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Rydalmere Lions FC: How diversifying income can lead to a financially sustainable club

At the grassroots level, many sporting clubs rely heavily on sponsorship dollars and player fees to drive their financial strategy. While this is a stock-standard approach, diversifying income streams can create enormous benefits for clubs and protect them from becoming overly dependent on one or two areas of business.

Based in Sydney’s inner-west, Rydalmere Lions FC is setting a new standard for economic diversification, branching out from traditional means and setting a positive example for the rest of the football industry.

After officially completing the takeover of a community bowling club, Executive Committee Member Elias El Khoury spoke exclusively to Soccerscene to discuss the club’s ambitious plans and the importance of creating a well-rounded commercial strategy.

“The COVID-19 pandemic has been disastrous, but it has also taught us a lot. Football needs to stand up on its own. Clubs can’t just rely on a sponsorship model,” El Khoury said.

“Diversifying income is critical. As a result of COVID-19 we’ve seen a number of clubs struggling and go public with requests for help, with some potentially going to hand in their NPL licenses. This is a direct result of sponsors either withdrawing their support, or being unable to support these clubs any longer,” El Khoury said.

With the takeover of the bowling club now complete after a four-year process, Rydalmere FC is in a position to use its new space to build its community presence and form a sustainable business model.

Rydalmere Bowling Club prior to being taken over.

“We don’t want to be seen as just a football club, but truly a community club. There have been some hurdles along the way, but we asked the council for a temporary license to operate the bowling club to prove ourselves. We’ve renovated the premises to make it livelier and give it a connection to younger families as well as traditional users,” El Khoury said.

“There are spaces to hire for social and corporate functions, other outdoor functions, barefoot lawn bowls and more. There are no membership fees at the moment, the local community is encouraged to use and benefit from the facilities.”

The concept of becoming a community-centric club is a deliberate strategy that the Rydalmere FC’s board is aiming to achieve. The concept creates a very beneficial two-way street where the club is supported by the people while also serving them with services that extend far beyond football.

El Khoury, a commercial lawyer who specialises in commercialisation strategy and business growth, believes many of Australia’s most successful clubs have shared this trait.

“All of the most successful current NPL and former NSL clubs have it in common – a genuine community connection embedded in passion. This is what drives football forward and keeps the likes of Marconi, Sydney United and so on going. Having that ingrained link to the club means patrons will come and support the club regardless of results on the pitch,” he said.

“The fanbase isn’t made up of the casual patron seeking entertainment but people with real ties to the club. Not that there’s anything wrong with the more casual patron, it is just a different type of model that requires a lot more from the club in terms of persuasion and selling that message of entertainment.”

It is only fitting that the biggest winners of Rydalmere Lions FC’s financially sustainable model will ultimately be the people.

El Khoury, along with the club’s other administrators have detailed their long-term plans to reinvest into the football ecosystem by tearing down barriers of entry that impact some families.

“Our vision is about creating pathways. In the end we want to create an environment where kids get to play for free, that way we are not limiting talent coming through the system. It would encourage more kids to attend and would remove finance as a restriction for some kids. Admittedly it’s a long-term goal, but with initiatives like the bowling club we can work towards creating the environment where player fees are zero, or as close to zero as possible,” El Khoury said.

Lions juniors lending a hand during renovations.

The idea of an ecosystem which provides equal opportunity for all kids is an exciting prospect, but Rydalmere Lions FC also believes by standing on its own two-feet, it will be able to allocate more resources towards player development turning football into a more realistic career path for the region’s next generation.

“Whether you’re for or against the transfer system, there is a need for pathways and funding to go back into grassroots football. It is so important for keeping clubs alive and dreams alive so unless money can flow freely, kids will hit a certain age group and disappear because football isn’t a viable career path,” El Khoury added.

“We know that as a club, in order to have a positive impact, we need to set our own standards first before leaning on FFA, Football NSW or other administrative groups. Four years ago, we built up a governance structure to create a sustainable business model so that way the club can rely less on funding from third parties to improve facilities and invest in technical resources to assist players in developing a career in the game.”

Outside of Rydalmere Lions FC’s commercial strategy and community ties, the club’s short-term goals involve improving its infrastructure and seating capacity.

These are undoubtably exciting times for the club from Sydney’s inner-west and El Khoury is optimistic that on the back of a sustainable strategy, the future looks bright.

“Everyone is surprise with what we’ve achieved, but we want more. We have a strong supporter base and we want to build a grandstand for the spectators. This will expose us to a wider range of football competitions and potentially the National Second Division when it arrives,” he said.

Christie Park set for major transformation

Christie Park is set to be transformed into one of the best football complexes in North-West Sydney, following the City of Ryde’s authorisation of the development of a new amenities building and extra training facilities at the Macquarie Park site.

The new facilities, funded by the City of Ryde and the NSW Government’s Greater Sydney Sports Facility Fund, will include office space and a function area for groups, as well as female-friendly locker rooms and improved accessibility for people with disabilities.

It will maintain the two FIFA-accredited synthetic fields that were recently built, ensuring Christie Park’s ability to hold state-level events in the future.

Cr Jerome Laxale, Mayor of the City of Ryde, sees the new investment as part of Council’s plan to turn Christie Park into a regional football centre that serves all levels of the game.

“The popularity of football is booming in the City of Ryde at all levels of participation and the improvements that we are undertaking at Christie Park will not only ensure that the venue will be able to meet the growing needs of the local community, but also the North-West Sydney region,” he said.

“Most importantly these works focus on providing elite facilities for local female clubs. With the Women’s FIFA World Cup being played in Australia in 2023, it’s crucial that councils invest in elite facilities for females who have historically struggled for access to such facilities.

“Building these facilities will offer a pathway programme from junior teams through to elite senior representative teams for women and girls in the Ryde local government area and beyond.

“This is a win for the community and a win for football.”

According to Football NSW Chief Executive Officer Stuart Hodge, Christie Park, as the home of North West Sydney Football, will gain tremendously from this improvement.

“City of Ryde and all the football users of Christie Park have partnered together to achieve so much in the last few years. This Christie Park masterplan compliments the NSW Football Infrastructure Strategy, and the importance of developing Homes of Football,” Hodge said.

Football Australia Chief Executive Officer James Johnson expressed his support for the development and praised the City of Ryde for committing to the development of this football facility.

“As the number one team based and most multi-cultural, diverse and inclusive participation sport in Australia which is confronting a chronic facilities shortage throughout the nation as a direct consequence of football’s continued and strong participation,” he said.

Creating upside: Four lessons for Australian football from US investors in Europe

It is often said that the United States has the biggest and best sporting market in the world.

According to the latest number from Forbes, the average value of a franchise in the National Football League (NFL) is $3.48 billion USD, a 14% increase on 2020.

In the NBA, the average franchise value is $2.202 billion USD, having steadily risen year-on-year since 2015 which was the first year that the average value crept over the $1 billion USD mark.

Even in the much-maligned MLS, the average franchise value is a cool $550 million USD up from $319 million USD in 2019 – a remarkable 72% increase.

So, with such a booming sports economy on their own doorstep, why are American investors turning to European football?

That was the question The Athletic Football Podcast hosts, Mark Chapman and Matt Slater, sought to answer in the latest episode of their podcast.

In two revealing conversations with US sports investors Michael Kalt and Brett Johnson, there were some potentially interesting lessons for Australian football to learn.

Kalt, who rose to sporting fame as part of the investment group that helped transform the fortunes of the Tampa Bay Rays in the MLB, now leads consortiums investing in European football clubs with current investments in AS Nancy in France and Oostende in Belgium.

Johnson is co-owner of Ipswich Town and also the owner and director of Phoenix Rising Football Club, which plays in the second tier of US football.

So, what do they like about European football?

Why don’t they invest the same sizeable funds into MLS teams?

What can Australian football learn?

Below we highlight four key lessons.

Upside Counts

The majority of clubs that Kalt and his consortiums look at investing in are loss-making businesses.

They don’t make money.

So why, when you have significant investment capital and can invest in a booming domestic sports market, do you choose to take your money to Europe and put it in loss-making clubs?

For Kalt, there are three things a club has to have to prove its investment value.

  1. Asymmetric Upside via promotion or European qualification
  2. Room for commercial improvement
  3. Training profits (EG: Player Transfers)

On the first point, Kalt explains the uniqueness of promotion and relegation and continental competition created pockets of value in Europe that offered much lower costs of entry in Europe.

“Can you buy them when you’re up underlying your downsize risk, meaning you’re not paying full price for a club that is recently promoted or in the top league or coming off European competition and you’re paying full price,” he said.

“If you look at the clubs we bought, we’ve bought clubs like Nancy, historically a club that has been in Ligue 1 and bounced back and forth. It has the infrastructure of a Ligue 1 team. It should be a first division, mid-table club, so there’s headroom there and not a lot of downside risk.

“That’s the sort of situation we look for, where there is an asymmetric upside, either through promotion or European qualification in a smaller club where we think we can compete in the top four or five teams.

On what he termed, “Training Profits”, which most readers would refer to as player transfers, Kalt thinks it’s incredible that a club could generate a sizeable portion of its overall value simply by trading players.

“This is a massive mover in this,” he said.

“When you create that value in American sports, the only way to really monetize it on the player basis is to make like exchanges. To say, I have a player that has demonstrated his worth and the market will pay way more for him. He’s got three or four years left of club control … your only path to monetization is to keep that player and hope the club plays better and people show up and you generate more revenue in the stadium.

“Or you go and try and trade the player for younger, more controllable talent and hope that that talent does the same thing.

“In Europe, you create value, and the market comes to you and says ‘okay, today we’re willing to pay ‘x’ for that player, and, by the way, that ‘x’ might be some significant portion of what you played for the club!’

“That system, combined with analytics to create that value, which is how we started looking at this … is why it’s so intriguing.

“You reinvest some of that back into the club and you can reduce your downside.”

Europe’s football culture and ecosystem are, obviously, significantly more developed than that of Australia or the United States.

But what is interesting to take from the conversation is the factors that make for a worthwhile investment for Kalt and his ilk.

They want to invest in clubs that have room to grow.

None of this is to suggest that the incorporation of promotion and relegation in Australia is going to send a flood of overseas investors ready to throw their money at ‘B-League’ or National Premier Leagues clubs.

But it does inherently create potential upside in investing in the secondary tiers of Australian football, particularly for local investors.

We have already seen in the most recent round of A-League expansions that there was potentially a lot of money left on the table by unsuccessful bidders looking for a way into Australia’s top flight.

The implementation of promotion and relegation could unlock similar pockets of value in Australia.

The addition of a domestic transfer market will also go a long way to increasing the upside of clubs in the A-League and potentially below.

Franchises Limit Upside

When discussing MLS specifically, Kalt believes one of the major obstacles facing the growth of MLS was to be the American attitude of, generally, not being as interested in watching sports that are not “the best”.

But perhaps the most interesting thing Kalt had to say about the investment value of MLS franchises is that their value was largely being grown by the expansion of the competition and the prices being paid for new licenses, dragging the value of the existing licenses up by association.

“Valuations five, six, seven years ago you had a 50 or 60 million cost of entry, which – candidly – still seems a little high given the economics of these clubs,” he said.

“But when you see these club trading at 200, 300, 400-million-dollar valuations, it’s hard for me to get my head around and I know it’s hard for a lot of people in the business to get their head around.

“I think a lot of it, historically, was justified on, ‘well, you buy in now because the next expansion franchise is going to be worth ‘y’’.

“But you’re not going to have a league with 60 clubs, so you’re running out of the ability to do that.”

This sounds alarmingly similar to the A-League, where hopes for the growth of the sport are so consistently pinned on expansion.

They might equate to growth for the value of A-League licenses and the value for the investors who own them, but it’s not enough alone to drive true value in football.

MLS’ One Big Tick

It wasn’t all bad for the MLS. Kalt had to give credit to the MLS for at least one thing.

Infrastructure.

“The amazing thing that they’ve done is that they’ve created the infrastructure for soccer in the United States that never existed before.

“They’re not just sticking teams in and hiring a bunch of over the hill stars and having them play in football (NFL) stadiums and hoping they can sustain it.

“They’re doing the right thing and the league is sustainable, whether at half-billion-dollar franchise valuations is a more debatable proposition.”

This is a crucial lesson for the A-League.

Over 15 years into this journey and there remains embarrassingly little football-specific infrastructure.

There has been some good ground made in recent years by some clubs, but overall, after 15 years one gets the feeling there is very little to show for all the investment made in the A-League.

We’ve had some great seasons, some great matches and some great players grace the league…but if the league collapsed tomorrow, what proof would there be that the A-League and its clubs actually existed?

This has to be urgently addressed.

Gratification Bonus

Another reason cited as key for both Kalt and Johnson in their investment in European football was the sense of gratification of investment in clubs and their surrounding communities.

Now let’s not get carried away. No one is suggesting for a second that these investors aren’t backing in European football for humanitarian reasons.

They’re in it because they see value in their investment.

But can they make themselves feel good about making money in the process?

Well, that’s a bonus. The benefits for the community, however, can be very real and tangible.

Research from 2019 shows Manchester City’s involvement in the title chase with Liverpool was worth £220 million to Manchester’s economy.

According to the think tank Centre for Economics and Business Research (CEBR), spending on match-day tickets, merchandise, and hospitality can boost a city’s economic growth by 1.1 percentage points.

At the lower level, Ipswich Town co-owner Johnson felt there was a great sense of satisfaction to be taken from investing in the surrounding community.

“It’s critical to be engaged with the community,” he said.

“I view [these clubs] as beacons. In England, these communities live and die by the success of these clubs and it’s been painful for these fans have been watching this beautiful asset punch below its weight class.

“It’s not just enough to win, you have to try and make improvements broadly.”

A big part of Kalt’s model was being able to choose clubs with room for improvement because it would be easier to keep the fans onside as things improved.

“Coming into a club that is perfectly run as the next owner is not a situation I would ever want to be in,” he said.

“You want to come into a situation where there’s headroom … you want to have some goodwill built in.

“We’re going to stabilise this, and you know your club is going to be around in a year.”

The question for Australian football is, how do we create value and the feel-good factor around our clubs that encourage the investment they require?

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