Marvel Stadium puts AFL in driving seat

Article posted by Coliseum, June 18^th, 2020

Image: Marvel Stadium

Marvel Stadium in Melbourne, Australia, has proved to be the biggest strong point for the Australian Football League (AFL). AFL’s ownership of the Marvel Stadium has enabled the organization to secure finance to help it steer through the COVID-19 business downturn. The asset has put the AFL in almost the driver’s seat among Australian sports.

The Australian Football League is the pre-eminent and only fully professional men’s competition of Australian rules football. Through the AFL Commission, the AFL also serves as the sport’s governing body, and is responsible for controlling the laws of the game.

Simon Gorr, Head of Infrastructure, Australian Football League (AFL), Melbourne, Australia, is a Member of Coliseum – Global Sports Venue Alliance (GSVA).

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Marvel Stadium is a multipurpose, grassed oval sports and entertainment stadium in the Docklands area of Melbourne, Victoria, Australia.

As in other markets, coronavirus has delivered a fierce blow to Australian sport too. The country managed to rein in the spread of the virus quickly by closing its borders and enforcing strict social distancing measures. But the action severed the revenue pipelines to the country’s major sports.

Financial stress stares in the face of the National Rugby League (NRL), Cricket Australia, Rugby Australia and football’s A-League. A case-in-point – Rugby Australia this week announced it was giving the pink slip to 47 of its 142 full-time staff.

The National Rugby League (NRL) is Australia’s top-level domestic men’s rugby league club competition.

Some of the organizations have sought loans from banks to help them sail through these uncertain times. Unlike the AFL, most have little or no assets to secure the loans against.

In May, the NRL knocked on the doors of banks and financial institutions in the UK for A$250m ($172.7m/€154m) loan after they were shown the door by Australian lenders. The loan amount was secured against future broadcast and sponsorship rights income as opposed to a particular asset.

The 54,000-capacity Marvel Stadium has come to the rescue of AFL with the latter securing strong financial support from two of Australia’s major banking groups – ANZ and National Australia Bank, in a deal worth more than A$500m.

Far-sighted move

Few leagues and teams in Australia own or have substantial control over the venues they play at. With the exceptions of some smaller suburban rugby league grounds, the vast majority of major teams in Australia play at publicly-owned and -run stadia or venues.

Four years back, the AFL purchased the Marvel Stadium which was seen as a gamble at that point of time. However, that very move has proved to be a blessing in disguise for AFL during these coronavirus times.

Under the deal struck that governed the construction and operation of the stadium, the AFL was entitled to take ownership of it in 2025 for a nominal A$30 fee.

In October 2016, the league agreed to pay A$200m to take the management rights and freehold ownership in its hands from the super fund and institutional owners, nine years early.

That decision meant the AFL owned a billion-dollar asset against which it could borrow.

The deal also proved to be advantageous for its tenants AFL clubs North Melbourne, the Western Bulldogs and St Kilda. The AFL is leasing the stadium to them under more favorable terms than the previous owner.

The Victoria Government is committed to funding upgrades of the stadium and development of the surrounding area under an agreement entered in April 2018 that includes a guarantee by the AFL that its annual spectacle Grand Final would be played in Melbourne every year until 2057.

Revenue angle

The Marvel Stadium is a multiuse entertainment and sports venue and also the headquarters of the AFL. Apart from AFL matches, it plays host to home fixtures for A-League football side Melbourne Victory, Twenty20 cricket matches, and one-off rugby union and rugby league matches. It has also consolidated its position as Melbourne’s major concert venue, and has staged artistes such as rock band U2, American singer Taylor Swift and singer-songwriter Ed Sheeran. These events keep their revenue machine well-oiled.

The Walt Disney Company in Australia secured the naming rights of Marvel Stadium for eight years in a deal struck in 2018 which is said to be worth more than A$70m, rebranding it the Marvel Stadium (it was earlier known as Docklands Stadium) to promote its superhero film and content studio. A substantial Marvel-themed retail store now sits within the facility.

“The rights change in 2018 to Marvel as a partner provided a good refresh and scope for new innovations in delivery alongside the Marvel brands,” stated Adam Karg, Associate Professor and Director, Sport Innovation Research Group at Swinburne University of Technology in Melbourne.

The stadium will provide an additional revenue stream for the AFL when live events come back online, which should accelerate the property’s recovery.

Calling the shots

The AFL’s stadium-backed finance deal has almost put it in a position from where it can call the shots and enjoys an edge over the NRL vis-à-vis upcoming talks with their domestic broadcast partners. As in other markets around the world, Australian broadcasters are seeking compensation for the interruption to the flow of live matches this year. The AFL and NRL are Australia’s two most valuable media rights properties.

The NRL was essentially forced to renegotiate its domestic media-rights deals with free-to-air broadcaster Nine and pay-television broadcaster Foxtel this month. The league’s coffers were almost dry and it was pushing hard to get its season restarted. In a case of making hay while the sun shines – the broadcasters took the opportunity to negotiate down their rights fee commitments over the coming years. The talks were not all negative for the league, as it also secured a five-year extension to its deal with Foxtel.

The AFL’s broadcasters are also seeking to negotiate their deals. Since AFL has deep pockets, it is considered to be in a stronger negotiating position than the NRL.

“Nine and Foxtel with Rugby League and Foxtel with the FFA (Football Federation Australia) are among those who are negotiating, or have already negotiated, amended terms with lower valuations,” Karg informed.

“It is expected that the AFL and others will inevitably be subject to the same. As such, the level of security provided for the league from the stadium deal creates a major point of difference,” Karg added.

No rosy scene

The Marvel Stadium may have provided the AFL with substantial financial buffer, but the AFL cannot be complacent over the same for the next few years – the full extent of the business decline caused by the coronavirus menace will take months or years to play out. Australia is set to enter its first technical recession – two quarters in a row of economic contraction – for 30 years this quarter.

“While this financial safety net means the AFL may be better placed to counter the COVID-19 fallout, there is still a significant financial impact on the AFL and clubs that will be felt for a while,” says Karg.

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