Just over a year ago, the world was placed on hold.
COVID-19, spreading at a rapid pace, caused shutdowns over many sectors and impacted most lives.
Sport wasn’t immune to those closures. Competitions across Australia and the world were put on hold. Professional sport is a business largely centred around travel and the gathering of crowds — two things verboten when dealing with a pandemic.
At the time, the prognosis wasn’t promising.
For the last 30 years, Australian Football’s professional boom has rolled along untrammelled. In that time there has not previously been a financial backwards step — at least until COVID-19 struck.
However, because of government intervention, severe cost-cutting, lower expenses and pay cuts, catastrophic losses were avoided.
As society starts to spin back into gear, the AFL is preparing for a challenge it hasn’t faced before — how to rebuild.
The big hit
When coronavirus hit the league, each club was affected in different ways. Some clubs relied on more walk-up fans and member churn for their attendance income. Others were more exposed to a loss of sponsors, inflexible leases and the closure of side businesses.
As a result, the AFL had to support clubs differently to normal, based on these impacts. Old hierarchies of need shifted as some smaller clubs found themselves relatively better off.
The effects of COVID-19 can be seen in club annual reports. Across all clubs, revenue dropped $342m, or an average of $19m per club. That fall wasn’t distributed equally and neither was the ability to commensurately cut costs.
West Coast lost $42m from a very high income and simply didn’t make their usual massive profit. On the other hand, deep cuts to sponsorship, membership and attendance saw both Sydney clubs with operating losses of more than $6m.
Much of the hit came from the loss of match-day revenue. Most members held tight as membership numbers dropped only 6 per cent, but club revenues from memberships fell by nearly half across the league.
Premium events and corporate boxes were mostly impossible and many fans opted for options such as reduced cost memberships or fees deferred toward next year’s membership.
The hard cuts
A drop in revenue was at least partially matched with a drop in expenditure. Job losses and wage cuts were the response across the board.
Eighty per cent of all jobs across AFL headquarters and the clubs were either cut or furloughed during the peak of the COVID shutdown, with the players taking a 50 per cent pay cut over the period.
The government’s rollout of JobKeeper helped reduce the level of cuts, with clubs accessing around $70-80m collectively from the scheme. Some clubs, like Richmond, with diversified economic profiles received more in JobKeeper, while others with streamlined staffing profiles naturally got less.
AFL Headquarters also embarked on a significant restructure to stay afloat. These cuts were designed to limit the losses of the year and not cut the fat. The development budget was essentially halved and may set back the pathways in ways not yet foreseen.
At the personal level, the crisis was tough on those working within football as clubs were forced by policy to cut over a third of all spending from their off-field football budgets. Stories of football department staff taking on jobs in other industries are rife, as are tales of staff left in the lurch. Clubs had no blueprint on how to react. Some reduced salaries uniformly; others cut the salaries of the better-off harder.
While it’s often easy to think of professional sport being rife with cash, that often doesn’t trickle down to the lower-paid staff supporting the on-field product. For them, the pain was as hard as in any other sector.
Not only fans
For the league, having stores of cash and a positive asset position was a help to getting through the financial pain.
While this asset base, and continued support of sponsors and members was critical, the most critical piece of the puzzle was the broadcasting rights deals that underpin the financial backing of the game.
Live attendance forms the backbone of the spirit of football but as technology has improved, in-person attendance isn’t the only way you can support your team. And it may have been the savior for 2020.
Where almost all of the historical backing from the game came from ticket sales, memberships and benefactors, now punters form a smaller part of the revenue pie.
Crowds in 2020 were at their lowest point since the middle of World War II, with just 826,458 punters walking through the turnstiles. Even that amount could be considered a miracle, considering round 1 was played in front of empty stands around the country.
But TV audiences stayed solid, rising 15 per cent in the chaos of the pandemic compared with 2019. Despite a cut of about an eighth of TV broadcasting revenue in 2020, the cash that came from the media helped the code survive the dark night.
A challenge not faced before
Professional football in Australia has not always been a high-money, high-stakes game. For most of the history of the game, the VFL has been hypersensitive to external environmental trends, and the future of clubs often being a fly-by-night type of arrangement.
While Australia has faced big, life-altering challenges before — such as the 1918 influenza epidemic and two world wars, sport in Australia has been more of a semi-professional pursuit than a fully professional one.
Even adjusted for inflation, half of the league’s modern clubs earned more revenue in 2019 than the VFL as a whole did in 1987.
In 1927, then-rich Carlton made 5,700 pounds — or about $470,000 in 2020 dollars. This is roughly what the Coburg VFL club pulled in from their own sources in 2019.
Amateurs still featured in the VFL right into the 1970s, and the wages of paid players for much of the century (under the Coulter Law) was limited to about $5,000 in today’s money.
The stakes to rebuild the game now are much higher, and an opportunity presents itself to shape the future financial direction of the game. With extensions to broadcast deals already locked in, and the lifting of crowd restrictions in most states, the journey may be quicker than thought even six months ago.
However, the prospects of future outbreaks, and related shutdowns, still loom on the horizon. COVID-19 has not disappeared from the public landscape and likely won’t for a fair while.
As such, sporting codes will have to plan from A to Z. All hopes are that it is plan A or B embarked upon in the future.