- Oct 11, 2016
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Can't be done? But it works for the NFL
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England had no real history of private ownership of sports teams before the late 1980's. Neither did many of the other European leagues. USA - well baseball set the trend in the 1880's.The reason there is no private ownership in the Australian football is due to historio-cultural reasons, not financial reasons, IMHO.
There very much is private "club" ownership in sport in Australia - in soccer and basketball for instance. As much as anything, this private ownership is actually a response to insufficient revenues in these sports
Likewise the VFL/AFL's very brief flirtation with private ownership occurred due to financial pressures rather than perceived opportunities.
The US and England have a particular history of private ownership in their sports that is not the case in Australia.
The AFL clubs are likely to have pulled in a billion dollars in revenues this year and the AFL half that again (excluding club distributions). This in an environment where the costs are as under control as most other pro-sports anywhere. What benefit would there be in opening up to private ownership?
Can't be done? But it works for the NFL
Its not just NFL but also the NBA, MLB and NHL don't spend development monies as its done by schools and colleges (and junior regional hockey leagues in Canada) and that's why players in those leagues get between 47% and 55% of industry revenues and AFL at around 27% under the new CBA and cricket at around 25%.The NFL doesn't pay a cent in game development, it drafts readymade players from the college system allowing the owners and players to take significantly larger cuts of league revenues than the AFL. In recent times the NFL have also shamelessly played the relocation card to prise out taxpayer money for their stadiums..
England had no real history of private ownership of sports teams before the late 1980's. Neither did many of the other European leagues. USA - well baseball set the trend in the 1880's.
If the money was there, history would be thrown out the window as we have seen in plenty of other parts of Oz society and economy. The money moves with opportunities.
Ego and perceived opportunity was why Edelsten went after the Sydney licence. Same with Skase and Brisbane licence. WCE was floated on the stock exchange in 1987 when the share market was booming. Why did it flop? Because people could see sports in Oz wasn't a great investment not because of historical reasons of member based clubs. They were right short term, but WCE have proved they would be one of those 4 to 6 clubs that would survive in a true free market for a national footy comp.
The Wienert/Willesee group took over from Eldesten/Sportsplay/Powerplay owners, who floated it on the stock exchange and it too flopped, but Wienert and Willesee saw an opportunity. Ruben Peleman was sort of conned by Oakley and co. into taking over from Skase, but he saw it as a business opportunity for himself to have a team on the Gold Coast
The VFL wanted easy money in licence fees. They knew clubs couldn't come up with the money so they went after the greed of 1980's entrepreneurs and got the money that way.
The NFL doesn't pay a cent in game development, it drafts readymade players from the college system allowing the owners and players to take significantly larger cuts of league revenues than the AFL. In recent times the NFL have also shamelessly played the relocation card to prise out taxpayer money for their stadiums.
This leaves aside also the muddied motivations of private ownership, is it about winning or making money? For every Kraft in NE or the Rooneys in Pittsburgh, there's a poorly run equivalent somewhere else that is either too interested in money, or too egotistical (Jerry Jones) for the franchise to be successful.
Whilst the NFL is better than most leagues with private ownership, it still has its flaws. Green Bay are effectively the closest thing they have to an AFL type setup, and it's no coincidence that they're consistently one of the best run franchises in the league.
There will be money prepared to invest in the top 6 to 8 clubs, but not the rest because they don't make money.The idea though the the league and clubs with collective annual revenues of $1.5 Billion (that have pretty much increased year on year for 3 decades), hundreds of millions in equity and costs well and truly under control, would not attract private investment if it could get at it, doesn't hold water.
There will be money prepared to invest in the top 6 to 8 clubs, but not the rest because they don't make money.
$1.5bil is probably $1.2~$1.3 bil given the AFL gave the clubs $255m in 2016 and that will be $320m+ in 2017 and I dont think you will get you $1bil total club revenue total as per your post in the other thread. Plus that pays for development grants which the private owners wouldn't have access to. Players salaries in sports where the competition isn't liable to pay for development are at around 50% of industry revenues.
Clubs can't make money on $50m revenue. Remove the extra distributions from head office and they are in the red. If the AFL asked for a licence fee then they would ask for around $25m if they asked for $4m, 30 years ago. You have to finance that $25m. You would have finance capital expenditure. At the moment how many $30-$60m facilities are being financed with the help of governments?? That would fall by the wayside if there isn't a community benefit for the government to justify the expenditure.
If you don't own stadiums you play in, you don't make capital appreciation on that stadium which you can sell when you sell your licence to another private owner. When you don't own your stadium you don't have the costs, but you are also restricted how hard you can work a stadium to increase revenue. When you are owned by private owners people don't volunteer as much to do things, so things now done for free would have to be paid for.
There is enough money to have a private AFL competition. I never said otherwise. But as other markets in Oz show, you are looking at Oligopoly set up if its to be a true private market league, then it will be 6 to 8 teams not 18. People aren't going to invest $25m-$100m over the first decade just to break even. The competition model would look drastically different to what you see today.
The richest league in the world has 32 teams spread out over about 29 markets because no city has more than 2 teams and its natural economy is one where you can have 10-12 major players in its national market unlike Australia where its basically an oligopoly market once you become a national company chasing national market share. There would not be 18 teams in an AFL privately owned clubs market if there were minimal subsidies from the AFL. Most AFL clubs depend on AFL subsidies and are not very rich. How many AFL clubs have bank guarantees issued by the AFL and listed in the contingent liabilities part of the AFL annual report?There is no necessary relationship between private ownership and oligopoly. The richest league in the world is almost totally privately owned. At some point, the private owners in this league gave power over to an independent commission which ultimately constrained their ability to dominate but still made them very rich (or alot richer at least). Two of the richest soccer clubs in the world, operating in one of the most unequal leagues in terms of revenue distributions, are both member owned..
The richest league in the world has 32 teams spread out over about 29 markets because no city has more than 2 teams and its natural economy is one where you can have 10-12 major players in its national market unlike Australia where its basically an oligopoly market once you become a national company chasing national market share.
There would not be 18 teams in an AFL privately owned clubs market if there were minimal subsidies from the AFL. Most AFL clubs depend on AFL subsidies and are not very rich. How many AFL clubs have bank guarantees issued by the AFL and listed in the contingent liabilities part of the AFL annual report?
Private owners did not hand over power to an independent commission. They were directors of membership clubs who had no private beneficial ownership of that club that eventually gave over powers to a central body. That's why it was easy to hand over powers. They didn't personally lose anything.
This thread is about private ownership. Private ownership in Australia wont work in an 18 team national comp because true market forces wont let 18 survive, That's the whole premise of the thread, why isn't there private ownership in the AFL? Private owners wont let those who drain resources year in year out survive. A true private ownership AFL wouldn't let 9 teams survive in Melbourne and you might only have 1 team in the other capitals, maybe 2 in Perth. In the NFL you see forced relocation of struggling teams to markets where they will survive. Shape up or ship out.Your analogy of the tendency to oligopoly in Australian industry is misguided. Like I said before, the AFL is effectively a monopolist. In reality, the AFL is a league (with broader "code governance and development responsibilities) with 18 member clubs. Through an "industrial organisation" perspective, it is far more logical to think of the AFL as the "firm" and the various clubs as "business units" within the firm.
The thread looks at why things aren't a certain way. Current rules prevent private ownership but if they did change, investors who don't have lots of money to piss up against the wall, like Arab oil billionaires and Russian oligarchs who stole assets worth billions from the state for nothing, would struggle to see an economic case to own some of the 18 teams. That is undeniable.Again this is moot, because the key is that the current structure of the AFL is that of a heavily equalised competition. It is this way because it is in the long term interest of the game to be so.
It is an interesting thought experiment perhaps about where we would end up if you removed all equalisation and cost control mechanisms and encouraged private ownership, but it is not relevant to discussions about whether or not private investors would be willing to buy into the current model
The AFL would need to establish a more defined funding model, but it could easily welcome in private ownership under the current approach which sees it giving more money to lower revenue clubs. Again, it won't do that because it is not worth it to it.
The FFA / HAL barely has two bronze razoos to rub together but it has 10 privately owned franchises pretty much all losing money.
I thought you were talking about V/AFL clubs handing over power. My mistake.Are you sure? I'm pretty sure pretty much all the NFL clubs have always been privately owned. At some point they moved to an independent commission model which introduced aggressive equalisation measures to achieve competitive balance. That's the point. Alternatively, the laliga, whose two superclubs are member owned, has little revenue sharing at all.
There is simply no necessary relationship between private ownership and competitive balance.
This thread is about private ownership. Private ownership in Australia wont work in an 18 team national comp because true market forces wont let 18 survive, That's the whole premise of the thread, why isn't there private ownership in the AFL? Private owners wont let those who drain resources year in year out survive. A true private ownership AFL wouldn't let 9 teams survive in Melbourne and you might only have 1 team in the other capitals, maybe 2 in Perth. In the NFL you see forced relocation of struggling teams to markets where they will survive. Shape up or ship out.
The thread looks at why things aren't a certain way. Current rules prevent private ownership but if they did change, investors who don't have lots of money to piss up against the wall, like Arab oil billionaires and Russian oligarchs who stole assets worth billions from the state for nothing, would struggle to see an economic case to own some of the 18 teams. That is undeniable.
Some wealthy owners might value the other intangibles of team ownership at a decent dollar value to them, but if they are going to try to sell the club, then if the buyers don't value the intangibles the same as them, just the value of what are in the books and the forecasts, they wont find buyers. We saw that in the 1980's and 1990's people owned teams for ego reasons. It didn't work because they weren't large millionaires/ billionaires who could subsides the team from other income producing assets they owned.
I thought you were talking about V/AFL clubs handing over power. My mistake.
The NFL and American FL clubs, before the merger in the late 1960's early 1970's as represented by NFC and AFC, pretty much all started as private clubs and they moved into a competition where they wanted to be part of an existing private competition. So they didn't hand over any existing powers, but yes overtime they agreed to pool resources as TV revenue took over from match day revenue as the most important revenue stream. The 1972 perfect season Miami Dolphins squad, most of the players still had jobs, mainly out of season and it was considered a big professional league then, but there was bugger all TV monies.
In terms of how professional sports have evolved in the modern era: 1 european soccer is very much the exception and 2 it is very much independent of private ownership (again, note the la liga example). Soccer perhaps has sufficient dominance in its strongest traditional areas and also arguably more "leveled" by the difficulty to score. Beyond that, the worst performed american sport (again I take this from a very reliable source) in terms of relative standings over the last half century has been the one with the least equalistaion (ie baselball)
The thing that makes soccer different around the world is promotion and relegation, so you see market forces at play and it makes it harder to have central control like other sports. Plus you have a true free market, a global market, for player movements once the contract is completed, and you don't have salary caps in most of the big leagues in Europe, South America and Asia. You have fully private owned leagues like EPL, mixed leagues like France and Italy and solely member based leagues like Spain and Germany. The north American sports don't have promotion and relegation, even in the MLS.
Australian sports don't have it. The NSL used to have it a bit in the late 1989's and early 1990's - the bottom two NSL clubs dropped out, replaced by champions of NSW (NSW, Northern NSW and the ACT) and champions of Victoria, Queensland and South Australia (in a playoff) provided they met financial criteria and of course wanted to be promoted - but it was part pregnant stuff.
I think a mixed ownership model league is the worst of the outcomes and its why the NRL suffered from it especially when News Ltd had game with veto rights until a few years ago when the ARL Commission took over and they owned teams, Brisbane, Melbourne and secured funding a lot of teams who had supported them in the super league wars. Brisbane were protected from having a 2nd and 3rd team compete in Brisbane because of News' veto power. It allows them to dominate and make big profits which can then be taken out of the club's books.