Commission to investigate expansion

[Perth Red]

Sounds like it might be some time yet until we know what the frick the NRL will do! I'm still interested to knowif expansion will drive part of te Tv deal or the Tv deal will drive (or not) opportunity for expansion.

“Growth can be achieved in a number of ways, expansion could be one of those ways and I’m not saying it is and I’m not saying that it is not, I think we need to be very cognisant of what we have today.
“We have a wonderful game, we have clubs that are performing well in terms of the teams they put out on the field. But you have to say that the financial performance of the clubs is variable. You have to have an imperative view that we make sure we stabilise where necessary and make stronger what we already have got.
“Then you look at what opportunities you have that can build on that.”

http://www.nrl.com/commission-to-investigate-expansion/tabid/10874/newsid/65808/default.aspx

 

[newman]

Put yourself in the shoes of a businessman Perth Red. You are running a business called the NRL that is performing ok, but individual departments (clubs) of it are struggling. Someone suggests expanding your business, but there are no guarantees that these new departments will make you any more money and could perhaps damage your overall profitability aswell as the finances of your existing departments who are struggling.

If this was your business, what would you do? Would you put the time and money into opening new departments so that you have a perceived national footprint, at some risk, or would you play it carefully like the IC are?

I know what I would do.

 

[Perth Red]

If I was renegotiating a contract for provision of my services and I thought that adding two new services would make my services more attractive and bring in a more lucrative bid then yes I would be looking to expand my services.

I don;t mind what they are saying but I wish they would be a bit more on the front foot and proactive, in reality if the game attracts a big enough new media deal then will be more than enough money to both secure the future of the struggling existing clubs AND expand the game (at both NRL and grass roots jnr level which seems to be totally missed as part of the ARLC's funding role). Do you think McDonalds became the biggest food franchise outlet in the world by focusing on making every franchsie profitable before expanding to the next one?

There's an old saying that if you are standing still you are going backwards.

 

[newman]

If I was renegotiating a contract for provision of my services and I thought that adding two new services would make my services more attractive and bring in a more lucrative bid then yes I would be looking to expand my services.

Yes but you dont know that do you? You dont know that it will make it more lucrative. You havent seen the modelling and the forecasts. You havent seen the figures. You havent been involved in negotitations with the broadcasters. For all the flak that the administration cops, they are professionals with an eye on the bottom line. They would have put an absolute mine of time and research into preparing for the TV rights and if there was a credible case that expansion into Perth and others was going to make guaranteed extra dollars, then they would do it and it would have been announced by now. If they havent done it, then I am sure there is a pretty good reason.

 

[newman]

Do you think McDonalds became the biggest food franchise outlet in the world by focusing on making every franchsie profitable before expanding to the next one?

McDonalds had a profitable model of expansion though and a predictable level demand in just about every start up area with minimal cost. It doesnt always work though. Look at Starbucks, they grew faster than they could support and it sent them bankrupt.

People think that by having more teams in more areas in means more money. Thats not necessarily true. Start up costs are huge and there is always, always an element of risk. The storm still rely on handouts and its a bigger market than Perth. The AFL have a 30 year curve with GWS. 30 years.

I'm glad the NRL are treading this path carefully.

 

[RLNY]

I would tread lightly. Overexpansion has diluted the talent pool in other leagues, most notably the NHL, the NBA, and most recently, the AFL.

 

[docbrown]

If they get anything over $800,000,000 from the media deal, then clubs won't be in the situation they are at the moment.

 

[Loudstrat]

McDonalds had a profitable model of expansion though and a predictable level demand in just about every start up area with minimal cost. It doesnt always work though. Look at Starbucks, they grew faster than they could support and it sent them bankrupt.

People think that by having more teams in more areas in means more money. Thats not necessarily true. Start up costs are huge and there is always, always an element of risk. The storm still rely on handouts and its a bigger market than Perth. The AFL have a 30 year curve with GWS. 30 years.

I'm glad the NRL are treading this path carefully.

Good point about startup costs. The club with by far the least start up costs and the least risk is the Central Coast Bears.

 

[Perth Red]

Food for thought: The lowest risk usually produces the lowest returns

 

[Red&BlackBear]

Food for thought: The lowest risk usually produces the lowest returns

Give an example? Because in AFL the S.A. and W.A. based teams were lower risk then the Brisbane Bears outfit and the Bears almost collapsed (had to merge to survive). In A-League the NQ Fury were much higher risk then the Heart and they (Fury) collapsed. In League, the Rams/Reds were higher risk then say the Warriors (due to being entrenched already in a rugby code ) and it was the Rams/Reds who collapsed. The Northern Eagles merger was more high risk then say Dragons and Tigers and they (Eagles) too collapsed.

So I'm not quite sure where you are getting that view from when it's evident that here in Australia not only do high risk options bring in lower crowds but they more often then not collapse very quicky due to being unsustainable.

 

[clarency]

Put yourself in the shoes of a businessman Perth Red. You are running a business called the NRL that is performing ok, but individual departments (clubs) of it are struggling. Someone suggests expanding your business, but there are no guarantees that these new departments will make you any more money and could perhaps damage your overall profitability aswell as the finances of your existing departments who are struggling.

If this was your business, what would you do?

You do what every successful business does. You remove the departments that lose money and put departments in areas where they will likely make a profit. It's common sense. You research areas where it is likely to succeed and then act based on the results.

McDonalds had a profitable model of expansion though and a predictable level demand in just about every start up area with minimal cost.

Which is all established through research....

It doesnt always work though. Look at Starbucks, they grew faster than they could support and it sent them bankrupt.

Wait.... you mean the same Starbucks that is still in operation (not bankrupt)... and is currently the largest coffeehouse chain business in the world, with a $10bil annual revenue? They closed a number of stores in Australia because they weren't making money (see the first part of the comment). They used the standard growth method as they always have, and while they did struggle to make profit in Australia, by that point they were (and still are) so big that the loss is nothing more than a blemish on the records.

Only the truely powerful can afford to make risks like that (GWS anyone?), and that's what the NRL (which is now run by proper business people) will be aspiring to.

 

[Spitty]

How can the ARLC seriously consider a massive change like expansion, when we're only just moving into a phase of massive change?

Let the TV deal get negotiated, let the extra money we've saved by having a commission and the extra money we've earned in the TV deal get distributed. Then we'll have a better idea on what resources the league can put into expansion.

It's pretty widely ackowledged that Perth will more than likely be the next team admitted. Realistically Perth may need a financial prop up from the league, similar to what Melbourne will be getting and what the AFL do for GC and GWS. At them moment the league dont have the ability to do that, but once the money's come in they might be. Which is a best case scenario for the league and Perth.

 

[Perth Red]

I find it hard to believe that an extra game a week plus the addition of two teams that bring a range of benefits to TV companies isn't worth a significant amount of $'s in the new TV deal. All the other codes announced expansion BEFORE they negotiated their TV deals (ALeague, AFL,S15) as they knew it would make the deals more valuable. For some reason we want to do the opposite?

 

[bobmar28]

I find it hard to believe that an extra game a week plus the addition of two teams that bring a range of benefits to TV companies isn't worth a significant amount of $'s in the new TV deal. All the other codes announced expansion BEFORE they negotiated their TV deals (ALeague, AFL,S15) as they knew it would make the deals more valuable. For some reason we want to do the opposite?

2 new teams will bring an increase in the value of the TV contract. That should be enough to support the new teams.

 

[Spitty]

I find it hard to believe that an extra game a week plus the addition of two teams that bring a range of benefits to TV companies isn't worth a significant amount of $'s in the new TV deal. All the other codes announced expansion BEFORE they negotiated their TV deals (ALeague, AFL,S15) as they knew it would make the deals more valuable. For some reason we want to do the opposite?

Yes but the expansions from those other codes has been done with limited success and none of the codes have gone through the amount of change our code has just gone through. I want expansion and I want your team in the NRL. But I want RL to still be in WA in 20 years time, so it needs to be done right. At the moment Gallop has said that all the expansion bids are short, maybe in 18 months or 2 years the NRL's extra cash can help the bids make the grade.

I'd rather see how much money we've got to assist the right expansion, as opposed to just putting in the two easiest teams so that we can get a quick financial windfall from having an extra game.

 

[Perth Red]

Don;t disagree but I see no reason why announcements can't be made ASAP and be driving the TV deal rather than the usual passive approach of RL to just sit back and see what happens. Those other 3 codes all expanded prior to the tv negotiations and ALL of them got a significant increase on their previous deals. How much is an extra Sunday game at 6.30pm plus a new market in WA and reconnection.strengthening in either CC or Brisbane worth I wonder to a FTA station? Every year from 2013 onwards we don't have expansion is missed money and opportunity for the game.

Waiting two more years before deciding if to expand and then a further 18months-2 years to actually get the clubs up and running is pointless. If bids aren't likely to be ready by 2014 or 15 then they are unlikley to be ready by 2017. Most of the bids have already been doing the ground work for two years+