Will all clubs survive the current economic crisis?

[mightytiges]

I was listening to ABC radio the other day and they had two experts in sporting broadcasting rights on.

They were discussing how the tv rights deals in recent times were boosted by competition between all the major networks and now with the current economic crisis that competition could be significantly reduced and that would drag down the value of the tv rights. This would seriously threaten the viability of certain clubs and leagues.

They were mentioning the possibility of one of the major networks being in receivership within a year. They mentioned Ten as an example who failed in their capital raising for $90 million only a week or so ago. If that happened then the major sporting organisations in Australia (not just AFL) could forget about tv networks paying through the roof for the rights as happened the last couple of times. It's just not FTA either. There's also the battle for market share between One HD, the new TEN 24 hour sports channel, and Foxtel. At the moment Foxtel has the money to outspend TEN and show more sports on pay TV but that could change in the future as Foxtel's subscriptions level off and more sports then get pushed to FTA. That would further reduce competition in the bidding process.

Also in the current climate tv networks are now run by accountants who only care about the bottom line rather than say a wealthy sports lover like Kerry Packer. So there'd be no hesistation to pull out of or pass on the next tv rights bidding process if the economics doesn't add up to the respective network's advantage.

Just out of curiosity the current tv rights deals are:

AFL - $780m over 5 years last time ($500m before that).
NRL - $240m over 7 years
Cricket - $280 for 7 years

They then mentioned how 100 years ago revenue to clubs and the Leagues were generated via gate receipts. However since the 80s and 90s revenue has come mostly (80%) from tv rights and company sponsorships. If the tv rights value falls on top of companies which are already pulling out of sponsoring then the proverbial could really hit the fan for sporting teams and competitions. IIRC they said 25% of companies are scrapping their sponsorships of sport altogether and another 50% are holding off on decisions to sponsor. No surprise but it makes you glad we've got Dick Smith and Luxbet plus all our other corporate sponsors signed up.

They then got onto the effect on player salaries and the possible financial effects with clubs. The two experts didn't think players in AFL would be greatly affected due the salary cap (although $1m+ salaries on one player may be questioned) but more the extra staff clubs have added in recent times. They could be the ones to get the flick on the end of cutbacks.

Interesting they also believed AFL and NRL which have a large core base of supporters will be in a better position to prop themselves up than say rugby which has a poor core supporter base to keep revenues going. Still I was thinking what about the smaller AFL clubs like North, Dogs and Dees. If clubs are going to have to fall back to relying on  revenue from gate receipts and memberships if revenue from tv rights and corporate sponsorships fall then these smaller clubs will find it very hard to survive let alone compete against clubs with the large supporter bases in the current economic climate.

Thankfully at Richmond we've had a massive jump in terms of memberships at just the right time we need it.

[Moi]

Yes, we hopefully are coming good at the right time and will be in a position to attract the limited sponsorships that will be out there in the marketplace.

The TV rights is a worry, if the advertising revenue they deem to generate won't be enough to warrant the lofty price they've paid in the past for them, or if channels go under.  I wonder how the AFL feels about a reduced TV rights.  Although I think they mentioned this on the Footy Show last night and they were talking about a billion dollars-plus for the next rights.  I agree with this summary, MT you've done and I think over a billion is in lala land. 

This is a really bad time for sporting organisations at the moment, and we have to really put our best foot forward now to compete with other clubs and organisations tooth and nail. 

Manchester United have just lost its massive sponsorship with AIG.  It's hitting hard everywhere.

http://ibnlive.in.com/news/aigmanchester-united-sponsorship-deal-to-end/83312-5.html


Awesome work BTW, MT.  Thanks for the summary - appreciate it 

[mightytiges]

No probs Moi  .

If we can starting winning more than losing onfield then you'd expect us to be one of rare clubs to make a profit this year. Our membership revenue is up 25%, we've secured our corporate sponsorship revenue at all levels from what I've heard and read, and the passion of the Tiger Army should see crowds up too going by Round 1. All clubs would be budgeting for zero growth so all that is pretty amazing from the RFC  .

I think 2011-12 are when the next tv rights are up for sale. That's only 2-3 years away. The AFL will be praying like crazy the economy is at least on the mend by then not only for the tv rights money but also for the two new teams. If the tv rights doesn't increase or worse falls because this recession lingers on then you'd expect the current AFL admin to prop up these new clubs in new markets rather than continue to bail out smaller Melbourne clubs if a choice came down to one group or the other. Then again it would be convenient for the AFL if two Melbourne clubs relocated and merged with each of these new clubs to help prop them up and give them some sort of existing supporter base to begin with. North could be regreting not going up north on their own terms rather than becoming the next Fitzroy if they are counting on the next tv rights being $1 billion and relying on it to save their backside. There's only so much of the pie to go around if the dollars from tv rights and corporate sponsorship doesn't keeping growing.

[WilliamPowell]

The current TV rights end after 2011. This year is the 3rd year of the 5 year deal

The AFL were looking to start negotiations at during 2010 but I wouldn't be at all surpised if they put that off until early 2011.

If they were up for renewal now they wouldn't get another $750 mil, they (AFL) would take a hit..

It will also be interesting to see what effect HD TV will have on the next lot of rights. With FTA stations having more than 1 channel willthey by-pass PayTV and try and keep it all for themselves

I think some clubs are going to struggle long term, especially if the TV $$$ decrease.

[bojangles17]

heres hoping the Ben Cousins express continues to gather steam, will be a boon for all concerned

[Infamy]

Well the fact that there will be more exposure will increase the bidding amount as there will be 12.5% more clubs and games each week. It will also have more exposure into NSW & QLD whereas at the moment the money is primarily from Victoria only. However this also means that there is more clubs to share the wealth.

The economy should be on the mend by late next year so I think it'll be ok, but I don't think they'll get the $B, somewhere inbetween would be about right. However that will be a nil gain given the two extra clubs.

[Ramps]

heres hoping the Ben Cousins express continues to gather steam, will be a boon for all concerned

Just shows that going after a name player can pay big dividends

[the_boy_jake]

The sooner Melbourne and North are asked to relocate, the better. Its a blight on the game to talk about this every season.

[mightytiges]

heres hoping the Ben Cousins express continues to gather steam, will be a boon for all concerned

Just shows that going after a name player can pay big dividends

Provided you pick them up cheaply so it's a bonus . Brodders from Fitzroy was someone we picked up cheaply and he was a top player for us.