Buying an A-League franchise takes some heart
Roar Guru By jimbo, 6 Oct 2008 The Crowd is a Roar Guru
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- A-League, Central Coast Mariners, football, Frank Lowy, Melbourne Victory, Wellington Phoenix
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A few months ago the A-League franchise hotline was ringing off the wall with investors looking to buy a share of a sporting business with annual growth running at nearly 20 per cent.
Following several highly enthusiastic and well-credentialed bids for additional A-League licenses in the past year or so, Ben Buckley CEO of the FFA said, “We continue to be very encouraged with the level of interest in the Hyundai A-League. The attractiveness of the competition is clearly reflected in the level of interest in the additional licenses and the quality of the bids we are receiving.”
Buckley reiterated the FFA’s earlier view that, ultimately, the Hyundai A-League has the capacity to expand from the current eight teams to be at least a twelve team competition and possibly fourteen teams.
He added: “When and where we expand the competition is measured simply by whether it is right for football, right for the existing Hyundai A-League clubs, right for the new clubs and right for the local community.”
It takes a lot of heart to buy an A-League franchise these days.
The starting point for any A-League bid is five million dollars or more in financial guarantees and a sound technical, football and business plan to take the club forward. Not withstanding are also the requirements for access to the playing and training facilities and a large enough population base to attract the fans to pay their money at the turnstiles.
Frank Lowy also specified that a club would need an average of about ten thousand spectators per game to just about break even. The FFA would also provide clubs with a share of television and media deals, gate receipts, sponsorship and other revenues.
Clubs can also raise money from trading football players to other clubs and selling club merchandising and their own local sponsorship deals.
Melbourne Victory is the best supported and most profitable club in the A-League.
The FFA recently announced they have begun exclusive talks with a consortium to create a second Melbourne A-League side for the 2010/2011 season, which will compete directly with Victory in the Melbourne football market. Melbourne businessman and thoroughbred racehorse owner, Peter Sidwell leads the consortium and the bid has been provisionally named the Melbourne Heart.
The FFA has given the Melbourne Heart syndicate the exclusive bidding rights for the next Melbourne football team franchise ahead of another consortium known as Southern Cross FC, which was linked with former NSL side, South Melbourne FC.
How will a second Melbourne team fare? Is this a good time to buy into a football team in Australia?
Understandably, Melbourne Victory chairman Geoff Lord doesn’t think it’s the right time for a second Melbourne A-League team. With Gold Coast and Townsville entering the A-League next season, Lord has no issue with new teams in new markets, providing they are viable, sustainable and progress the competition and the game.
But with the new team in Melbourne, Lord is not certain of the sustainability of the current market and for the sake of both franchises, Lord believes a second team might be about five years too soon. “As a businessman, I was prepared to start Melbourne Victory,” Lord said. “Today, as a businessman, I wouldn’t be prepared to start up a second team in Melbourne. But that’s only my personal judgment. They’ll have love of the game and passion, but whether their business model will work, I’m a bit skeptical.”
“I don’t think Melbourne is ready or big enough for a second side. I would say they need 10 years. It’s going to be hard work (but) we’ve got our own issues and that’s to keep building the club and making sure it represents the whole of Melbourne.”
Lord has reluctantly come to accept that a second Melbourne team is now inevitable. “If there is a second side coming in from Melbourne, then the best thing for Victory to do is continue to build on our progress as much as we can and drive to a new level of support. We’ll have to work harder.”
The financial performance of the A-League teams to date has been mixed and a good return on the large outlay is far from guaranteed.
On the plus side, two A-League clubs; Melbourne Victory and Central Coast Mariners have already turned a profit in only their third year of operation and are looking to make a handy surplus in the coming financial year.
Recouping a five million dollar plus outlay and making a profit within three years is a very good return on investment for any type of business.
At the other end of the scale, the owners of the defunct New Zealand Knights football team from Auckland have had their fingers badly burned and their financial backers will see very little of the millions they invested for their failed license.
This season, the poor crowds and diminishing support at Perth Glory and Wellington Phoenix put them below Frank Lowy’s break even benchmarks.
If the FFA are consistent in their rulings, Perth and Wellington will have their A-League licenses revoked if they fail financially. There are a number of consortiums willing to take their place.
With the A-League’s slow start this season and falling attendances – from a high of over fourteen thousand per game last season to below twelve thousand per match so far this year and the major financial collapses and market meltdowns across the globe, its going to take a lot of heart to hand over millions of dollars for an A-League franchise license in the next couple of years and get a decent return on your investment.
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October 6th 2008 @ 12:28pm
Redb said | October 6th 2008 @ 12:28pm | Report comment
SJ,
Dunno….probably searching for an entry angle. A passionate fan our Pip, I kept him in the upper stand at Telstra Dome to avoid a fence jump
There was little chance Melb Victory would have copped a red card on Saturday arvo anyway the refs were too busy shaking their head in disbelief at the poor display by Perth Glory. Perhaps a red card to PG for simulating a futbol team?
Allsop and friends on the other hand played well.
Redb
October 6th 2008 @ 12:36pm
oikee said | October 6th 2008 @ 12:36pm | Report comment
I am Talking growth redb, not who’s the biggest. Where the growth is going to be best justified.
October 6th 2008 @ 12:36pm
Slippery Jim said | October 6th 2008 @ 12:36pm | Report comment
hah hah, simulating a football team! I made Allsopp my captain in fantasy A-League – looks like some investments are still paying dividends
October 6th 2008 @ 12:45pm
Redb said | October 6th 2008 @ 12:45pm | Report comment
Oikee,
Hate to break it to you but other parts of Australia are also experiencing growth, in particular Melbourne. Queensland’s population may exceed Victoria’s in 50 years (based on current estimates) but Brisbane will still be well behind Melbourne. These are facts. Go to ABS website for details.
Melbourne – the sporting capital of the universe.
Redb
October 6th 2008 @ 12:47pm
Redb said | October 6th 2008 @ 12:47pm | Report comment
SJ,
yes Pippinu was pretty happy with Allsop he is in his team but not as Captain I think. Changes the way you view games at times with fantasy selections especially opposition players who do well for you.
Redb
October 6th 2008 @ 12:54pm
Millster said | October 6th 2008 @ 12:54pm | Report comment
RedB – your best line ever “simulating a football team” good work!
Interesting question about whether the FFA is racist (too storng a word I know). While I understand their fear of the way things were perhaps the pendulum has swung too far the other way… and I can understand the views of those ethnic loyal ‘socca’ guys who battled through the Australia of the 60s-70s-80s supporting their game while it was so prejudiced against, and now locked out of the ethnic side of their support.
I’m starting to believe here in Sydney that the best option for next team is Illawarra (also representing some of Sutherland) rather than just Western Sydney. I think there is still ways to keep the one-team logic in place and I think this article is spot on in terms of the view from club managers and investors. Would a Geelong team make more sense? I don’t know Victoria well enough to make the call but just feel like Melbourne Heart is a risk – for both clubs. But if I had to have a 2nd Melb club it would certainly be South Melb.
Oikee – no question about Qld but you can stay quiet and happy in the knowledge that QLD already have Townsville and Gold Coast starting next season so they have been well looked after – in fact currently we’re talking of moving Vic from 1 to 2 clubs, with you guys already having 3 from next season’s kick-off. Oh and socceroos v qatar would sell out anywhere – its a national game and a serious one at that so different to club level sports.
October 6th 2008 @ 12:57pm
The Bear said | October 6th 2008 @ 12:57pm | Report comment
I think the sceond melb team needs to come in now. New stadium soon, would not want either team feeling as they are territorial at the new olympic park. As far as the fans go… well who knows. Syd v Melb in season 2 had 50K in attendance at T-Dome. I think there is hope for the Heart.
Graciously,
The Bear
October 6th 2008 @ 1:09pm
Redb said | October 6th 2008 @ 1:09pm | Report comment
Millster,
Melbourne dominates Victoria’s population, Geelong has about 150,000 then your down to Bendigo, Ballarat, La Trobe Valley (combined Morwell, Moe,etc) about 100,000 each. Big difference to Sydney with Newcastle (500,000) and Wollongong (250,000?). Geelong is possibly the only regional choice and would embrace a team, parochial lot those from sleepy hollow, but the town is also is in economic neutral gear and lacks a big end of town benefactor that a Melbourne type baron would be looking for and the business marketing opportunties of a city with 3,800,000 as opposed to 150,000.
From what I recall Melbourne Victory were one of the last teams to get their act together at the formation of the A League (funding and Board issues). Thus I think one team was considered difficult at the time without thinking about the next Melb team, with hindsight the decision to call them Melbourne may well be a long term limiting factor.
Redb
October 6th 2008 @ 1:19pm
Redb said | October 6th 2008 @ 1:19pm | Report comment
The Bear,
With respect, the stadium they play at is not the issue, it will be new, shiny and located in the middle of Melbourne it has little suburban or regional connection. it is aprt of a massive sports precinct that inlcudes the MCG, Rod Laver Arena, Hisense Arena (multi purpose) , Olympic Park, Lexus Centre,etc.
The issue is how you differentiate as a futbol fan, Melbourne Heart from Melbourne Victory. Unless you’ve been under a rock for the last 4 years, Melb Victory are the futbol team of choice in Melbourne and have done little wrong to fans. Remember its primarily Telstra Dome and the FFA that have caused most of the angst amongst BWB groups.etc. Happy to be corrected on that. But certainly as far as the general sporting public is concerned there is nothing but goodwill for Victory.
Redb
October 6th 2008 @ 1:22pm
The Substitute said | October 6th 2008 @ 1:22pm | Report comment
In the one city, one team rule, Melbourne is the exception. Sydney can be split up geographically, Queensland has lots of regional centres to work with — in Victoria, it’s Melbourne. It is almost as if you’ve got to have a strong presence in Melbourne if you are to succeed Victoria-wide, even Geelong (in the AFL) play 3 home games a year in Melbourne.
While this new team may end up being “based” in Casey, it will still be a Melbourne team. They will be no different to a Hawthorn or Western Bulldogs — their support will not be geographically limited. (Didn’t Sydney FC at one time train in Parramatta? Do they still do that? They were never considered a Parramatta club, were they?)
As for Geoff Lord’s comments, well, you could tell he had his MV hat on when he made those, I wouldn’t read too much into them Apparently a team now isn’t the right time, he would wait ten years (when MV has built its monopoly…)
“Today, as a businessman, I wouldn’t be prepared to start up a second team in Melbourne” should’ve read “Today, as a MV chairman…”