A-League clubs and the FFA have come to an agreement on A-League independence. This means that rather than the FFA continuing to manage A-League marketing and operations, a new independent company will do so. The Independent A-League Company will be jointly owned by the FFA (owns 20% of the Company) and the 12 A-League clubs (each own 6.67% of the company).
As emotionally exhausted fans rejoice in Australian football’s bureaucratic win (in lieu of an on-field win) the true implications of an independent A-League are only now beginning to be revealed, and one point published by John Stensholt of The Australian is worth consideration:
“While some A-League owners, such as Melbourne City’s Abu Dhabi and Chinese-owned parent body City Football Group have considerable funds, others may not have the capacity to inject new funds into the league. That could see owners explore selling some of the league to private equity or a global sports management firm, a strategy believed to have been considered by the owners and FFA.”
The public always considered that the League new owners would be making the decisions but what the public didn’t consider, as pointed out by Stensholt, is the League owners may not be the clubs, it could be anyone.
Who could these owners be, and what would the implications be for the A-League and Australian football?
- Private Equity Fund (PEF)
A PEF is a pool of money that is invested in private companies. PEFs typically invest in companies for five to ten years with the goal of significantly improving that company’s business case and eventually selling off that company for a profit.
As they have done for some English Premier League clubs, PEFs are look to reduce costs, which could pose a risk to league standards, and also look to increase revenue, potentially through expansion. PEF’s regularly use large amounts of debt to fund business transformation which is financially risky. Broadcast deal lengths are similar to PEF’s regular investment time horizon, which would offer a natural cash-out opportunity for PEF owners. However PEF’s medium term goals may not align with football’s long term goals. Leaving a debt fueled, unregulated A-League with a miscalculated broadcast deal is a bad investment for a PEF but would be disastrous for Australian Football.
- Global Sports Management Firm (GSMF)
GSMFs are companies that exclusively operate sporting businesses such as leagues, stadiums and clubs. As GSMFs get larger, their relationship networks and business synergies improve, and so does their overall profitability. GSMFs can also be set up for political and social purposes, themselves backed by governments or private investors.
Melbourne City’s backers, the City Football Group (CFG) are an example of a GSMF and potential impacts of their networks. CFG business acumen was crucial in uniting the professional clubs and getting them to the negotiating table to make the A-League independent in the first place and business synergies saw a global scouting resources used for Melbourne City. GSMF’s network can benefit the A-League in similar ways but only so much as the A-League is a priority. Melbourne City for example will always plays second fiddle to Manchester City. Can the A-League be its best self if it plays second fiddle to another GSMF asset?
- Angel Investors
Angel Investors are wealthy individuals who invest their money in personal projects of interest for financial or non-financial gain.
Australia’s The National Basketball League has experienced a renaissance period of talent, attendance and interest off the back of League owner Larry Kestelman’s Investment. Kestleman has set up partnerships with the NBA and is using his property investment portfolio to expand the League’s footprint. Interestingly Kestelman has recently purchased the marketing rights to Australia’s national basketball teams as well. Angel investors vary in terms of incentive and ability and for every Larry Kestelman willing to invest in the NBA there is a Clive Palmer who isn’t willing to invest in Gold Coast United. The A-League will have to place a lot of trust in the vision of an angel investor owner.
- Media Companies
Broadcast rights up until now have grown to become sporting league’s greatest source of revenue and media companies are the consumers beneficiaries of these broadcast rights. Media companies look to control their content will consequently look to increase their influence over the leagues and clubs that create that content.
Australian Rugby League was ripped apart in the 1990s when News Corp funded a rival league, the Super League. In the end News Corp folded the Super League in exchange for a 50% ownership in the NRL. Consequently the NRL received mass media coverage and broadcast revenues but also saw a consolidation of teams to better reflect markets beneficial to News Corp’s media business. Even today, NRL expansion is secondary to the conversation about club relocation, and the world’s second largest Rugby League city, Brisbane, only has one professional team. Tying the A-League to a broadcast owner will massively increase exposure, but prioritizing broadcast objectives may undermine competition goals and player pathways.
Governments operate for the good of their constituents and are a major financier of sporting infrastructure, teams and programs. They will invest in programs they see to be beneficial to the public and will adjust that funding according to their changing budget and priorities. Football is Australia’s largest participation sport and a key international exposure tool, firmly in the government’s interest to maintain.
Government ownership would likely only be a possibility if the league, its clubs and the FFA all fail financially and require emergency funding. Government ownership would be conservative and potentially impossible due to FIFA’s anti-government interference statues. A second dissolution of the national body and national league would be more probable.
Sponsors financially support the league and teams in exchange for exposure and prestige. Sponsors protecting their brands will increase or decrease sponsorship amounts and are constantly looking for creative ways for their brand to cut thought to increasingly saturated markets.
Redbull for example has invested heavily in sports teams to marry their energy drink’s brand with the exhilaration and excitement only sport can provide. Marvel has made creative leaps into Australian sports as well, with special promotional events out of the AFL’s appropriately names Marvel Stadium, and NRL rounds featuring superhero jumpers. A sponsor owned A-League would inject significant capital but could also result in over-commercialisation of the sport and the protection of brand interest at the cost of football objectives.
- Public Ownership
Public ownership involved putting the New A-League company up on the stock exchange so that anyone can buy a share of it. An initial public offering would offer a sugar hit of cash but share prices and public owners are subject to dramatic change, quickly. Along with more public transparency a publicly listed A-League would find it challenging to balance rapidly changing financial goals and ownership, with long term football goals.
- Crowdfunding and Special Interest Groups
The implications of anyone being able to own the league may open the door for special interest groups and lobby groups to buy a stake. Fans, crowdfunding, state federations are on the list of potential backers and the consequences of such an owner for the League are unlimited. Fan groups are known to purchase stakes in German and English clubs, closer to home, clubs like Brisbane Strikers originated from state federations financing. There are even strange situation where a League owns a club! The West Australian Football Commission which runs the WAFL also owns AFL clubs West Coast and Fremantle. Even in the A-League, frequent ownership changes of clubs saw the FFA own stakes in A-League clubs. Would the new A-League company buy the license of a failing club? Would that mean the clubs own their competitors? Can fans buy into the League? What other crazy options are there?
The conversation about an Independent A-League needs to change
Until now the A-League independence discussion has been focused on what the professional clubs want, what the FFA wants and how that impacts stakeholders. Until now, the discussion has seemed simple:
- Professional clubs want to make as much money as possible and keep their top league status,
- FFA management are protecting their revenues and their jobs
- Stakeholders want Australian football to improve overall – better player pathways, better facilities, better domestic football to watch and one day an Australian World Cup!
Although the A-League is just one part of football in Australia it’s a big part that drives many of the sport’s domestic goals. The possibility of external A-League ownership – possible or not – highlights the grave importance of getting the details of independent right and should shift the conversation from broadcast revenue distribution to something more fundamental, incentives.
What do the professional clubs really want?
What does the FFA really want?
What is actually best for Australian football?
The A-League is a sporting competition first and foremost however the incentives of potential external vary substantially from competition integrity. An additional cause for alarm is the increasing influence of the already influential City Football Group. CFG helped orchestrate A-League Independence but what do CFG want? Despite unfathomably superior resources CFG’s Melbourne City has failed on the park with a peak regular season ladder position of third, and no Grand Final appearances. Meanwhile CFG has brought development players Melbourne City, exported its best players overseas and sent Australia’s most successful coach to Japan. Australia may not be a ‘destination’ market for footballers but its clubs should be striving to be the best. Melbourne City will never be the best if it is structurally second tier to Manchester City, and potentially fourth tier behind New York City and Yokohama F Marinos. If that’s how they manage a club, how will they manage the League?
An vitally important protection against rogue owners and misaligned interests appears to be the recently reported FFA ‘golden share’. Along with 20% ownership, the FFA’s ‘golden share’ provides the governing body with veto rights over a number of key issues and as the natural protector of the game’s interests in Australia the powers of the ‘golden share’ may become the A-League’s saving grace in the face of the risks associated with independence.
For better or worse the A-League will break away from the FFA’s sole control. Now more than ever stakeholders must be vigilant in ensuring the interests of the A-League align with the interests of Australian football. The details and use of the ‘golden share’ needs to be scrutinised and protected. Decisions made by the independent A-League company need to be analysed, the motives of decision makers need to be questioned, and the football community must ensure that the FFA is managed by people with the best interests of the game at heart.
The FFA may not run the A-League anymore but the community has an obligation to ensure the new Independent A-League doesn’t run the game.