Life and death
2.4K
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5.5K
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almost 17 years

I've started a topic here rather than clog up the Phoenix ownership thread as this discussion is more about whether or not it is possible to make money from owning a sports team rather than can the Nix make money? This topic obviously impacts on the discussion/arguments that have been going on in the other thread but I'm hoping we can have an intelligent conversation here and not the usual attack on others for holding a differing point of view.

I have always leaned towards the view that it is possible to make money from owning a sports team as long as the financial model is right and the structure of the league you play in, is structured in such a way that it allows you to be profitable. I based that view on a reasonable amount of experience with American sports ownership in various countries around the world and just a general understanding of how large corporations and businesses operate financially - having been employed by one of Australasia's biggest at executive management team level.

Armed with that view and the many opposite views thrown against me, I decided to do some internet searching. The subject is really fascinating. 

The following quote sums it up for me: Generally, it is not the motivation of a sports team owner to make a profit, but to have their franchise increase in value. That's not to say that all teams don't make money, but many do not. It does seem that profitability of sports franchises for their owners is more dependent on the change in value of the team from its purchase to when it is sold than how much money it actually makes through ticket sales and television deals. However some teams are able to both make a profit and increase in net worth. A notable example of this can be found in the Los Angeles Angels of Anaheim, whom have produced solid profits and steadily increasing value in past years,

Much of the conversation in the other thread has been based on the narrow view that profitability is simply based on money in and money out. It fails to take into account appreciation of the asset over time [buy at a lower price than what you ultimately sell it for or what it is valued at - like buying a house in terms that most of us are more attuned to], ability to write off as tax, ability to use the asset in other ways such as marketing, forming business alliances and networks, cash flow etc.

It would be fair to say that the Nix are not making money in the normal sense and they are severely hamstrung by the fact that the club has no real value because of a number of factors. Because the club has no value, there is no prospect of selling the club and realising a profit above the price they paid for it.Therefore they are in a real catch 22 situation - simply shut up shop and get what they can for it or invest in a strategy that gives their club value and either allows them to sell it at a profit or have the club valued as a valuable asset [book value] that can be used in a variety of ways if they wish.

What prospects are there for a sale today? I'd suggest close to zero. The license can be cancelled in 2 years by the FFA and that looks to be probable if the FFA retain control of the A League. Metrics were set and agreed to and we simply aren't meeting them. The license is not transferable [in terms of location] under the current rules, so talk of these wanna be A League consortia wanting to buy the club and simply transfer it to their operations in Australia is not feasible under the current FFA/A League model. Any prospective buyer would need to be someone who is prepared to take a punt on getting the club at a low price, and then experience a significant change in the landscape that enabled the club to operate in a manner where it can survive and gain real value.

The second scenario is what I believe is happening now. Welnix are part of the group pushing for a change in the A League model and taking control away from the FFA. There is no doubt that clubs can not make money [in fact are more or less guaranteed to  make an operating loss] in the current environment. That has to change to give all A League clubs [more so us] real value. Some form of restructure has been promised by FFA for years and this has lured new owners and caused current others to hold on to their clubs and wait for the day these changes were made. Its not just the Nix that needs this change.

Back to the general question of whether or not clubs can make money in sports - to make your mind up you really need to stop looking at leagues like the EPL where wages are out of control, the likes of the top leagues in Spain and Italy where things are really skewed in favour of the top 2 or 3 clubs [and wages are out of control] and look at other leagues and sports where clubs and leagues were set up in a way that allowed clubs to make money and then maintained the strength to maintain those structures and not give way to pressure by those with money to tamper with the salary cap or change the equal distribution of merchandising income model as examples.

Are there any clubs like this? I'm about to go away and search further, but the quote above cites the Los Angeles Angels baseball franchise makes money, and while they are in a huge market, surely its a matter of scale? smaller teams in smaller markets have lower costs but can operate in a similar manner but those quadruple 0's are more likely to be point 0's - but you get my drift.

Lawyerish
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4.8K
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about 13 years

Think you have summed it all up perfectly there Napier

Starting XI
1.8K
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4.1K
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about 17 years

Great post. I wonder what Welnix foresaw when they bought the Phoenix?

In terms of basic operational management and budgeting, it really is quite straightforward:

1. Determine your revenue

2. Build a budget based on your revenue with contingency built in

3. Build a strategy to increase revenue

Put quite simply, do not spend more than you earn. Given the revenues that the Phoenix can/might earn, how much should be spent? What things does the club need and what can be shelved? How much can the club spend on players? How much can the club spend on coaches?

It seems to me that there are certain industry expectations that surface only when a club is classified as 'professional'. When a club is amateur, you just have 2 kits for the season. When a club is pro, you have one per game. An amateur team has a physio that turns up most weekends, a pro club has a medical team, with a manager and they might need an office. You get the drift.

I'm guessing that, financially, the Phoenix exist in the space between semi pro and pro, but for one reason or another have to spend like a pro team. 

Marquee
6.9K
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9.3K
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over 13 years

Of course it's possible to make money on sports teams. Most teams in the big three sports in the US make a ton of money but the US has a very low ratio of professional sports teams to population. When I was based in San Fran you'd always have to buy tickets to the Giants on stub hub as it was invariably sold out (that was the championship year), AT&T park seats 40k odd people and there's something like 80 - 90 home games a year in a season, then you tack on sponsorship, etc. and you can see why. The 49ers would also pretty much constantly sell out candlestick park which had a capacity of around 70k.

If you look wider there are also a number of F1 teams that are independent constructors and make money off of racing in F1, including the Williams team which makes their accounts public as they're listed on the German stock exchange.

To show you how uncompetitive the US market is, a city like Austin has no major league sports teams despite the fact that the city has a population of over two million, which seems insane when you think that Wellington is supporting four professional sports teams on a population of half a million.

It's much tougher in New Zealand with a much smaller market and any cities above 100k having at least two professional sports teams. Despite traditionally being our second biggest sport in terms of punters cricket barely makes any money, apparently the whole professional operation in NZ is paid for by the central body and is ultimately funded by India. I'd imagine the NZRFU also subsidises the regions to run domestic rugby teams professionally. Outside of the Phoenix, Warriors, and Breakers, the NZ market is probably reasonably unique with the central body owning or having direct control over all the teams in the two major professional competitions.

Mostly sports teams are status symbols, often they're used as ways to legitimise people or to funnel dirty money, and sometimes, as in the Phoenix, they're something which is philanthropic.

Marquee
1.1K
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7.6K
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over 12 years

In my honest opinion (long hand for clarity) Loyd Morrison was the instergator. 

His daughters played at college.  It was a sad day when he left use. A very influential man. 

I THINK Rob holds the mantel in his brothers name! So this Clubs is a legacy in my opinion. 

( To many beersies so not to offend RB) END 

Edit: Profit not in equation 

Marquee
1.1K
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7.6K
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over 12 years

Ryan wrote:

If you look wider there are also a number of F1 teams that are independent constructors and make money off of racing in F1, including the Williams team which makes their accounts public as they're listed on the German stock exchange.

That may only be MCLaren cars - Retail as they have many divisions /companies 

Marquee
6.9K
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9.3K
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over 13 years

Blew.2 wrote:

In my honest opinion (long hand for clarity) Loyd Morrison was the instergator. 

His daughters played at college.  It was a sad day when he left use. A very influential man. 

I THINK Rob holds the mantel in his brothers name! So this Clubs is a legacy in my opinion. 

( To many beersies so not to offend RB) END 

Edit: Profit not in equation 

100% this.

Marquee
6.9K
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9.3K
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over 13 years

Blew.2 wrote:

Ryan wrote:

If you look wider there are also a number of F1 teams that are independent constructors and make money off of racing in F1, including the Williams team which makes their accounts public as they're listed on the German stock exchange.

That may only be MCLaren cars - Retail as they have many divisions /companies 

Mclaren's had multiple income streams since the 90s, which are as diverse as a corporate catering service (higher taste) to outsourced R&D (Mclaren Applied Technologies). They also have historically had wealthy benefactors like Monsour Ojjeh, Honda, and Mercedes, and is currently owned by both Ojjeh and the kingdom of Bahrain so can probably be considered more in the vain of a vanity asset than a business that has to stand on it's own two feet.

Williams also has other income streams but they're mostly around the F1 team, like renting out their conference room with the perk being the car displays, etc. but Frank Williams, Claire Williams, etc. rely on Williams for the bulk of their fortune and don't have other income streams to push back into the team, the team has to be profitable or else it will cease to exist, of course they do lose money often and have to take on debt, and seven or eight years ago they had a huge amount of debt, and were taking on debt just to meet payroll rather than in investment, but they steadied the ship and eventually paid it off. I remember also in the early 2000s after Williams split with BMW there was an article that Patrick Head had to mortgage his house, sell his cars, and drive to work on a scooter because they needed to put all their spare cash back into the team for a new wind tunnel.

Force India by all counts is actually propping up it's owners (one of whom's in jail, the other is fighting extradition for billions of dollars in debt).

Sauber also relies on income from it's GP activities, although it's struggling massively and is always on the verge of bankruptcy over the last few years.

No idea about Haas, but my guess is the expectation of that team is to make money.

Life and death
2.4K
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5.5K
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almost 17 years

Ryan wrote:

Of course it's possible to make money on sports teams. Most teams in the big three sports in the US make a ton of money but the US has a very low ratio of professional sports teams to population. When I was based in San Fran you'd always have to buy tickets to the Giants on stub hub as it was invariably sold out (that was the championship year), AT&T park seats 40k odd people and there's something like 80 - 90 home games a year in a season, then you tack on sponsorship, etc. and you can see why. The 49ers would also pretty much constantly sell out candlestick park which had a capacity of around 70k.

If you look wider there are also a number of F1 teams that are independent constructors and make money off of racing in F1, including the Williams team which makes their accounts public as they're listed on the German stock exchange.

To show you how uncompetitive the US market is, a city like Austin has no major league sports teams despite the fact that the city has a population of over two million, which seems insane when you think that Wellington is supporting four professional sports teams on a population of half a million.

It's much tougher in New Zealand with a much smaller market and any cities above 100k having at least two professional sports teams. Despite traditionally being our second biggest sport in terms of punters cricket barely makes any money, apparently the whole professional operation in NZ is paid for by the central body and is ultimately funded by India. I'd imagine the NZRFU also subsidises the regions to run domestic rugby teams professionally, outside of the Phoenix, Warriors, and Breakers, the NZ market is probably reasonably unique with the central body owning or having direct control over all the teams in the two major professional competitions.

Mostly sports teams are status symbols, often they're used as ways to legitimise people or to funnel dirty money, and sometimes, as in the Phoenix, they're something which is philanthropic.

Apart from quoting what the club and owners themselves have said - what do you base this statement on?

I am assuming that your philanthropic reference is to them buying the club so they can maintain a professional football presence in Wellington [and by extension - NZ].

However, the owners actions don't appear to back that up with some of things they have done/haven't done.

As soon as the A League signalled a shorter license period for us than other clubs and installed metrics for us to remain in the A League, what has the club done? I would argue that they haven't thrown everything at achieving those metrics. Crowd numbers have decreased further - what did they do to increase crowds? They certainly haven't been able to employ the players and coaches to improve the teams performance and attract more bums on seats. Have they managed to better engage with the fans they do have? You can argue that everyone makes mistakes and they will get it right next time - quite simply they keep making the same mistakes and despite them saying they are learning, the proof is there that they have not and the mistakes keep getting repeated. 

So if their primary motivation in buying the club was to keep a professional football presence in Wellington, then they have done nothing discernible to achieve that through meeting the metrics set down by FFA for survival.

So what have they done?

They have joined and are playing a high level role in a group of owners that are pushing to remove the FFA from control of the A League, a subsequent change of the A League funding model and a guaranteed place for the club in the league. They have given up on trying to meet any metrics and have put all of their eggs in the change basket.

I believe that is their best approach and the one most likely to guarantee the club's place in the A League - but putting that aside, those are not the actions you'd expect from a group who's main reason for buying the club was to keep professional football in Wellington.

I'm sure that philanthropic reasons would have formed part of their reason to buy the club, but they would also have expected to make money from their investment. Their actions to date lean more towards protecting the value of their asset than keeping a club in Wellington at all costs. Personally I have no problem with them buying the club for either or both reasons and I'm grateful they did - but I wish some people would stop giving the owners some god-like status for saving Wellington football and not acknowledge that was/is unlikely to be their only motivation.

Legend
11K
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21K
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almost 9 years

Ryan wrote:

Of course it's possible to make money on sports teams. Most teams in the big three sports in the US make a ton of money but the US has a very low ratio of professional sports teams to population. When I was based in San Fran you'd always have to buy tickets to the Giants on stub hub as it was invariably sold out (that was the championship year), AT&T park seats 40k odd people and there's something like 80 - 90 home games a year in a season, then you tack on sponsorship, etc. and you can see why. The 49ers would also pretty much constantly sell out candlestick park which had a capacity of around 70k.

If you look wider there are also a number of F1 teams that are independent constructors and make money off of racing in F1, including the Williams team which makes their accounts public as they're listed on the German stock exchange.

To show you how uncompetitive the US market is, a city like Austin has no major league sports teams despite the fact that the city has a population of over two million, which seems insane when you think that Wellington is supporting four professional sports teams on a population of half a million.

It's much tougher in New Zealand with a much smaller market and any cities above 100k having at least two professional sports teams. Despite traditionally being our second biggest sport in terms of punters cricket barely makes any money, apparently the whole professional operation in NZ is paid for by the central body and is ultimately funded by India. I'd imagine the NZRFU also subsidises the regions to run domestic rugby teams professionally, outside of the Phoenix, Warriors, and Breakers, the NZ market is probably reasonably unique with the central body owning or having direct control over all the teams in the two major professional competitions.

Mostly sports teams are status symbols, often they're used as ways to legitimise people or to funnel dirty money, and sometimes, as in the Phoenix, they're something which is philanthropic.

Apart from quoting what the club and owners themselves have said - what do you base this statement on?

I am assuming that your philanthropic reference is to them buying the club so they can maintain a professional football presence in Wellington [and by extension - NZ].

However, the owners actions don't appear to back that up with some of things they have done/haven't done.

As soon as the A League signalled a shorter license period for us than other clubs and installed metrics for us to remain in the A League, what has the club done? I would argue that they haven't thrown everything at achieving those metrics. Crowd numbers have decreased further - what did they do to increase crowds? They certainly haven't been able to employ the players and coaches to improve the teams performance and attract more bums on seats. Have they managed to better engage with the fans they do have? You can argue that everyone makes mistakes and they will get it right next time - quite simply they keep making the same mistakes and despite them saying they are learning, the proof is there that they have not and the mistakes keep getting repeated. 

So if their primary motivation in buying the club was to keep a professional football presence in Wellington, then they have done nothing discernible to achieve that through meeting the metrics set down by FFA for survival.

So what have they done?

They have joined and are playing a high level role in a group of owners that are pushing to remove the FFA from control of the A League, a subsequent change of the A League funding model and a guaranteed place for the club in the league. They have given up on trying to meet any metrics and have put all of their eggs in the change basket.

I believe that is their best approach and the one most likely to guarantee the club's place in the A League - but putting that aside, those are not the actions you'd expect from a group who's main reason for buying the club was to keep professional football in Wellington.

I'm sure that philanthropic reasons would have formed part of their reason to buy the club, but they would also have expected to make money from their investment.

Maybe I've missed something, but what do you base this statement on?

Also what would you have the owners do, to improve the metrics? Obviously bearing in mind the financial limitations.

I'm talking quite specific solutions, not just something like 'engage better with existing fans'. Sure they can improve their fan engagement/social media or whatever, but that isn't going to bring in crowds of 10,000. Apart from becoming a winning side, what else specifically can they do to improve the metrics?

Not trying to be a smart arse, just when you criticise I think you need to table specific solutions, rather than just say 'must do better'. That's true for anything in life. 

I'm sure Welnix would love to hear any great ideas. Here's your chance to truly impress David Dome.

Marquee
1.1K
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7.6K
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over 12 years

Stop the FFA bashing on about the flaws with a NZ based team. Stop the A-League CEO bashing his own product.

That is what the public see in NZ - 

Marquee
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9.3K
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over 13 years

I wouldn't conflate a lack of results with a lack of intent.

Life and death
2.4K
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5.5K
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almost 17 years

coochiee wrote:

Ryan wrote:

Of course it's possible to make money on sports teams. Most teams in the big three sports in the US make a ton of money but the US has a very low ratio of professional sports teams to population. When I was based in San Fran you'd always have to buy tickets to the Giants on stub hub as it was invariably sold out (that was the championship year), AT&T park seats 40k odd people and there's something like 80 - 90 home games a year in a season, then you tack on sponsorship, etc. and you can see why. The 49ers would also pretty much constantly sell out candlestick park which had a capacity of around 70k.

If you look wider there are also a number of F1 teams that are independent constructors and make money off of racing in F1, including the Williams team which makes their accounts public as they're listed on the German stock exchange.

To show you how uncompetitive the US market is, a city like Austin has no major league sports teams despite the fact that the city has a population of over two million, which seems insane when you think that Wellington is supporting four professional sports teams on a population of half a million.

It's much tougher in New Zealand with a much smaller market and any cities above 100k having at least two professional sports teams. Despite traditionally being our second biggest sport in terms of punters cricket barely makes any money, apparently the whole professional operation in NZ is paid for by the central body and is ultimately funded by India. I'd imagine the NZRFU also subsidises the regions to run domestic rugby teams professionally, outside of the Phoenix, Warriors, and Breakers, the NZ market is probably reasonably unique with the central body owning or having direct control over all the teams in the two major professional competitions.

Mostly sports teams are status symbols, often they're used as ways to legitimise people or to funnel dirty money, and sometimes, as in the Phoenix, they're something which is philanthropic.

Apart from quoting what the club and owners themselves have said - what do you base this statement on?

I am assuming that your philanthropic reference is to them buying the club so they can maintain a professional football presence in Wellington [and by extension - NZ].

However, the owners actions don't appear to back that up with some of things they have done/haven't done.

As soon as the A League signalled a shorter license period for us than other clubs and installed metrics for us to remain in the A League, what has the club done? I would argue that they haven't thrown everything at achieving those metrics. Crowd numbers have decreased further - what did they do to increase crowds? They certainly haven't been able to employ the players and coaches to improve the teams performance and attract more bums on seats. Have they managed to better engage with the fans they do have? You can argue that everyone makes mistakes and they will get it right next time - quite simply they keep making the same mistakes and despite them saying they are learning, the proof is there that they have not and the mistakes keep getting repeated. 

So if their primary motivation in buying the club was to keep a professional football presence in Wellington, then they have done nothing discernible to achieve that through meeting the metrics set down by FFA for survival.

So what have they done?

They have joined and are playing a high level role in a group of owners that are pushing to remove the FFA from control of the A League, a subsequent change of the A League funding model and a guaranteed place for the club in the league. They have given up on trying to meet any metrics and have put all of their eggs in the change basket.

I believe that is their best approach and the one most likely to guarantee the club's place in the A League - but putting that aside, those are not the actions you'd expect from a group who's main reason for buying the club was to keep professional football in Wellington.

I'm sure that philanthropic reasons would have formed part of their reason to buy the club, but they would also have expected to make money from their investment.

Maybe I've missed something, but what do you base this statement on?

Also what would you have the owners do, to improve the metrics? Obviously bearing in mind the financial limitations.

I'm talking quite specific solutions, not just something like 'engage better with existing fans'. Sure they can improve their fan engagement/social media or whatever, but that isn't going to bring in crowds of 10,000. Apart from becoming a winning side, what else specifically can they do to improve the metrics?

Not trying to be a smart arse, just when you criticise I think you need to table specific solutions, rather than just say 'must do better'. That's true for anything in life. 

I'm sure Welnix would love to hear any great ideas. Here's your chance to truly impress David Dome.

Well its not my job to come up with solutions for the club, I'm presuming that David Dome and others are being paid to do that. I don't know where it is written that you can only criticise if you can come up with workable solution.

I base my assumption [that you highlighted] on the subsequent comments of Gareth Morgan  and a little bit of common sense. The converse position to the one I stated is that the owners were prepared to just throw money at the club and its obviously they haven't done that. They have been very financially prudent - no big name marquees and playing games away are both designed to stop the haemorrhaging of money. Throw into the mix that they have admitted to seeking investors to share the financial burden of ownership. These people didn't get where they are today by just throwing money around and it would be unrealistic to think these guys wouldn't have backed themselves to make a buck through ownership. Everything they are doing now is geared towards giving their club some real value and therefore a return on their investment.

Marquee
6.9K
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9.3K
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over 13 years

The converse position to the one I stated is that the owners were prepared to just throw money at the club and its obviously they haven't done that.

Why is it obvious they haven't thrown money at the club? Dome said they're about mid pack in terms of budget.

They aren't billionaires, they're millionaires and don't necessarily have the liquidity that you'd think.

But, they are good business men, and they wouldn't make an investment into the Phoenix expecting a return, they have stated all along that they bought the team for Wellington but they can't support it for ever and want it to break even.

(edit for quote)

Marquee
1.3K
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5.3K
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over 16 years

Ryan wrote:

Why is it obvious they haven't thrown money at the club? Dome said they're about mid pack in terms of budget.

They aren't billionaires, they're millionaires and don't necessarily have the liquidity that you'd think.

Add to that the cost of running an academy (and soccer school in Akl).
Legend
11K
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21K
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almost 9 years

Yeah but if you criticise whoever, and you don’t at least attempt to give them a solution - maybe it’s means there is none, or no easy ones at least. Apart from having a winning team, how do you improve the metrics? 

Sorry but I think you might have failed on the impressing David front.

Also I’d argue Welnix already ‘throw’ cash at the club every month. Just a question of whether folks think that throwing, could be higher than it is now.

Starting XI
1.8K
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4.1K
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about 17 years

It's a good topic and I'd personally be keen to keep it going. 

NP's first post was very intuitive and I enjoyed reading about the US franchise system as I don't know much about this; I'm more clued up about European football club funding structures, but find the American structures fascinating.

I think it's quite a good idea to present ideas and apply them to the Phoenix. Maybe we can keep the bickering about Weelnix in the ownership thread?

Lawyerish
1.7K
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4.8K
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about 13 years

I call BS on Domes line about being mid pack on the salary front, 

Next time he says that comment to any media they should challenge him to back it up with a figure

Life and death
2.4K
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5.5K
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almost 17 years

reg22 wrote:

It's a good topic and I'd personally be keen to keep it going. 

NP's first post was very intuitive and I enjoyed reading about the US franchise system as I don't know much about this; I'm more clued up about European football club funding structures, but find the American structures fascinating.

I think it's quite a good idea to present ideas and apply them to the Phoenix. Maybe we can keep the bickering about Weelnix in the ownership thread?

A lot of this is outside the club's immediate control Reg. Success is dependent on the leagues structure and a recognition that each member is only as strong as their weakest member. The American franchise and equalisation model, the draft and the salary cap were designed in tandem to keep everyone strong financially and on a level playing field. It has probably varied a little over the years but not to the degree that the A League [as an example] changed in a very short space of time. The salary cap is a prime example, the A League has tampered with that so much that it is no longer a level playing field, the richer clubs are able to buy success so we generally see the same clubs at the top every year. We also see this in most European leagues don't we? the champion can generally be predicted from 2,3 or 4 clubs every year. Yet the likes of the NBA and NFL and the other US big sports have a different champion every year for the most part. I know the Patriots in the NFL and the Warriors in the NBA have had several years at the very top, but it is widely accepted that they did this through wise and clever identification of players rather than spending the most money to attract the best talent.

I'm not sure how it works exactly now, but in the later 1980s/90s in the NFL, the salary cap was set at the value of the equal share each club received from broadcasting rights. Additionally all merchandising revenue went into a pool and was paid out equally to all clubs. So while the Dallas Cowboys sold the most jerseys hats, fingers, flags etc they got paid the same amount of money from the pot as the team that sold the least. So a clubs operating costs were essentially covered by the broadcasting rights and merchandising fees. The way clubs made their own profits were through game attendance income, they got to keep all of that money. The really big money came from selling corporate boxes and hospitality and that is why we saw clubs putting pressure on cities and communities to build them new stadia with additional corporate boxes - so the clubs could maximise their profits. When or if a community refused to pay up, the club owner moved their teams from the likes of Oakland to Los Angeles, Los Angeles to St Louis, Houston to Nashville and the likes.

Marquee
970
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6.5K
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over 11 years
Marquee
1.1K
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7.6K
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over 12 years

Jerzy Merino wrote:

  Who knows a good house mover?
One in a million
4K
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9.5K
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almost 17 years

And they're doing alright too, midtable, had a win on the weekend.

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