The XFL TV Rights Deal: Are the Terms Favorable?
Zachary A. Landow is a J.D. candidate, 2021 at NYU School of Law.
The XFL is in its debut season as a supplement to football fans’ desire for more of the sport after the conclusion of the Super Bowl. Overall, the game largely resembles the NFL, with the main changes focusing on eliminating less-exciting plays and improving the pace of play. On May 6th, 2019, the XFL announced television rights deals with ESPN and Fox that would begin with the league’s inaugural season. The typical TV rights model functions with networks paying large sums to leagues for the right to air their games. The major North American leagues derive a significant portion of their revenues from these deals. For example, the NFL earns over $5 billion per year from the companies that broadcast their games. The networks then recoup their investment by selling valuable advertising space during the games.
While those types of deals are reserved for established leagues, the XFL’s agreement demonstrates that the networks see it as a risky gamble. The XFL will not receive any money from ESPN or Fox. Instead, each party will take control of different parts of the entertainment process. First, the networks will pick up the tab on production fees, which tend to total around $400,000 per game. The networks still have the responsibility of selling the ad space, but of course this gives them the privilege of pocketing the profits as well. On the XFL’s side, they will handle the sale of sponsorships at each venue.
At the outset, it may appear that this deal is fantastic for the networks and awful for the XFL. ESPN and Fox did not have to pay at all for the general rights to broadcast the games and stream them online, and yet they are still able to pocket the advertising fees. As a result, they stand to lose little should the XFL fail. However, the benefits to the networks do not necessarily result in negatives for the XFL when compared to its most recent predecessor. An unproven product not receiving any money for its TV rights is far from unheard of; in fact, the American Alliance of Football (AAF), which folded during its first season last year, had to pay networks just to get its product on the air. Furthermore, the XFL’s deal includes an agreement to have far more games on broadcast television. They plan on having 24 of the 43 games on this platform. Comparatively, the AAF had just one game (its season debut) on broadcast television before the league folded. The rest of the AAF games were spread out throughout various channels and streaming platforms, making it difficult to follow game schedules and which platforms to watch them on. Learning from that mistake, the XFL negotiated to have most of its games played on Saturdays and Sundays, and all games will be on ESPN/ABC or Fox/Fox Sports. The league’s presence on ABC and Fox is particularly important, as broadcast networks tend to have sizable viewership.
One could argue that it is quite surprising that the XFL was able to negotiate favorable terms. The industry is just a year removed from the tremendous failure of the AAF, and the XFL itself previously failed in 2001. However, the failure of the AAF taught the XFL many lessons that may allow it to survive. For example, the AAF lacked sufficient funding, which should not be an issue with Vince McMahon’s investment in the league. McMahon is the CEO of the WWE and has a net worth in the billions of dollars.
Overall, compared to the AAF’s TV deal, the XFL appears to have negotiated an agreement with ESPN and Fox that is beneficial to both sides. The networks are able to take a small risk with the potential for a big reward, and the league gets a generous starting point from which to begin competition. Thus far, the XFL’s ratings have been quite positive. Its first week saw similar ratings to the AAF’s first week, which, at the time, was seen as a major success. Of course, the league would later struggle to retain its viewership. However, the XFL has already sold more in ticket sales revenue and generated more gambling activity than the AAF. Thus, the future seems brighter for the XFL than its spring football predecessors.