Rebels a risky proposal

[AndyS]

Hmmm, JO'N clearly still has his feelers out there. He puts this out there yesterday:
Australian Rugby Union chief executive John O'Neill has warned potential backers of the Melbourne Rebels only to do so if they have a spare $1 million to indulge a passion....''The thing about owning a sporting franchise is that you don't go into these ventures to make money; you go into it hoping not to lose any,''...
(http://www.smh.com.au/sport/rebels-a...02-pge2.html):

the day before this hits the news
FOOTBALL Federation Australia is staring into a $20 million black hole as concerns grow over the financial viability of the A-League competition....The sobering news comes on top of reports that North Queensland Fury owner Don Matheson is scaling down his investment with the fledgling club amid suggestions he is bleeding as much as $50,000 a week....an upbeat A-League chief Archie Fraser said the FFA was not overly concerned...."Look, there is no doubt we have to get the model right. Some clubs are doing better than others. Melbourne (Victory) will make a small profit and while Adelaide United will lose around $1.3m, we are happy with the progress being made there."...
(http://www.theaustralian.com.au/news...225836723145):

Now, perhaps if I am wrong, but wasn't the Soccer model the one that was held up as the example of successful private equity involvement that Union was going to emulate....?

[mudskipper]

Moreover, John O'Neil set up the A league model...

[GIGS20]

I'm not sure that Australia is a business environment where we have oodles of people willing to throw a mill a year into a black hole for a passion.....AUsies are a little more pragmatic than that!

[beige]

The problem with the A-League is that it is trying to expand too quickly. When the league first started they deliberately restricted the number of teams (believe it or not O'Neill was actually more cautious than the market research indicated he could afford to be) but now there are teams entering left right and centre. The reason is that they want more spots in the Asian Champions League, and the dollars that will bring, but the problem is that they might stretch the market too thin before they get there.

The same thing happened with soccer in Japan - new league, big popularity, rapid expansion, popularity waned, clubs folded. Fortunately they figured it out and the league is tremendously popular again.

I guess the lesson for rugby with private equity is to make sure the market's there before they go jumping in to it.

[TOCC]

Now, perhaps if I am wrong, but wasn't the Soccer model the one that was held up as the example of successful private equity involvement that Union was going to emulate....?

if you look purely at the numbers it looks bad, however the overall picture is that a financially broke FFA at the time set up a national competition which now has pretty good ratings..

[zimeric]

the big difference between the A league is that the tv deal is MUCH smaller than rugby's and thats where 80% of the revenue will be coming from (yeah 80% is a guess ) but my point is with good media backing any comp should be able to ride the short term pains of setting up a new franchise...
the ARC is a good example of how the lack of media interest/investment can hurt a good idea.

[TOCC]

the big difference between the A league is that the tv deal is MUCH smaller than rugby's and thats where 80% of the revenue will be coming from (yeah 80% is a guess ) but my point is with good media backing any comp should be able to ride the short term pains of setting up a new franchise...
the ARC is a good example of how the lack of media interest/investment can hurt a good idea.

exactly, A-League might make some lossed in the next few years, but the next TV deal with be worth 100% more, which means larger grants to the clubs and less chance of a loss

[AndyS]

For mine though, these numbers don't seem to be aggregate, they are annual figures...."The eight clubs that made up last season's competition lost a combined $12m, or $1.5m each on average. That figure is expected to balloon with the 10 clubs likely to record a combined loss of about $20m.....Some $16m of that loss comes from just three clubs -- Sydney FC will lose between $5m-$7m and Gold Coast and North Queensland around $5m each."

Where on God's green and verdant earth is all that money coming from, and how can they continue to sustain it when $4.7M was supposedly enough to nearly send the ARU under?

[TOCC]

For mine though, these numbers don't seem to be aggregate, they are annual figures...."The eight clubs that made up last season's competition lost a combined $12m, or $1.5m each on average. That figure is expected to balloon with the 10 clubs likely to record a combined loss of about $20m.....Some $16m of that loss comes from just three clubs -- Sydney FC will lose between $5m-$7m and Gold Coast and North Queensland around $5m each."

Where on God's green and verdant earth is all that money coming from, and how can they continue to sustain it when $4.7M was supposedly enough to nearly send the ARU under?

um... private equity

[AndyS]

If so, where do they find such spectacular wastrels? Given that JO'N must know a bunch of these morons from his time in Soccer, did it really never occur to him to look at PE for the ARC - a mere $3M bonfire would surely seem like a profit!

[TOCC]

If so, where do they find such spectacular wastrels? Given that JO'N must know a bunch of these morons from his time in Soccer, did it really never occur to him to look at PE for the ARC - a mere $3M bonfire would surely seem like a profit!

the ARC and the A-League are/were so different its not funny, the model of the clubs and the contractual system for rugby union players within Australia is completely different to the way soccer players are contracted.

Ultimately it wouldnt have been impossible to introduce private equity into the ARC, but to work through the details it would have taken near 12 months of planning.

Not only that, its needs to be a product which people want to invest in, the A-League has national coverage as well as exposure in the Asian League, the fact that the ARU had to pay the ARC to broadcast the games is a reflection upon the value of the product.

[AndyS]

Yeah, heaven forfend the ARU should spend 12 months planning something - so much easier to just "manage" it out of existance.

Good point on the Asian League though. As relative standards go the two competitions would be much of a muchness, but it highlights the importance of perceived significance and the need to create a wider relevance for the sponsors/broadcasters.

[James]

Competitions will always be stunted if something better is on offer. Everyone I know (well only 3 people) who are into basketball only watch the NBA and don't give a toss about the NBL. The majority of I know who are into soccer follow the premier league or someone else in Europe.

Looks like the FFA or whatever its called is trying to expand and ride the wave of this years World Cup but the big problem is that the majority of the Socceroos don't play in the A-League and so in a sense they separate identities. Unlike the Super 14 where the same players playing for the Wallabies and the ones you see in the S14.

[AndyS]

Still, crap as it is, their last TV deal was reportedly $120 million over seven years. Difference for mine was that, good or bad, the folk selling it don't have a choice but to get behind it.

[jargan83]

Still, crap as it is, their last TV deal was reportedly $120 million over seven years. Difference for mine was that, good or bad, the folk selling it don't have a choice but to get behind it.

The folk selling it didn't really have a choice as Football (soccer) has not had a television broadcaster since Channel 7 used to screw it by not showing it. I have heard from a couple of sauces (media speculation and a few that I have) that they are in the running for a vastly improved offer next time around