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Why the NRL needs a 17th team

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Roar Rookie
6th June, 2021
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As the calendar flips to June, it means the rugby league world is another month closer to finding out which south-east Queensland club will be granted the 17th NRL license.

Formally kicking off in 2023, I hope the head of NRL scheduling doesn’t apply some perverse form of irony and award the Jets, Firehawks or Dolphins a Round 1 bye.

In advocating for the 17th team, the NRL have for several months trumpeted the fact an extra Brisbane team will grow the game’s footprint, increase participation, and of course bring in an extra $50 million in annual revenue to the game.

This is down from an annual figure of $100 million attributed to former Nine boss David Gyngell in 2013, but it’s still a sizeable increase.

There have been ample dissenting voices around the merits of expansion, plenty of which have come from the existing clubs heavily soaked in self-interest.

In fairness, several opposing arguments have a logical basis. For one, unbalancing the competition by moving to an odd number of teams and a bye each week is a head scratcher.

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There is also the very serious question of whether there are enough players to adequately fill 17 squads. No serious observer would suggest the NRL is flushed with playing talent and in fact it’s more accurate to suggest the pool has never been shallower.

While player managers may be licking their lips at the inflationary prospect of a 17th team, footy managers are rightly scared of the prospect.

(Photo by Albert Perez/Getty Images)

Then there is the sustainability factor. The NRL may have trumpeted their cost savings over the past year, yet a glimpse of their balance sheet demonstrates they cannot hope to underwrite an expansion team in the way the AFL did with the Giants and the Suns.

Any new club will need to be viable from day one and remain that way during the inevitable struggles expected of an expansion club. On that note, I suspect the NRL’s narrow focus on south-east Queensland is because they know they cannot prop up a club in a developing market.

While those arguments simmer in the background, several existing clubs have also proposed a multi-million-dollar entry fee, payable either to the ARLC or as a dividend to the existing clubs.

It was Paul Keating who famously said: “never get between a state premier and a bucket of money.” As David Gallop, David Smith, John Grant and Todd Greenberg have publicly learnt, we can just as easily apply that sentiment to the NRL and its relationship to clubs.

NRL clubs currently receive an annual grant from the league of 130 per cent of the $9.5 million salary cap. Despite that largesse, few are profitable in a normal year and as the salary cap inevitably rises, so too will club grants.

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The players took a pay cut last year and agreed to lower representative match payments over the next two years, so I expect they’ll be pushing for a bump in the salary cap over the next few years.

That doesn’t take into account the NRL’s very essential commitments to the state bodies and junior development.

ARLC Chairman Peter V’landys

(Photo by Matt King/Getty Images)

The NRL has a lot of mouths to feed and while their public pronouncements are about doing the right thing for the game, I suspect their pitch to clubs is very much built around the financial necessity of expansion.

The NRL desperately needs to grow revenues and with free-to-air television rights on the horizon, the pressure is on to draw increased income from their primary income source.

The current television rights are reportedly worth $323 million per year to the NRL with Fox Sports paying two thirds and Channel Nine the remainder. Under last year’s renegotiated terms, the Channel Nine rights run through to the end of 2022 and Foxtel through the 2027 season.

This is where the situation gets interesting. According to the NRL, last year’s broadcast rights renegotiations involved exploratory discussions with Channel Ten and Seven West Media. Channel Ten were unable to make a bid and Seven West’s offer was reportedly half that of Channel Nine.

Discussion with emerging providers Netflix and Google were also similarly brief, with both proposing a revenue sharing model, which would involve among other issues the NRL absorbing $50 million in annual production costs, currently absorbed by Nine and Foxtel.

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If we consider the competitive landscape, the existing AFL television rights held by Seven West Media and Foxtel will run through to 2024. And while not directly clashing with the winter codes, Seven West’s cricket rights – not discounting their serious case of buyer’s remorse – will also run through to the end of the 2023-24 summer.

So as things currently stand, the next NRL free-to-air agreement will start from 2023 and with Channel Ten owning the tightest balance sheet of the three providers and unlikely to be a player, that leaves Seven West Media and Channel Nine.

Channel 9 commentators Andrew Johns and Brad Fittler talking.

(Mark Kolbe/Getty Images)

With Seven West holding expensive commitments to both cricket and AFL, it’s highly unlikely they’ll be able to make a competitive bid, even if they wish to.

And while the world of broadcasting is changing rapidly, I just can’t see the NRL being ready to dip their toe in the water of emerging media, particularly when the game will still be subject to anti-syphoning laws.

This leaves Channel Nine in the box seat to secure the rights going forward. Indeed, like the rest of us, they know they will largely be bidding against themselves and are too smart to pay above the going rate.

While NRL ratings might be higher this year, comparisons to the COVID-affected year are unreliable and in a market of one, it will take more than a shrewd negotiator to draw a significant bump on revenues from their lone free-to-air broadcast partner without offering them something new.

That is where the 17th team comes in and the promise of drawing in a new set of viewers from the game’s second biggest market.

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There can be little doubt the NRL already has an annual figure in mind for broadcast income from 2023 onwards and knows it cannot get there without a 17th team. That money will come from a new deal with Channel Nine and presumably activation of an option with Fox Sports, triggered by the 17th team.

To stand still is to die and while the NRL isn’t on the verge of death, it desperately needs something new to sell to its broadcast partners from 2023 and beyond.

Offering them the status quo simply isn’t going to allow the NRL to meet the growing needs of players and clubs, to invest in the women’s game and just as importantly the junior game.

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Nor will it allow them to compete with the AFL and a resurgent rugby union, with Australia firming to host the 2027 Rugby World Cup.

Growth in revenue won’t happen by itself, the NRL knows it and deep down I suspect the 17 clubs know it too. Bring on the 17th team.

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