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May 29, 2013

Could football survive without the gambling industry?

While sports betting is increasingly controversial, outlawing its advertising and sponsorship could have dire consequences for some football clubs. Is the NRL now as addicted to gambling as the punters?

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Footy is increasingly addicted to gambling. Can it afford to kick the habit?

In the case of rugby league, perhaps not. Sports betting agencies now have their logos plastered over a number of NRL clubs — something New South Wales Premier Barry O’Farrell along with anti-gambling advocates would ban if they got their way. The loss of a major sponsor can cripple a franchise.

“As an NRL club, your main revenue streams are sponsorship and advertisers, and people coming to watch your games, either through ticketing or membership,” Nic Ferraro, the managing director of trade publication Sports Business Insider, said. He added:

“With ticketing and memberships, they’re not secure. You can’t rely on them, because they’ll go up and down with your team’s results. If your team is performing well, you might get crowds of 25,000. If you perform badly, that can dip to 10,000. So any stability you have as a club — to pay for recruitment, backroom staff, all of that — depends on sponsorship and other stable revenue streams. Any club which loses a sponsor for an extended period is always going to be in danger.”

Some clubs are already in a precarious position. The Cronulla Sharks, for example, sponsored by Luxbet, is up to its eyeballs in debt. The South Sydney Rabbitohs made a loss last year.

It’s hard to get exact figures on how much sponsorship by sports betting companies is worth to the NRL clubs, many of which are privately owned. But Dr Ross Booth, a senior sports economics lecturer at Monash University, points to a complete data-set released by the AFL in 2008 that can shed some light on the importance of sponsorship to professional Australian football.

“Total revenue for all AFL clubs in 2008 was $563 million,” he said. “Gaming revenue was $55.6 million, which is just under 10%. I suspect since then it’s risen as a proportion of revenue.”

The reliance of clubs on gaming revenues varied widely. In 2008, Collingwood earned $16.8 million of the $55.6 million gaming pie, while most clubs earned far less.

But it’s unlikely to be the elite football clubs who most rely on sponsorship from gaming companies or poker machines, Booth says. The elite clubs have far more potential sources of revenue open to them than the state leagues. He said: “The state leagues and lower, they don’t get the television broadcast revenue, they don’t have the membership base, they don’t have the big sponsors, or the attendance. If they can get any help from gaming, for many, that’d be their biggest source of revenue.”

Plenty of local, semi-professional or amateur clubs own pokies and a related “leagues club” venue, with the profits from poker machines going to supporting the clubs. When the government was considering mandating that poker machines allow gamblers to set themselves a personal loss limit, the impact of this on local sport was one of the arguments used by opponents to have the measure defeated.

In the NRL, plenty of elite clubs have relied on pokies revenue for some time, according to Adam Karg, a lecturer in sports management at Deakin University — though there are moves to limit this.

There were similar fears when the government banned cigarette advertising from the sporting field. Instead, total sponsorship of Australian sport continued to grow, increasing 11.4% to $390 million in the year after the ban came into effect in 1997, 7.7% to $420 million in 1998, and 14.3% to $480 million in 1999 (according to figures released in 2000 by BRW). This led British anti-smoking lobby group Ash to use Australia’s experience as an example of how tobacco isn’t essential to fund sport. As the group wrote in 2000:

“There is no evidence that the bans on tobacco company advertising and sponsorship through sport has harmed Australian sportspeople or sporting organisations from either the perspective of raising revenue or sporting achievement.”

It’s a similarity Karg says bodes well for professional Australian sport, pending any moves to limit its reliance on gambling revenues.

“The revenue would be missed and impact bottom lines, but sport survived after tobacco companies and their revenue was banned and would again here. While arguably sport is more reliant on commercial revenue now than in the 1980s and 1990s, for current organisations and teams, revenue from broadcasting and membership are the million-dollar contributors — rather than one sponsor category,” he said.

“In short, I think the withdrawal of gambling revenue within sponsorship, if it occurs, would not impact the sustainability of these teams in the short or long term.”

Ferraro isn’t so sure. “At a revenue level, more than half of the clubs in the NRL have gambling sponsors. Some gambling companies support two or three teams. If you close off a revenue stream, there needs to be an alternative. Given how much is at stake with gambling, you could argue there’s no other industry that’d be willing to pay as much to fill that hole,” he said.

*This article was originally published at SmartCompany

Myriam Robin — Media Reporter

Myriam Robin

Media Reporter

Myriam has been Crikey’s media reporter since 2014. Before that, she was a business journalist with sister site SmartCompany, covering economics and corporate strategy.

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