The AAF filed for bankruptcy before the end of its first season, putting an official end to what was a promising complementary football league.
Over the past couple of weeks, CBSSports.com spoke to dozens of former players, coaches and football operations staff members about the final week of the league's existence. However, one person who hasn't been able to comment publicly has been CEO Charlie Ebersol -- until now. Ebersol broke his silence earlier this week with a Q&A with the Sports Business Journal, but in a conversation with CBSSports.com, Ebersol went into extensive detail about why the AAF shuttered and from where the league's financial issues came. He also addressed some of the horror stories from the chaos of the AAF's sudden demise, including why players were stuck with four-digit hotel bills.
While it would take hours upon hours to go through every question raised about the AAF by the time it shut down, Ebersol did peel back the curtain on the business operation side of the league, showing why it never realized its full potential. Below is that interview, edited only for flow.
CBSSPORTS.COM: You mentioned back during training camp that the AAF encountered three to four ELEs (Extinction Level Events) per week for a while. Did you ever imagine this -- money -- would be the ELE?
EBERSOL: No. Honestly, going back to last year when I signed a [business] contract for $170 million, we had it vetted by multiple different banks. It was structured in a way where we had access to the capital. So I assumed at that point in time that, while we had many challenges to overcome, financials should not be one of them.
CBSSPORTS.COM: So then if you raise capital investments and have more than $200 million at the start of the year, per the interview with the SBJ, where does that money go?
EBERSOL: Let me clarify. We spent less than $30 million getting to kickoff. We didn't overspend and run out of money. We were not able to get access to the capital. Oftentimes in fundraisers that are this big -- high eight-figure, nine-figure raising -- the money is put into an account that you have access to and you draw down from because the cost of taking that much money out of circulation to an investor or a fund is too big for them to park it when we didn't need all that money. Like, we weren't going to spend $200 million on Feb. 9 [when the season began]. We were going to spend $200 million over the course of two-and-a-half years.
So the money would be made available to us through a facility, which had been set up over six months and vetted by and run through by multiple banks, both in the U.S. and international. Everything was signed off on and agreed to in contracts. The board signed off on it. Most of my major investors had access to all the information. A lot of my partners had access to the information. All of my GMs and head coaches met with my primary investor during January and had a chance to talk to him and understand the financing.
What happened was -- really in the weeks leading up to the first game -- we started getting nervous about issues that were popping up with access to the capital. There were draw-down issues, a variety of different things that started happening that were preventing us from getting access to the capital. The money was on an as-needed basis so we could draw down. When that started happening we weren't in immediate trouble, but we knew we were going to have to find another protective source.
CBSSPORTS.COM: If that's the case, where do you think a lot of the negative reaction comes from?
EBERSOL: People like to grave dance. People slow down on highways to look at car crashes. That's just what they do. But, look, you don't get in the ring if you're not willing to take a hit. I'm not bemoaning people taking their shots at me. I take full responsibility for the role I played in this business. I just want people to understand there was no malfeasance. There was no misleading. There was no misdirection. There was no lying.
CBSSPORTS.COM: The people I've spoken with over the past couple of weeks -- specifically coaches and football ops personnel -- said they took a job with the AAF because they felt they had three years. So they weren't misled then?
EBERSOL: I feel exactly the same way. When we announced the league and closed our investors, we were operating under the assumption that we had a three-year deal. We had a contract signed for three years of financing. Do you think my broadcast partners signed multi-year contracts with me without vetting the amount of money I had access to? That's what's interesting to me. The comparisons that are being made are implying that there wasn't a level of vetting by the partners we had. Keep in mind the NFL put us on the NFL Network. Do you think the NFL did that without looking at our financing?
CBSSPORTS.COM: Did (control owner) Tom Dundon go through the same vetting process when he came aboard?
EBERSOL: Nobody puts in money like that (Dundon committed $70 million up front) without having access to the financials of a company.
CBSSPORTS.COM: So, if you and Dundon weren't on the same page with your business plan, was that evident when Dundon first joined?
EBERSOL: No, that became apparent in the first couple of weeks. There were subtle differences in how we saw the world that very quickly became very significant separations. And it became clear it was a different vision with a different timeline. Tom wanted to see things that we were planning on doing in Year 3 happen in Year 1. What we thought should take three years he thought should take three weeks. Every single contract I had signed, every partnership I had done -- my CBS deal, my NFL deal, my Turner Broadcasting deal -- what we were working on with the NFL and NFLPA, they were all long-term deals. Tom felt very strongly that those deals needed to happen much, much quicker. Ultimately, we built a company of 1,200 people that was in the middle of a football season and redirecting the ship in any direction was going to be very, very difficult.
CBSSPORTS.COM: What role did unpaid vendors and liabilities play into Dundon's decision to halt operations? Did he feel like his money was going out the door?
EBERSOL: You'd have to ask Tom. I understand Tom has complete authority to do what he did. I don't understand why he did it and neither does Bill [Polian, AAF Head of Football]. The conversation about liabilities, vendors, etc.: the natural course of business is that there is a delay between when something happens and when someone gets paid. By this point in the year, you're paying on a 60-day or a 90-day pay period. The decision was made by the board [Dundon] not to pay vendors looking backward.
CBSSPORTS.COM: What is being done about stories of Memphis Express players being billed for their hotel rooms?
EBERSOL: When you put your credit card down for an incidental, when the company is paying for the hotel, the hotel is absolutely not supposed to charge the person on their incidental credit card. At the very least, that's extremely bad faith, and at most it's bad business. It's not as if any of the hotels contacted us that day saying 'you've paid us up to this point, are you planning on not paying us going forward?' Very questionable decisions were made by the hotels that we've worked over the past two weeks to try to resolve because the players 100 percent should not have paid a dime for that.
Keep in mind that all the players were fully paid through the eight weeks. All the injured players have access to the necessary health insurance to get through their injuries. We paid for all of their housing, food. The wind down was not a reflection of the wind down as it was planned, which is a whole separate issue.
CBSSPORTS.COM: Regarding the 60-day or 90-day waiting period for vendors to be paid, was there still money available to do that?
EBERSOL: Let me answer your question a little differently. Our business plan called for an investment of $200 million over three years to establish enterprise value at which point there were a couple of exit scenarios where investors would get their money back. That $200 million initially came from our initial investors and primary investor. And then Tom replaced that investor and bought a majority of the company, took over the board, and took over the liabilities of the company as the majority owner of the company. So he became the control owner at which point in time he made decisions about how the company was financed moving forward. Our original business plan of $200 million to be investment in the cost of running a business for three years. My business model was single-entity football league where all the operations saved the league long enough to establish its partnerships. And then there were a bunch of exit scenarios that could occur at that point in time.
Our expenses fell almost exactly in line, within a couple of million dollars, of our original business plan. We had no real surprises in expenses. Our surprise was in financing. Which, again, I cannot emphasize this enough: We had signed contracts -- not just investors, but with banks, that were vetted by multiple parties. We had legally tendered documents to give us access to capital. That's the whole purpose of having contracts, vetting them and running them through banks.
