Can The A-League Afford Such Costs?

Followers of Perth Glory will have noticed one thing that changed post the salary cap scandal, and that was that the Chairman of the club, Tony Sage, limited his media outbursts, or cut them drastically. Some may say that the majority of media outlets wised-up and realised that they were simply being used to garner the owner more than his allotted ‘five minutes of fame.’ To many fans it was a blessing.

Sadly though some on the East Coast were still happy to run almost any utterance made. In fact one outlet and one journalist appear to now be the lone soapbox for the owner. Whenever he needs that moment in the spotlight to tell all – or now the few – of his generosity of spirit, or the money he has lost on behalf of the club, or how the FFA are against him and the club, he turns to this individual who happily pens a piece, it would appear with no questions asked.

It therefore came as no surprise that it was through this channel that news broke that Tony Sage has agreed to fork out in the region of $700,000 to secure the services of new coach at Perth Glory, Tony Popovic.

It has not been revealed, because it rarely is what salary the new Perth Glory CEO Tony Pignata is receiving but one can be assured that he too has not come cheap, and that Mr Sage is paying more for his CEO than ever before.

To some this may look like ambition, to others it looks like one last roll of the dice to get Perth Glory playing in the Asian Champions League. With Mr Sage’s mining businesses this is where he has always wanted the club to be. This is far more important than the A-League, as Asia is where his business is, where his investors and potential investors are based. With Perth Glory playing in the Asian Champions League he has a vehicle to invite potential investors and current investors to join him and his team on that journey. In a much smaller way he becomes an Asian Abramovich. This too explains the decision to try and play an A-League fixture offshore in Malaysia.

Fans are rightly excited by the news that Tony Popovic has been signed as the new coach, but one has to question the salary being demanded by the new head coach. What is even more staggering is that reportedly he was paid over $1million by Western Sydney Wanderers. Let us not forget this was a first job as head coach at a professional club.

What many who have the long term future of that game at heart are asking, is how can the A-League clubs afford such salaries, and is it really any wonder that the club’s find themselves in the red if they agree to meet these demands.

It was well known that former Socceroos boss Ange Postecoglou was paid in the region of $600,000 a year when signed to coach the Melbourne Victory. Yet Postecoglou had the runs on the board having been successful in the old National Soccer League and then at Brisbane Roar playing a brand of football that few will ever forget.

Out-going Sydney FC boss Graham Arnold is another whose Salary demands are believed to have been closing in on the $1million mark. According to sources at the Perth Glory when Kenny Lowe was appointed Head Coach Arnold’s demands exceeded the $700,000 a year, and he also wanted to bring in Andrew Clark as his assistant. These demands were too steep to be met by the club.

Arnold has now achieved success at both the Central Coast Mariners and Sydney FC, in addition that success has seen players from his clubs force their way into the Socceroos, which in turn means that their value goes up should they look to make a move overseas. So to the owner of a club paying a coach that can achieve success and also bring in revenue paying a high salary has its benefits.

The question still has to be asked can the A-League really afford such salaries, especially when none of the clubs own the venues that they play at, so have operating costs beyond most clubs in most Leagues around the globe?

Has the rise in coaching salaries risen by too much and too quickly?

If we look at the wages of the players, in season one of the A-League the salary cap for assembling a squad was $1.5million. Thirteen seasons on that has almost doubled with the salary cap for 2017-18 set at $2.928million.

Most A-League clubs have operated a system in which seven players would be paid the highest wage bracket at the club $200,000 a year or more. The next seven players would slot into the middle wage bracket which usually sits between $100,000 and $150,00. While the remaining players  would be paid the minimum salary of $61,287 or slightly more.

The increase in the salary cap is a 95% increase since season one. Which in just over ten years is a large hike, even though the levels of pay are a long way below many of the established leagues across the globe.

Yet the increase in coaching salaries has risen by around the 200% mark. It is hard to give an accurate figure as some clubs paid above what was then the average salary when they brought in overseas coaches. For example in 2012 Sydney FC’s Vitezslav Lavicka, was reported to have been paid $500,000, at a time when Arnold and Postecoglou were both earning around $200,000 and Ian Ferguson at the Glory was the lowest paid coach in the A-League.

Has this increase come too quickly and can the A-League genuinely afford such wages?

If we try and put it in perspective the Australian Prime Minister’s salary is $527,852 per year. The Premier of Western Australia is paid $355,000 a year. Sure, many will argue that this is too much, but we put our faith in these people to run our country and our state the whole year around.

Sure the argument will be raised that the top English Premier League managers earn a great deal more than the UK Prime Minister who is paid GBP142,500 (Approximately AUD$255,745). This is true and again one has to ask if the world has not gone a little mad and we have our priorities wrong.

In the EPL the salaries are colossal. Yet this is the most watched football competition on the planet. The money that flows from the clubs and the League is in itself mind boggling. Yet nearly all of the EPL clubs find themselves operating at a loss. Why? They own their own grounds, they play to packed houses week-in-week-out, they have huge sponsorship deals as a result of this. Could it be that once again they over stretch themselves in terms of what they pay their players and their coaches?

In the English Premier League the season lasts from the start of August until the second week of May. It runs for a period of ten Months and features some of the best players in the World. The A-League runs from the start of October and finished on the 5th of May. It runs for seven months. Three months and 11 league games shorter than the English Premier League.

In 2017 Manchester City’s Pep Guardiola was the highest paid coach in the EPL. He was paid GBP15.3million (approximately AUD$27.6million) a year. So proportionally by comparison the salaries of A-League coaches is indeed a pittance.

However the difference is in the 2016-17 financial year Manchester City posted record revenues of GBP473.4m. Despite this their profits were down from GBP20.5m to just GBP1.1m; however these accounts covered a 13-month period rather than the usual 12 months. It was pointed out that the extra month was a mitigating factor.  City’s wage bill looked to be responsible for much of the increased spend. Expenditure  had risen from GBP197.6m to GBP264.1m in that 13-month period following Pep Guardiola’s arrival as manager, when he was assembling the squad he wanted to ensure success.

As a private company it is hard to know what Perth Glory’s financial record looks like. However every year the owner Tony Sage states that he has again lost money.

In October 2015 three months after being appointed CEO Peter Filopoulos told the Financial Review that his aim was to boost the club’s annual revenue by $2.5 million in order to achieve financial stability. He then put together a four year strategic plan that he explained would allow the club to “see what we want for the football department and part of that will be targeting making finals every year. We’re also aiming for 10,000 members and average crowds of 15,000 by 2020.” Having returned to Melbourne he will not be here to see if that plan will be adhered to or whether his successor comes up with one of his own.

At the time this article was published it was claimed that in 2015 “in revenue terms the Glory’s turnover will be about $8.5 million this year.”  Filopoulos was then quoted as saying “We need about $10 million annually to break even and about $11 million to start making money.”

Which has some asking can Perth Glory really afford Tony Popovic? Approximately an extra half a million on the wage bill is going to push the break-even figure even higher.

Glory are not alone. Six months ago Melbourne Victory, the most successful club in the A-League, and the recently crowned Champions of 2017/18 reported a small loss of $137,498 for the 2017 financial year. This was in spite of recording profits of $933,790, $1.5 million and $369, 276 in the 2014, 2015 and 2016 financial years respectively.

What is worth noting is that Victory’s “payments to suppliers and employees” was only approximately $8000 more in 2017 than it was in 2016. Which means that club suffered a $1.1 million shortfall of cash coming in as opposed to cash being spent.

Crowds have been down across the A-League in 2017-18, so too has been television viewership, which will ultimately have an impact on the deals that clubs can broker with sponsors. Which means that clubs are going to have to cut their costs in relation to the revenue that they can generate if they hope to survive in the long term.

However with clubs being in the hands of private owners they are entitled to spend as they wish. If it means a greater loss then no doubt their accountants will make it beneficial from a tax perspective. However if it does indeed result in a greater loss don’t bleat in public about it, as ultimately it is the owner’s decision whether or not they opt to spend that money.

Hopefully clubs will not be sucked into a spend cycle simply to stay up with their rivals as we have seen in State competitions. For the long term future of the game we need clubs to be viable and so the expenditure on players and coaches needs to be inline with the monies generated. The signing of Marquee players has proved questionable. As has been proven from this experiment, they must not only be able to perform on the park, but also bring in over and above what they cost.

Some would argue that the same should apply to coaches. That their salaries should be set at a base level and bonuses paid based on not only where they finish in the league, which is already in many contracts, but that bonuses should also be paid based on the style of play, and the team pulling fans through the gates.

One cannot help feeling that like many a teenager the A-League is starting to try and run before it can walk. It is trying to offer and pay salaries that it simply cannot afford. They may not realise it but it is important that those with the power make sure that the League stays on the right path to becoming a long-term successful and self-sustaining competition. The rebellious teenage needs to be kept in check.