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Mar 6, 2014

Lauded as the AFL's saviour, but Demetriou missed the mark

Andrew Demetriou will retire at the end of this season, amid accolades and praise. But was he actually good for AFL?

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On announcing his retirement after 11 years, AFL boss Andrew Demetriou (pictured) was lauded by AFL Commission chairman Mike Fitzpatrick as “one of the most influential chief executive officers in the history of the AFL”. The reality is a little different.

Most journalists who cover sport, and AFL in particular, have little or no knowledge of business. This is understandable given business reporting is very different to sport reporting — however, the lack of acumen has allowed the AFL to dictate the media agenda as it has morphed from informal, not-for-profit association to corporate beast. The journey for the AFL started in 1986 under Jack Hamilton and Alan Schwab (no relation to the author), before Ross Oakley and Wayne Jackson continued the corporatisation of the code. But it was under Demetriou that AFL became a bona fide financial Goliath. The only problem was, the organisation appeared to forget who its shareholders were.

With the exception of  former Hawthorn president Jeff Kennett and highly respected Geelong CEO Brian Cook, few in AFL House devote much concern to club members. As the AFL has expanded as a business, the beneficiaries have largely been those behind the scenes. The apparent crowning glory of Demtriou’s regime is the $1.2 billion broadcast rights agreement, negotiated with Seven in 2011. But he did little more than sign the contract. The broadcast rights were a valuable asset — that much was obvious to anyone. Demetriou was no different to a vendor at a house auction who happened to have a bidder willing to shell out for a valuable asset.

The rise in the value of broadcast rights has been a global phenomenon since the early 1990s, largely spurred by Rupert Murdoch’s cable television interests across the UK and US. Price inflation for broadcast rights to the NFL, Premier League and the Olympic Games were courtesy of a willingness for broadcasters to pay a premium for live sports.

What did Demetriou do with Seven’s $1.2 billion? While annual revenues have risen by 162% since 2003, player wages have increased by only 50%. Attendances have risen by barely 8% in the past decade (less than the rate of general population growth), despite Demetriou leading a costly expansion to traditionally hostile environments such as western Sydney and the Gold Coast.

The effect of the broadcast rights agreement also contributed to the growing imbalance between rich and poor clubs. The broadcast rights largely acted as a funnel to centralise an increasing amount of revenue in the hands of the AFL itself, rather than the clubs. This meant that weaker clubs in particular would become increasingly beholden to the AFL for regular dividend and special assistance payments — when in fact, those funds were generated by the clubs in the first place. Stronger, well-run clubs like Collingwood and West Coast, which were able to maintain revenues due to reserved seating and sponsorship revenue, have been able to grow in stature and dramatically increase off-field spending. Meanwhile struggling teams were forced to trudge, cap in hand, to Demetriou’s office and beg to be repaid money that they played a large role in generating.

Demetriou and the AFL Commission were also widely criticised for their handling of the Essendon drugs affair, while Demetriou also would spend years vehemently denying the existence of “tanking”, only to later suspend and fine several Melbourne Football Club leaders for that very act. Ironically, the motivation for clubs to intentionally lose matches was created by the AFL itself, which rewarded poorly performed teams with draft incentives. I think Demetriou’s follies in the Essendon and tanking affairs largely stemmed from arrogance and self-belief.

But while attendances plateaued, the cost to ordinary members to attend matches and watch live broadcasts has skyrocketed. At the same time the AFL executive did little to assist tenants of Etihad Stadium (a ground the AFL will take over in 2025). Since 2001, tenants of Etihad Stadium (which include powerhouses Essendon and Carlton as well North Melbourne, St Kilda and the Western Bulldogs) have been required to pay to host home games — and none of those clubs has won a premiership in that time. Meanwhile. Geelong, under the superb leadership of Brian Cook and Frank Costa, bucked league demands to leave their Geelong home ground, in the process collecting three premierships and raking in huge profits.

There was one other thing that took off during Demetriou’s tenure: his own salary. In 2004, Demetriou received $560,000. During 2013, Demetriou was paid a jaw-dropping $3.8 million, making him one of the highest-paid executives in the country. In relative terms, Demetriou took home an amount almost equal to 25% of the AFL’s total profit for 2013. In 2012, Demetrious received almost $2 million, despite spending a substantial part of the football season on an overseas family holiday.

The Andrew Demetriou legacy at the AFL will be remembered for the complete corporatisation of Australia’s national sport — but sadly, not for the better.

*Adam Schwab is the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed and CEO of the AussieCommerce Group

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