There’s already been a lot of discussion about the pros and cons of Harry Kewell’s proposed incentive-based deal with the FFA.
Yesterday, Kewell’s manager Bernie Mandic clarified his demands in order for his client to play in the A-league.
According to theworldgame.com.au, Mandic is asking that Football Federation Australia pay Kewell 70 percent of any increase in gate takings from last year’s average crowds to any match in 2011/12 involving Kewell. In his words:
“So if for example Harry is playing for Sydney against Adelaide at Hindmarsh Stadium and the Reds’ average home crowd last season was, say, 14,000, and 18,000 turn up to watch him play, he gets 70 percent of the income generated by the extra 4000 people.”
At face value, it seems fair enough. If Kewell leads to a big increase in crowds, then he pockets a big paycheck. But if he has no effect on crowds, he walks away with nothing. All the risk is on Kewell, right?
As Mandic says “…this episode proves beyond any doubt that Harry is not about money but about giving something back to the game.”
If you dig into the maths of this system, however, it starts to look a little less rosy. The important thing to remember is that Mandic’s system works on a game by game basis. So if crowds go up by 4000, Kewell gets 70 percent of the increase. If crowds go down by 4000, Kewell loses nothing.
This exploits the natural variability of matchday attendances.
For example, last season the Wellington Phoenix had an average attendance of roughly 8000. When the Melbourne Victory played there in November only 6500 people showed up. Maybe it rained.
If that same attendance is repeated this season, Kewell wouldn’t make any money, but he wouldn’t lose any either.
However, just six weeks later, the same two teams played at the same venue and this time the crowd was an impressive 9500. If that same attendance is repeated, Kewell would stand to make 70percent of the extra 1500 people who rocked up on top of Wellington’s 2010-2011 season average of 8000.
That means Kewell would stand to make a tidy sum even if the attendances for those games in 2011/2012 are exactly the same as they were last season. That same process gets repeated for every game. If one week the crowd increases, Kewell get a chunk of money. If the next week it goes down, Kewell loses nothing.
In addition, the two clubs that Mandic says have agreed to terms, Melbourne Victory and Sydney FC, tend to draw the highest away crowds in the league.
In the case of the Victory, the derby with the Heart draws a crowd massively higher than average. 26 000 people attended the first Melbourne derby, and 23 000 went to the second.
Both were Heart home games.
That’s compared to an average attendance of just over 8000 for the Heart.
Under Mandic’s system, the FFA would have to pay Kewell 70 percent of the increase in attendances for those two games.
That’s 70 percent of 23000 tickets. Say the average ticket price is a conservative $20, that’s over $300,000 Kewell would pocket even if his personal impact was nothing.
That’s for just two games, on top of everything else he’d be paid by his own club. No wonder the FFA knocked back Mandic’s offer.
This also poses the question of exactly what Kewell’s incentive-based deal with Sydney FC and Melbourne Victory looks like.
If it’s based on a similar arrangement, where the club pays Kewell when there’s an increase for each individual match above last season’s average, then it’s a lot more favourable than it seems at first glance.
Mathematically, the risk that Kewell and Mandic are taking through attendance-based deals is lower than people think.
PeterK
Guest
The method of calculation seems to be contaminated with much confusion. One would hope that the FFA are very clear on what constitutes the "baseline" for the calculations. And what happens in Harry's second year? Does the baseline increase because of the first year's expectedly larger crowds? Personally I would hope so.
Jeremy
Guest
How about a new deal, still 70-30, however it is compared against the average for each opposition. If he plays for Melbourne, as Victory usually get more away crowd compared to the average, if its an average of Victory away attendances per each ndividual team, this would lower any gains for Mandic/Kewell. So, as the Victory v Heart away average attendance was 24500, Kewell would need to attract more than this amount to obtain any gains from away games next season. Also, if the individual away average attendance was for some reason less than overall away average attendance, the overall average attendance should take precedence. Even though the Victory away average attendance vs Wellington equaled the average attendance for Wellington home matches, if they only played Wellington away once and turned out 6500, it should be brought up to 8000 (Wellington's average home attendance).
topher
Guest
i dont know what the fuss is about , he obviously thinks hes better than the leauge,well hes not, i remember in leeds and liverpool, moan moan moan...get the money behind young talent , look out for liam miller at glory good good player...hail hail.
dasilva
Guest
Yeah the deal could only work if Kewell gets a percentage of the increase from the average crowd between the two sides (so the Melbourne derby used the average crowd number for that derby of 24000 instead of 8000) rather than the increase from the total seasonal average. Even then, FFA may not benefit as they don't directly earn revenue from ticket sales
TomC
Roar Guru
Beau, I agree entirely that Kewell would be taking a big risk agreeing to not be paid if he gets injured. I'm not saying there's no risk. Just that there's less risk than Mandic is letting on. Mandic himself states that Kewell would get 70% of the income. I'm sure if he intended taxes and expenses be taken out he'd have said so. You're right to say that the Heart have the biggest discrepancy in attendances, but all clubs have big variations. For example, the Roar's highest regular season crowd was 20,000, and their lowest was 3,500. All my figures are based on last season's attendances. The only assumption I've made is that the average ticket price for the Melbourne derby is at least $20. Most likely it is more than that. Certainly Kewell would stand to make more money under the FFA's deal by signing with Melbourne Victory rather than Sydney FC. That is another problem with Mandic's offer. If the FFA accepted it, they would in all likelihood be agreeing to pay out a lot more money should Kewell choose the Victory over Sydney. Thats not really fair.
Fussball ist unser leben
Roar Guru
Well, if ad agencies had been paid using that profit-sharing formula, for the past 3 years they would have received ZERO, ZILCH, NADA from the FFA for their time and materials. I'm not sure what the FFA has spent on marketing and promotion during the past 3 HAL seasons, but I assume adds up to a couple of million dollars ... for a NEGATIVE return on their advertising spend! Look if the FFA are really serious about this I'm sure some smart investment banker could engineer a derivative (insurance) product, which cap FFA's upside risk, in exchange for a premium. Risk management is the bread-and-butter of the insurance industry.
TomC
Roar Guru
Fussball, the article is really about Kewell's deal with the FFA, not MVFC or SFC. Under Mandic's deal, the FFA are still likely to pay Kewell a hefty sum even if there was no overall increase in revenue. That is the point I try to make in the article. As for marketing and advertising companies, I'd imagine they'd be falling over themselves to be paid 70% of any increase in revenues! Particularly if that 70% was calculated in the same way Mandic wants Kewell's deal with the FFA to be calculated.
Chris
Guest
How is this deal beneficial in the long term? It's only attracting people who are interested in seeing Kewell. And financially the vast majority of the (possible) increased revenue is going to Kewell, so the club doesn't benefit all that much revenue-wise. I can certainly see the benefit in the short term, but I don't think it's much of a deal thinkinig beyond a season or two. Which is even more of a reason for the FFA and A-League NOT to get involved. They should be putting resources into growing the game long-term.
Beau
Guest
I disagree with the entire premise of this article. Here is why. Working for free IS a risk, you seriously think he should pay out of his own pocket if a crowd is lower than average? He's still at work, working. IF he gets injured, he gets nothing - you're telling me thats not a MASSIVE risk for Kewell with his history? And to be fair, they don't talk it up as being a massive risk, they talk it up as harry will only benefit if the league benefits which would be relatively true. You talk about ticket sales - who says we would get a % of the ticket price!? Are you sure gate takings aren't calulated after taxes and expenses related to them?? You're 300,000 might be a big overstatement. You're also assuming a) hed play for Victory - only Heart has that kind of discrepency in attendances b) they will calculate average based on game by game (what happens in rounf one then?) and not on last seasons averages. c) you assume a low crowd would happen before a high crowd - what if the bad weather happens in the 2nd game? I think your figures are wrong, your assumptions are vast and could easily be looked at the other way, and worst of all - the premise of your article being that it's not a big risk for Kewell in this arrangement, based largely on the fact if crowds don't improve he doesn't "lose" money is just utterly false. Like I said, working for FREE is a loss. If you write a blog on the arrangement that you only get paid if 50 people comment on it, rather than getting a set fee for each one - if no one comments and you get nothing for all that time, I think you'd consider it a loss, not breaking even. It's a risk you might take if you are confident in your ability, knowing you get greater reward when you DO get 50 comments, yes, that is true, but it IS a risk all the same.
FFC down under
Guest
I think you will find that Harry deal is that he is not on a fixed wage at any club, he just paid on the increased gate taking at home and away matches.
Fussball ist unser leben
Roar Guru
As a businessman, I would ONLY prefer to pay "fixed costs" IF I am concerned the promotion will be TOO successful - i.e. too many customers come and, by revenue-sharing I'm paying a bigger "commission" than the alternative "fixed fee". By contrast, a "revenue-sharing deal" is MUCH more attractive IF I have no confidence in the marketing/advertising agency's ideas (or the player's "selling power") ... i.e. I'd rather share the revenue b/c I don't expect many customers to come along and a fixed fee is too much risk for, perhaps, ZERO return. So, the reason the FFA is worried is b/c H could be TOO successful and they need to have some "cap on the costs".
Fussball ist unser leben
Roar Guru
"Mathematically, the risk that Kewell and Mandic are taking through attendance-based deals is lower than people think." ... really, how so? What's the business risk for MVFC if they sign H under this revenue-sharing deal? If H plays: a) MVFC get to use his on-field talent b) if a bigger crowd comes than the baseline figure, H gets paid very well - 80% of extra profit, BUT ... in this scenario, MVFC also comes out 20% ahead. The reason they choose a baseline figure is b/c that's the accepted reference point for what crowd we can expect next season. So, for a ZERO up-front fee, MVFC may or may not get more attendance ... if they get a bigger crowd then H's marketing provides MORE profit for MVFC than if he were not in the team. If, as you say, this revenue-sharing model is not that risky for the promoter (i.e. Harry) ... here's a novel idea .... ... let's ask all marketing and advertising companies to accept the same revenue-sharing proposal for HAL work - i.e. they will only be paid IF more people turn up to the games? I wonder how many companies will think this business deal is not that risky?
nordozzz
Roar Guru
i'd rather see a fixed cost as well, least they can plan for it. But i guess the nature of the revenue coming in will be open-ended and dependent on how HK does, so the deal reflects that. There's more good to it than bad for me.
Australian Football
Roar Guru
This deal is so confusing I'm still struggling with the 30/70 split. I heard Mandic make the announcement but as I understand it now, it's 70% for Harry and nothing if the crowd does not go above the average gate. OK, Mandic did not make that clear. Now is the 70% the part only above the average gate, or is it the whole gate on the day that the 70% will come from? Who will determine what was the average and what constitutes the above average gate? I think this is all just a strategy by Mandic to keep Kewell in Europe, to make it impossible for Harry to end his career in Australia. I think he has achieved his goal. Thanks for the memories Harry.
Pete
Guest
If it is a game by game calculation, then that really is a swindle. The open-ended nature of it is a bit rough as well.
danski
Guest
Well said Cpaaa, Harry is asking for too much. The Roar are champions and will naturally average more fans this season. If they signed Harry he would be taking 70% of the profits last years success may have brought. 50/50 at most. I think with his millions in the banks he should accept the mean average A-League player wage. Now that's humble.
Cpaaa
Guest
My question is which player in the world today could increase A-League crowds. Messi, Ronaldo, Rooney, Harry Kewell. Harry Kewell is playing for free with a percentage of the gate. So the FFA are fearful that crowds will explode and that they will have to pay Harry too much? Bizzare. How about Bernie you take out the confusion of the 70/30 or 30/70 split and just go with 50/50. No player should be bigger than the League itself, and it should fit better with fans and FFA. Yourself and Harry could be loved instead of looked upon as Scrooge McKewell.
Mick
Guest
I like the way the manager clarifies the deal after he says Kewell will not play in oz. I would of thought he would of said something before. If Kewell's team was top / near the top I would expect his club's away game attendance to go up anyway