Buying an A-League franchise takes some heart

By The Crowd / Roar Guru

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.

The Crowd Says:

2008-10-10T03:03:35+00:00

jimbo

Guest


The FFA are favouring regions and towns rather than ethnic associations so teams like Western Sydney and Wollongong need to have greater community involvement and a fresh approach. Not sure about the Heart and East Melbourne. There are no ethnic associations and I think Mooroolbark from the old NSL came from that area. They weren't a great success and only lasted one year.

2008-10-10T01:30:30+00:00

True Tah

Guest


dasilva, there are plenty of people in west Sydney who follow Sydney FC already. If a western sydney franchise was added, it would be marketed as Penrith/Blue Mountains. A 2nd Victoria team would be based around Geelong area, as I understand it has a separate identity to Melbourne. When they bring in 2nd teams in WA and SA, I expect that Fremantle would be the 2nd WA franchise and SA would probably be similar to Port Adelaide.

2008-10-10T01:25:28+00:00

Redb

Guest


Milslter, Ok, shall dismiss all your posts as spurious dribble from now on. :-) Redb

2008-10-10T01:13:02+00:00

Millster

Guest


Awwww RedB spoil my fun.... I was imagining Mornington Muppets FC ;0)

2008-10-10T01:08:40+00:00

Redb

Guest


dasilva, Yes that's the 64 dollar question and its not jsut restricted to the A Leauge, as the AFl consider a second Sydney team, NRL considers second Brisbane team. Super 14 considers any team ;-) Millster, Geelong maybe..... Frankston!.. Noooooooooooooooooo :-) Redb

2008-10-09T13:27:38+00:00

Millster

Guest


Very interesting issues dasilva and I have been musing on the same thing of late as well. I am firming up around the view that even if in practise it is eroded, nominally at least there is some merit in retaining the 'one city' concept and separating out team constituencies still on a fairly well defined geographic basis. So, for example, in Sydney we are seeing the Illawarra concept gain some prominence over the assumption of just a 'West Sydney' team. Even if a team were to end up in West Sydney, some friends with whom I chat locally see merit in it being marketed as a Penrith/Blue Mountains club to maintain that level of separation from the city. Similarly in Melbourne I am sure that opportunities to use Geelong or Frankston in the branding of a future club are being considered. I don't know the demographics of those areas well enough to comment on the business case for choosing one of those, but it would certainly create a clear separation of identity from Melbourne Victory. Anyway, long way of saying that now that the HAL is facing 2nd Sydney and 2nd Melbourne teams in the face, the benefits of that separation of geography and identity are becoming very clear to many observers and I think there is a strong case to retain it.

2008-10-09T13:18:32+00:00

dasilva

Guest


I'm not from Melbourne so these next comments are based from impression. feel free to fix up any mistakes and misunderstanding How would the second melbourne team differentiate from Melbourne Victory? People say that in West Sydney people don't watch Sydney FC as it's too far away and that Sydney FC hasn't engage the community there. So they claim that a second Sydney team will win new crowds and will not gobble up crowds from Sydney FC. Does Melbourne have those same issue in which Sydney has. Would a second Melbourne club win crowds from underepresented areas or would they just eat up crowd from Melbourne Victory. It seems to me from face value that Melbourne does a good job at garner support from the whole city of Melbourne and that the city has pretty much consider Victory as their side. Perhaps the success of Melbourne Victory will make it hard for a second club to break the market. The only underepresented groups that a second Melbourne club could win support from are the ethnic group and old NSL supporters which may open a can of worms. The question has to be asked - What type of Football supporters in melbourne do not support Melbourne Victory and what would Melbourne Hearts do different to win supporters from that group? If that question can't be answered then I'm very skeptical whether a second melbourne team can succeed.

2008-10-09T11:47:40+00:00

jimbo

Guest


MC and Redb yes times are changing and the A-League and other of life's luxuries are becoming less popular. The second Melb A-League team will be an interesting development to follow and if the new franchises are going to survive under the tighter financial controls. Not sure yet if the gloss of the A-League is dulling or other factors affecting crowds and ratings. Interesting times, but it all goes on regardless and there is still plenty of football to watch right round the world. As good (or bad) as the NSL was and their small crowds - the national competition ran for 27 years. BTW thanks for posting guys - I've managed to beat Pippinu's conspiracy theory article into second place this month with 121 posts.

2008-10-09T11:31:30+00:00

Michael C

Guest


Redb - ah, that's better - - I was amazed by those figures and some how sceptical. The fellow on Brissie radio didn't sound the brightest of all sparx.

2008-10-09T09:59:14+00:00

Redb

Guest


MC, real estate auction clearances are around 65% in Melb. Redb

2008-10-09T09:38:57+00:00

Michael C

Guest


Finally read the article today re Melb 2nd team (I'd kept it from the paper on the plane on Friday) - - the bit about the 2nd team isn't permitted to use "Melbourne" in it's name is nice. Given that MVFC has covered all angles of Melbourne, and the iconic Big V (white on navy) and "Victor(ia)y".........doesn't leave team 2 anywhere to move really and at this stage just yells "failure in the making". given that many strategic plans might have assumed a growth factor for MVFC rather than decline factor re crowds etc - - the Melb modelling might be a little out. Remember 2 years ago, MVFC averaged 32K at Telstra Dome (for 8 matches - not counting finals). And the sky looked the limit. Last year that TD ave reduced to 26K......but they had an average season. This year, with a ripping start they have dropped that average to 22K......we've seen their first ever TD sub 20K crowd on a competition free weekend and even whilst the team does the job on the paddock to top the table, the crowd figures this season have progressively trended downward. What's it say about the Melbourne market that was perhaps used for modelling 2 years ago? Everyone estimated that the new 30K capacity venue would be too small and a waste of money to NOT be built to 40K at least capacity up front. Right now, it's looking too big for all prospective tennants. Fair enough though, the long term may and should be different, but, the long term is only accessed via the short term doorway. Dave - the big difference about drawing solace from comparisons to the J-League, or MLS is - well - to put it bluntly - - size. We only have 20 odd million people and there already are 3 other footy codes divided into that. The HAL and FFA know that a lot of things have to go right for them - - and the dangers now that economic belt tightening etc may be presenting during a phase of expansion might just be too big a bight to take. btw - I was intrigued to hear on the radio up in Brissie on Saturday morning that Real Estate Auction clearances in Melb were still running around 80% whilst in Brisbane they were sub 40%.

2008-10-07T12:37:11+00:00

jimbo

Guest


Typo - Lyle O'Gorman and here's a pat on the back from the Right Honourable John Della Bosca http://www.parliament.nsw.gov.au/prod/PARLMENT/hansArt.nsf/V3Key/LC20060302006

2008-10-07T12:22:37+00:00

jimbo

Guest


Pip, what is the FFA's hidden agenda for a second Melb team? I must have missed it. Midfielder, do you think Lyle Gorman and the Mariners board would mind running SFC as well and help them to make a profit and connect with the local community like the Sand Shaggers are doing.

2008-10-07T09:34:34+00:00

Midfielder

Guest


Just adding to an earlier post of mine regarding connecting to the Football community is the wat forward IMO anyway. Just took this off the Mariners site and in SFC backyard mind you. Gala Day success at ParkleaThursday, 2 October 2008 Football NSW & Mariners Gala Day Football NSW © Football NSW The Central Coast Mariners met with their Members and supporters south of the Central Coast for the occasion of the second annual Football NSW and Mariners Gala Day at the Valentine Sports Park, Parklea last Sunday. Played out in ideal conditions for football, Mariners players and coaches met with competitors from across the state, with an estimated 1,000 players, coaches and spectators in attendance throughout the day. Of the competitions that were contested, it was the Rockdale City Suns that were crowned winners of the Under 10’s competition, while the Hawkesbury Commodores claimed the Under 11’s crown. Perhaps the most committed of all of the clubs that attended were Tottenham from inland Dubbo and Bathurst ’75 FC, each of whom were in transit for several hours over some 350 kilometres en route to the north-west of Sydney. "I’d firstly like to extend a huge thank you to everyone at Football NSW for their assistance in co-ordinating such a fantastic event that again provided our club with a tremendous chance to meet and mingle with our Members and supporters south of the Central Coast," said Mariners Executive Chairman Lyall Gorman. "Lastly but certainly not least, we must also thank each of the competing teams, particularly the likes of Tottenham and Bathurst ’75 FC who showcased amazing dedication in order to take part in a day that was immensely enjoyed by our playing group and the Gala Day’s competing players alike."

2008-10-07T08:15:42+00:00

Pippinu

Roar Guru


Don't forget - the FFA has its own particular agenda for the 2nd Melbourne club.

2008-10-07T07:14:48+00:00

Dave

Guest


Millister Exactly and this is what l posted yesterday re MV - "Melb 2nd team is a must and the city is big enough to cope…obviously needs to be done properly but…interested to read the MV response to a 2nd team was along the lines…oh now we will have to put more effort into community work, school clinics, media etc etc. What a larfff…why do they need another team to suddenly realsie they have to work damn hard to get a crowd. l think they have had it too easy and to a certain extent rested on their laurels in that respect…a 2nd team will give them a kick up the arsenal and also instigate a rivalry which in term makes the clubs earn support not have it dumped into their lap as to a certain extent MV have. " Why do they need a 2nd team to stimulate them to greater efforts on the things they should have been doing anyway?.

2008-10-07T06:57:14+00:00

Midfielder

Guest


Savvas Perth should have a lot of international matches I agree.........also some owners who care more about football than taking their Asian Clients to matches would help as well ........... bring back Nick

2008-10-07T06:39:50+00:00

Savvas Tzionis

Guest


Yes, Midfielder, they are all the reasons why Football will continue to succeed, unlike Basketball. Maybe Perth needs some International matches?

2008-10-07T06:36:14+00:00

Midfielder

Guest


TT Obie One is Frank Lowy ............ or my name for him anyway ......... he has achieved a lot he has done a lot ........ his one failing as I see it is SFC. Savvas Basketball did not have Obie One ........ nor the Socceroos ..... nor the world cups ........ nor an SBS. Further if you study the fall of basketball it has a lot to do with the management or I should say poor management like in season two they more than doubled the ticket prices, played midweek games nay nothing like basketball. Further Newcastle go back to the start of the NSL and are essentially the same team, Newcastle Rosebuds, Newcastle KB etc

2008-10-07T06:30:48+00:00

Millster

Guest


Dave - I agree and am optimistic but also don't think we can sit on our laurels. For example, I don't think FFA have been really innovative in the last 12 months in their marketing and promotion of the code. I also think the clubs have a way to go in terms of their own responsibilities to promoting themselves in their communities, proactive open-ness to media of key players, etc. Not trying to bag outright as there is much that is good in the HAL, but just saying our code has to keep its finger on the pulse and that includes having a real plan to keep up the visibility and excitement of the game.

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