Dear Members,
Please refer to the below summary and regulations in regard to tonight’s Information Session.
THE OVERVIEW
The full Board’s preference is that we remain as a Victorian based club.
However, as a Board we have differing views as to whether this is possible beyond 2009. Hence the need to consider the option of relocation to a new market whilst retaining our heritage and legacy.
A unanimous Board position that we remain a Victorian based club and play up to 8 home games on the Gold Coast was rejected by the AFL.
Since then we have requested of the AFL that they provide a 12 month grace period on their offer to relocate whilst our club reconsiders its options in Melbourne.
Current Situation
Our Club has a remarkable record.
After joining the VFL/AFL in 1925, we spent the first 50 years on, or near, the bottom of the ladder financially, and in a similar vein on-field.
However in the past 30 years, we rate as number 1 in on-field performance in terms of finals appearances – and, of course, 4 premierships.
For most of that period, we have remained down the bottom financially.
If you look at the record for the past 10 years, you will see that we rank number 1 for Victorian based Clubs.
Finance
This on-field success is an enigma. While the spirit of our players must be applauded, it has not converted to our membership, match attendances or finances.
We hit rock bottom in 2002 with a $2.5m loss.
It has been a slow climb uphill since then. We will report a $100,000 profit for 2007, a $600,000 cash turnaround in operating performance from 2006. This was aided by keeping expenditures, including football, in tight control and additional payments from the AFL, including games on the Gold Coast.
The Business of Football
The “Sport” of Football is becoming the “Business” of Football.
Back in 2002, half the AFL Clubs were losing money. This year they will all report a profit, for the first time.
Other Clubs are now beginning to build assets – pubs, gaming venues, car parks – to support their football operations.
We have nearly $5m debt.
Our membership is small (ranked 15th) and our home base in North Melbourne is confined – and the population has changed with few young families being able to afford to live in the area.
Small crowds at games are not in themselves a problem – eg: Geelong at Skilled Stadium. But our Telstra Dome deal is:
· 200,000 match attendances over 6 games in 2007 only netted us $400,000 for the season. Some games we pay to play. Other Clubs have the potential to make that in one game.
Our attendances, averaging around 32,000 is OK, but the break-even has increased from 20,000 at TD to the high twenties.
This is not MSL’s fault. It is a great stadium. We just need more fans to come to our home games.
MSL, under Kerry Stokes, helped the club with a $1.5m loan in 2002. Under new owners, they still help out through finals tickets/boxes, at concessional prices, but that only improves the overall economics marginally.
The underlying problem is the primary contract with the AFL.
They know the problem, but are yet to face up to it and tackle it directly. Until they do so, our financial opportunities in Melbourne are limited.
GEMBA EVALUATION
Background
In June 2007, the North Melbourne Board commenced a review process of the options for growth for our Club. The focus of this review was to establish whether our Club could remain as a viable, sustainable, entity based in Melbourne.
Sports, Media and Entertainment Consultancy, Gemba was engaged to bring an independent, fact-based perspective to the issues.
Gemba have a deep understanding of the dynamics that drive successful sports organisations, having undertaken strategic planning for several AFL clubs and many other Australian sports organisations.
Gemba’s brief was to:
Analyse NMFC’s current environment:
- Financials
- Member data
- Organisational structure and resources
- Sponsorship
- Analyse NMFC’s relative performance:
- Benchmark performance relative to the competition
- Explore NMFC’s growth opportunities that would enable our club to achieve its long term growth objectives in Victoria.
- Assess various scenarios against NMFC objectives:
- Objectives developed through consultation with the NMFC Board and CEO to define our club’s picture of success.
Gemba Report Summary
The Gemba Report quantified a potential improvement of financial performance in 2008 and 2009 based on achieving the full potential model, AFL Annual Special Distribution and revenue generated from home games in South East Queensland.
However, forecasting a range between a significant loss to a marginal profit (specific to base case and full potential models) from 2010.
From 2010, to increase football department expenditure by $1m and achieve a profit of $0.5m factoring in the loss of Gold Coast games and reduction in ASD to the average of Victorian Clubs, the NMFC would need to generate an additional $6 – 8m in revenue.
The Gemba report concluded that North Melbourne had significant strengths in certain areas, namely:
- On-field performance
- Membership conversion (members as a percentage of supporter base)
- Strong football culture
Unfortunately, the reality of the external environment and the structural constraints with which our Club is faced make it extremely difficult to step change financial performance.
Whilst, there are opportunities to achieve a better financial outcome (net profit of $0.3M by 2010) with the current management resources and external environment, it is the view of Gemba that this is a stretched goal and will be difficult to achieve.
PEER GROUP REVIEW
Following presentation and review of the Gemba report by the North Melbourne
Board, a review was held with the ‘Peer Group’
The Peer Group were in broad agreement with the key findings of the Gemba Report.
The Peer Group stressed the importance of understanding the alternatives to being a Melbourne based club before committing to any arrangement with the AFL.
Any alternative must allow North Melbourne to become independently viable and not just continue to be dependent on the AFL in a different location.
INFORMATION SESSION
More details will be presented at the Members Forum, including the Stay in Melbourne and AFL Proposals as well as question time.
We trust that this background will be beneficial in helping you understand the present situation.
Finally we have received queries in relation to recording tomorrow night’s event. Please note the club will be recording the session, so I would like to make it clear that members are not permitted to use any form of recording devices during tomorrow’s session. Anyone who is found to be doing this will be asked to leave by security.
Best regards,
Rick Aylett
CEO
