Building Australia's Football Community—review into the sustainability of football

1. Executive Summary

Page last updated: 25 October 2013

When the Australian Government last commissioned a review into football in Australia, the game was in a state of dysfunction arising from poor governance, political infighting, lack of strategic direction, poor performances on the field and severe financial stress. Urgent reform was required and the direction for this reform was provided by the 2003 review into the governance and management structures of soccer in Australia (Crawford Review).

The challenges that confronted the newly established Football Federation Australia (FFA) in the aftermath of the Crawford Review should not be underestimated and neither should the achievements since its formation. While challenges remain, principally financial, the game is

strong and a foundation exists for a bright future. Governance reform has largely been achieved in accordance with the Crawford Review recommendations and constructive discussions are ongoing about how further reform and efficiencies can be made for the betterment of the game.

Grassroots football is strong. The number of participants has grown from 1.1 million to

1.7 million between 2001 and 2009. There has been a 52% increase in the number of people playing outdoor football between 2001 and 2009. In this period the number of 5–14 year olds playing the game has grown by 58% and for over 15 years of age the number has grown by 42%. In fact, the biggest challenge for participation is not how to encourage it, but how to meet the demand.

The international teams have also enjoyed unparalleled success. The Socceroos’ Fédération Internationale de Football Association (FIFA) world ranking has improved from 86 to 22, with the team qualifying for the past two World Cup Finals and performing strongly in initial qualifying rounds for the 2014 competition. The Matildas won the 2010 Asian Cup – the first time an Australian team has won a major international tournament. FFA’s decision to move from Oceania to the Asian Football Confederation (AFC) has been credited as a key strategic step, opening the door to higher quality competition and opportunities to advance the game in Australia.

The A-League is a competition of increasing quality, and the 2010–11 final, which saw Brisbane Roar defeat Central Coast Mariners in a penalty shoot-out, has been credited as one of the great contests across all codes in Australian sporting history. The 2011–12 season commenced with great expectation, strong crowd attendance and high quality football. After the early rounds, average crowds increased by 42% compared to the same point in the previous season and are up 53% on the season average; television viewing is up 74% compared to the same point in the previous season and up 66% on the season average; and memberships are up 17% on the 2010–11 numbers. The A-League is a competition of quality and professionalism far exceeding that of the National Soccer League which it replaced.

These positives around the game are significant, and throughout an extensive consultation process which elicited wide ranging views and opinions, one of the common themes that emerged was that the FFA Board and its administration must be credited for bringing the game such a long way forward from where it was immediately preceding the Crawford Review.

The 2022 FIFA World Cup bid requires mention. The bid to host this event was ambitious, yet strong and credible. However, it is apparent that the failure of the bid affected the view of some as to how the community and government should interact with the game into the future. It is important to remember that despite the criticism FFA and the bid have received since Qatar was announced as host (and questions remain about the integrity of the process); the bid was technically excellent and had strong, bipartisan government support. It also enjoyed a groundswell of support from the public and sports commentators. Other bids which were also seen to be of superior technical quality were similarly unsuccessful. Nonetheless, the conclusion of the 2022 World Cup bid process has created opportunities to refocus on the game domestically.

Australia’s bid to host the Asian Cup in 2015, Asia’s premier football tournament, was however successful. This brings with it opportunities, both in relation to the event itself and the legacy to be gained through broader engagement of the Australian public with the game of football.

The next four years in the lead up to the Asian Cup are central to football’s long-term prospects. The game remains the beneficiary of special government support. This is not sustainable in a fiscal environment where policy priorities compete for limited funding. Consequently, FFA has developed a four year strategic plan to achieve self-sufficiency.

Financial stability must be the singular and immediate priority for FFA – to reduce the reliance on government funding and to provide a strong base upon which a next phase of growth can be built. This report is the basis for a move towards this sustainability. The discussion and recommendations that follow take into account the FFA plan, and suggest appropriate enhancements for fast-tracking FFA’s strategy.

Grassroots football is strong. The number of participants has grown from 1.1 million to 1.7 million between 2001 and 2009. The 2011–12 season commenced with great expectation, strong crowd attendance and high quality football... the biggest challenge for participation is not how to encourage it, but how to meet the demand.
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For all its quality on the pitch, the A-League is still in its infancy and is the greatest financial pressure for FFA. It is a high-cost enterprise with the establishment phase presenting financial challenges to FFA and club owners. Revenues do not match costs – the clubs incurred aggregate losses of more than $20 million in 2009–10 (half of this amount was discretionary spend by clubs). Clubs are funded by private owners with FFA responsible for central operating costs and special assistance to clubs suffering financial difficulty. Financial pressures have seen the exit of one team and other teams change hands, with FFA responsible for providing financial support through the transition. Despite the financial difficulties, the competition continues to attract people willing to invest in its future by buying into A-League clubs.

More than 40% of FFA’s total revenue (which includes government support) is applied to the A-League. Reducing costs and increasing revenues in the A-League is fundamental to the game’s broader sustainability and to eliminate reliance on government support.

Consultations point to a ‘disconnect’ between the vast participation base and the A-League clubs. There is work to be done by clubs and FFA to connect with the participation base and convert this into A-League support – a key recommendation of this report. As the A-League matures and clubs convert participation to support, reliance on the private investment of owners, and support funding from FFA, will be reduced.

The success of the A-League is a key to the future of football in Australia. The next phase for FFA must be a period of consolidation for the future and a focus on helping the A-League clubs build strong and deep links with the community. FFA must execute this key element of its plan. Costs and structures within FFA and the A-League must be examined with a view to achieving stability and long term sustainability and to build on the product that has been developed since 2003.

It is also essential to protect and nurture the other business arms of FFA, including women’s football, junior development and community outreach programs. Setting a clear budget and reporting accountabilities for the A-League should minimise the risk to these essential parts of FFA’s business.

The review has identified a series of key findings and recommendations that when implemented will build on the achievements of the past, reduce reliance on government support and which should underpin a phase of consolidation. These findings and recommendations are supported by extensive financial analysis undertaken by the review team throughout the course of the review. FFA worked collaboratively and constructively with the review team and the open and pragmatic approach to this review demonstrated by FFA’s Board and management is to be commended.

In addition, the review team undertook more than fifty consultations, with a range of stakeholders including State and Territory federations, A-League clubs, commentators and others with past and present involvement with the game. The review team is grateful for the time willingly given by stakeholders and the open and frank discussions that have been invaluable in shaping this review.

Key Findings

Connect with grassroots, link with community

A-League clubs must tap into the participation base to establish a connection with grassroots. The juniors of today should be the players, volunteers, fans and football community of the future. This is more than a marketing challenge. Winning hearts and minds is about integrating with the community, forging a connection, formal linkages and development pathways with junior, intermediate and top tier competitions. More than 10,000 people attended the 2011 New South Wales Premier League Grand Final – a figure which should excite A-League clubs about the potential.

Such an approach would require close collaboration with State and Territory federations to establish mutually beneficial arrangements, for the good of the game. FFA already requires A-League clubs and State and Territory member federations to establish Cooperation Agreements covering a range of matters to the benefit of both parties, as well as participants and the game more broadly. FFA, working with club administrators, owners and member federations, must identify an optimal base model for this Cooperation Agreement which can be tailored for individual markets. The Cooperation Agreement must allow A-League clubs to connect with grassroots levels through the State and Territory leagues to juniors. Clubs and member federations must be supported to implement these Cooperation Agreements.

FFA should report to government in coming months proposing options for a way forward, with a tangible deliverable being the development of a model Cooperation Agreement for roll-out by each A-League club and member federation. Additionally at the community level, the considerable reform achieved through the governance measures arising from the Crawford Review should be recognised but there is a need to continue to move forward, drive efficiencies and reduce duplication with a view to creating a clearer line of sight from FFA down to juniors. This clear line of sight will help improve the game and connection with grassroots, and demonstrate the accountability of FFA to its fundamental stakeholder – football participants.

Create more formal opportunities for A-League clubs and owners to contribute to strategic decision-making affecting the A-League

A-League club owners are significant investors in the game, absorbing considerable losses in these early establishment years of the competition. It is important that these owners contribute to the strategic direction of the competition and have an opportunity to influence decision-making that impacts on their costs or ability to generate revenue. The strategic direction of the A-League is important to club owners because of their investment, and to FFA because of the links to broader sustainability and vision for the future of the game. The A-League also represents a contingent risk to FFA which must support clubs that are struggling financially, and which takes ownership of some clubs when licenses are terminated until new investors are found.

Getting the A-League and its clubs on track financially is fundamental to broader sustainability – a critical contributor to the future of football is the success of the competition. It is in both FFA’s and owners’ interests to see the A-League flourish. There must be an alignment of interests between club owners and FFA, where both contribute to strategic direction and address challenges. Costs must be reduced – player salaries and stadia deals represent costs disproportionate to revenue. The A-League must live, and grow, within its means.
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The FFA Board established an A-League Sub-Committee (ALC) to provide a forum for engagement between FFA and A-League club owners. However, there is scope for more to be done to achieve a greater alignment of interests between FFA and A-League clubs. It is recommended that FFA explore ways of further enhancing the existing ALC structure with reference to the following key principles:
  • providing the A-League club owners with a formal structured opportunity to contribute to the strategic decision-making affecting the A-League
  • developing an annual operating plan for the A-League in collaboration and consultation with owners and a regular process for reporting against the objectives of the plan
  • ensuring that ultimately decisions are made in the overall interests of the A-League
  • ensuring and recognising that given the interdependence of the A-League and other strategic pillars of the game as a whole, particularly the important role that talented player development policy plays in the future success of the A-League, decisions regarding the strategic direction of the A-League recognise and factor in this interdependence
A particular point of interest throughout the review has been the specific operating model for the A-League. Consultations revealed wide-ranging views, with some strongly advocating for a full separation as proposed by Crawford. This has been carefully examined and is not an option that would be appropriate to pursue at this time. The A-League relies on a stream of funding from FFA and shares critical services. The competition is still in its relative infancy and has not matured to the point that it could survive if separated from FFA. It is for these reasons that the initial decision to manage the A-League from within FFA was sound. Further, integration of the A-League recognises the interdependence of the League and the other fundamental pillars of football in Australia – elite player development and community football. A theme of this report is the importance of forging stronger and deeper ties between the A-League and these other areas. An integrated model best serves that objective.

Other areas that the review considered in relation to the A-League to enhance clubs’ financial position and support their move to self-sufficiency included:
  • connecting with grassroots
  • re-examining the salary cap and marquee affordability arrangements
  • stadia deals
  • preconditions for further A-League expansion

Establishing the conditions for future expansion – consolidating for the future

The A-League

The A-League has expanded quickly, entering new markets with varying success. The competition currently has ten teams. A necessary element of this consolidation phase is for the A-League not to grow beyond this point until sustainability has been achieved, or where such a move – demonstrated through comprehensive business planning and modeling – would significantly contribute to sustainability.

Pre-conditions should be identified that must be met before the A-League further expands and, once a decision has been made to expand, the criteria that new franchises must meet to ensure their long-term prospects should be set. In addition to minimum capital requirements, when the A-League does introduce a new team to a new market, an important factor should be consideration of where the connection with grassroots can be best achieved. For example, there is no A-League team in Western Sydney, but some 137,000 participants. This represents a significant opportunity.

Salary cap

Payments to players represent one of the biggest costs to the A-League. Annually around $32 million is spent on player salaries (around $24 million under the salary cap and $8 million on marquee players and additional services agreements). This figure represents over 40% of the income generated by the A-League, compared to the Australian Football League, National Rugby League and Super Rugby where players receive approximately 20% of the income generated by their respective leagues.

While recognising the particular challenges faced by football, where there is strong international competition for talent, earning the right to grow must also apply to A-League player salaries. As noted above, salaries have increased at an unsustainable rate, out of step with the income the product generates and at a time when the Australian dollar is extremely competitive in the international player recruitment market. At a minimum the salary cap must be frozen, but it would be appropriate to explore options to reduce the cap. Options to adjust or remove the minimum player payment which artificially inflates incomes must also be considered. Unless this happens, given the proportion that player costs represent in clubs’ total cost base, A-League clubs will, in the absence of a considerable increase in their revenue streams, struggle to move to a position of sustainability or profitability for the foreseeable future.

It is also important that arrangements for the recruitment of marquee players do not lead to a contingent risk to FFA. Clubs should not be recruiting players outside the salary cap unless FFA’s existing ‘capacity to afford’ regulations are strictly applied.

A-League clubs must tap into the participation base to establish a connection with grassroots. The juniors of today should be the players, volunteers, fans and football community of the future.

Roll-out of new programs

New programs and initiatives that seek to develop the game and engage the community are important for any code. However the roll-out of new initiatives by FFA must be prioritised such that sustainability is not compromised. The FFA Cup is a concept that has received wide support and which supports the need to better connect with grassroots, but is one which will have a considerable cost. Further consideration must be given to its funding and timing of implementation – in the absence of a certain level of sponsorship and broadcast revenue it may be prudent to delay.

Head office should set the standard and prioritise investment

FFA should continue to review its head office costs. Acknowledging work that FFA has already done in this area, in an environment where public money is being invested in the game to achieve long-term sustainability, the administration of the game should take a ‘lean’ approach to its own operations. As long as FFA receives public funds, FFA head office should be required to identify, deliver and report on cost reductions. Plans to increase the workforce should be put on hold, with any salary increases funded via further efficiencies. More efficient approaches to travel and other procurement should be explored. Maintenance of core activities and programs would be expected.

FFA should also prioritise its spending on national teams and look to reduce associated travel and support costs within the constraints of its formal obligations to AFC and FIFA. This is a complex task that requires balancing short, medium and long-term objectives and ensuring the future of the game by building a platform for continued national team success through development of the next generations of Socceroos and Matildas.

Broadcasting and anti-siphoning arrangements

The measures outlined above provide a pathway to sustainability for FFA. However, any discussion about long-term sustainability must also contemplate broadcast value which represents approximately a third of the FFA revenue base. FFA has a high-quality product to offer the market, between the Socceroos and an ever-improving A-League. The current broadcast arrangements provide a package which includes the A-League, Socceroos Asian Cup qualification matches, Socceroos friendly matches and Socceroos World Cup qualification matches. This content is currently available exclusively to Fox Sports under existing broadcast contracts.

The extent to which World Cup qualification matches are affected by new anti-siphoning legislation (which proposes to list these matches) is a critical consideration, which will impact future broadcast values. Recognising that the government’s announcement of proposed listing noted that the details and timing was subject to negotiation, there is a case for government to take into consideration the state of the game’s evolution when determining its policy settings in relation to anti-siphoning. Minimising changes to the status quo in the short to medium term, enabling FFA to package World Cup qualification matches with the A-League and other

Socceroos matches for the purposes of its current and next broadcast deal, would enable FFA to maximise broadcast revenue and decrease reliance on government support.

Recommendations

The combination of reform and hard work by FFA, with a period of consolidation and collaboration with its key stakeholders and other strategic measures, holds the game in good stead for the future.

Government has made significant investment in the game to date, and should protect that investment by requiring FFA to deliver the reforms proposed in this report.

Recommendation 1:

A-League clubs should develop stronger and deeper links to grassroots. This should be achieved through:

1.1 FFA, working with stakeholders, should develop a blueprint for Cooperation Agreements (as required by the club participation agreements and Member Federation Charter) between A-League clubs and member federations to promote community engagement and both oblige and enable A-League clubs to forge deep connections with State leagues and juniors

1.2 Disbursements to A-League clubs should be provided and increased at the level planned, to the extent this can be afforded, with disbursements linked directly to clear performance measures including establishing links to the community

Recommendation 2:

FFA should explore ways of further enhancing the existing A-League Committee structure, having regard to the following key principles:
  • providing the A-League club owners with a formal structured opportunity to contribute to the strategic decision-making affecting the A-League
  • developing an annual operating plan for the A-League in collaboration and consultation with owners and a regular process for reporting against the objectives of the plan
  • ensuring that ultimately decisions are made in the overall interests of the league
  • ensuring and recognising that given the interdependence of the A-League and other strategic pillars of the game as a whole, particularly the important role that talented player development policy plays in the future success of the A-League, decisions regarding the strategic direction of the A-League recognise and factor in this interdependence

Recommendation 3:

Until the A-League is self-sufficient, measures supporting clubs’ drive to sustainability should be explored as follows:

3.1 Salary cap reforms including options to freeze or reduce the cap and remove the minimum salary

3.2 Strict application of the ‘capacity to afford’ approval criteria for marquee player qualification to ensure that the risks remain with the owners, for example via balance sheet and profit and loss tests, or bank guarantees

3.3 A review of stadia deals and options to reform stadia costs

Recommendation 4:

The A-League should remain at ten clubs until it is sufficiently strong financially, or where expansion could be demonstrated to significantly contribute to broader sustainability.

Recommendation 5:

Any changes in ownership of existing A-League clubs should reflect the importance of extensive community and grassroots links and, where appropriate, have broadly based ownership structures.

Recommendation 6:

FFA should continue to invest in the non A-League components of its business, including grassroots and women’s football, and protect these business lines from the risk of A-League losses.

Recommendation 7:

Within the constraints of its formal obligations to AFC and FIFA, FFA should prioritise its support for national teams, noting the need to balance short, medium and long-term objectives.

Recommendation 8:

FFA should identify, deliver and report on cost reductions to head office. Plans to increase the workforce should be put on hold, with any salary increases funded via further efficiencies. More efficient approaches to travel and other procurement should be explored.

Recommendation 9:

The roll-out of new initiatives or programs should be prioritised, with specific consideration of the funding for and timing of the implementation of the FFA Cup. In the absence of an appropriate level of sponsor and broadcast commitment, serious consideration should be given to delaying implementation.

Recommendation 10:

The review considers governance reform is an important area for improvements that have the potential to deliver tangible benefits for football stakeholders, especially at the grassroots. Accordingly it recommends reform continues to be explored initially through the current joint governance review being undertaken by FFA and its member federations.

Recommendation 11:

In light of the centrality of World Cup qualification matches to the value of broadcast rights, as far as possible within the broader context of communications policy, the government should minimise changes to the status quo in the short to medium-term (capturing the current and next broadcast deal), enabling FFA to package World Cup qualification matches with the A-League and other Socceroos matches, thereby decreasing reliance on government support.
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