footyfootyfooty has already touched on the issue of expansion when they sat down to chat with Greg Florimo who is heading up the Central Coast Bears bid. Follow the link to read about what he had to say and our opinion.
footyfootyfooty have decided to make themselves the authority on expansion by talking to everyone involved in the discussions. Heads of the Wellington, Central Queensland, Ipswich and Perth bids will all be chatting with us over the next couple of weeks and we'll evaluate the merits and risks of each as an option to the NRL for expansion.
But before we got ahead of ourselves, and all excited about the potential of new teams to follow, we thought it was important to talk to the NRL itself. So we contacted John Brady, NRL director of media and communications for an exclusive interview about what the NRL's priorities are in growing the game in the next 5-10 years.
Here's what he had to say;
Q. Is there a short to mid term plan on expansion for the NRL, or are you waiting to see what each bid might offer before deciding to expand at all?
There is a 5-10 year plan but it doesn’t specifically relate to ‘put a dot on the map’ by a certain time or a certain place, in fact there is a certain amount of reservation on the ‘dot on the map theory’. The game’s focus is on broadening it’s interaction with fans but that may or may not be by being in new areas. And it may not always mean by bringing in new teams.
The factors that we face in a team decision and these are long term objectives are the first thing is to increase the revenue in the game to narrow the gap between or eliminate the gap preferably between the salary cap and the club grant. We currently give the clubs around the $2.6 million mark, and the salary cap is around the $4.1 million mark, so there’s clearly a shortfall we’ve got to find. As we grow revenue in the game one of our objectives is to narrow that gap.
Every time we get revenue you have players wanting more money which increases the gap, because the cap goes up. And you also have development and all the other competitions within the game trying to increase and trying to invest more in marketing and everything else. So you have those competing factors every time you have revenue come to the game.
What you need to assess is ‘are you able to achieve some of those goals and still invest in a new team or not?’ which is why the touch points we use around expansion tend to be around the Television rights negotiations because that’s when you can assess a number of factors, how much revenue is coming in, the amount of new revenue you can generate by having more matches or not. The view on our part is that as we get in to those TV negotiations again –which will be next year and there’s already been a lot of work go in to that already – that that’s the next time we will seriously look at the expansion option because that’s the time in the game at which you can.
Q. The TV deal will be important to funding expansion, what do you see is the crucial element to adding value to that deal? Is it simply adding more games?
No, that’s one of the interesting points. Most people think more games mean more money, but the truth is that’s not the case. The strength of this competition and this era of the NRL has been to always have more good games. More good games doesn’t necessarily mean more games overall.
If you go back a few years in rugby league you would have – and in other competitions today – you would have teams that are no hope of winning the competition and matches that were pretty predictable. The thing that makes value for sports broadcasting is to have a good contest almost every time. That’s what attracts audiences. It’s not about attracting air time, it’s about attracting audiences and having people want to watch it. So simply putting some more on isn’t going to guarantee you more money, putting on something people want to watch is.
That is the focus of what we do in the competition, to keep it to the point where there is a certain amount of talent equalisation, where the matches each week are exciting. And that balance is established pretty well over the last few years. So if you bring a new team in, it’s got to be on the basis that you're able to maintain it.
There is this sort of formula, the new team has to be able to bring value to the competition, both in terms of the amount of money the competition can generate as well as competition on the field. At the same time it’s got to come in at a time where the competition can bring value to the new team.
If you don’t have a certain amount of strength on either side than the history of expansion both in RL and other codes [would indicate] you’re in awful trouble. There have been a lot of expansion cases across Australian sport where the team coming in hasn’t had sufficient strength or brought sufficient value to the comp, or even if they have the competition itself has been weak. So when you bring a new team in, by nature you’re going to need to invest in that team’s entry, like the sheer cost of running that comp, and the fact that any team is likely to take a while to get to it’s full strength.
One of the great things about the decision in relation to the Titans, a lot of which is lost in history now, is that they wanted to come in at a time when we weren’t looking to expand. We knocked them back many times over because their bid needed strengthening. At the time, the NRL was looking to the offers from the Central Coast and Gold Coast, it wasn’t really looking to introduce a team, and it wasn’t going to introduce a team until it got a better look at its medium term revenue.
We actually brought our telecast rights deal forward and negotiated that [deal], which at the time the market felt was pretty outstanding. There’s been a lot of things written about the TV deal since because a few months later the market changed a bit and the AFL got a good deal, there’s no doubt about that. When we did ours we actually brought revenues forward, increased revenues and everybody said it was an outstanding result. It was one that allowed us to have some certainty around the timetable for the Titans.
At the same time the NRL and the Titans were able to say well, there’s a whole lot of things have to happen for this team to get in. Can they give us guarantees around these things, most notably a stadium?
Q. Obviously the business case of a bid is important, as is their ability to add revenue to the game. You seem to be placing a heavy emphasis on ensuring any new team would add to the competitiveness of the competition. How do you know whether a franchise is going to be competitive before it exists?
It’s always hard to tell with any certainty. But the facts that you look for are the ability of that team to invest both in salary cap, and the support structures around running a team which go well beyond the sheer cost of player wages. The ability of that team and of the competition to provide sufficient talent that can be spread across the comp so that that team can access that talent.
Beyond that, there’s no magic formula. There’s a range of options used around the world, from teams buying franchises to simply bringing them in and not charging franchises and letting the market sort itself out. Rugby league has seen all of them over the years.
I go back to when Illawarra and Canberra joined the competition. Both of those cases came in on the basis “look, we need to come in, and if we don’t come in now rugby league is going to be in trouble here”, which was an interesting proposition. But, they worked – [at least] in terms of Canberra’s case. But there are other teams that came in, such as the first Gold Coast incarnation, simply didn’t work because they didn’t have the groundwork for accessing players and they didn’t have the talent equalisation method in the comp. A lot of those are in place now.
Q. Going back to the TV deal for a moment, there has been criticism of Channel 9 for not showing Melbourne Storm games in Melbourne at appropriate/good times. Are you confident that you will be able to negotiate a better deal for clubs like Melbourne or any possible expansion clubs like Perth or Wellington in terms of better broadcasting schedule’s when you sit down for the next TV deal, or are you more concerned with the potential devaluing of the product due to low ratings if you try and do this?
It’s a fine line. Everybody says, get prime time. The sport I remember is basketball on Channel 7, which rated really well late at night. Everybody said we had to get it on earlier. Channel 7, when they did the ratings, said they would match the money offered by rival networks but that the product couldn’t handle prime time. Another network offered them prime time and that became the sticking point. That network put basketball on in prime time, but it couldn’t survive in prime time, it couldn’t generate enough market share to be competitive.
Ultimately networks buy products to win ratings, and at the very least to be competitive in their ratings cycle. On the other side sports want exposure. Those are the two arguments. Obviously, we would like better exposure in Melbourne at times, but you don’t want to be in a position where you’re watching your sport run last in the most popular time slots every day of the week. I’ll leave it to others, but plenty will argue that the AFL suffered a bit from that from its Sydney performances. So there’s a trade-off there.
What we’ve done over recent years is to open up more slots in Melbourne in terms of major matches and in terms of finals matches. We certainly would like to see more opportunities for the Melbourne Storm, and that will be a factor of the next rights negotiations. The extent to which that can be achieved in a commercial world is always a matter for negotiation. But that is our objective, to get more coverage for them, yes.
Q Is it fair to say that much of the press/hype surrounding expansion isn’t necessarily coming out of the NRL but from the rival bids? Is expanding not necessarily on your immediate radar?
There’s two groups. If you talk to the [existing] clubs – as journalists often do – you’ll find that the clubs don’t want to expand. If you talk to the people wanting to come into the competition, they’re looking to expand. In some ways that’s a healthy tension, and that’s not something we’re massively concerned [about].
The other option is for a sport to say “look, we are going to expand at this point at this time”. We think there are inherent risks in that, because expanding for the sake of a timetable as opposed to the right market conditions has its own elements of risk. There have been plenty of examples of that over the litany of lost clubs in a rage of codes over the years.
There is an element of building a strategic plan around the objectives of trying to spread the game. But spread it by way of having an even competition and look for when those indicators come together in a commercial sense that would allow you to expand. The Gold Coast is a perfect example.
Certainly at the moment you have a lot of people wanting to come in and saying “this is what we can do”. There’s an element of market forces that drives among those [bids] a competitive bidding process in itself. They’re all trying to show what they can do. There is more speculation on it than there is immediate appetite to do it, but there is also a realisation that you have opportunities around major revenue streams, television rights and online rights and major sponsorship rights –which don’t come up very often- and they certainly are major revenue streams for sports.
There is an opportunity to look at the expansion argument within that wider context every few years, and that’s in essence an inbuilt review process. So that’s why there is more noise at the moment and that’s why we’ve been pretty clear as to where we would next look and where we wouldn’t.
(L-R, John Brady, Geoff Carr, David Gallop, Colin Love at
the Country NSW RL dinner. Picture courtesy of crlnsw.com)
Q. Hypothetically, given the option to expand into a new market (eg Perth) or an existing one (eg Central Coast) with two equally strong bids, do you have a preference or an indication as to what might be the more attractive option?
Do I have a preference? No, personally. Yes, a decision needs to be made. But the answer is I don’t have an indicator on it right now.
The global argument on expansion is that you bring an area in that can add more value to your competition than you already have, that brings in a new market in terms of commercial opportunities to sponsors, in terms of fan base. That was probably the argument that first got the AFL down the road of coming to Sydney. And that’s the argument we’re down in Melbourne on – it is an important market and a share of that market is important.
That’s why New Zealand is very important and very good for us, because we can say that we are in a market that other people aren’t in. You can look at the claims of Perth for instance and say, “that’s a new market, bring it in”.
But you can equally argue, as many will, that you already have an incredible fan base in Queensland, an incredible fan base in New South Wales. So by bringing new teams in and strengthening your heartland, growing your domination in those areas and growing your position within two very large markets so you’re able to say you have better control of them.
You can mount cases either way. Do we have a definitive position on which is the best? No. We think these are arguments that need to be considered in the light of the strength of the bids, but they are factors to be taken in to account. Do you want to grow or do you want to shore up existing areas? That’s all part of the debate. But I can’t give you a clear view of where [the NRL] sits.
Q. Are there scars from the failed expansion teams from Super league that are affecting how aggressive the NRL feels it can be on expansion?
I don’t think so. There are lessons to be learned from that, there’s no doubt about that, there are lessons from that. There are lessons back from the old NSWRL days before that. This is a personal view - if you look at the Gold Coast introduction now compared to when it was first introduced, in essence it was first introduced to make up the numbers back in the NSWRL days. There wasn’t a stunning bid from the people of the Gold Coast. It was really the leftovers of a Queensland bid. Whereas this time around the Gold Coast community rallied for some time to get a team and built up a groundswell of public support for it, commercial support for it and got to a point where they said “come on, you’ve got to take us”. At the same time our comp was at a point finally where it could look at that, so those two things had to align.
It’s not that you’ve got the scars. You’ve got lessons to look at.
The other thing that you’ve got in terms of your 5 year planning that you raised earlier is the very clear focus of ours to keep a close competition. That’s one of our objectives. If expansion was going to upset that balance, then that would be a huge negative against it. The danger you can have is to say “we’ve got to put a team there because a team will work there”, regardless of whether it suits the competition, regardless of who’s running that team, regardless of all the factors [to take] into account.
The strategic goal for us at the moment is to broaden the supporter base of the game as much as we can by the product we have on the field. You’re never going to get a team everywhere where you’re going to want supporters. A lot of people who live in Australia follow the NFL, because of the nature of the competition. Our primary thing is to build a competition that people want to follow, because of the excitement that it produces and the talent that it produces and because of how close it can be. It’s not that you don’t expand at any stage. But your expansion can’t risk that. That is probably the view that we have.
Q. Do you envisage that in 2013 there will be another team in the NRL?
I’ve never played Nostradamus. It’s too hard for me to suggest one way or the other. I think certainly by 2013 it would have been looked at very closely. Whether it would have actually happened is a different issue.
footyfootyfooty would like to thank John for giving up his time to do this interview, we greatly appreciate it and hope it has given you some clarity on the NRL's plans for the future.
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