Robert Dillon: Sporting Declaration

Posted on 12/17/2018

APPARENTLY $10 million doesn’t go as far as it used to.

JUGGERNAUT: What started out as a modest leagues club in New Lambton is now a thriving entertainment empire known as the Wests Group. Picture: Darren Pateman

That’s the only conclusion Sporting Declaration can draw after reading this week that the Parramatta Eelsposted a loss of $10,156,596 for their football operationslast year.

Looking on the bright side, it’s an improvement on the$12,016,648 deficitthey incurred a year earlier. And at least last season Parra made the finals for the first time since 2009.

But that’s still more than 10 mill after the Eels collected their NRL grant, which supposedly covers the salary cap, and on top of any income they received from gate-takings, sponsorships and merchandise sales.

Where did it all disappear?

It’s a mind-boggling amount of money, and I’d be surprised if the Wests Group board of directors–the proud new owners of the Newcastle Knights–had not noted it with interest, and perhaps a modicum of concern.

Given the past two seasons have cost the Eelsmore than $22 million, one can only hazard a guess at how much they have burned, with very little to show for it,since their last premiership, in 1986.

Logically, it must be hundreds of millions of dollars.

And while the Eels rate as arguably the NRL’s most profligate spenders, they are by no means flying solo when it comes to blowing the budget.

According to a Fairfax Media report a little more than a year ago: “Only the Brisbane Broncos posted a profit in 2016andthe other 15 clubs, including premiers Cronulla, lost more than$45millioncombined as they used dwindling leagues club grantsand various benefactors to stay afloat.”

Some clubs are apparently quite content to sustain such haemorrhaging.

Take Penrith Panthers, for instance, who are funded by a mini-empire comprisingsix licensed clubs.

Last season the Panthers spent$16 million on their football program, and anticipated a loss of$5 million, after servicingthe region’s 8500 junior players, as well as funding an academy and improvements to their home ground.

“We don’t call it a loss, we call it an investment,” Panthers group CEO Brian Fletcher told the Daily Telegraphlast year. “It’s not a loss. We can take the money outandbreak square –or even make money -but then you don’t have 8500 juniors playing.

“Our core business is rugby league.Andthe board …has no hesitation in investing an extra $5 million a year, on top of our grant, to run rugby league in Penrith.”

For certain clubs, such as Brisbane, Parramatta, Penrith, Sydney Roosters and Canterbury, money appears no object. Whatever losses they sustain each year are absorbed by their respective licensed premises.

But the trouble is that their rivals feel obliged to compete, whether they can afford it or not, creating a culture whereby living beyond their means is the norm.

This apparently extends even to the governing body, the NRL, which last year was reportedly trying to source a $20 million loan to address a short-term cash-flow crisis.

That’s the same organisation who five years earlier signed a much-celebrated $1 billion TV deal that was supposed to enshrinethe code’s financial future.

Now the NRL has secured a $2 billion broadcasting deal and guaranteed clubs an annual grant that will cover 130 per of their salary cap, which is risingto$9.4 million in 2018.

The theory is that, thanks to the increasedgrant and proposed restrictions to control how much can be spent on support staff and facilities, eventually all NRL clubs will run as break-even operations, at least.

It sounds good in theory.

The reality is that, since the foundation season in 1908, rugby league clubs at all levels of the game have a proud tradition of committing fiscal suicide.

And what Parramatta have highlighted this week is thetwo-pronged challenge the Wests Group face after taking over the Knights.

As well as turning the three-time wooden spooners into a competitive on-field force, Wests will also be aiming to transform the Knights into an entity that, for the first time since the club was created in 1988, is a thriving business in its own right.

Unlike Parramatta, Penrith and company, I sincerely doubt Wests have any intention of producing a blank cheque each year and tipping millions into a black hole, even though they could conceivably afford to do so.

According to the group’s most recent financial report, for the year ending January 2017, Wests enjoyed a record turnover of more than $143 million,posted an annual profit of $23,234,000 and had net assets of almost $231 million. Owning the Knights, in other words, is unlikely to put much of a dent in their coffers.

But my guess is Wests have no intention of becoming a slush fund for the city’s NRL franchise.

Their plan will be to turn the Knights around –just as they have done with the various licensed clubs they have purchased over the past two decades –and make them profitable.

To do so will require wise, strategic investment, as opposed to the blasé wastefulness of which so many rival NRL outfits are guilty.

Winning a premiership, which the Knights have managed twice previously, isa mighty feat.

Creating a club that for the first timecan support itself financially, in perpetuity, might be an even greater achievement.