Welcome to the latest edition of Winning Formula, the newsletter that breaks down the business behind our favourite sports. If you were forwarded this newsletter, you can sign up here. 

Today's edition is a collaboration with Tony Gruebner, a seasoned marketing and analytics professional who has held executive roles at Sportsbet, Australia's leading online wagering company and Pepperstone — one of the world's biggest online trading platforms. 

In his career, Tony has worked closely with major sports teams like the Tennis ATP Tour, Geelong Cats (AFL), Adelaide Strikers (Big Bash), and South East Melbourne Phoenix (NBL). It’s fair to say he knows his way around different sports leagues. Outside of work, Tony is a big sports fan who loves getting into the analytical and business side of the game.

Today, we focus on challenger sports leagues and why some succeed but most fail. We use the Hamilton Helmer 7 Powers framework to analyse the competitive advantages of major sporting leagues. We hope you enjoy! 

Please shoot us any feedback and as always, we’d appreciate it if you could share it with any friends or colleagues who might enjoy!

What you can learn from failed challenger sports leagues

Challenger sports leagues, the leagues set up as alternatives to well-established professional competitions, are on the rise. It’s easy to see why.

Owning the dominant sports league is a lucrative opporinty. Balooning broadcast and media rights, asset appreciation, merchandising, the rise of sports betting, league expansion and the exclusivity all point to why money is pouring into the establishment of challenger leagues.

Despite being extremely well funded, these leagues often don’t manage to displace the incumbent. Let’s look at one of the most totemic recent examples of a recent challenger league that has been making some noise.

By every metric, the recently completed third edition of the LIV Golf in Adelaide, the Saudi-backed challenger gold tournament to the PGA, has been a runaway success.

Over 100,000 patrons attended the event across three days, a healthy bump of 10% from the previous year's tournament. 

The event's popularity has led to a long-term commitment between LIV Golf and the South Australian Government, ensuring Adelaide remains the exclusive Australian host through 2031. 

This agreement includes plans for a new Greg Norman-designed course to host the tournament from 2028 onwards. Additionally, LIV Golf has extended its broadcasting partnership with Australia's Seven Network, guaranteeing live and free coverage of all events for Australian viewers in 2025 and beyond. 

While this is all well and good, the reality is LIV’s traction in Australia is the exception rather than the rule. Adelaide's enthusiasm is notably higher than at other LIV events, where attendance figures are far lower. Some tournaments reported ticket sales under 30,000.

Low attendance has ramifications for players, too. Former world number one Dustin Johnson has had his 18-year deal with TaylorMade ended, rumoredly due to his reduced public visibility since joining the LIV tour in 2022.

LIV Golf struck gold in Australia, carving out a lucrative niche thanks to Adelaide’s unique appeal and the country’s limited exposure to top-tier golf. But finding niches was never the plan — the plan was global domination.

Backed by Saudi Arabia’s $3 billion war chest—$2 billion of which went to player deals—LIV set out to overthrow the incumbent PGA and DP World Tour golf competitions. Despite the spending spree, mainstream global traction proved elusive, leading to a June 2023 merger deal with the PGA Tour. This unification remains stuck in negotiations.

To the winner goes the spoils

The challenge facing LIV and other sporting league disruptors, past, present, and future, is that the sports industry is inherently structured as a natural monopoly or a winner-takes-all market. 

A single dominant league often captures the vast majority of revenue, media attention, and talent. 

Unlike traditional consumer industries, where multiple competitors can coexist, sports leagues rely on a combination of legacy, exclusivity, and network effects to maintain their dominance. 

A stark example of this exists in the world of basketball. 

Due to its rapid growth and smart maneuvering over the past decade, the Australian NBL has jostled into a position where some experts have called it the second most important league in the world. 

However, to attach some scale to the gap between first and second, using social media clout as a proxy for significance, the NBA has almost 90 million followers on Instagram. In contrast, the NBL has yet to crack half a million. 

In fairness, the NBL doesn’t harbour any ambitions of overthrowing the NBA’s supremacy, but for a rebel league like LIV Golf, trying to disrupt an established league is a case of ‘if you come for the king, you’d better not miss’. 

What can we learn from previous attempts to come for the king

The most important factor giving these incumbent sporting leagues their power is their access to the best sports players

Using Hamilton Helmer's 7 Powers - a framework for defining how businesses gain sustainable and defensible competitive advantage - we define this as a cornered resource.

For sports leagues, having the best players in the world is a cornered resource.

LIV Golf realised this and consequently spent around two-thirds of its $3 billion war chest on signing players away from the PGA.

Though, even with the LIV tour's deep pockets, it has still, at best, attracted only half of the top talent in the world.

Had it reached a majority, it may have reached the tipping point needed to achieve its original goal of world domination.

Lessons from the Australian Super League coup

In the mid to late 90s, we saw a very similar scenario play out in Australia during the height of the pay-TV wars; Rupert Murdock’s News Corp tried to rip the game of rugby league away from the establishment by creating the Super League.

With an open cheque book, the rebel league attempted to sign up all of Australia's best players and clubs.

Like the LIV golf, Super League could only secure about half the best players, and the results were eerily similar, with the two leagues forced to merge after just one season apart.

Average fan attendance was down around 23% versus the peak in 1994, before the Super League was announced. This drop countered the trend of an annual growth of almost 6% for the decade prior.

Despite having the major players and clubs on your side, it doesn't guarantee success either. 

The failed Soccer Super League 

The European Super League (ESL), a rival to challenge or replace the Union of European Football Associations’ (UEFA) Champions League, was attempted in 2021.

This example proved that even the most powerful football clubs can fail when they underestimate fan loyalty and regulatory resistance. 

Backed by elite teams like Real Madrid, Barcelona, Manchester United, Liverpool, and Juventus, the breakaway league aimed to create an exclusive, high-revenue competition that enabled the largest clubs from European leagues to compete in inter. 

The league even secured financial backing from JP Morgan, but much like an ill-fated IPO, the ESL collapsed within 48 hours due to intense backlash from fans, governing bodies, and even national governments. 

Protests erupted across Europe, with supporters accusing the league of prioritising profits over tradition, while UEFA and FIFA threatened severe penalties for participating clubs. 

On 17 of July, 2024, the British government introduced the Football Governance Bill, which will, amongst other things, prevent English and Welsh clubs from "joining closed-shop, breakaway or unlicensed leagues, such as the European Super League".

This spectacular failure highlighted that while money and power can shake up the sports industry, they alone aren't enough to overcome the deep-rooted traditions and emotional investments that define global football.

What can we learn from a successful sports league coup d'état

One of the most successful attempts at a coup d'état of an established league came in our own backyard. In the late 1970s, the Kerry Packer and Channel Nine-backed World Series Cricket (WSC) shook the foundations of the cricketing world.

Frustrated by the lack of player compensation and restrictive broadcasting rights, Packer lured top international cricketers with lucrative contracts to play in his breakaway competition, featuring day—night matches, coloured uniforms, and white balls under floodlights—revolutionary changes that later became mainstream.

Initially met with hostility from traditional cricket boards, WSC ultimately forced the establishment to modernise the game, leading to better pay for players, improved broadcasting deals, and the rise of limited-overs cricket as a global spectacle.

At around the same time, the American Basketball Association (ABA) gained enough traction and disruption in the USA that the Denver Nuggets, Indiana Pacers, New Jersey Nets (now Brooklyn Nets), and San Antonio Spurs were merged into the NBA. 

A few years earlier, the American Football League (AFL) achieved a similar position against the established NFL, with 10 of its franchises integrated into the merged league, which, despite the NFL maintaining the name and the records, was, for all intents and purposes, a merger of equals. 

It’s telling that we need to go back about 50 years to find these positive case studies. Since then, the established behemoths have become increasingly established as cable TV became more popular, making them less susceptible to disruption. 

Since the NFL and AFL merger, a rolodex of American Football Leagues has been created with the intent to put a dent in the NFL shield. 

The World Football League (WFL) lasted one and a half years in the 1970s before shutting down mid-season due to financial troubles. The United States Football League (USFL) achieved some notoriety in the early 80s by playing their season during spring to avoid going head-to-head against the NFL. With that momentum, they got ahead of their skis and attempted to move their season to winter to compete directly with the NFL. 

As an aside, future president Donald Trump was the key instigator of this move. After one season, the decision proved catastrophic, with the league quickly dissolving as it was unable to secure TV rights and income when competing directly with the NFL.

The Vince McMahon-backed XFL unsuccessfully tried in 2001. The Alliance of American Football (AAF) didn’t even make it to the end of their first season in 2019. 

The XFL was reincarnated in 2020, but COVID ended any hopes of success. Subsequently, it was purchased by Dwayne ‘The Rock’ Johnson, yet continues to struggle to be economically viable but still produces a decent highlights reel.

From a revenue perspective, the NFL is the biggest sports league in the world, having achieved revenue of about $20 billion in 2024.

For perspective, the English Premier League (EPL) comes in second place with just under $12bn in revenue. And there are about 30 weeks of the year when no NFL football is played.

On paper, it makes sense that an upstart league could prosper in a sport with a huge total addressable market during a time of the year when no competition exists - but the boulevard of broken dreams above highlights just how difficult it is for an upstart sports league to disrupt the market.

Apparently, it’s easier to become President of the US than disrupt the NFL.

What the future holds for sports league disruption

It doesn’t appear many listen to these cautionary tales. If anything, the number of attempts made at sports league disruption will likely increase.

Live sports are becoming one of the few remaining media types that can still attract consumer attention. Due to this growing scarcity, the size of the prize is continuing to become bigger and bigger ~ more eyeballs are watching the same teams.

Another factor is that sports leagues operate in complex stakeholder ecosystems where the goals of individuals are often extremely varied and misaligned with the others.

In many of the cases outlined above, the impetus for starting a challenger league is found within disgruntled stakeholders.

Whether it’s broadcasters looking for different terms (the Australian Rugby Super League or World Series Cricket), ambitious cashed-up investors being unable to enter exclusive ownership clubs (LIV Golf and the American Football League) or existing owners wanting a larger slice of the pie (European Soccer Super League), as sports become more professional the line up of ravenous seagulls wanting to fight over the chip packet becomes more and more intense.

It remains to be seen where the next attempted disruption or European Soccer Super League-type announcement bombshell will come from.

Saudi Arabia’s Public Investment Fund is still circling, searching for more opportunities to invest in Western sports teams and leagues. Some would call this sportswashing - a term used to describe the practice of nations, individuals and corporations using sports to improve reputations tarnished by wrongdoing.

They recently made a significant deal with the ATP and WTA tennis tours.

For the ATP and WTA, bringing the Saudi Public Investment Fund (PIV) into their camp was as much a defence mechanism as a commercial sponsorship opportunity. The tennis tour has many of the same mechanics as the PGA tour and is ripe for the same ‘poach the headline’ players playbook that they rolled out with the LIV Golf tour.

One sport closer to home that could be a prime candidate is Cricket.

The introduction of T20 cricket has already seen the rise of the Indian Premier League (IPL), plus a myriad of other pop-up leagues worldwide.

The International Cricket Council (ICC) has only just kept a lid on this activity, with the worry that more eyeballs on these pop-up leagues will mean less engagement in the traditional, slower-paced international games.

The significant global success of the support, along with the wild fragmentation of teams, leagues and competitions, has created an environment ripe for consolidation and disruption.

If you’re looking to disrupt a league soon, one thing is for sure: It won’t be easy.

LIV Golf has proved that even with an open cheque book, some innovative additions, and favourable external conditions, you can win the battle for South Australia but still have a long fight ahead to win the war of global golf.

Well, that’s the third newsletter! We hope you enjoyed it. Thank you again for Tony for chipping in with some awesome insights! Connect with Tony online here.

The next newsletter will focus on the behind-the-scenes action of sports betting, with an interview with someone who runs the odds for NBA games. If you have any questions, shoot them over!

These newsletters grow with personal referrals, so please forward them to someone who loves sports or business.

If you have any feedback or ideas for a newsletter, please get in touch with me on LinkedIn, reply to this email or shoot an email to me here. 

‘Til next time,

👋 Will