AFL clubs have been told the 2020 soft cap will be slashed as the league moves to impose tough austerity measures across the industry in response to the devastating revenue decline caused by coronavirus.
Clubs are uncertain of the size of the cut the AFL will demand but some believe it will be as much as 30 per cent, a move that will mean either massive salary cuts for staff or a cut in staffing numbers.
The football department soft cap has sat at close to $10 million since the AFL introduced the measure in 2015 as a mechanism to rein in escalating costs and ensure clubs competed on an even playing field.
The AFL has been scrambling to model financial responses to quickly find savings in the wake of the coronavirus pandemic, which has seen the season cut to 17 rounds and no crowds attending games.
AFL senior coaches have already agreed to a 20 per cent pay cut with assistant coaches and other football department personnel expected to follow suit after the AFL executive led the way in volunteering to reduce their salaries by the same amount.
Clubs bosses were told on Friday to expect “a significant reduction” in the soft cap this year after already being told last Monday to start finding cost reductions worth $5 million.
Brisbane Lions director Leigh Matthews said on 3AW that the $5 million figure was the starting point as clubs waited for further direction from the AFL as to what was required to respond to the fast moving environment.
A coronavirus ‘crisis cabinet’ has been set up with key industry figures while club CEOs such as Carlton’s Cain Liddle and Hawthorn’s Justin Reeves have bandied together to develop a unified approach to membership concerns. Gold Coast CEO Mark Evans said clubs are collaborating more than ever before to ride out the crisis.
West Coast have told recruiters to take annual leave while clubs and the AFL have already informed several casual staff members that there is no work available, with Essendon confirming in an email to members that casual membership staff were not required.
Permanent staff in areas such as community programs, marketing and hospitality at several clubs will be informed this week what lies ahead with some clubs hoping arrangements can be made for stand downs to occur as the cost of redundancies would potentially be problematic.
There have been emotional scenes as managers processed what the shutdown meant for staff with the rapid escalation of the crisis hitting hard as clubs examine all assets to see whether they can assist them in creating cash flow.
More powerful clubs such as Collingwood have told staff in briefings their aim is to retain them while making cuts across the board to ride out the storm. Carlton began to contemplate the work that would be needed to recover, having paid off another $1 million in February to cut their debt in half in the past 12 months.
Players have also been asked to take a 20 per cent pay cut with details still to be worked through.
The AFL earned $793.9 million in revenue last financial year while the 18 AFL clubs earned more than $1 billion collectively. However, much of the club revenue comes from gate receipts and hospitality, which have disappeared without crowds. Geelong budget to earn close to $1 million in revenue for each home game in a normal season.
Clubs were awaiting direction from the AFL. Those with less robust balance sheets such as St Kilda and Melbourne are dependent on their support. Seven clubs, including the Saints and Melbourne have debt, with about 60 per cent of St Kilda’s debt being money owed to the AFL.
Fremantle CEO Simon Garlick told ABC radio that the clubs and the AFL were considering three main scenarios when doing financial modelling as round one kicked off without crowds on Thursday night.
The first involved the 153-game season and finals being completed without crowds, a scenario club staff were told last week was very possible at this stage.
Garlick said they were also modelling a season that required a three-month interruption that was completed with crowds allowed into stadiums at the back end of the year, a scenario the Dockers CEO said would be a “a really good outcome”.
Clubs and the AFL were also modelling the worst case scenario where the season is shut down, which would affect the broadcast income, which is already set to be reduced because 153 rather than 198 games are being played.
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