Once its greatest asset, the AAF’s proprietary technology platform may have led to Tom Dundon’s decision to cease the new football league’s operations.
The Alliance of American Football (AAF) began its inaugural season earlier this year full of promise. The league hoped to be a supplemental league to the NFL, capitalizing on the NFL’s short offseason by providing a compressed football season during the months of February to April. The AAF believed this would position it for long-term success because it would be able to capture the eyes of football fans during the NFL’s off-season.
The AAF began with a promising start, drawing in 2.9 million viewers on its first night of the season. However, the AAF soon began to face hardship. Only 2 weeks into its season, it was reported that the AAF was having trouble meeting payroll and needed a $250 million bailout by billionaire Tom Dundon to keep the league operating. Then, as we discussed in a previous post, the AAF faced a lawsuit from Robert Vanech, who claimed that he had a handshake deal that he would be a 50% owner in the league with AAF co-owner Charlie Ebersol. In this lawsuit, Vanech also claimed that he collaborated with Ebersol to come up with the idea for a proprietary technology that the AAF would use for real-time data in games.
The AAF’s proprietary technology was the league’s greatest asset. As also discussed previously, the AAF’s proprietary technology was a platform that can provide data in the blink of an eye. This technology can be used to standardize data delivery to gambling houses and fantasy leagues. Therefore, with this technology platform, the AAF was positioned nicely to capitalize on the legalization of gambling following the Supreme Court’s ruling in Murphy v. NCAA last year where the court overturned a federal prohibition on sports betting. In its long-term plans, the AAF believed this technology would allow for live in-game betting on play outcomes in the future.
This exciting proprietary technology and strong initial ratings indicated that the league was set up for success. Surprisingly, it was reported yesterday that the league will be suspending operations, thereby leaving many wondering why a league with such promise would fold so quickly. Some believe that the reason is because the NFL Players Union (NFLPA) would not allow NFL players to play in the AAF.
Albert Breer of the MMQB reported that the league’s future came down to a decision by the Chairman of the AAF, Tom Dundon. Breer tweeted out that perception within the AAF is that Tom Dundon bought a majority stake in the league “simply for the gambling app being developed.” In a follow-up tweet, Breer attached the text of an email from the AAF board regarding the league suspending operations and canceling the remainder of the season. The text of the email can be seen below:
It is interesting to note that in this email, the board states that they expect to “keep a small staff on hand to seek new investment capital and restructure our business.” This could be an indication that Tom Dundon is looking to dump the AAF as a supplemental football league and simply push forward with its proprietary technology. It was also reported by Darren Rovell that Tom Dundon lost $70 million from the league folding. A billionaire like Tom Dundon wouldn’t just throw away $70 million, which is why many are speculating that Dundon invested his money solely for the proprietary technology.
Although we can only speculate what will happen with Tom Dundon and the AAF’s technology, one thing is for certain, the legalized gambling market presents an enormous business opportunity. Prior to the Supreme Court’s decision in Murphy, it was estimated that the previous black market took in over $150 billion in illegal bets every year. Therefore, this industry presents an enormous opportunity and makes Tom Dundon’s $70 million loss from the AAF look like peanuts if he is able to capitalize on the proprietary gambling technology developed by the AAF.
In addition, professional sports are more data-driven than ever before. This technology allows individuals to receive data in milliseconds, which will not only be useful for gambling, but also for professional sports teams trying to gain a competitive advantage. As a result, this technology is not only applicable to gambling but to all professional sports teams as they continue to incorporate data into their game strategy.
Currently, we do not know the full story of the downfall of the AAF or what Tom Dundon’s plans are for the AAF’s proprietary technology. Although, with the legalization of gambling and the rise of big data in sports, we do know that there is an enormous opportunity for Dundon to capitalize on this technology. Based on the present information, Dundon very well may have decided to ditch the AAF and shift focus to its proprietary technology. Therefore, once the AAF’s greatest asset, this technology platform may have actually led to the downfall of the Alliance of American Football.
Albert Breer – https://twitter.com/AlbertBreer/status/1113201087698415619