Private Ownership of an AFL Club

[Bob Neil]

A simple hypothetical for you...would the AFL accept the private ownership of an AFL club? And if so on what terms?

For example if a wealthy mining magnate offered to buy the Gold Coast Suns for (say) $50 million would the AFL accept that? What would be the pros and cons for the game?

 

[Kwality]

The Swans

http://www.sydneyswans.com.au/club/History/overview

Privatisation (1985 - 1989)

Survival (1990 - 1995)


Privatisation
The Swans’ initial success in Sydney was short lived, and the Club’s tenuous hold on its new home was further complicated in 1985, when the VFL agreed to a deal that had significant and far-reaching ramifications for the Club.

On July 31, 1985, for what was thought to be $6.3 million, Dr Geoffrey Edelsten bought the Swans. However in reality, the deal was $2.9 million in cash, with funding and other payments spread over five years.

A period of relative on-field success followed, with an array of stars including Greg Williams, Merv Neagle,
Bernard Toohey and Gerard Healy lured to Sydney to join the likes of Warwick Capper, the first player to kick a hundred goals in a season for the Club since Bob Pratt in 1935.

However, success on the field was not translated to financial security, membership or a sustainable structure. Edelsten resigned as chairman after less than twelve months. By the end of 1988, ownership passed to a group of investors led by John Gerahty, Mike Willesee and Basil Sellers.

Survival
Lack of footballing success and financial instability continued to dog the Club and on September 1, 1992 the owners of the Swans told the AFL that unless the Club was restructured it could not continue. A crucial AFL meeting on October 14 granted the Swans seven days to produce a plan for survival – a merger with North Melbourne being one of the options proposed by the AFL.

It was a momentous meeting on October 21, 1992. At 7.33pm, the Club’s survival was ensured when the other clubs voted that the AFL should waive the Swans’ outstanding license fee (almost $2 million), provide working capital to Sydney for three years, and award priority draft choices.

AFL intervention was launched emphatically early in the following season when the team’s losing streak extended to eighteen successive defeats and coach Gary Buckenara was replaced by Brett Scott as caretaker coach. On May 4, the AFL Commission led by Ross Oakley resolved that the Swans would revert to a traditional member-based system rather than continuing with private ownership, that AFL Executive Commissioner Alan Schwab would be appointed Executive Chairman of the Club, and that Ron Barassi would be appointed coach until the end of 1995.

 

[telsor]

A simple hypothetical for you...would the AFL accept the private ownership of an AFL club? And if so on what terms?

For example if a wealthy mining magnate offered to buy the Gold Coast Suns for (say) $50 million would the AFL accept that? What would be the pros and cons for the game?

It's been tried before (WCE, Brisbane and Sydney) and didn't go well, with the AFL needing to bail out Sydney and Brisbane, and WAFC taking over WCE. I very much doubt the AFL would let it happen again, and if they did, the terms would be such that the potential owner is unlikely to want to go ahead with it.

 

[Rob]

No.

 

[Bob Neil]

It's been tried before (WCE, Brisbane and Sydney) and didn't go well, with the AFL needing to bail out Sydney and Brisbane, and WAFC taking over WCE. I very much doubt the AFL would let it happen again, and if they did, the terms would be such that the potential owner is unlikely to want to go ahead with it.

Thanks for your comments telsor. Do you think the sport/industry of AFL is (or was at the time/s of those previously privately-owned clubs) fundamentally incompatible with successful, long-term private ownership or was it rather that these ventures were poorly conceived and/or executed at the time?

 

[Kwality]

THE EAGLES
The West Coast Eagles have been owned in full by the West Australian Football Commission (WAFC) since 1989.
The club was originally owned and operated by Indian Pacific Limited, a publicly listed company that was delisted from the Australian Stock Exchange in 1990 after 75% of the shares were bought out by the WAFC.[39] The last minority shareholders were bought out in 2000. West Coast pay approximately $3 million in rent to the WAFC for the use of Subiaco Oval, and 50–70% of overall profits.[40]
In 2001, a South African investment company, Southern African Investments Ltd. (SAIL), had proposed a AUD$25-million deal for a 49-percent stake in the club, with the bid being rejected in 2003.[41]
In 2011, it was reported that the AFL had lobbied to take over the ownership of both the Eagles and the Fremantle Football Club from the WAFC.[42]

https://en.wikipedia.org/wiki/West_Coast_Eagles#Finance_and_ownership

 

[telsor]

Thanks for your comments telsor. Do you think the sport/industry of AFL is (or was at the time/s of those previously privately-owned clubs) fundamentally incompatible with successful, long-term private ownership or was it rather that these ventures were poorly conceived and/or executed at the time?

I'd say it's largely incompatible.

Having a not for profit league with mostly member based clubs, and some privately owned clubs is bound to cause stresses, especially when the league controls a significant part of the funding, and distributes it by means that aren't really publicly known (I imagine the clubs have far more insight into how funding is worked out). Government funding (e.g. training facilities, or in some cases grounds) would also be a lot harder to achieve, which also could flow on to the non-private clubs.

To be privately run ultimately means having someone take profits out of the corporate club, which brings up way too many questions about the money going into said club.

Also, the leagues bad experiences would make it gun shy about any such prospect.

Ultimately, I suspect the Australian market just isn't big enough though. US sports, and European soccer clubs simply have far bigger markets to work with.

 

[Bob Neil]

THE EAGLES
The West Coast Eagles have been owned in full by the West Australian Football Commission (WAFC) since 1989.
The club was originally owned and operated by Indian Pacific Limited, a publicly listed company that was delisted from the Australian Stock Exchange in 1990 after 75% of the shares were bought out by the WAFC.[39] The last minority shareholders were bought out in 2000. West Coast pay approximately $3 million in rent to the WAFC for the use of Subiaco Oval, and 50–70% of overall profits.[40]
In 2001, a South African investment company, Southern African Investments Ltd. (SAIL), had proposed a AUD$25-million deal for a 49-percent stake in the club, with the bid being rejected in 2003.[41]
In 2011, it was reported that the AFL had lobbied to take over the ownership of both the Eagles and the Fremantle Football Club from the WAFC.[42]

https://en.wikipedia.org/wiki/West_Coast_Eagles#Finance_and_ownership

Thanks Kwality - given that INDIAN PACIFIC LIMITED (IPA) was delisted from the ASX so long ago (1990) it's hard (at least initially) to find any of the information (e.g. company announcements) that would give an insight into what happened and what went wrong. Similarly I couldn't find anything on Google about the SAIL bid back in 2001.

 

[Bob Neil]

I'd say it's largely incompatible.

Having a not for profit league with mostly member based clubs, and some privately owned clubs is bound to cause stresses, especially when the league controls a significant part of the funding, and distributes it by means that aren't really publicly known (I imagine the clubs have far more insight into how funding is worked out). Government funding (e.g. training facilities, or in some cases grounds) would also be a lot harder to achieve, which also could flow on to the non-private clubs.

To be privately run ultimately means having someone take profits out of the corporate club, which brings up way too many questions about the money going into said club.

Also, the leagues bad experiences would make it gun shy about any such prospect.

Ultimately, I suspect the Australian market just isn't big enough though. US sports, and European soccer clubs simply have far bigger markets to work with.

I think your logic is very sound. Mixing private (for-profit) and member-based (not-for-profit) clubs would be difficult.

The only scenario in which I could see it perhaps working is where a corporation was large enough to take over and run the club on a largely not-for-profit basis in which it's only benefit was indirect via building brand recognition and/or social/political influence in the Australian market. If you're <INSERT MULTI-NATIONAL CORPORATION HERE> considering a long-term, multi-million dollar sponsorship of an AFL club you may be able to convince yourself that it's financially better to just buy the club.

As to whether you could convince the AFL that would be another matter entirely and probably a bridge too far.

 

[Kwality]

Thanks Kwality - given that INDIAN PACIFIC LIMITED (IPA) was delisted from the ASX so long ago (1990) it's hard (at least initially) to find any of the information (e.g. company announcements) that would give an insight into what happened and what went wrong. Similarly I couldn't find anything on Google about the SAIL bid back in 2001.

Bob,
Indian Pacific Ltd:
http://theeagleeye.fansunite.com.au/2016/09/05/41216/wc30-biggest-moments-10-5

Indian Pacific were the original operators of the Eagles and was formed by a conglomerate of partners when the Western Australian Football Commission (WAFC) were granted a licence by the AFL. One of the requirements of the licence was that the fee of $4 million be paid upfront (to be immediately distributed to almost bankrupt VFL sides), and the WAFC were reluctant to dip into their already dwindling finances.

In order to raise capital for the licence fee as well as other anticipated set-up costs, Indian Pacific Limited were established. But at the end of 1989, just three years into the Eagles existence, Indian Pacific were broke, and in essence, so were West Coast.

In its short time since joining the then VFL, West Coast had failed to establish a training base, were struggling to get members and sponsors on board, had no cash flow and on the back of a poor season that netted just seven wins, the Eagles were on the verge of collapse.

Despite the vast amount initially raised by the float, the Eagles were still stung by a number of costs. West Coast were left to cover all travel and accommodation in it’s initial seasons, made cash payments to all eight WAFL sides who were financially-strapped, forked out for transfer payments in the first two seasons to VFL clubs before the system was scrapped, as well as making the agreed royalty payments to the WAFC.

West Coast also missed out on gate receipts due to the VFL system, where only monies taken through memberships were held by the home side, with the rest of the takings split between an AFL equalisation fund and the two competing sides.

Fortunately for West Coast and the national competition, the WAFC stepped in and offered to buy out those that held the diminishing shares of Indian Pacific Limited at the significantly reduced price. Initially listed at 50c at the time of the float, the holdings of Indian Pacific dropped to just 9 cents. At the end of the bid, the WAFC held nearly 75% of the shares and were able to assume control.

The remaining issue was snapped up in the following years as Indian Pacific Limited was officially dissolved. Although the intention of the float didn’t pan out the way it was expected to, the end result worked to the benefit of Western Australian football, as the almost-collapse forced a restructuring of the WAFC and allowed the Eagles (and in future the Dockers) to be managed by the WAFC.

As West Coast became a financial force through the 1990’s, much of the funds were able to be distributed back to the WAFL and the development of football in WA.

 

[telsor]

I think your logic is very sound. Mixing private (for-profit) and member-based (not-for-profit) clubs would be difficult.

The only scenario in which I could see it perhaps working is where a corporation was large enough to take over and run the club on a largely not-for-profit basis in which it's only benefit was indirect via building brand recognition and/or social/political influence in the Australian market. If you're <INSERT MULTI-NATIONAL CORPORATION HERE> considering a long-term, multi-million dollar sponsorship of an AFL club you may be able to convince yourself that it's financially better to just buy the club.

As to whether you could convince the AFL that would be another matter entirely and probably a bridge too far.

Barring highly unusual circumstances, I think any such multi national would see it as a better move to make a massive, long term sponsorship offer that had a high level of influence on the club in question, giving it enough control to satisfy it's requirements while retaining the option to get out should their needs change.

Of course, that depends on what the corporates want...e.g. back in the 80s, Alan Bond tried to take over Richmond, with him becoming president, and the club was willing to accept his 'leadership' due to the money he brought along, but as soon as those within the club got wind of his plans (moving Richmond to GC), Bond got his walking papers.

Anyway, the only case I can think of where the AFL would allow a real corporate takeover would be a massive long term commitment to a club that would otherwise fail....For example in 10 years time, if the AFL has decided GC is a bust and were about to close it down, they might listen if someone came in with a suitable takeover offer. I suspect that's an unlikely scenario however.

 

[Kwality]

Not much on the South African interest in WA, just this courtesy Michelangelo

SOUTH AFRICA
http://www.adelaidenow.com.au/sport...i/news-story/8336d428466dd1e6b2e92092ea32673f

Locked out behind the paywall, effectively offering not much more but noting SA is 10 hours behind Melbourne, very challenging for live TV .

 

[telsor]

Not much on the South African interest in WA, just this courtesy Michelangelo

SOUTH AFRICA
http://www.adelaidenow.com.au/sport...i/news-story/8336d428466dd1e6b2e92092ea32673f

Locked out behind the paywall, effectively offering not much more but noting SA is 10 hours behind Melbourne, very challenging for live TV .

In retrospect, $25M for 49% of the money WCE has paid in royalties to WAFC would be a very good deal for the investors. (and not so good for WA football)
Of course, if that was the structure, I daresay the rent at Subi would have been much higher, as would other expenses.


But no, I can't see much of a market for live games to/from Sth Africa. I dare say any interest was purely financial.

 

[Bunk Moreland]

God I hope never.

Private ownership is just about the single biggest enemy of sport.

 

[greatwhiteshark]

Where the AFL is heading where money is everything then private ownership of clubs is inevitable I think. Not for a couple of decades though.
The AFL follow everything American and this will follow as well.
I have absolutely no doubt in the next half century private ownership will be in place, salary cap gone and 4-6 Current AFL clubs no longer in the AFL.
The natural progression of players wanting more and more will lead to this, it is inevitable.

 

[NoobPie]

Where the AFL is heading where money is everything then private ownership of clubs is inevitable I think. Not for a couple of decades though.
The AFL follow everything American and this will follow as well.
I have absolutely no doubt in the next half century private ownership will be in place, salary cap gone and 4-6 Current AFL clubs no longer in the AFL.
The natural progression of players wanting more and more will lead to this, it is inevitable.

No way the AFL will ever have private ownership...why would they?

They don't follow everything American and this is a classic example

They have costs as under control as any other pro league going round and have a far more heavily equalised competition (ie including football department caps and equalising revenue distribution)

Private ownership offers nothing but for potentially a bit more coin at the expense of them being able to manage overall costs and revenue distribution longer term. The EBA has now locked in a shared revenue model for which private ownership does nothing to increase all else being equal

The only things I could see the AFL potentially "privatising" would be auxilliary competitions such as AFL X

 

[greatwhiteshark]

No way the AFL will ever have private ownership...why would they?

They don't follow everything American and this is a classic example

They have costs as under control as any other pro league going round and have a far more heavily equalised competition (ie including football department caps and equalising revenue distribution)

Private ownership offers nothing but for potentially a bit more coin at the expense of them being able to manage overall costs and revenue distribution longer term. The EBA has now locked in a shared revenue model for which private ownership does nothing to increase all else being equal

The only things I could see the AFL potentially "privatising" would be auxilliary competitions such as AFL X

None of us really know the future but with all respect to think the landscape in 20-30 years will even closely mirror what is here now is just naive.
Players are going to be the huge issue as their want for more and more over the years will simply put clubs to the wall.
It has been shown in all sports around the world that capping what they can earn does not work for the players. It won't take to long before the Australian footballers cotton on to it.
It is not a good thing for the game or it's clubs but it's just the way it will go. The players want more and more of the pie, the AFL can only sell small increment increases to them for so long before they say shove it.
Like I said it might be a few decades away but there is nothing that can ever be done to stop the players greed to earn what they want to earn.
You disagree and thats cool but it is inevitable where the game is heading. Fortunately for me I probs won't be around to see it.

 

[NoobPie]

None of us really know the future but with all respect to think the landscape in 20-30 years will even closely mirror what is here now is just naive.
Players are going to be the huge issue as their want for more and more over the years will simply put clubs to the wall.
It has been shown in all sports around the world that capping what they can earn does not work for the players. It won't take to long before the Australian footballers cotton on to it.
It is not a good thing for the game or it's clubs but it's just the way it will go. The players want more and more of the pie, the AFL can only sell small increment increases to them for so long before they say shove it.
Like I said it might be a few decades away but there is nothing that can ever be done to stop the players greed to earn what they want to earn.
You disagree and thats cool but it is inevitable where the game is heading. Fortunately for me I probs won't be around to see it.

The players have just agreed to a revenue sharing model which is far less as a % of the NBA and NFL players shares. This is likely in part because, due to private ownership of franchises in america, the players bargaining position is a lot stronger

Even european soccer has recently introduced financial fair play restrictions on salary levels to control hyper inflationary costs

No chance the salary cap will be significantly increasing as a share of revenue, let-a-lone going in a hurry

 

[telsor]

Where the AFL is heading where money is everything then private ownership of clubs is inevitable I think. Not for a couple of decades though.
The AFL follow everything American and this will follow as well.
I have absolutely no doubt in the next half century private ownership will be in place, salary cap gone and 4-6 Current AFL clubs no longer in the AFL.
The natural progression of players wanting more and more will lead to this, it is inevitable.

The US comps fought hard to add in salary caps over the past couple of decades (they're a lot softer than our caps, but the point is the trend).

I also doubt the AFL would abandon NSW & QLD so readily. (and the legal/financial fight between the Vic clubs and the league over the ownership of Docklands and the stadium deals there and at the MCG would also be 'interesting' if the league suddenly changed it's policies/support)

 

[Starburns_]

God I hope never.

Private ownership is just about the single biggest enemy of sport.

The NFL is the only example where it mostly works from an overall equalisation standpoint. It's run fairly cohesively too, not many of the private ownership pitfalls we see everywhere else.

Of course this is helped by continuous growth (and nothing more than token investment in game development) that will eventually stop. Plus the whole owners holding cities to ransom is a really poor aspect of that.

None of us really know the future but with all respect to think the landscape in 20-30 years will even closely mirror what is here now is just naive.
Players are going to be the huge issue as their want for more and more over the years will simply put clubs to the wall.
It has been shown in all sports around the world that capping what they can earn does not work for the players. It won't take to long before the Australian footballers cotton on to it.
It is not a good thing for the game or it's clubs but it's just the way it will go. The players want more and more of the pie, the AFL can only sell small increment increases to them for so long before they say shove it.
Like I said it might be a few decades away but there is nothing that can ever be done to stop the players greed to earn what they want to earn.
You disagree and thats cool but it is inevitable where the game is heading. Fortunately for me I probs won't be around to see it.

It'll never happen in the AFL. The players can ask for more all they want, but if the money isn't there, they won't get it. It's not as though they can just go play in another league either.

Plus private ownership does nothing but shrink their share of the pie by adding another stakeholder, whilst alienating the biggest stakeholders of all. The AFL may still relocate a club or two in the name of 'expansion', but they won't be whoring themselves out to owners because they dimply don't need to.

Private ownership is what you do when you're desperate for cash like the VFL were in the pre-salary cap 80s (or more recently the A-League upon startup). That's why Cricket Australia took the short-term risk on the BBL in order to not be shackled by private ownership in the long run.

As for the bolded, where hasn't it worked? The only reason the NBA and MLB have 'soft caps' is due to private ownership having differing levels of financial commitment.

 

[NoobPie]

The NFL is the only example where it mostly works from an overall equalisation standpoint. It's run fairly cohesively too, not many of the private ownership pitfalls we see everywhere else.

Of course this is helped by continuous growth (and nothing more than token investment in game development) that will eventually stop. Plus the whole owners holding cities to ransom is a really poor aspect of that.



It'll never happen in the AFL. The players can ask for more all they want, but if the money isn't there, they won't get it. It's not as though they can just go play in another league either.

Plus private ownership does nothing but shrink their share of the pie by adding another stakeholder, whilst alienating the biggest stakeholders of all. The AFL may still relocate a club or two in the name of 'expansion', but they won't be whoring themselves out to owners because they dimply don't need to.

Private ownership is what you do when you're desperate for cash like the VFL were in the pre-salary cap 80s (or more recently the A-League upon startup). That's why Cricket Australia took the short-term risk on the BBL in order to not be shackled by private ownership in the long run.

As for the bolded, where hasn't it worked? The only reason the NBA and MLB have 'soft caps' is due to private ownership having differing levels of financial commitment.

High quality post

 

[greatwhiteshark]

The NFL is the only example where it mostly works from an overall equalisation standpoint. It's run fairly cohesively too, not many of the private ownership pitfalls we see everywhere else.

Of course this is helped by continuous growth (and nothing more than token investment in game development) that will eventually stop. Plus the whole owners holding cities to ransom is a really poor aspect of that.



It'll never happen in the AFL. The players can ask for more all they want, but if the money isn't there, they won't get it. It's not as though they can just go play in another league either.

Plus private ownership does nothing but shrink their share of the pie by adding another stakeholder, whilst alienating the biggest stakeholders of all. The AFL may still relocate a club or two in the name of 'expansion', but they won't be whoring themselves out to owners because they dimply don't need to.

Private ownership is what you do when you're desperate for cash like the VFL were in the pre-salary cap 80s (or more recently the A-League upon startup). That's why Cricket Australia took the short-term risk on the BBL in order to not be shackled by private ownership in the long run.

As for the bolded, where hasn't it worked? The only reason the NBA and MLB have 'soft caps' is due to private ownership having differing levels of financial commitment.

Fair enough as it’s just my opinion. Money will take our game to places we cannot Even imagine and Even if private ownership doesn’t come the chances of the league resembling what it is now in 30 plus years is just romanticism.

 

[NoobPie]

Fair enough as it’s just my opinion. Money will take our game to places we cannot Even imagine and Even if private ownership doesn’t come the chances of the league resembling what it is now in 30 plus years is just romanticism.

I think we can agree on that to an extent at least

The AFL / club revenues have tripled to likely $1.5B this year in the last 10 to 15 years with TV rights now worth $425M a year, sponsorship rocketing and memberships now nudging 1M

30 years ago the game was still not fully professional and had just introduced the 13th and 14th teams through the one and only attempt at private ownership...5 more teams have since been introduced and 2 merged.

At the rate of growth it is on (which could only be sustained with international expansion I suspect) it would necessarily look very different to now in 20147. It is also certainly possible that recent growth tapers and the game consolidates rather than continues to rapidly expand

 

[Rob]

Private ownership is what you do when you're desperate for cash like the VFL were in the pre-salary cap 80s (or more recently the A-League upon startup). That's why Cricket Australia took the short-term risk on the BBL in order to not be shackled by private ownership in the long run.

From memory, CA tried to get private owners on board in conjunction with the state associations. No-one wanted a bar of that - presumably the asking price for a share of a franchise was too high and the private interests wouldn't have had control. The latter being the most important as owners of sports teams tend to have egos the size of the MCG and unless they had full control of their toy it all would have meant nothing.

In hindsight, even a minority interest in a BBL club would be worth a fair bit of money today.

 

[Kwality]

If/when the rivers of gold from the TV rights dry up, paying the players at the current level at that time may drive a change to the current ownership model IMHO.
We've already seen pay replace free to air as the major funding.