In this week’s column, California Sports Lawyer® CEO and Managing Attorney Jeremy M. Evans discusses who bears the loss when a sports league runs out of money and how its competition can continue to shape a sport after the league closes.
[M]aybe the best outcome is that competition from a new sports league causes an established league to change.
You can read the full column below. (Past columns can be found, here).
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LIV Golf has announced plans for an orderly wind down and is currently going through Chapter 11 bankruptcy proceedings. LIV Golf remains open to investment opportunities, but it seems as if the upstart league is coming to an end. The question of who gets paid and how when an investment does not work out is important and will be reviewed herein, but so will the question of why startup sports leagues often fail or find a way to combine with another league to survive. Lastly, maybe the best outcome is that competition from a new sports league causes an established league to change.
Front Office Sports reported that LIV Golf faces more than $100 million in unsecured claims from players, vendors, and other creditors, with $2 million currently set aside for recovery of those claims. That amount could change as the case proceeds. Bankruptcy law distinguishes among secured lenders, priority claimants, and ordinary unsecured creditors, who may have different prospects of recovery. Contract guarantees, advance payments, security, and rights to end or transfer a deal can establish and protect certain rights without guaranteeing that the league has money to pay what it owes. Some ongoing agreements involving players, sponsors, media companies, venues, and production partners may be assumed or rejected during the bankruptcy case, subject to the applicable rules and court approval. The larger lesson is that a professional sports league’s funding and headline contracts can create confidence, but the payment structure determines who carries the risk if the business fails.
Startup professional sports leagues face an uphill battle because they are often fighting against established leagues with longstanding audiences, media contracts, sponsors, and access to venues. While MLB has a distinctive antitrust exemption, the NBA, NFL, and NHL do not have the same general exemption. Sports history shows that established leagues have sometimes combined with competing leagues or taken in their teams. The AFL merged with the NFL, four ABA teams entered the NBA, and four WHA teams joined the NHL. Upstart leagues often bring new rules and moneymaking ideas and payouts for the established league to copy or model. For as much as some PGA Tour players may have lamented LIV Golf, its challenge put pressure on the Tour at a time when the Tour increased purses and changed its schedule to benefit players. The point here is that competition matters and is often forgotten in sports as a league, since there is very little competition in the league office, but plenty on the field of play with athletes.
Professional sports leagues are much different from athletic departments at universities. Universities are educational institutions with other sources of funding, although that does not guarantee a bailout for athletics. No matter how much athletic departments spend or raise, more students attend who do not play a sport. Sports are exciting, but a university is fundamentally a university, not a sports league. A startup league, however, needs enough investment and revenue to support its players, employees, teams, venues, and broadcasts. When those resources run out, a league may shut down, be sold, or combine with another. The XFL ceased operations in 2001 and again in 2020, returned under new ownership, and later combined with the relaunched USFL to form the UFL in 2024. College conferences and the NCAA are more like league offices in that they rely on their member schools to survive.
In the end, a league can close without ending the competition it created. LIV Golf’s challenge may leave changes in professional golf even if LIV itself does not survive. Players may gain opportunities while a new league operates, but players, employees, and business partners can also be left with unpaid promises when it closes. A new league needs more than enough money to begin play. It needs a business that can continue supporting the people who made the league possible.
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About Jeremy M. Evans:
Jeremy M. Evans is the CEO and Managing Attorney at California Sports Lawyer®, representing companies, creators, and talent in dealmaking matters across entertainment, media, sports, and intellectual property. An award-winning attorney and industry leader, Evans is based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.
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