The failure of Nathan Tinkler’s privatisation of the Newcastle Knights, and uncertainty over the fate of his soccer team the Newcastle Jets, adds weight to calls for an alternative to the “narcissistic” model of private ownership, which can leave beloved football clubs hostage to the whim and fortune of wealthy individuals.
The nation’s biggest football code, the AFL, learned the hard way in the 1980s, after disastrous forays by the likes of flamboyant “medical entrepreneur” Geoffrey Edelsten (one-time owner of the Sydney Swans) and developer Christopher Skase (Brisbane Bears).
At board level, the AFL makes good use of high-profile businesspeople who want to support their club — tapping their door-opening and commercial skills in exchange for top ticket holder status, and the chance to rub shoulders with players. Those roles are generally unpaid, however, and equity stakes are not on offer. It’s all about the love of the game.
Soccer’s A-League has gone exactly the other way under Westfield founder and billionaire Frank Lowy, who has overseen a resurgence of the round-ball game since he became Football Federation Australia president but has also had more than his fair share of crises to deal with.
There was Clive Palmer’s all-time dummy spit in 2012, that saw the failure of his Gold Coast United — a stoush which Tinkler joined in, threatening to hand back his Jets licence until Lowy flew up to talk face-to-face with Tinkler at his private Brisbane hangar.
A fortnight ago Lowy confirmed that upstart premiers Western Sydney Wanderers, the last non-privately owned club in the 10-team competition, would be sold for about $10 million to a four-man consortium chaired by Primo Smallgoods businessman Paul Lederer.
That deal will put some value on Tinkler’s Newcastle Jets, which has one of the strongest fan bases in the competition, gets blanket coverage in the local media, and is understood to have been on the market for the best part of a year with buyers apparently sought in Asia. Tinkler, a league fan and former player, was never a natural owner for a soccer team and to his credit only stepped in to buy the Jets in 2011 as a favour to Newcastle when previous owner Con Constantine, who’d made his fortune at Sydney’s Parklea Markets, was himself under pressure — although at the time a devastated Constantine accused Lowy of bitterly of pouncing on a competitor. Before Constantine, the Jets were briefly in the hands of Sydney businessman David Hall, who left the club in a parlous state.
Newcastle media identity Neil Jameson, a former member of the Jets community advisory board, says there is an alternative to the “narcissistic” single-owner model typified in Europe by Russian oligarch Roman Abramovich’s ownership of Chelsea. Germany’s Bundesliga competition has a “50% plus one” rule that ensures ultimate control of the club remains in members’ hands and private owners can only ever have a minority stake.
“By many measures the model is considered the most sustainable in world football.”
“By many measures the model is considered the most sustainable in world football,” Jameson told Crikey. “I’m sure the FFA are aware of it and would be considering it as one of the long-term options for the A-League.”
The NRL is somewhere in the middle on private ownership, which luminaries of the game like Mal Meninga have seen as the way of the future. Aside from the Knights, there are half-a-dozen privately owned clubs in the 14-team NRL: the publicly-listed Brisbane Broncos, the fully private Melbourne Storm, Gold Coast Titans and New Zealand Warriors, and the part-private South Sydney Rabbitohs and Manly Warringah Sea Eagles.
The Broncos, 69% owned by News Corporation, are believed to be the most profitable club in the competition. The business made $2 million in after-tax profit in 2013, a bit down on the prior year, on massive (and rising) revenues of $35 million.
By contrast the Storm, owned by News until last May when it was sold to a bunch of low-profile private investors, made a profit of just $419,000 last year despite revenues of $22 million. Manly — half-owned by chairman Scott Penn and 12% owned by the members of the club — has not filed its 2013 accounts yet but in 2012 it made a loss of $970,000 on comparatively paltry revenues of $14.5 million. Souths, on the other hand, finally clambered to a $1.4 million profit last year on revenues of $24 million, seven years after a 75% stake in the club was sold to now estranged duo Peter Holmes a Court and Russell Crowe (James Packer is believed to be weighing up a stake).
The debt-laden Titans lurched from crisis to crisis under founder and former MD Michael Pearce — almost losing their licence in 2012 — until a white knight businessman from Wagga Wagga, Daryl Kelly, bailed out the club, paying $3.25 million for a 32% stake. Australian Securities and Investments Commission records show the Titans got another million-dollar equity injection in late January with Kelly’s private company Bruttund Investments stumping up half that to lift his stake to 34%.
It has been a similar story for the Warriors, owned 50/50 by expat kiwi businessman Eric Watson — founder of the failed debenture finance company Hanover — and billionaire countryman Owen Glenn. Warriors chief Wayne Scurrah told Crikey the club made a small surplus last year — not in the millions — on revenues exceeding $20 million and recently invested a million dollars into a new gym. He agrees there are no safeguards for club fans should the owners ever falter for any reason, but says it’s “no different to any business”.
The Knights financial position is similarly unknown as Tinkler’s Hunter Sports Group is caught in the whirlpool of his diminishing business empire. The true financial position will hopefully be revealed to the NRL and Knights’ members tomorrow when they sit down with HSG in a bid to resolve the future ownership of the club. With a number of local investors willing to back the Knights, the most likely outcome might be a transfer of the club back out of Tinkler’s hands. It is a far cry from the rampant hopes of three years ago.