AFL warns clubs of tough economic times ahead
Damian Barrett | November 11, 2008
THE AFL plans to slash millions of dollars from its 2009 outlay and is urging all clubs to brace for potentially heavy downturns in revenue as football begins to deal with the global economic crisis.
While stressing the game was as well placed as any industry to ride out the financial meltdown, AFL chief executive Andrew Demetriou said yesterday the league was not immune to its reach and that it had cautiously budgeted for 2009, effectively setting an example for the clubs.
In his most direct public assessment of the expected impact of the financial crisis on football, Demetriou told the Herald Sun:
HE HAD already urged clubs to have contingencies for possible dire financial outcomes, including the loss of a contracted major sponsor.HE WOULD meet club chief executives as a group next week to "see how they are finding it out there".
WESTERN Bulldogs, Richmond and Melbourne had been and would continue to be assisted by the league in their increasingly desperate pursuit of major sponsors for 2009; UP TO $5 million would be cut from AFL spending next year, coupled with financial plans that incorporated no increases in expenditure growth;
THAT the entry to the national competition of Gold Coast, in 2011, and Western Sydney, in 2012, remained an AFL Commission decision, but in his eyes they seemed on track, arguing the cyclical nature of the financial crisis could be trending upwards in three years.
The AFL decision to cut costs will be only the second time since the AFL was formed, in 1990, that the game's controlling body will spend less from one season to the next.
"We have taken a very, very conservative, prudent approach, and we have basically attacked our budget to have zero expenditure growth, so our expenses are planning to go up by zero per cent, and we have cut costs probably to the tune of around $4 to $5 million," Demetriou said.
Asked where the cutbacks would be made, Demetriou said: "Programs, staff freezing, we are looking at doing things more efficiently. Where we might have spent $100 on something, we might now be spending $80.
"It has been a very lengthy process, but it wouldn't be unlike a lot of businesses."
The 16 clubs expect the corporate arms, particularly hospitality, of their businesses to be hardest hit in 2009.
While attendances are confidently predicted to remain strong, there is speculation from some club chief executives that membership will drop significantly, possibly by more than 10 per cent.
"What's happening financially on a global perspective is something none of us has seen in our lifetime, and on that basis, it is the unknown and the uncertainty of what lies ahead that provides food for thought as to how to approach the next 12 months to two years," Demetriou said.
"We will work collaboratively to make sure we can withstand what lies ahead, and I think our industry is in very good shape to do that.
"But it means we need to act proactively to try to minimise the downside. Football is not immune to what is going on globally, there is a cascading effect with what is happening around the world."
At a meeting with club marketing managers 11 days ago, Demetriou urged the creation of back-up financial plans to combat worst-case scenarios.
"I did say we should all factor in hypotheses, as it is not beyond the realms of possibility, what if one of your major sponsors walks in tomorrow and says: 'Our business has suffered severe cutbacks, we can't afford to pay your sponsorship'," he said.
"How would you as a club react to that? Do you have a contingency and plans in place for that happening?
"What happens if you are one or two million dollars short of your revenue because corporate hospitality isn't where you wanted it to be, or membership is down?"
http://www.news.com.au/heraldsun/sport/afl/story/0,26576,24632904-19742,00.html
