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Insert Copy Here 42. 5 February 2019 Ms Leslie Guy Secretary to the Committee Select Committee on the Redevelopment of Adelaide Oval Via email: [email protected] Dear Ms Guy RESPONSE: ADELAIDE FOOTBALL CLUB Thank you for your letter requesting feedback from the Adelaide Football Club (AFC), on the matters listed in your letter dated 20 December, 2018 and related to the redevelopment of Adelaide Oval. The move of AFL Football from AAMI Stadium to a redeveloped Adelaide Oval has been positive for the AFC against the majority of key metrics. The quality of the Stadium and its central location was welcomed by our members and fans, which has underpinned increases in membership and match day attendance. Similarly, it has enabled the Club to go to market with a strong corporate proposition which has supported growth in our hospitality and sponsorship revenue with corporate partners better positioned to conduct compelling activation and leveraging campaigns. The fan experience is much improved, with both Clubs rated by the AFL as delivering leading match day entertainment. The financial model that supports this growth, has enabled both AFL Clubs to deliver a net stadium return that benchmarks positively within the AFL. This did take some time to achieve, with two reviews (2015 and 2017) across the first 5 years necessary to ensure that the Club received appropriate return from the overall football economy. One of the challenges through the review process was achieving sufficient level of transparency of the true value of the football economy. This is due to the fact that SANFL and by extension AOSMA are only required to disclose their financials to the AFL and not the two AFL Clubs. The AFL then will play a role in brokering an outcome with the information that they are able to access from each of the parties. This has made each review more difficult than it might have otherwise been if there existed a greater level of transparency. It is also important to note when reviewing revenue growth, that the Clubs also incur materially higher costs playing at Adelaide Oval. This includes the contribution to funding a higher proportion of the costs for the free public transport service – Footy Express, as well as additional investment in security, traffic management, staffing and other game day costs. Again, with the majority of these costs passed directly to the major tenants as hiring costs, it can be frustrating that we are not consulted regarding the negotiation of these key service contracts. However, as stated above, despite these issues, the overall net return is within benchmark parameters for the AFL and the AFC been able to ensure that the move to a redeveloped and city-based Stadium, has delivered the necessary financial benefit to return to profitability and provide confidence that, at least in the short term, this will remain the case. Financial viability supports our repayment of debt, investment back into the match day experience, into our member, fan and corporate engagement programs and into supporting our wide range of community programs. Of course, it also ensures that we can optimise support of our AFL program as the performances of the team ultimately play a key role in driving the revenue engine of the Stadium. It is important to note that our overall working relationship with key AOSMA staff is positive, despite the fact our interests may not always be aligned. We still have no resolution to one major commitment that was made to the AFC when moving to the Adelaide Oval, that being the establishment of a “Shed” facility consistent with what was successfully operating for fans at Footy Park. The SANFL has acknowledged that this has not been delivered but has been unable to identify a solution. It is a significant omission that has frustrated the AFC and in particular our fan base. With regards to the more recent issue regarding the proposed establishment of the Adelaide Oval Hotel, it is difficult to provide much feedback as we have been given very limited information. We were only made aware of the proposal via the media, and although we have subsequently met with representatives of AOSMA and SANFL, we remain unaware of the potential financial upside nor the financial and operational risk that might accompany this significant undertaking. Its development will potentially impact our existing amenity at the Stadium, including some currently commercialised corporate inventory (which we have opposed) and we are unaware of whether underperformance of the new venture can directly or indirectly, impact the AFC. Furthermore, we are unaware whether the projected financial upside from the Hotel was modelled at the time of the last Stadium review – it certainly wasn’t presented to the Clubs as a proposed new asset that was going to drive revenue back to the SANFL. We do support initiatives that will drive return to AOSMA and ensure that it is able to invest appropriately into the maintenance of the Stadium and into continuing to improve the match day experience for fans, players and our key corporate partners. This isn’t just into bricks and mortar, but into connectivity and improved technology, improvement in corporate facilities, retail and concession outlets and a range of other measures that will help to ensure that patrons are provided a leading sports and entertainment experience. It would just be preferable if there was a greater collaboration and a mechanism to facilitate genuine input from the Clubs. It is important to note that the AFL Clubs also invest into the improvement of the Stadium facilities. Most recently, together with Port Adelaide and the SACA, we helped to finance the multi-million dollar upgrade of the LED lighting. We do believe that a change to the current governance structure is worthy of discussion, to ensure the Stadium is best placed to produce positive outcomes for the fans, Clubs and other key stakeholders. By way of background, when the move to Adelaide Oval was initially negotiated, the SANFL had ownership rights over the licenses of two AFL clubs. However, between that time and signing of the agreement to occupy Adelaide Oval, both Clubs were able to secure their independence from the SANFL with the license now granted directly by the AFL. This was a strategic decision of significant importance. Whilst owning the AFL licenses, the SANFL was given the responsibility for negotiating the key commercial terms of the move to Adelaide Oval, including the AOSMA shareholding, the ability to commercialise Football Park and a guarantee to be no worse off compared to revenue generated at Football Park. Fundamentally, our relationship with the SANFL changed when they no longer held the AFL licenses. Whereas they previously acted in the best interests of football (including that of the two AFL Clubs), they now represent their own interests and somewhat appropriately deliver against their own strategic objectives without fear or favour. The decisions they make as AOSMA representatives are confidential and rationale or key data and information is withheld from the AFL Clubs that they were meant to represent when the AOSMA structure was established. Of course, the priorities of SANFL and those of the two AFL Clubs are quite different, aside from a common interest in wanting to see the game of football prosper. We are not consulted on key decisions, we have limited ability to influence strategic direction or ensure the needs of our supporters are appropriately represented. Accordingly, we believe that the current governance structure requires review and that consideration be given to nominees from the two AFL Clubs, replacing two of the SANFL appointees on the AOSMA Board. Thank you again for the opportunity to respond. We look forward to discussing these any other issues you may wish at a future time. Yours sincerely Andrew Fagan Chief Executive Officer .
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