There is currently a lot of debate going on in other blogs about many financial aspects of running the Eels, as well as potential privatisation, so I thought it would be interesting to do a blog on the financial side of running an NRL club.
From what I have seen on 1EE, there are a lot of intelligent people that know a lot about the workings of the club, so I reckon with the combined knowledge available on this site we could work out roughly what it takes.
I'll admit that I have no knowledge of running a football club, I'm only here because I am a lifelong ardent fan of the Eels. However I'm good with numbers, so I reckon we can pull this together.
Some of the questions I have to get this started are:
- How many people does the club employ?
- Who gets paid what?
- What do people like Bernie and Max get paid?
- How much revenue does the club generate?
- How much revenue COULD the club generate?
- How much sponsorship money does the club receive?
- Why has the Parra Leagues club had to pour so much money into the club in the past, i.e. where does all that money go?
Here are some points that we already know:
- The salary cap is roughly $10M this year, however my understanding is that this is covered by the grant from the NRL. So we can pretty much mark off player payments for the first grade squad as being covered. Does the grant also cover lower grades?
- Regardless of whether or not the head coach is Brad Arthur, this position is going to cost you roughly $1M per season. How much for assistants and others in the coaching staff?
Feel free to jump in everyone...
Replies
The Leagues Club had to pay for the new training facilities, pays for the back-room staff, supplies, playing kits, training equipment etc. It also pays any fines and the like issued to the club.
Max isn't paid by Parramatta, he's paid by Ferrier Hodgson.
Also here's the 2017 Annual report: https://www.parraleagues.com.au/content/uploads/2018/04/PNRL_Annual...
Thanks Super, that's a good place to start. I'll have a look over that later and gather some more info.
Max gets paid nothing in his capacity as Chairman, however Ferrier Hodgson, the company that he is a partner in gets paid to provide Max as the club’s administrator.
You could expect Bernie to be paid a salary in the 500k range as CEO, then you have the CFO who is probably on 350k, department heads, (marketing, commercial, membership, HR, WHS, Football Operations) would be on salaries in the 150-200k range.
There’s roughly $2m just there.
Footy department
Assistant coaches, 200k each
other footy department staff would be consultancy based
Then you’ve gotta staff the non footy departments, and it then really depends on the club’s budget, which is in turn based on it’s projected revenue base.
But given that the footy club lost $11m last year, you can assume the club spends.
The CEO salary is just a guess, but it’s based on article I read about the kinds of salaries that Paul White earns at the Broncos.
It does seem strange, but most, if not all head coaches would earn significantly more than the CEO. As a rule, when it comes to footy clubs, the board does the hiring and firing of head coaches, not the CEO.
The Chief Financial Officer usually reports directly to the CEO and is responsible for watching the company’s financial position.
As Super posted, it's all there in black and white in the annual report, and when talking about privatisation it ain't a pretty picture.
Check out the revenue breakdown. Take out the NRL contribution and take out Sponsorship because neither of those are significantly scalable income streams, their use is also heavily regulated.
You're left with services rendered ($3m) and merchandise ($1.4m). So this organisation currently has a recognised earning potential of, let's round it up to $4.5m.
The cost to generate this $4.5m? Close to $30m.
And this is why privatisation is a pipedream. There's no money to be made in the football club. Especially not in the Sydney market. It's easy to lose big money, it's incredibly hard to break even, and it's almost impossible to make anything. Why would a single person want to take on that burden?
That's why the current club model works. There's no single point of massive loss for an individual. As members we all have a tiny stake. Sure, this model comes with its own massive challenges - but at least the financial risk is effectively spread over thousands of very small stakeholders who expect no return.
I was going to write a blog on some of this stuff but I'll just drop some thoughts here.
The guys who bought the Melbourne Storm told the AFR last year that they had managed to get the club to break even, which included using poker machine licenses they picked up. They said something along the lines of that we don't run it as a "traditional football club" - we view it as an "entertainment business".
That's the first time I've read someone in Rugby League talk about the business of Rugby League in the same way as I see it. Rugby League businesses are entertainment/marketing firms.
You know what's interesting about that from our point of view - the Leagues Club is also an entertainment business.
From my point of view the two businesses should be run from the top level as one. Personally, I'd had a single CEO that sits across the top of them with focused direct reports. This would include a Corporate Partnerships Director who did sponsorships, Membership & Consumer Director and Director of Football. (Plus gaming director, hospitality director, etc on Leagues Club side and some shared services roles like IT/Data and Brand/Marketing).
The Eels is a relatively small business in terms of revenue, and arguably cannot support high-level executives on those revenues. If you look at the business from a broader perspective you can employ higher-quality people if you deploy them across both. ie A data analytics director would surely pay for themselves in terms of increasing gaming/marketing revenue, but sure would come in handy across but those skills could certainly be applied on the football side as well.
You can then stop looking at football in isolation, which doesn't really make sense because the health/performance of the two business do have overlap anyway. And it doesn't matter if the football club is spending a lot of money, if the overall business is also generating a lot of business.
So Phil how would that work. You have long been an advocate for separate boards for the Leagues Club & the Footy Club, which I might add I've agreed with, but now you're suggesting we have separate boards but a single CEO ?
I can't see how that would work, the CEO answering to two different boards across the same business.
What if the footy club board wanted to get rid of the CEO, but the Leagues Club board didn't, or vice versa ?
I think if you're going to have a unified executive across the whole business then it would have to answer to a unified board.
Thanks for the contributions guys. I'm going to do some more research, because I find this topic of interest given everything else that is going on at the moment.
And without trying to compare the sports, i.e. looking at if from a purely financial perspective, here is a story I found on the net about AFL club revenues:
https://www.theroar.com.au/2018/03/15/billion-dollar-world-afl-clubs/