The AFL season is over … let the financials begin!

The AFL will be hoping for big crowds in 2021.

By Dr Abdel K Halabi

On October 24 the Australian Football League (AFL) grand final was played in Queensland, ending the most unusual of all seasons. Australia’s national pastime dominated much of the news in sport during the coronavirus pandemic.

Remember when on March 19 the first game was played on an empty MCG between the eventual premiers Richmond who defeated Carlton by 24 points? March also saw the media bombarding sports readers with daily updates on the AFL, with issues including the cancellation of the yearly AFL game in China; debate as to whether spectators would be allowed into matches; a reduced 17 AFL game season; the AFL deciding to play the first round of matches the day before schedule; the AFL season being suspended after one game and AFL clubs reaching out to members to allow them to keep membership funds.

Round two of the AFL was played 11 weeks after round one. That the AFL was able to complete its season amid many ongoing issues – not the least being relocating Melbourne teams to Queensland’s hub – and play a successful finals series with (reduced crowds) was a huge credit to the AFL administration.

With the season now closed, attention for many people within and outside the AFL turns to the finances of the league and its clubs. The reporting year for the AFL and most clubs ends on October 31. The AFL’s Annual General Meeting (AGM) is traditionally held in the following March, while some clubs have held their AGMs as early as November. It is unlikely clubs will have had time to plan and hold their AGMs in November, and many have not yet set a date.

The Brisbane Lions, for example, announced that their AGM “will be held on a date to be confirmed in early 2021”. Of those clubs who have confirmed dates, the premiers Richmond will have theirs on December 14, Essendon’s AGM is scheduled for December 15, while the Footscray Football Club Limited (trading as Western Bulldogs) will hold theirs as a virtual meeting on 21 December. Three clubs have already released their annual reports – Hawthorn announced a loss of $1,330,483, Essendon a profit of $1,223,157 and Richmond a profit of $217,727.

While club finances will be under the spotlight from loyal football fans, the greatest attention to those in the industry rests with the governing body – the AFL. The key question will be: has the pandemic resulted in the AFL making a loss? The last 10 years have witnessed two net losses.

Forecasting projected revenues and profits of the league is more challenging this year, particularly for financial professionals who largely rely on the past to predict the future. This year, the AFL’s shortened season would have affected its two main revenue streams – broadcasting rights and commercial operations.

One media outlet predicts the AFL will receive $150 million less in broadcasting rights this year. In 2019 the broadcasting rights made up 50 per cent of the total revenue of $793 million. Much of the increases in the AFL’s revenues can be traced to broadcast fees. When the 2017-2022 broadcast deal came into place, the total revenues in 2017 jumped 32 per cent. Interestingly in June this year, the AFL extended the broadcast rights for a further two years to 2024 at a reduced rate.

While the amount provides a sense of certainty in uncertain times, the AFL may have been a little premature, particularly as TV ratings were up around 20 per cent throughout the year, and the night grand final was up 30 per cent on 2019.

Just as interesting as the revenues will be AFL’s expenditures. While AFL revenues will likely fall, the administration stood down 80 per cent of its staff in March, thereby significantly saving on their expenses. In 2019 the reported amount of salaries and wages was $105 million. However, relocation of teams from Melbourne and the hubs themselves have been said to cost around $60 million.

Another interesting item in the forthcoming annual report will the AFL’s cash position.  In March, the AFL had secured a line of credit with two major banks with the total amount of the loans reportedly more than $500 million. Did the AFL use this money? In terms of cash, the AFL had been in a strong position before 2020, and this was primarily built over years of success. According to the 2019 annual report, the AFL’s cash holding was $187 million, while in 2010, this was a mere $64 million.

Throughout the year, COVID-19 put the focus on the AFL. The AFL is still under the microscope at year’s end, and the forthcoming AGM and annual report will provide interest to many. The AFL is indeed big business – it was placed 568th in the top 2,000 companies in Australia in 2019.

Dr Abdel K Halabi is a Senior Lecturer in Accounting at the Federation Business School. He is a Fellow of the Chartered Accountants of Australia and New Zealand (CAANZ) and a Certified Practising Accountant with CPA Australia.  He is co-editor of Sporting Traditions the journal of the Australian Society for Sports History.

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