With the recent news about Amerileague, longtime readers of my articles or followers on Twitter will no doubt remember that I’ve been saying the league was a complete joke for several months. This morning I woke up to multiple texts & tweets about the crash of the league and quite a few messages asking ‘How did you know?’ I had the same experience last spring when the Elevate Basketball Circuit was exposed as a fraud, which I had also stated more than 10 months before it happened.
The reality is, this isn’t the first time by a long shot and it won’t be the last. Unfortunately, it seems that almost every AAU parent or young basketball player hoping for a pro career all think they are masters of navigating the basketball business underworld, and that means they will continually get taken in with scams like this. Think of it like this: I’ve heard parents who play hardball and ‘negotiate’ payments from college coaches, and they’re really proud of themselves. Meanwhile, they have no idea that while this is their first and only under-the-table deal, that college has been doing it for a long time. The parent/runner is almost always the ‘new guy’ in the deal.
But, I digress.
Yes, it is true I have been scouting, writing about and running sports related businesses for a while, so naturally I would have more experience than someone just entering the AAU scene. But you don’t need vast amounts of experience to know when a deal is bad. So while I realize that most people will continue to ignore this advice, I offer you five pretty rock-solid tip offs that that awesome new basketball league or deal is a complete scam. These are not really basketball specific – these are true in any business, but we’ll keep it at court level for today.
Red Flag #1 – Who’s running the show?
The number one, absolute, lock-it-down red flag of any scam league, prep school or business in general is who is behind the whole thing. If you pay attention to NOTHING ELSE in this article, remember this:
No legitimate business in the world is operated by ‘invisible’ people.
You want to know who runs Basketball Elite? It’s right on our site – there’s my name, there’s my twitter handle. You can Google me and find out who I am and what my connection to the site is. If you want to know who is the CEO of Uber, or the CEO of Coca Cola, you can find out what you need to know in one search engine query. This isn’t limited to massive companies. On a recent trip to San Fransisco I happened across a food truck serving up Peruvian street food and guess what? They are super easy to find, as well.
Why is this? For starters, a real business doesn’t hide from customers. Over the years, one of the things we’ve put together at Basketball Elite is showcase events. Right on our website are our contact phone numbers, and we’ve bent over backwards to respond ASAP to any customer questions or complaints. Yes, we do it primarily because we want to treat customers the same way we’d want to be treated, but there’s also that cold hard fact that a business that avoids customers won’t be a business for long.
So what happens when you hear about some new basketball league, and you search Google for news about the league and the person organizing it is non-existent? Yeah, this isn’t rocket science. It’s not real. A real league would have someone front-and-center, answering questions with real answers and putting themselves on the line. It doesn’t mean their league will succeed, but any real business wants as much exposure as it can get. A ‘business’ which avoids any footprint is a business that wants to be able to disappear in a hurry.
Now the second part of this is when you look at who is running a proposed league and they have a LONG history of bad deals. No business is going to make everyone 100% happy all of the time, for various reasons. But when you see names attached to a business who have been busted before on various scams or shady deals, that’s pretty much a dead give away that this one is, too.
Red Flag #2 – ‘Magic’ business models
Minor league sports rarely work, with some exceptions in baseball and you may even be able to include Arena football. The business model of sports is based on the fact that sports are actually entertainment, and good entertainment leads to big audiences, which leads to advertising dollars. It’s not complex. Lebron James and Kevin Durant garner attention, and people are interested in watching them play, so the ratings are high enough that make buying advertising on their games worth it to companies. Without television contracts, major league sports as we know it – worldwide – would not exist. It would be impossible to maintain the million dollar contracts, licensing deals and huge arenas of pro sports without television ad revenue. Minor leagues don’t have TV deals (which is why I hesitate to include all of Arena football, since some divisions do have TV deals). Minor leagues have to rely primarily on game attendance and merchandising, and getting people out in person to watch lower level athletes they’ve never heard of is not an easy task. This is why so many minor league teams fold; first, they overestimate how many people will attend the games, and second, they completely ignore the fact that road games are going to be played at a loss. Add it all up and you get most new minor league teams folding only a few games into their inaugural season.
But every so often, there’s someone who comes along and pitches a new league which will make gobs of money but do (and this is the best part) nothing different than every other league. It doesn’t matter if you sign some former McDonald’s All American player or some former NBA benchwarmer, because those players won’t bring people in. The Amerileague pitch also added that they wanted to sign big time high school recruits, but that is a misunderstanding of recruiting interest. There are high school basketball players who pack gyms when they play; and many people around those players mistakenly think that people are coming to watch the players because they are stars. But the dark truth is that the players are stars because they are actively being recruited by major college basketball programs, and those major basketball programs have huge, active fan bases. If you are a high school player, and you have offers from Duke, UNC, Kentucky and Kansas, there are literally millions of fans of those teams who are interested in watching you. But guess what? As soon as a player commits, he loses all of the fans from the teams he didn’t commit to. If he comes to the school and just has a normal career, he won’t be a massive draw anymore, and even if he plays really well, he will only be a big draw to his college fans. The NBA is full of guys who had thousands of fans in college but now play on weak teams in front of half-empty arenas.
If Amerileague had signed some top high school prospects, those prospects would have seen their ‘box office appeal’ vanish overnight. Very few people are going to watch players they don’t have a personal interest in just because they can do cool things on a basketball court. There already is a popular traveling show like that, and it’s called the Harlem Globetrotters.
Red Flag #3 – Unrealistic revenue sources
There is a reason why McDonald’s sponsors a high school All American basketball game every year, and it’s not because they love basketball. It’s because ‘corporate sponsorship’ is just another form of advertising. Getting corporate sponsors is not some deal where big companies or investors are just going to fork over truckloads of cash so your league can get rich. You have to have something of value that they are getting for their money. I say this as a person who has ‘big name’ corporate sponsors for our Southeast Summer Showcase; any deal with a corporate sponsor has to promote the sponsor’s business in a way that may make them money. Corporate sponsorship isn’t easy to get, and sponsors drop major names every single day. I’m actually on a mailing list that sends out most of the major sponsorship deals or drops every couple of days. Amerileague was never in that conversation, not even close. They had nothing to offer the types of corporate sponsors they were claiming. Nike doesn’t sponsor the EYBL because they want a few kids to have free sneakers. They want the exposure that comes from having high level recruits wear their shoes, and they also hope to make inroads so that when one or two of those players actually become big NBA stars, they might have a relationship. Think I’m wrong? Go look at how many kids played on Nike sponsored AAU teams 10 years ago, but never made the league, and tell me how many still are getting free shoes while working a non-basketball related job.
But Amerileague pulled the same stunt I’ve heard so many times before – that big money would come gushing in from corporate sponsors and make it rain on everyone involved.
Red Flag #4 – Going Big Right Away
Almost every single business – even Microsoft, General Electric, Apple, and Facebook – started small. It is almost impossible for a business to open up on their first day of existence with 1,000 retail locations and keep growing from there. Many companies go under because they expand way too fast. During the dot-com bubble, heavily-funded companies were springing up everywhere, and many of them had lavish offices with unbelievable perks that most established companies couldn’t afford. Guess what? They all went under within a few years, sometimes within months. It’s called ‘burn rate’ – how much more money is going out the door as opposed to money coming in. Any legitimate minor league should be able to give the media some idea of their long term profitability plan, even if they can’t hit their targets. But scam leagues show up like multi-level-marketing hucksters – they arrive with jet planes, Rolex watches and nice suits. It’s based on two things: One, the guys running it are not real business people; Two, they are trying to convey how much money they have so people will believe they are more successful than they are. This is most dangerous when the targets are high school kids, because young players don’t know the difference between an NBA agent and a con man, but adults get taken in as well.
A real business person knows they are taking on risk, so they start as small as they can without cutting too many corners. If you open a new ice cream shop, you want to stick with making that one shop profitable before you open a second shop. You definitely don’t open up 20 ice cream shops right away. Elevate Basketball Circuit was hiring people like crazy, and flying people to high level meetings from around the country. Amerileague had apparently hired a PR department and was jetting in coaches/players/agents but the media couldn’t get a company rep to even answer the phone. I’m confident if USA Today wanted to get a corporate statement from the D League (or Sears, or Best Buy), they could get it pretty fast.
Red Flag #5 Nobody reputable is really involved
If we are “judged by the company we keep” as the old adage goes, then we are also judged by the company we don’t keep as well. To put it another way, if Warren Buffet turned down a deal, you would do well to also turn it down as well, right? It doesn’t mean Buffet is always right, but you and I both know there’s a pretty good chance he turned it down for a really good reason.
You might not have insider knowledge of a business or whether a new league is going along just fine, since a private company isn’t going to just put all of their inner workings out for everyone to see. But there are people you can follow up with. You can ping me on Twitter about a league and I will tell you if I know anything. There are other reputable people as well as media who cover the specific business or area. The radio silence of media alone surrounding Amerileague should have been a tip off. If there are high profile people involved, they will be open about it. Their name, brand and business are part of their monetary value and it is important. If you contact local newspapers anywhere we are running a Basketball Elite event, someone on that newspaper staff will know who we are or can find out within an hour. If you tried to contact local media, even in Las Vegas, about Amerileague, they would have just shrugged their shoulders because nobody was talking.
In cases like this, listen to the silence, because it’s speaking loud and clear.