Yanks Show A Way Ahead

I think I have said before that if you haven’t got a good idea yourself, then pinch one from somewhere else. Roy Masters of the Sydney Morning Herald has helped us there when he reported on a visit to American football headquarters by AFL people.

A key issue was the NFL’s unique method of distributing the code’s income amongst its 32 clubs. The principle is that most of the cash is spread equally amongst all of them with the minority accruing directly to the local club.

What happens is that broadcast fees (about half the total) and 34% of ticket sales, all national merchandise sales and corporate sponsorship are pooled and shared equally. The home team gets the remaining 66% of ticket sales as well as game-day income from local sponsors, parking and concessions. In some cases the latter items may be shared with the body that owns the stadium – which is usually not the football club.

In passing, let’s note that NFL teams are all privately owned so profitability, or a break even result, is of some importance. Failing sufficient local support, franchises can move to another city, and have often done so. Many inhabit big cities but some are at the opposite end of the scale. For example, The Green Bay Packers in upstate Wisconsin are four-time Super Bowl winners, the town has a population of just over 100,000, yet the stadium often hosts crowds of 70,000 – and never mind the snow.

Greyhound racing may have plenty to gain from going down this road. Not identically, but by utilising some of the principles involved.

For example, many of the code’s existing practices are artificial in nature, not market driven.

  • Revenue attributable to individual clubs has more to do with when it races than anything else, especially today when mug gamblers are becoming more influential, and race scheduling is overcrowded and conflicting.
  • Race dates and times are assigned more or less arbitrarily, often with grandfather rights dominating.
  • Except for a few races at city clubs, field quality does not determine income – any old races will do.
  • Patronage is less important, mostly because few fans want to go to the track any more.
  • There is less incentive for clubs to better promote the sport because they gain little extra income by doing so (in contrast to pre-SKY times when attendances were vital).
  • Major funding – for prize money, heavy maintenance and track development – is already in the hands of the state authority, not the club.
  • The greyhound code receives no fees from broadcasters, rather clubs have to foot the bill for necessary equipment and expenses. Its efforts pay dividends to TAB shareholders, with only a small proportion ending back with authorities and then individual clubs.
  • There is an imbalance between states in the quality of racing stock and therefore in the attractiveness of the product to what is now a national or international audience.
  • Participants’ operating costs are much the same everywhere but income is governed by significantly different prize money levels from state to state.
  • There is an inbuilt incentive for owners to shift good dogs away from less profitable states to Victoria and, to a lesser extent, NSW. In particular, SA and WA fortunes are underpinned not just by their own efforts, but by the diversion of lesser dogs from the eastern states and by policy decisions from the Wheeler camp (without which SA would be in terrible strife).

The broad outcome is that we have two states – NSW and Victoria – sitting on top of the pile with most of the good dogs (and sires) and the lion’s share of the population to bet on them. Naturally, their turnover and prize money is much higher and quite a bit of it is generated from interstate.

The other states and territories are therefore handicapped before the race is started. At the moment, SA and WA are just getting by while Tasmania and Queensland are battling financially.

In any event, all jurisdictions are dependent on the whims of state governments for their fixed and variable incomes, mostly ex TABs. Victoria, for example, has been riding a gravy train for years due first to unearned income from the state’s poker machines and, more recently, a bigger allocation from racing taxes and commissions. Conversely, NSW is stuck with an enforced cross-subsidy of several millions a year to the other two codes due to poor business judgement from an earlier administration.

So, why re-examine all this?

The answer lies in whether one system or another will benefit the breed and the long term development of greyhound racing. Currently, a poor position in the pecking order can enforce low returns and a disincentive for both participants and customers. That has both local and national implications.

This is a principle long addressed by major Australian football codes, all of which regard themselves as national in nature and which are tightly controlled by national bodies. Competitions have not only spread to new regions but, while doing so, recognise that imbalances can occur due to no fault of a club. In the AFL, Western Bulldogs, North Melbourne and Port Adelaide have been battling financially and have therefore received extra support from head office. Gold Coast and Greater Western Sydney gained huge initial and ongoing financing to get them started. Sydney Swans share of revenue acknowledges the higher living costs in the country’s largest city.

The ARL (and News Ltd) has sponsored expansion to Melbourne, North Queensland and Auckland. The Gold Coast rugby league team is now fighting its way out of financial difficulties and the Tigers are battling to break even in Western Sydney, but both will still get their share of broadcast revenue.

The aim everywhere is to equalise opportunities – hence the salary caps – and to assist where circumstances make life tough. As in the NFL, the view is that a strong whole comes about when you have strong parts. Indeed, the size of the TV contracts is a function of how good that national coverage is. (This is also why Channel 9 has been desperate to take control of TV stations in Adelaide and Perth).

Of course, racing is conducted at many different levels. Achieving an equitable national outcome would be practicable amongst major city and perhaps a few provincial clubs, leaving the other levels to be accommodated by local authorities. And it is not a coincidence that differentiation like that could also help authorities to create more attractive race options for customers – ie premium and other, rather than the current motley mix.

It would also be logical to simultaneously embrace a national betting pool, something which has been pushed many times over recent years but never acted on. Taking that step would immediately improve the betting product and encourage more and bigger punters to take an interest, while everyone would be able to rely on more stable dividends. Tabcorp proposed just that four years ago and Tatts spokesmen have also made encouraging comments. Sadly, nothing has happened since. Governments have looked the other way.

That’s a pity because Tatts’ smaller pools already put SA, Queensland and Tasmania at a structural disadvantage. Local punters, in today’s electronic world, find it far too easy to venture to bigger Tabcorp pools, thereby cutting rewards to those smaller states. And, physically, a few short steps take Queenslanders away from Coolangatta and Tatts to the Tweed Heads Services Club in NSW where Tabcorp rules. The same migration occurs at the popular betting auditorium at Border Park, just down the road.

A fully national approach has a lot going for it. Somewhere in this mix is the potential for a jump in national income of perhaps 25% to 50%. But can Racing Ministers and racing authorities find a way to do it? Only a concerted effort would have hope of success.

The do-nothing option leaves us with some tough questions – can Tasmania and Queensland survive, at least in their present form? And how does that affect neighbouring states? How will existing trends pan out in five or ten years time, remembering that the big usually get bigger and the small are left with the scraps?