Long read: Unpacking the ‘metrics’ in the A-League expansion decision

The key drivers of the A-League expansion decision included David Gallop's metrics, but also the interests of the existing big A-League clubs

The recent decision by the new FFA Board to admit first, the Western Melbourne Group (WMG) from 2019-20 and second, Macarthur South-West Sydney (MSWS) from 2020-21 into the A-League was welcomed much as rain would be welcomed in most of rural and outback Australia – with relief.

There is hardly a soul who did not think it was time for A-League expansion and, for many, it was almost a case of any expansion would be better than no expansion.

As Matthew Galea’s assessment of the six shortlisted bidders showed, each had their positives and negatives based on the published criteria. In case you’re not familiar with them, the criteria for evaluation of the bids are provided on pages 10 and 11 in FFA’s Expression of Interestdocument. In summary, they are:

• Vision and strategy

• Proposed location(s)

• Financial capacity, and

• Details about persons involved in the prospective bid

• And anything else that they feel like considering.

Regardless of which way the FFA Board’s decision went on 12 December, there would always be some football fans aggrieved by the decision, others who thought it was the right one, and another group who would think it was half-right.

So what were the factors that came in to play?

We have taken a look at some of the data crunched by Deloitte to rate the geographic regions on some of the key ‘metrics’.

Financial contribution

At one point in the long evening of deliberations on 12 December – following the final briefing from FFA CEO, David Gallop, the A-League chief, Greg O’Rourke, and Deloitte representatives to the FFA Board – a Deloitte representative is understood to have contacted some bid teams seeking more money for the license fee, and specifically more money upfront.

The two bid candidates that were eventually selected are understood to have agreed to provide $30 million between them: $18 million upfront from WMG and $12 million from MSWS – $2 million upfront and the rest paid over four years.

MSWS’s main backer, Lang Walker, didn’t become a billionaire by blinking too readily and he is thought to have said no to the last minute request for more money.

South Melbourne apparently promised $15.5 million and Southern Expansion’s Chinese backers, $16 million.

Assuming these reports are accurate, or at least in the right vicinity, then money wasn’t the only factor for the FFA Board as Southern Expansion’s bid would have been successful although clearly, they tried to get as much as possible from each of the bidders.

Fishing where the fish are

Gallop famously said in relation to expansion that he thought it necessary to ‘fish where the fish are’. By this, FFA considers that the key numbers are current and projected population, club-based participants and annual television viewers.

These factors are seen as the primary drivers of sustainable success in an expansion process. They are combined with the factors seen as the secondary drivers: that is, the proportion of young people and families and population density, to provide an index of the potential of the expansion bids, where 1 is the median revenue generated by current clubs per season.

For this expansion process, the numbers showed that the area covered by Sutherland/St George/Wollongong (in other words, Southern Expansion) received the highest score of 1.32, while the front runner in Melbourne was the combined south/south-east corridor (to which both Team 11 and South Melbourne laid some claim) with an index of 1.12.

South-West Sydney (MSWS) at 1.13 was marginally better than Melbourne south/south-east, but there was never going to be two teams from the same city admitted in the one expansion sweep.

While not included in the shortlist, Brisbane was the same as Melbourne south/south east at 1.12. Emphasising the further potential of Sydney as an A-League 'market', Sutherland as a stand-alone area in Sydney and the Northern Beaches area of Sydney were rated higher than western Melbourne (at 1.05), while the Canberra index was amongst the lowest of a number of regions tested (0.78). If western Melbourne and Geelong are combined, the index for the combined region drops to 0.95.

The Deloitte analysis also compared the potential expansion areas with the current A-League clubs across the same criteria.

It will be of surprise to no-one that Melbourne Victory are streets ahead of the next club – but that next club may be of surprise: Melbourne City. (Western Sydney Wanderers are second on Deloitte’s analysis once they return to their own stadium but they currently sit slightly above south-west Sydney).

Sydney FC is the next best existing club (1.30), but it wasn’t rated third overall: the area of Sutherland/St George/Wollongong (ie. Southern Expansion) was.

Potential fans

Fans are measured on the basis of television viewership, membership and attendance.

Once again, the Sutherland/St George/Wollongong areas were ranked number one on all factors, with Melbourne south/south-east number two on viewership and attendance, and fourth on membership.

South-west Sydney was rated third on every measure, while Canberra was rated fourth on viewership and attendance and second on membership potential. No data was made available in respect of WMG.

TV viewers

Of all the regions, Melbourne’s south/south-east had the most significant TV viewership of the A-League in 2016, with 15.4% of total unique viewership of the A-League. (Sydney siders might make a snide remark about Melbourne weather at this point – not that Sydney people can brag about weather!)

Western Melbourne was second with 12.9%, South-West Sydney with 11.2% and Sutherland/St George/Wollongong with 10.8%. Not surprisingly, Canberra had 2.7%.

Brisbane would have fitted in as a comfortable third position with 12.7%.

Those figures shift slightly when looking at all football TV viewership shown on FOX Sports and FFA’s free-to-air partners, but by far the biggest TV consumers remain in Melbourne’s south/south-east, while just 0.5% separates south-west Sydney and Sutherland/St George/Wollongong when all football is counted.

Impact on existing clubs

Perhaps the most telling set of numbers in the Deloitte data are those that look at the impact of the six shortlisted bids on the existing A-League clubs.

The Deloitte data looked at the number of existing A-League clubs members in each of the expansion bid geographic regions.

When it came to the final decision, this may well have been the overriding set of numbers, and perhaps explains the delegation of A-League chairmen who visited FFA in the days prior to the Board meeting. Those visitors were Anthony di Pietro (Melbourne Victory), Simon Pearce (Melbourne City), Scott Barlow (Sydney FC), Chris Fong (Brisbane Roar) and Paul Lederer by telephone (Western Sydney Wanderers).

There is little doubt the group of five would be concerned about maintaining the value of their investment in the A-League so far, as well as the value of their current license.

It is widely known, because of the tit-for-tat battle played out in the media and elsewhere, that Sydney FC Chairman Scott Barlow was vehemently opposed to Southern Expansion’s bid on the grounds that many of Sydney FC’s members come from the Sutherland/St George area. The Deloitte data shows that more than one-in-five (21%) Sydney members are from the region covered by the Southern Expansion bid, while only 3% of Western Sydney Wanderers’ members are from the region.

We also know that Western Sydney Wanderers’ Chairman, Paul Lederer, wanted to ensure that his club had a full season back in their home base at Parramatta before having to deal with the potential competition from a new club in the general vicinity – again with cause, with 17% of members coming from the south-west, and 5% of Sydney members also from the south-west.

When it comes to Melbourne, and despite the strong claims of the south/south-east region across most of the data, the potential for ‘cannibalisation’ of existing club membership is even greater, with almost one-third (32%) of Melbourne Victory’s members from the region, and 28% of Melbourne City’s.

In other words, it seems that the FFA Board took the pragmatic decision to protect current A-League assets and licenses in the hope that the second best region in each of Sydney and Melbourne would be strong enough to be a successful expansion option.

What is less clear, based on the data, is just why Canberra was included in this shortlist in the first place, other than someone at FFA headquarters thought a shortlist of six would be a good number to have, or because of the identity of the Canberra bid’s mystery backer.

Financial capacity

On that point, it is worth looking at this area of non-transparency from two of the bid teams, that is, the identity of the backers of Canberra and WMG.

The principal financial backers of MSWS, Southern Expansion, South Melbourne and Team 11 were clearly identified.

However, as the Deloitte data suggests, Canberra was never going to be successful in this round, and they have so far refused to say who their principal financial backer is (the ACT Government committed $1.2 million pa if successful). The Canberra bid leader has said that their backer was “a major international sporting consortium that owns 'household-name clubs' throughout Europe and the US” which is known to FFA.

One possibility on this description is that it is the US-based Anschutz Entertainment Group, which owns the Sydney Kings and has interests in a number of stadiums and facilities in Australia (and around the world).

This has not been tested with the bid team.

In terms of the successful WMG consortium, John Stensholt reported in The Australian that their backers are “several Melbourne billionaire individuals and families”.

It is clearly someone with a deep interest in property development, because the quid pro quo in the WMG concept is a gift of land from the Wyndham Council to a developer or developers that can be used for commercial and residential development in return for private construction of the centrepiece of the WMG bid, Wyndham Stadium.

WMG consortium representatives have also told The Age’s Michael Lynch that “it is good Australian money”.

According to the most recent Australian ‘rich list’ there are 14 Melbourne billionaires, one of whom is also Chinese and lives most of the time in Shanghai, with another couple living in Singapore. We assume these do not quite meet the description of ‘good Australian money’ and have not included them in our examination of the billionaires' list.

The possibilities, based on WMG descriptions, include the Gandel family, Maurice Alter and/or Sam Tarascio, all of whom have substantial property development interests. All of them are also clients of ProBuild which, through former Socceroo Andrew Zinni, has an interest in the WMG consortium. [See update below].

Who made the decision?

The irony of the Board decision is that three of the four people who made the formal decision were on the previous Board which not only was dragged kicking-and-screaming into the idea of expansion in the first place, but decided in October that the new Board should make the decision. Of the two elected Board members who voted, the Chairman Chris Nikou was nominated and seconded by the two Melbourne A-League teams and received the support of all A-League clubs, while Heather Reid received the highest level of support from stakeholders.

The two Board members who recused themselves from voting on the basis of their involvement with the MSWS bid, Joseph Carrozzi and Remo Nogarotto, were nominated by Melbourne Victory and Western Sydney Wanderers (Carrozzi) and Northern NSW and Melbourne City (Nogarotto).

Where next?

On the basis of the Deloitte data, and assuming Sydney FC, Melbourne Victory and Melbourne City allow it to happen, the areas of Sutherland/St George/Wollongong and south/south-east Melbourne remain strong contenders for future expansion. The list of regions assessed by Deloitte, and that missed out, and the index applied to them are presented in the chart.

The next stage of expansion will be a difficult one and could well be a battle of philosophy.

If the decision is to ‘fish where the fish are’ (and assuming the data holds steady) then they should head to Sutherland/St George and Brisbane for the next two teams. If the priority is to have a derby in every major city, then Brisbane, Perth and Adelaide are next. If the imperative is to extend the national footprint of the professional game, it should be Canberra and Wollongong.

Lederer, who is now the Chairman of the Australian Professional Football Clubs’ Association (APFCA) – which is likely to be driving the next expansion phase via the independent A-League entity – said last week that he would prefer to see the expansion markets selected first and work with bid teams to get the best possible bid, rather than calling for an open tender process from around the country.

It’s a tough decision. And it’s little wonder that, regardless of the decision, there will always be a proportion of informed, knowledgeable fans who are happy with it – and some who are not.

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Update: A WMG spokesperson contacted us after publication of this article to state that “none of the names you mentioned are in ownership Group. And, none of our money is Chinese nor even Australian/Chinese. It is all local families who are 3rd/4th/5th generation Australian.” The spokesperson declined to advise who those 'local families' are but, if the various WMG comments about their backers are accurate – that is, Melbourne billionaire individuals and families, good Australian money, no Chinese money and multiple generation Australians – the possibilities narrow further.