Where should Councils stand on paying for major events to come to their City? It is a perplexing issue and one that seems to be brought up more and more. At the heart of the issue is the difference between the Council bottom line and the injection of money into the local economy.
Take a simple example. If a Council was approached with an offer for a major event to be brought to a city at a net cost of $10,000 but with a guarantee of 5,000 people who would travel to the city to attend the event and stay overnight, what would most Councils say? If we use Dubbo’s overnight injection number of $132, then such an event would inject approximately $660,000 into the local economy. This would be go into the hands of hotels; motels; cafes; restaurants; retailers and more in the local economy. It would seem like a fantastic result for a city but the crunch is when it comes to paying the $10,000. Where does that come from? It comes from Council’s bottom-line which is ultimately contributed by the ratepayers of the city. Is it acceptable for a tiny amount of rates money to go towards the $10,000 so the economy of a city can benefit? There are other benefits that might be harder to measure. Does the city receive significant media exposure from the event? Are there other potential positive flow-on effects? Other benefits might make it easier to justify expenditure by the Council on behalf of the community. I think for a city the size of Dubbo, $10,000 would be relatively easy to justify for such a positive outcome – although I am sure that some people who had no interest in the event would still argue against their small percentage of rate money contributing towards an event that held no interest for them but they would probably see the greater good for the community.
I want to go to the other extreme. We have seen NRL matches played so far this season in Albury and Bathurst. I am not aware of the exact amounts paid by both of these communities but I know that Group XI in our region was involved in bidding for one of these games and that other media outlets have reported amounts of several hundred thousand dollars that is paid to an NRL club to secure a game. The crowd at Albury was 6,346 and at Bathurst it was 6,240. Obviously many of these people came from the local community with some potentially travelling and staying overnight.
Now the question becomes harder. Is it reasonable for a club – from any sport – to take money out of a community for the privilege of holding a game in that community? To make the discussion more relevant, we should use some numbers. The NRL, as an example, generated revenue of over $350 million last year. They funded NRL clubs to the tune of $118 million. Their operating surplus was in excess of $20 million. Individual clubs typically generate revenue of between $14 million and $30 million directly from football related activities and, if there is any shortfall, there are typically huge leagues clubs (think of the Eels; Raiders and Panthers) or rich owners (think of the Rabbitohs; Warriors and Sea Eagles) to ensure they can continue to survive and thrive. If an NRL Club approached a Council and asked for a cash payment and supporting work to the tune of $300,000 (as an example), with a crowd of possibly only 6,000 with half coming from out of town, is that a reasonable equation. 3,000 people staying overnight may inject $396,000 into an economy – but at a cost of $300,000 out of the pockets of ratepayers it seems like a much harder equation to justify. Even when you consider the TV coverage and fantastic exposure for the city, it would be hard to justify to the average ratepayer (especially the ones who are not NRL fans or who follow a different team to the one playing). This is not designed to target NRL – the same stands for A-League; AFL and Rugby Union.
I have an alternative view. Over the last twenty years in major Australian sports, we have seen a dramatic shift in the number of spectators at games. The AFL is leading the way with an increase of 22 per cent in spectator attendance to lead the way. NRL still sits in second but has dropped spectator numbers by 14 per cent. Soccer is the real sleeper with an increase (from a low base) of 35 per cent and Cricket sits in 4th place with a small drop of 5 per cent. There is no surprise to me that AFL generates roughly three times the revenue of the NRL. Where the spectators are then so is the money. Rather than expect communities – via their Councils – to prop up clubs with lazy business models that take money from a community, I think the sports that will be successful in the long-term are the ones that expose their product to a variety of audiences in a variety of areas. TV rights is where the majority of the money is so taking your game to an area just once every few years will increase TV viewers in that area.
Tell me how much you think per spectator a Council can justify in paying for a major event at email@example.com