspend and with owners who voted not to suspend,” Policy said. “The owners were also talking amongst themselves.”
Against the backdrop of their decision to fold their franchises was the sense that ESPN would not carry a truncated league, though multiple sources said that ESPN never intimated such to league officials or owners. Sources said that ESPN would not have been happy to air the scaled back AFL, but most likely would have done so. ESPN officials would not comment.
Once word reached other teams that members of the 10-team caucus had decided they would fold, votes changed. The Chicago Rush, one of the most successful AFL franchises, switched sides and agreed to suspend the season. So did the Orlando Predators, giving the faction the 12 votes needed to suspend the season.
Votes in hand, the executive committee hurriedly called for another ownership vote. The reckoning day was to be on Dec. 14, at 9 p.m. ET, the earliest time allowed by league rules requiring at least 48 hours notice before an owners meeting.
When the owners met by phone, a source said the tone was businesslike, with a feeling of resignation.
Little discussion was held and Renacci led the voting process. Each of the 12 teams voting to suspend the season did so by proxy, allowing Renacci to voice their decision as a show of solidarity. Voting to fold the 2009 season were the Chicago Rush, Cleveland Gladiators, Colorado Crush, Columbus Destroyers, Dallas Desperados, Georgia Force, Grand Rapids Rampage, Kansas City Brigade, Los Angeles Avengers, Orlando Predators, Philadelphia Soul and Utah Blaze. Voting to play in 2009 were the Arizona Rattlers, Tampa Bay Storm, New York Dragons, San Jose Sabercats and Gridiron Enterprises.
“The decision wasn’t entered into lightly,” Policy said. “The board meetings were very passionate.”
Those that wanted to continue stressed the need to stay in the public eye.
“We believed that more harm is done by not playing than playing, and we felt that even a reduced schedule and mutual sacrifice from the league office down to the team water boys would have kept the game in front of people,” said Bill Niro, president of Gridiron Enterprises.
Surprisingly, business was still happening. From the first meeting on Dec. 10 to the final vote on Dec. 14, Chicago Rush general manager Mike Polisky sold 22 season tickets and had three local sponsorships on his desk waiting to be signed.
“We were trending ahead in both season-ticket sales and corporate partnerships, and we were ready to play,” Polisky said “But we understand the need for the suspension and believe it’s imperative that the league have one voice and one objective to make it sustainable.”
After the vote on Dec. 14, the league scheduled an announcement for the next day.
League employees gathered in conference rooms at the AFL’s New York and Chicago offices that day, waiting to hear their fate just 10 days before Christmas. Policy, who was traveling back to New York from business, addressed all of the employees through a conference call. Not then, nor at any time through press time, were league employees informed about layoffs, severance or even if there would be a continuing league office. Layoffs, Policy said, are inevitable.
The new plan, which will include decreased player costs, a streamlined league office and a centralized business model under which teams will share expenses, is due by March 1.
“This league has always known we had to redo our model,” Renacci said. “We finally decided that this was the best opportunity to retool it.”
AFL not a big moneymaker, but arenas don’t like open dates
The Arena Football League’s decision to cancel the 2009 season means facilities in 16 cities lose prime dates in the summer when business is typically slow for those buildings.
The rent deals AFL teams made with arenas differed by market. Four arena managers indicated they were not getting rich off those agreements, in which, for the most part, their facilities kept concessions and parking revenue but did not share in ticket sales and sponsorship income. Food per caps in those cities — Dallas, Los Angeles, Orlando and Philadelphia — ranged from $8 to $12.
In Dallas, American Airlines Center broke even with arena football, said Dave Brown, general manager for Center Operating Co., the facility operator. Booking two strong concerts next year could “wash out the financial loss” from the absence of eight Desperados games, where average attendance was about 12,000.
“The per-game financials were not the reason we wanted the AFL,” Brown said. “It was diversity of programming for our suite holders and sponsors.”
Losing eight dates is a concern in Los Angeles, where the AFL’s Avengers played the last eight seasons, said Staples Center general manager Lee Zeidman. As it stands now, the concert market looks soft for arenas in 2009, so it could be tough to fill that void, Zeidman said.
“We are scrambling to fill those dates like everybody else,” he said. “We love the sport from the family entertainment standpoint; we were getting 12,000 to 15,000 in the building for every game.”
Because the AFL never confirmed its schedule, Amway Arena in Orlando has 20 dates to fill instead of eight after officials held multiple dates to give the Predators options, Executive Director Allen Johnson said, although the arena did not turn away events because of the holds. The Predators averaged 12,500 fans.
“Anybody who has a successful arena football team is not going to be pleased with this decision,” Johnson said. “Those are eight dates when you really need them in soft times, when they are not competing with the NHL and NBA. No manager is looking to get rid of events.”