AFL clubs set new financial goals
Gate takings and chook raffles have given way to long-term investments, Louis White reports
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March 15, 2007
http://www.theaustralian.news.com.au/st ... 22,00.html
FOR 20 years Michael McCall has visited the Sydney Aussie Rules Social Club regularly, sitting at the bar drinking with his mates.
McCall, who adopted Sydney as his home after 23 years in the navy, has seen a lot of changes in Kings Cross, and some of them are not to his liking, such as control of his favourite watering hole shifting to the Sydney Swans.
"On a match day, the locals get upset because AFL is on every channel and we like to watch rugby league," McCall says. "We either leave or stay and barrack for the opposition.
"After all, we are the ones that come in everyday, not just when the AFL footy is on."
The AFL is a commercial beast - a fact highlighted by this week's push to control photo rights for the code - and AFL clubs are looking for new revenue streams.
The Swans are expected to announce a $1.5 million profit on a $30 million turnover for 2006 today, a substantial increase on the $282,000 profit made on the $28 million turnover for the 2005 season.
The extra revenue can be attributed to increased sponsorship deals, merchandise sales and a growing membership after the 2005 premiership, but premierships can't be won every year.
"The bane of every football club is that your revenue is linked to your on-field performances," Sydney Swans president Richard Colless says.
"It is important that you are in a position that if you have a lean year or two - as the AFL draft is set up to ensure - you have additional revenue from non-football sources."
The Swans are hoping that the registered club, soon to be a licensed club under new legislation, will finish its $7.5 million makeover (paid for by the landlord, ING Real Estate) in August.
It will comprise three levels offering a restaurant, bar, private function room and gaming and outdoor balconies and is expected to turn over about $9 million annually, of which the Swans are banking on a $2 million profit.
In Melbourne, the Collingwood Football Club is well into a financial diversification that will make it Australia's richest sporting club.
"There is not enough income from football-related activities to generate profits," Collingwood chief operating officer Eugene Arocca says.
"We currently have four hotels and are buying a fifth. They are strategically placed throughout Melbourne and we expect to obtain between $4 million and $5 million revenue a year on the three hotels we own outright with net profits of about $1 million a year from each."
Collingwood recorded a $2 million profit from $44 million turnover in 2006.
This is a far cry from 1999, when the club was turning over between $13 million and $14 million a year and languishing near the bottom of the ladder.
Collingwood, however, is not prepared to rest on its laurels. It already has the highest revenue in the AFL and is looking to boost that even more in 2007 with an estimated $51 million turnover, rising to $100 million in 2011.
"The aim is to turn approximately 10 per cent of that revenue into net profit," Arocca says. "The good thing is the revenue will continue to grow but the football department costs won't increase as much.
"At the moment we are in the top two or three in the AFL for spending in our football department."
Across Port Phillip Bay at Geelong, chief executive Brian Cook is taking a vastly different approach - renting out the club's executive suites to telemarketers from Monday to Friday.
"So far, the telemarketing has brought in an extra $500,000 in revenue," Cook says. "We gain an extra $3 million in revenue from non-football activities through gaming, food and beverage facilities, functions and special events, such as auctions."
The Cats, which made $300,000 profit from $28 million turnover in 2006, have established the Geelong Cats Foundation as a separate entity. This has generated revenue of $2 million revenue in the past three years, but the only money the club can receive is interest from the foundation.
The AFL's draft system means in theory that each club should spend a year in the top eight and a year outside the top eight, as the bottom clubs get to select the best players each year.
Most businesses don't have to contend with such even playing fields, but of course some will always buck the trend.
The West Coast Eagles have not only won three premierships in their 20-year history (and back-to-back flags this year will result in a bonus of $1 million from the AFL), they have also made the finals in all but three of their years in the competition.
The Eagles also have a very healthy balance sheet, recording a $4.6 million profit on a $38 million turnover in 2006. The club has, however, almost reached the limit of its ability to attract additional turnover as sponsorships and memberships are full, home grounds almost always sold out and functions are used to the maximum.
"We are now investing money (about $1 million) in Commonwealth bonds and top 50 ASX share companies," chairman Dalton Gooding says.
"We are waiting on the state government task force to decide whether Subiaco Oval will be demolished or increased in size.
"Even when that recommendation is made on March 31, it will take another three to four years or so to either build a new stadium or redevelop Subiaco Oval.
"So, we have to look at alternative ways of raising revenue."
West Coast and Fremantle are in the unusual position, like the Adelaide Crows and Port Adelaide, that the licence is held by the state's peak football body and therefore pays money to the licensee.
The West Coast Eagles' arrangement results in the club paying profits back to the Western Australia Football Commission every year.
"Initially, we were giving them 80 per cent of our profits but we renegotiated that so they get 70 per cent of the first $1 million, 60 per cent of the second million, and 50 per cent thereafter."
Other AFL clubs have tried playing more games away from home, and Hawthorn has signed a lucrative $15 million five-year deal, involving the AFL and the Tasmanian Government, to play four home matches each year in Launceston. The Kangaroos will play 10 home matches at the Gold Coast for the next three years, and the Western Bulldogs will play two home matches in Darwin.
The jury is still out on whether locals such as Michael McCall will be pushed aside by the new crowd or whether it will be just him and his mates sitting in the bar during the summer months.
"If the Swans operate it at the same level as it has been, it will be a haven in Kings Cross," McCall says. "But as long as I have my seat at the bar I'll be happy either way."