Dave Smith’s big ‘Don’t argue’ to the AFL

[TITAN PETE]

PUBLISHED: 01 MAR 2014 07:42:14 | UPDATED: 01 MAR 2014 07:42:14

Such has been the perceived weakness of rugby league in recent years that the AFL has poured hundreds of millions into establishing new teams in two of the code’s heartlands in western Sydney and the Gold Coast.

It made perfect strategic sense. League was a game marred by off-field controversies and occasional on-field violence. Its national competition struggled financially at times and fell well behind AFL on income and television interest.

But times have changed. Growth and good management was what Australian Rugby League Commission (ARLC) chief executive Dave Smith identified this week when *speaking about the record $46 million profit league recorded in 2013 from revenue of $314 million.

“Wind the clock forward five years and we will be the biggest sporting community in the country,” Smith said, with a firm nod at the AFL.

“Rugby league is poised for growth in a way that it never has before. Our results show that rugby league is investing more in the game than ever before and now is truly positioned to enter a period of growth that will make it the strongest and healthiest it has ever been.”

Smith has laid down the challenge to rival sports, not to mention the challenge it will be for himself. Suddenly league has cash in the bank and is in rude health. It is forcing the AFL and other financially strong sports such cricket to take notice.

The ARLC is flush from the $1.2 billion, five-year broadcast deal it struck with Channel Nine, Fox Sports Australia and Telstra in 2012. In the remaining life of the deal the organisation plans to invest $200 million: $120 million for game development and $80 million in a *sustainability fund that will be locked away to safeguard the sport’s future.

The fund will be overseen by an investment committee including ARL commissioner and former chairman of the Australian Competition and Consumer Commission Graeme Samuel, and fellow commissioner and CSR chairman Jeremy Sutcliffe. That sort of business acumen is what Smith wants to cultivate. He’s a Welsh-born former banker whose resume includes stints at JPMorgan, Deutsche Bank, UBS and HBOS prior to his most recent job as Australia-based CEO of Lloyds International. He wants league – still looked down on by some AFL and rugby fans as crude and working class – to have a different image.

“We’ve got a good story to tell about rugby league and it’s a story we think sits as well in the business section as the sports pages,” Smith tells AFR Weekend. “Rugby league is a big enterprise so we need to think big.”

AFL chief executive Andrew Demetriou has taken notice, saying: “We wish [league] well but we will continue to do our best to maintain our place at the top of the tree.”

Demetriou cautions that the AFL is still ahead of league on income, given that its revenue was forecast to reach $440 million in 2013. And the AFL was doing well enough to fund those two new teams, the GWS Giants in Western Sydney and the Gold Coast Suns, in the process entrenching itself even more deeply as the leading national football code.

“We’re debt free and we’ve got about $60 million in [the AFL’s future fund] now and we’re confident we will get to about $100 million by the end of 2016,” he says.

The scale of Smith’s ambition is best illustrated by a look at a few more numbers. The NRL’s average crowd of 13,000 is dwarfed by AFL’s 32,000. NRL club membership last year was 200,000 compared with more than 750,000 for the AFL. Player participation in AFL was almost 940,000, while rugby league was about 555,000.

RAPID GROWTH SINCE MURDOCH’S EXIT
That said, the improvement in league’s balance sheet has been rapid since a 2012 corporate restructure. The ARLC was formed at the beginning of 2012 to make the game independent of its previous half-owners, News Limited. Prior to that the game went through a messy 15-year episode that began with News Corporation’s controversial Super League war of 1995, which split the game in into two competitions. Later it was reunited into an unwieldy 20 team competition and later again cut back to the current 16 sides. Hardly a model of well-executed management.

There even used to be talk, always denied, that the News ownership stake meant the value of the game’s broadcast rights with the News-owned Fox Sports Australia was deliberately kept below market rates.

That talk resonated, given that the AFL was receiving twice as much broadcast income as the NRL. The broadcast gap is closing, though the AFL still sits ahead.

With money in the bank, league can now afford to think strategically. Smith’s five-year plan includes doubling club membership numbers from 200,000 to 400,000 by 2017, growing average game attendances from about 13,000 to 20,000, having more than 700,000 players across all age groups and reaching 5.8 million people via social media. A big part of the new plan is investing more in its digital NRL Media unit. A fan database with a cutting-edge customer relationship will be built to allow the sport to better engage with new and existing fans.

“The stronger we are the stronger the game is,” Smith says. “It’s about creating a strong and healthy game and making returns that we can then reinvest to make us an even stronger and healthier game. Every dollar we spend will be designed to create a return to make the game stronger.”

In particular, Smith wants to end league’s reliance on broadcasting revenue to fund the game, with TV income representing about two-thirds of total revenue.

Non-broadcast revenue was $68 million in 2012 and was forecast to reach $140 million by 2017. “I want us to stretch that target to $150 million,” Smith says. “It comes across a number of areas, sponsorship, merchandise and ticketing. We will increasingly be inquisitive and thoughtful about all bits of the value chain that involve our game. We’ll be looking for partners across all bits of the value chain.”

That money could be used to finally expand the competition beyond the existing 16 teams, with Smith and the ARLC to consider new teams – which could come from markets such as Perth, Queensland and New Zealand – at the end of 2014. A second-tier competition will also be boosted, and more funding will eventually flow to clubs, allowing them to increase player wages.

And then there’s a deal, which Smith says was a strategic business decision, linking league with touch football, giving the sport access to a wider player, and crucially fan, base. A player is statistically seven times more likely to be a fan of a sport.

“Strategic health in any business is something that you strive to achieve, and once you’ve got it you strive to keep it,” Smith says. “You’ve always got to try to keep one step ahead of the competition.”

[DIEHARD]

I love reading articles like this. May there be many more. Crowds really need addressing though. They have stagnated.