In February 2014, FFA chief executive David Gallop made an announcement that would ignite the promotion and relegation movement. FFA granted the nine Australian A-League franchises a 20-year licence extension, a move to curry favour with the owners, although Wellington Phoenix would have to wait until last week to be granted a 10-year licence filled with clauses.
“Today’s decision is consistent with our long-term strategy. The extension will give the clubs the certainty they need over a 20-year timeframe to invest, and will also underpin and enhance the value of the licence,” said Gallop upon the announcement. With any franchise system, the security of the licence adds value and also makes an A-League club more attractive to potential investors. However, clubs outside the A-League system felt they were doomed to play out their days in the state leagues.
Between the announcement of the A-League licence extension on 17 February 2014 and the formal launch of the FFA Cup on 24 February, a little known administrator from Victoria would write to both FIFA and the Asian Football Confederation’s (AFC) top brass, requesting that FFA introduce a promotion and relegation system between the A-League and National Premier Leagues (NPL).
On 19 February 2014, Football Federation Victoria (FFV) Men’s Standing Committee chairman Harry Zaitman, emailed the then FIFA Secretary General Jerome Valcke and AFC President Shaikh Salman bin Ebrahim Al Khalifa on behalf of the Victorian clubs, asking if the governing bodies would put “any more effort and scrutiny” into ensuring promotion and relegation is “mandated in Australia within a certain time frame”. Zaitman made reference to the long process of setting up the NPL competition as a “more professionally orientated second tier” and felt FFA had thwarted attempts for these clubs to ever get a chance to play top flight football, “effectively shut the door on any club in Australia that wishes to rise to the highest level in a free and open marketplace”.
FIFA asked FFA for a please explain and to handle the issue internally. Gallop was incensed that a representative of the clubs would go over his head and communicate directly with FIFA and AFC. On 11 March, Gallop emailed Zaitman clarifying that the licence extension for A-League clubs did not lock out any promotion and relegation system. Gallop also revealed a clause within the A-League participation agreement which:
“Expressly provide for the introduction by FFA of a promotion and relegation system for the A-League and furthermore that an A-League club’s continued participation in the A-League is subject to any such promotion and relegation system.”
There would be further correspondence between Zaitman and Gallop. Zaitman sent an email on 22 July demanding a firm commitment on the “time frame” for introduction of promotion and relegation. Gallop responded on 9 September, reinforcing his previous argument that the NPL and FFA Cup were the next stages in developing the second tier to get clubs up to the standard required for professional sport:
“This process is of course essential to enable the introduction of a promotion and relegation system that is sustainable and does not operate to the detriment rather than benefit of participating clubs, the A-League and Australian football generally. The appropriate timing of introduction of a promotion and relegation system will depend upon ensuring this sustainability.”
This correspondence started the battle between the so called “aspirational clubs”, who vie for the opportunity for a regular spot in Australia’s premier competition, and a national federation which is trying to balance the competing interests of club owners – who have effectively bankrolled the A-League – with the demands of AFC to fall in line with its competition guidelines. All of this is being played out while a cash strapped FFA try to grow football in a highly competitive market without sending the sport broke.
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FFA’s relationship with AFC since joining the federation has always been mixed. FFA has been criticised for not working hard enough in trying to understand its Asian neighbours and imposing its way of thinking on the confederation. Over time, FFA has slowly improved on the diplomacy front, spending more time explaining the “Australian Way”.
Back in 2010, former FFA chief executive Ben Buckley realised that the federation needed to been seen to be proactive in implementing the list of AFC’s requirements on governance and structure of domestic competitions. With each passing year, FFA could no longer sell the line that the A-League was still in its infancy. So the federation announced that it would commence a National Competition Review (NCR) with the aim to “seek the best option for a second tier national competition”.
The following year, a delegation from AFC went on week long “fact finding mission” to learn more about Australian football and give its recommendations on how to improve it. Listed among the top of the recommendations was for the A-League to “have a promotion and relegation system” and a “knock-out cup” competition.
FFA was not ready to enact the recommendations. It was still less than 12 months off from the release of the NCR and the birth of the national cup competition was delayed due to financials constraints. In FY2011, FFA’s revenue dropped $17 million compared to the previous year. FFA was waiting for the finalisation of the media rights deal before committing funds to a national cup competition and still had full ownership of Brisbane Roar.
In November 2012, FFA received news of a massive financial windfall for the game while also receiving swift retribution from AFC for failing to act on its demands. A $160 million media rights deal enabled the federation to finally cover the full cost of the salary cap for all 10 A-League clubs. With the owners back on side with FFA – following a tumultuous period of keeping then Newcastle Jets owner Nathan Tinkler from walking away from his licence, closing down Gold Coast United and successfully launching a replacement franchise in western Sydney – then FFA chairman Frank Lowy announced expansion would be placed on hold until after 2017. The sustainability of the A-League clubs would be the federation’s priority.
FFA’s joy would soon turn to disappointment by the end of the month, with AFC stripping one automatic spot for the Asian Champions League (ACL). The reason? FFA’s failure to have the A-League under separate administration and no promotion and relegation system. Melbourne Victory’s chairman Anthony Di Pietro words reflected the opinion of the other clubs: “What we need to do in this country is understand the Asian Confederation and get ourselves more involved. We need to get on committees, build relationships and have interaction,” said Di Pietro. FFA did indeed worked harder on building relationships with AFC and eventually got back its lost automatic ACL spot.
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2013 marked the year where FFA worked on trying to meet some of the demands of AFC, launching a national second tier competition and the FFA Cup. In February, the NPL competition was launched after a 29-month process of reviews, road shows and restructure. The end result was a competition with only five out of the nine state federations participating – NSW, South Australia, ACT, Queensland and Tasmania. The other federations (except Northern Territory) agreed to commence in 2014, after it was deemed they required more time to implement the new model.
The challenge FFA identified in rolling out a standard competition and youth development system across the country was that:
“Clubs are resourced to varying degrees nationally, they do not presently have the capability to deliver youth development programs to a nationally consistent high level of quality.”
The main objective was to get all state league clubs up to the same level in administration, coaching and development, facilities, financial management and governance. A noteworthy cause, one that was much needed, but did not necessarily satisfy those who felt they were already there.
Rumours began to circulate that the NPL was the first step towards setting up a national tiered system of football. Gallop did little to fan out the speculation, and reports emanated that promotion and relegation could happen within five years of the NPL launch. However, the truth was that FFA had rebadged the state league competitions and relegated the participating clubs into being a development pool for the A-League. “Our aim is to see highly qualified coaches employed by stable and well-run NPL clubs producing better Australian players from under 12 to under 18, then under 20s and finally to senior ranks,” said Gallop at the NPL launch.
The NCR was lead by then FFA National Technical Director, Han Berger. He identified two main issues within the state league system: an inadequate focus on youth development and unsustainable player wages. The state league clubs were accused, which was not unfounded in many cases, of paying overs for journeymen in the aim of winning titles. The solution was to get the clubs to focus on developing their own talent rather than procuring it. Rather than introduce a salary cap system as is used in the A-League, Berger developed a Player Points System (PPS), which forced clubs to use more players under the age of 25 developed from their youth teams.
Unlike modern professional sport where the aim is to get star players to help drive attendances, Berger had devised a competition that effectively turned the state competitions into a development league. Berger’s reforms pushed the cost of development down to the clubs. The NPL model was designed to reduce player wages, however, as a consequence, it lead to higher costs in employing accredited coaches and technical directors (most of who paid to get themselves accredited).
FFA failed to understand the club’s economics and develop, along with the respective state federations, a plan to increase revenue. “The common brand and logo will be crucial in our endeavours to find sponsors and commercial partners who’ll be attracted to the national footprint of the NPL,” explained Gallop at the NPL launch. It would take 20 months for FFA to find an official naming rights partner. The NPL, still to this day, has a solitary partnership with Sony PlayStation, with the state federations supplementing it with minor sponsorship deals for their respective competitions. While the FFA Cup, which has only been operating for two years has Westfield, Telstra, Continental, NAB, Harvey Norman and Umbro. Also Fox Sports televises FFA Cup games from Round 32 to the final. For those wishing to watch the NPL, even the final series, they have to hope their internet stream works.
The Victorian state league clubs weren’t happy with the NPL model. A revolt began after Melbourne Knights announced in May 2013 that they would not be participating. From there the tipping point became an avalanche, as over 50 clubs refused to sign up, citing that the model was “financially unviable”. The clubs presented a financial model that showed costs would go up without an increase in revenue. The clubs demanded to know what the plans were for revenue generation.
“With some strategic thinking around that model in terms of sponsorship and revenue that they can get more dollars in through those avenues,” the then Football Federation Victoria chief executive Mitchell Murphy told FourFourTwo. At the time, FFV said that FFA was working on securing a seven-figure sponsorship for the NPL competition. It is believed that Sony has paid nowhere near this ‘seven-figures’ for the naming rights agreement.
FFA tried to distance itself from Victoria’s dramas. It had wanted each state to develop a variation of the NPL model to suit each federation’s unique circumstances. However, it grew tired of FFV’s incompetence to resolve the situation with the Victorian clubs and decided to step in. By December 2013, a truce was made and Victoria joined the NPL the following year.
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In February 2014, the FFA Cup was officially launched, along with a truly Australia-wide NPL competition. The national federation realised it was onto a winner with the FFA Cup – a product it could sell to the football community, even to those who felt neglected after the demise of the National Soccer League (NSL). Within its first year, the potential of the competition was on full display, as former NSL club Sydney United 58 hosted A-League club Sydney FC in front of over 8,000 people.
The NPL competition was proving to be a much harder sell. At the NPL launch, Head of A-League Damien De Bohun told the Guardian, “Like a lot of these commercial properties, until you’re actually organised and can show people exactly what it is, it’s hard to lock someone into [sponsoring the competition].” As most attendance levels in the NPL competition have stagnated at low to mid hundreds, the FFA Cup has caught the imagination of the footballing public.
Many in the football community got a taste of what could be. Others wanted more. The talk of promotion and relegation started to move into column inches, as respected football journalists Michael Cockerill, Michael Lynch and Simon Hill, argued its merits. Lowy was asked by Fox Sports about plans for promotion and relegation. He admitted that it would become an “eventuality”. “They [AFC] know that we have started, it will take time. Nobody’s pressing us at the moment except ourselves,” said Lowy.
FFA had been working hard to buy time with AFC in introducing promotion and relegation, as it explained its strategy around the A-League, NPL and FFA Cup. AFC began to understand the uniqueness of the Australian sporting market and were generally pleased with the administration of the sport compared to its other member nations. As one source involved in the discussions told Leopold Method, “They [AFC] don’t want to be the body that has these rules that brings [Australian] football to its knees.”
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As the platitudes of Australia successfully hosting (and winning) the 2015 Asian Cup died down, attentions turned to the domestic competition. The rush of an exciting international tournament caused the domestic league to hit a little bit of slump. Journalists turned their minds to how the competition could be spiced up and the discussion of promotion and relegation was back on the sports pages.
“The Asian Football Confederation insists this is a non-negotiable for continued membership – even Frank Lowy admits that eventually, Australia must have it,” wrote Hill for Fox Sports. What Hill, and others in the media didn’t realise, was that FFA used the Asian Cup to buy some time with the Confederation’s “demands” of a separate administration of the A-League and promotion and relegation system.
On the foreshores of Sydney harbour in May 2015, David Gallop announced FFA’s 20-year vision for Australian football. Gallop’s Whole of Football Plan (WOFP) is centred around addressing the issue that has continually plagued football in Australia – the lack of money – by trying to create a ‘virtuous cycle’ by doubling the number of participants and converting 75% of them into fans of the A-League. The revenue generated from this virtuous circle, along with targeted programs, will then “trickle down” all the way to grassroots.
While the plan was ambitious, not everyone embraced it. Most of the objections focused on how the A-League intended to continue operating out of the central body, and on its plans for future expansion teams to come from key strategic markets, “rather than a relegation and promotion system based purely on results”. FFA not only convinced AFC on the “Australian Way” of football, to give it some time to meet its competition regulations, it also announced publicly in black and white it had bought at least two decades of time.
Some of the former NSL clubs were livid about the lack of detail in the WOFP to develop football’s second tier without a promotion and relegation system. South Melbourne released a statement calling it the “possible end for aspirational football in this country”. Melbourne Knights shared South Melbourne’s view and even presented an alternative WOFP. South Hobart argued that Tasmanian football was “relegated to backwater status”. Some parts of the WOFP were seen as overly ambitious, others felt it was not ambitious enough.
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To understand what is wrong with the second tier of football in Australia is to examine the differences in how clubs approach the FFA Cup and NPL. In September 2015, former NSL club Heidelberg United hosted A-League club Melbourne City in front of 11,372 people. In the lead up, Heidelberg invested more than $50,000 to get its infrastructure up to the required standard to host the game. They also recruited 116-game Greek international Kostas Katsouranis as the marquee signing.
The investment paid off, with the club making a six-figure windfall from the match, more than it would in a season of NPL match takings. What this has done is distort the economics of the second tier, with clubs now playing “crap shoot” in trying to host an FFA Cup game against an A-League club. Playing on the national stage with media spotlight, and a television appearance, helps attract sponsors. Playing in front of several hundred die-hard fans, in the almost complete anonymity of the NPL, does not.
During the Victorian clubs’ stand-off over the NPL plan, a financial model presented showed that 94% of revenue was derived from three main sources – registration fees (68.1%), canteen (19.7%) and sponsorship (15.5%). Leopold Method has analysed the financial reports of various NPL clubs, and for most of the clubs, these revenue sources have barely changed since the introduction of the new competition, with some clubs deriving up to 80% of their revenue from registration fees. The clubs, the national and state federations have found it difficult to attract corporate sponsorship dollars for the NPL.
With no transfer fees between clubs in the Australian football system, NPL clubs make a pittance from the compensation payments made by A-League clubs for signing their players. The only real game changer in the regular source of revenue for NPL clubs has been the installation of synthetic pitches. Those clubs fortunate enough to have a synthetic pitch can be known to make six-figures from summer football competitions and hiring the pitch to other clubs, private academies and schools. The installation of a synthetic pitch comes with a $1 million plus investment. Clubs on council grounds can source funding from local and state government. Those on private property find that they have to pay from their own pocket. And with not all synthetic pitch installations bringing in instant revenue streams, the investment does come with risk.
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Leading into the third NPL final series, and following its conclusion, Cockerill lamented about the current dilemma of the second-tier competition. “The annual three-week play-off series crowns the second-tier champions and is in its third year. Truth is, you’d hardly know it existed,” wrote Cockerill, as he ramped up his argument for a national second division with promotion and relegation system with the A-League.
Cockerill told the plight of the NPL clubs through the narrative of 2015 NPL champions, Blacktown City. Based in Sydney’s west, Blacktown City is arguably the benchmark NPL club. Backed by successful businessman, Lily Homes’ Vince Camera, City derives revenue from a mix of sources including a function centre that has recently been expanded and a synthetic pitch which hosts numerous competitions, private academies and clubs. Blacktown City is not actively pushing for a national second tier; it’s not their style. They are a club who keeps their head down and continually focuses on developing talent. However, like most NPL clubs, success has not translated through the gate.
The economics of second tier football is skewed towards Sydney and Melbourne mainly due to the sheer number of former NSL clubs that play within those respective competitions. Sydney clubs are generally better resourced, due to some of the teams being backed by local associations. Some of these associations have larger, or almost equal, playing numbers as some of the smaller state federations, which has resulted in sizable bank balances. Association cash funds can provide the funding gap for their NPL club’s ever increasing expenses and stagnate revenue.
The focus on improving facilities has been one of the major positives to come out of the NPL system. Again, the Sydney clubs lead the way through their own endevours and a proactive state federation. This has resulted in clubs like Blacktown City, APIA Leichhardt, and Sydney United 58 joining the likes of Manly United, Sutherland Sharks and Blacktown Spartans, in installing synthetic pitches. Both Sydney Olympic and newly promoted Hakoah are going through the process of building new football facilities complete with a synthetic pitch. Even NPL2 and NPL3 clubs are joining the movement. This means more revenue is coming into the Sydney club system as the other states play catch up.
While the aim of the NPL was to bring all of state league clubs across the country to similar level in development, governance, facilities and finances, the reality is there is still a massive gap between the haves and the have-nots. The aspirational clubs are frustrated that they have to remain stagnant while they wait for the other clubs to catch up.
In FFA’s mind it is still early days for the NPL competition. This season will be the first time all Australian A-League clubs will enter teams within their respective state competitions, again, adding to the dilemma that the NPL is seen purely as a development league.
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The A-League is the most successful football competition in Australia’s history. FFA’s administration has brought the game into the modern professional sporting world. Even with these accomplishments, the game is a long way off in securing its future. FFA recorded a paltry $259,000 profit on revenue of $103.1 million for FY2015. In the same period, A-League clubs recorded a combined loss of $17 million. But compared to the other football codes, with their much larger media rights deal, FFA and the A-League is fairing well.
FFA has focused a lot of its attention on improving the financial viability of the A-League clubs. It is aiming to double the current media rights deal from $40 million per year to $80 million. If FFA is successful in achieving this, it will mean more funds flowing towards the A-League clubs and players. But if the NPL competition runs on its current course, with no trickle down funds from FFA, it will result in a widening gap between the two tiers.
The question that needs to be asked is whether the current NPL model can source the same revenue streams as other professional leagues? If it can’t, then what competition format will?
What has been lost in the argument for promotion and relegation is the urgent need to improve the financial model of the NPL. Contained within the words of the WOFP is the commitment from the national federation to help NPL clubs “secure new sources of revenue through providing national exposure for the NPL”. The most pressing issue is finding a way to commercialise the NPL.
Modern professional sports generate revenue from three main sources: the stadium (ticket sales, memberships and corporate packages), broadcasting rights and marketing (sponsorship and merchandising). Currently, most NPL clubs derive more than two thirds of income from fee-paying parents, there are no broadcasting rights, let alone television coverage, and only a handful of clubs are proactive in growing memberships and generating corporate support. If it is deemed that the national second division is the best way of generating not only revenue, but also investment, then this option should be explored.
How do you convince an administration, who have been versed in the world of successful closed market competitions, and have built the national league competition to its greatest ever position, to open up the A-League? Provide a comprehensive model that will grow the domestic competition sustainably.
How do you convince a risk-adverse administration plagued by the precarious financial circumstances that is Australian football economics? Speak in a way that will pique their interests: the potential for more money to enter the game.
What the aspirational clubs lack is a united front, with a respected leader within football who talks the same language as FFA’s suits and a business model for a national second division competition. All that has been presented at this stage is single shot messages from a handful of clubs, supported by words written by small group of football journalists and bloggers, and a couple of television debates. If aspirational clubs want to convince FFA to look at an alternative model, one that replicates the rest of the football world, it needs to present a better sales pitch.