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How the AFL used its biggest asset to tackle Covid-19 financial woes

The Marvel Stadium in Melbourne, Australia.

  • The Australian Football League has secured a loan of more than A$500m against its Marvel Stadium
  • It is one of the few Australian sports properties to own a venue
  • The finance has put the league in a much stronger position than other Australian sports during the Covid-19 crisis

The Australian Football League’s ownership of the Marvel Stadium in Melbourne has enabled the organisation to secure finance to help it through the Covid-19 business downturn. The asset has put the AFL in a uniquely strong position among Australian sports.

As in other markets, Covid-19 has delivered a savage blow to Australian sport. The country managed to contain the spread of the virus quickly by closing its borders and enforcing strict social distancing measures. But the action severed the pipelines of revenue to the country’s major sports.

The National Rugby League, Cricket Australia, Rugby Australia and football’s A-League are all facing financial difficulties. In just one example, RA this week announced it was cutting 47 of its 142 full-time staff.

Some of the organisations have sought loans from banks to help them through. Unlike the AFL, most have little or no assets to secure the loans against.

Last month, the NRL went to banks and financial institutions in the UK for a A$250m ($172.7m/€154m) loan after it had been turned down by Australian lenders. The loan amount was secured against future broadcast and sponsorship rights income as opposed to a particular asset.

Thanks to the 54,000-capacity Marvel Stadium, the AFL has secured strong financial support from two of Australia’s major banking groups, ANZ and National Australia Bank, in a deal worth more than A$500m.

Prescient move

Few leagues and teams in Australia own or have substantial control over the venues they play at. With the exceptions of some smaller suburban rugby league grounds, the vast majority of major teams in Australia play at publicly-owned and run stadia or venues.

Four years ago, the AFL took something of a gamble by purchasing the Marvel Stadium, in what has proved a prescient move.

Under the agreement that governed the construction and operation of the stadium, the AFL was entitled to take ownership of it in 2025 for a nominal A$30 fee.

In October 2016, the league agreed to pay A$200m to take control of the management rights and freehold ownership from the super fund and institutional owners, nine years early.

That decision meant the AFL owned a billion-dollar asset against which it could borrow.

The deal was also a positive development for its tenant AFL clubs North Melbourne, the Western Bulldogs and St Kilda. The AFL is leasing the stadium to them under more favourable terms than the previous owner.

The Victoria government is committed to funding upgrades of the stadium and development of the surrounding area under an agreement in April 2018 that includes a guarantee by the AFL that its annual showpiece Grand Final would be played in Melbourne every year until 2057.

Bayley Fritsch of the Demons (R) celebrates kicking a goal during the round 19 AFL match between the St Kilda Saints and the Melbourne Demons at Marvel Stadium on July 27, 2019 in Melbourne, Australia. (Graham Denholm/Getty Images)

Revenue generator

The Marvel Stadium is a multi-purpose entertainment and sports venue and also the headquarters of the AFL. As well as AFL matches, it hosts home fixtures for A-League football side Melbourne Victory, Twenty20 cricket matches, and one-off rugby union and rugby league matches. It is also firmly established as Melbourne’s major concert venue, and has hosted artists such as U2, Taylor Swift and Ed Sheeran. All these generate extra revenue for the AFL.

In 2018, in a deal said to be worth more than A$70m, the Walt Disney company in Australia secured the naming rights to the stadium for eight years, rebranding it the Marvel Stadium to promote its superhero film and content studio. A substantial Marvel-themed retail store is now housed within the facility.

“The rights change in 2018 to Marvel as a partner provided a good refresh and scope for new innovations in delivery alongside the Marvel brands,” says Adam Karg, associate professor and director, Sport Innovation Research Group at Swinburne University of Technology in Melbourne.

The stadium will provide an additional revenue stream for the AFL when live events come back online, which should accelerate the property’s recovery.

Negotiating position

The AFL’s stadium-backed finance deal looks to have put it in a stronger position than the NRL vis-à-vis upcoming talks with their domestic broadcast partners. As in other markets around the world, Australian broadcasters are seeking compensation for the interruption to the flow of live matches this year. The AFL and NRL are Australia’s two most valuable media rights properties.

The NRL was essentially forced to renegotiate its domestic media-rights deals with free-to-air broadcaster Nine and pay-television broadcaster Foxtel this month. The league was running out of money fast and was pushing hard to get its season restarted. The broadcasters took the opportunity to negotiate down their rights fee commitments over the coming years. The talks were not all negative for the league, as it also secured a five-year extension to its deal with Foxtel.

The AFL’s broadcasters are also seeking talks about their deals. But the league’s relatively healthy finances are considered to put it in a stronger negotiating position than the NRL.

“Nine and Foxtel with Rugby League and Foxtel with the FFA (Football Federation Australia) are among those who are negotiating, or have already negotiated, amended terms with lower valuations,” Karg says.

“It is expected that the AFL and others will inevitably be subject to the same. As such, the level of security provided for the league from the stadium deal creates a major point of difference.”

Caution ahead

The Marvel Stadium may have provided the AFL with a substantial financial buffer, but the AFL will not be resting easy for the next few years – the full extent of the business downturn caused by Covid-19 will take months or years to play out. Australia is set to enter its first technical recession – two quarters in a row of economic contraction – for 30 years this quarter.

“While this financial safety net means the AFL may be better placed to counter the Covid-19 fallout, there is still a significant financial impact on the AFL and clubs that will be felt for a while, particularly the longer it stays without crowds,” says Karg.

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