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AFL statement: Competitive Balance Policy

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WORKING TO ENSURE ANY TEAM CAN WIN ON ANY GIVEN DAY

The AFL today released its Competitive Balance Policy to the 18 Clubs, with six key recommendations to be phased in from the 2015 and 2016 seasons.

AFL Commission Chairman Mike Fitzpatrick said the 18 AFL Clubs supported the principle of ensuring greater balance on and off-field and the Club Presidents/Chairmen and Chief Executive Officers were briefed today on measures to achieve this at a meeting with the AFL Commission in Melbourne.

Mr Fitzpatrick said the new competitive balance approach was the result of more than 18 months’ work within the industry, with the AFL Executive and Commission working with key club leaders, including Hawthorn President Andrew Newbold, Western Bulldogs President Peter Gordon, Collingwood President Eddie McGuire, West Coast Eagles CEO  Trevor Nisbett, Port Adelaide CEO Keith Thomas, Richmond CEO Brendon Gale and then-AFLPA CEO Matt Finnis.

“The AFL’s strengthened competitive balance measures have been introduced because the financial gap between our big and small Clubs continues to grow and the capacity of many Clubs to invest in their football departments and to grow other elements of their respective businesses is challenged,” Mr Fitzpatrick said.

The new model will reinforce existing competitive balance measures under the rules which include:

§  The National Draft for the distribution of player talent;
§  Total player payments & additional service agreements with players, to ensure Clubs all pay their players a similar amount;
§  Distribution of AFL funds across the 18 Clubs generated by competition broadcast rights, sponsorship and licensing;
§  The Club Future Fund; and
§  The gate levy on adult match day attendees.

“The AFL competition has been built on the basic philosophy of ensuring supporters of every Club believe that their team has a chance to win in any game, regardless of the Club’s financial strength,” Mr Fitzpatrick said.

“In March this year, the AFL Commission met with the 18 Club Presidents/Chairmen and CEOs in Adelaide and agreement was reached on the broad principles of competitive balance between AFL Clubs, leading to the strengthened measures detailed today.”

The new policy:
§  Recognises the financial advantages and disadvantages of the AFL fixture
§  Recognises the relative strength of each Club’s supporter base and the widely varying markets in which each Club is based
§  Recognises the financial advantages and disadvantages of current stadium agreements held by AFL Clubs
§  Provides for AFL Clubs to retain all of their club generated revenue
§  Boosts or reduces AFL Distributions to Clubs to reflect differences in Club income
§  Caps the reduction in AFL distributions to be received by the larger Clubs to $500,000
§  Works to provide all Clubs with the capacity to pay 100% of total player payments & additional service agreements
§  Works to provide all Clubs with the capacity to fund a level of non-player football department expenditure to be competitive on field while remaining profitable
§  Provides players with a fair increase in payments which is affordable for all Clubs
§  Provides a more equitable system of total player payments by phasing out current veterans and cost of living allowances by 2017
§  Replaces the current cost of living allowance with an accommodation subsidy for players on below average payment contracts with the Greater Western Sydney Giants and Sydney Swans, that will be paid directly by the AFL
§  Aims to control growth in non-player football department expenditure through a soft cap on non-player football department spend.

The new competitive balance measures consist of six key elements:

1.      Move toward a ‘pure’ salary cap – phase out Cost of Living Allowance and Veterans Allowance by 2017 to move toward a more equitable salary cap for all Clubs; replace the current Cost of Living Allowance for the Sydney Swans and GWS Giants with a rental subsidy for each player on below average player payments. The rental subsidy to be paid direct to players by the AFL;
2.      Increase payments to players – affordable increases in payments to players;
3.      Greater control on football cost growth – curb industry football cost inflation through the introduction of a soft cap on non-player football expenditure. Clubs can continue to spend what they like on their football departments, but any spend over the soft cap will be subject to a luxury tax;
4.      Enhanced revenue sharing – augment the existing Gate Levy by adjusting existing AFL Club distributions based on a measure of relative Club income for years 2015 and 2016; the reduction in AFL Club distributions to some clubs will be capped at $500,000 in 2015 and 2016 – but note Clubs retain all revenue they generate themselves;
5.      Continue Supplemental / Discretionary funds – compensate smaller clubs for structural inequities – allocate uncommitted Club Future Fund monies to smaller Clubs;
6.      Stronger accountability and performance management – help smaller Clubs which benefit from increased distributions from the AFL to improve performance, grow revenues and to be accountable for delivering on key targets.

How cost control on non-player football expenditure will work:

Implement a soft cap on non-player football expenditure set at:
•        2015 – projected industry average spend plus $500k
•        2016 – 2015 soft cap level plus CPI
•        A luxury tax will be applied to spend above the soft cap:
                       - 2015 – 37.5%
                       - 2016 – 75%
•        Luxury tax payments will be capped at $1m per Club per annum for 2015 and 2016
•        Any cash impact for Clubs will be phased in with luxury tax on 2015 spend to be paid in 2016
•        The soft cap and luxury tax rate will be reviewed for season 2017
•        The decision to spend above the cap is at each Club’s discretion – but capped to ensure Clubs are not unfairly disadvantaged

How Total Player Payments will work under the revised competitive balance measures:

PHASED REFORM OF THE COST OF LIVING ALLOWANCE (COLA)
•        Abolish COLA in its current form for season 2017 for both the Sydney Swans and GWS Giants
•        COLA to be transitioned down over 2015 and 2016, taking into account existing contractual obligations so as to not unfairly disadvantage either Club and their contracted players
•        New fixed accommodation subsidy to be introduced for newly contracted players (from season 2015) below a salary threshold to be determined, that will be paid directly by the AFL

PHASED REFORM OF THE VETERANS ALLOWANCE
•        Current veterans allowance to be retained at $118k per eligible player in 2015 and 2016
•        Agreement from AFLPA that the veterans allowance will be abolished from season 2017

INCREASED PAYMENTS TO PLAYERS
•        Increase TPP by an additional $150,000 per Club in 2015 and in 2016 above already contracted amounts:
‒ 2015 – increase from $9.92m to $10.07m (+$150,000)
‒ 2016 – increase from $10.22m to 10.37m (+$150,000)
•        TPP increases to be self-funded by larger Clubs and supported by increased revenue sharing for smaller Clubs

A NEW TPP BANKING MECHANISM
•        Introduce a new TPP banking mechanism that allows Clubs to spend over 100% of the TPP and ASA limits (combined limit), if in any of the preceding two years the Club spent below 100% of the combined limit
•        The permitted amount of overspend is commensurate with the level of underspend in the relevant preceding period - for instance, if a Club was $500k below the combined limit in 2015, they can spend up to $500k over the combined limits across 2016 and 2017
•        The overspend amount in any given year permits a Club to spend up to a maximum of 105% of the combined limit in that year
•        This mechanism is effective from season 2015 (as such any underspends in 2013 and/or 2014 can be recovered in 2015)

Mr Fitzpatrick said that while greater competitive balance was the objective, the AFL remained committed to enabling each of the 18 Clubs to maintain their own separate identities.

“Based on a range of factors such as heritage and geography, each of our Clubs is different, as they should be – this is part of the appeal of our game and in fact all successful professional sports competitions,” he said.

“Significantly, the Competitive Balance measures will not impact in any way on Club-generated revenue for the larger stronger clubs, who will be able to continue to build their businesses. The new measures will only affect the distributions provided to all Clubs by the AFL from central revenue.”

The Competitive Balance Policy will be reviewed during 2016 before the AFL Commission establishes a financial strategy for 2017-2021.

Mr Fitzpatrick said he wished to thank all Club leaders for their support of the AFL’s work, acknowledging the Clubs had given the AFL Commission and Executive the key instructions that Clubs that were revenue-sharing recipients must remain incentivised to grow their club, and that no Club should be unfairly disadvantaged by the new measures.