The overdue age of financial integrity in sports

"Professional sport has to get better at business, or get less professional at sport."

Game Legal & Game Consulting Principal, Mat Jessep, recently discussed his thoughts on what sports governance might look like in a post-COVID-19 world with Australian Broadcasting Corporation (ABC) sports journalist Jack Snape.


Without trying to disparage any one particular governing body's track record or otherwise be controversial, Mat can see the real possibility that we move to enhanced sports governance oversight with an intense focus on financial sustainability and an increased role for private investment in sports leagues and teams - what Mat sees as the overdue age of financial integrity.


This could happen in a couple of ways - via additional governance requirements and greater oversight from government via a beefed up Sport Australia, and/or from increased private and even fan ownership models in leagues and teams.


This article also features additional comments from Paul J Hayes QC, Liam Lenten, Sarah Kelly, and Adam Hodge.




Mat's full transcript is set-out below:


Question: The things that were once thought of as fanciful but could actually happen now in sport due to coronavirus. Outline something wild that would almost never have happened before, but might actually happen in coming months/years.


1) what it is:

Enhanced sports governance oversight with an intense focus on financial sustainability and an increased role for private investment in sports leagues and teams - what I see as the overdue age of financial integrity. I see this happening in one of two ways - via enhanced governance requirements and greater oversight from government via Sport Australia, or from private and fan ownership models in leagues and teams.

2) why it wouldn't have happened before:

As sports governance concepts and practices have evolved, sports in Australia have experienced a long-held tension between sport and business; arguments that sports governance should focus on "the game" vs "the business of sport" have abounded in boardrooms and some sections of the media.   We see this evident in the corporate structures of leagues and sporting organisations being set up as incorporated associations (for state-based organisations) or companies limited by guarantee, both being what some call not-for-profits (NFPs), run by boards with directors who may hold limited business experience. While a NFP structure doesn't prevent an entity from making a profit, we've seen few sports actually ensure profits are made, and fewer investing any profits into sustainability measures. Overall, business accountability is reduced in these structures. What the current suspension of sports shows us is how precarious the finances and overall self-sustainability practices of major sports in Australia actually are, and how reliant many sports are on regular broadcast rights revenues and gambling product fees, both of which are currently in short supply.

3) why it might happen now:

As a result of what is clearly evident in the current situation, certainly for a major sports league like the ARLC's NRL competition, and with reduced media rights deals threatened by existing broadcast partners in the next round of deals, sport can't just shrug this off and go back to the good old days. Professional sport has to get better at business, or get less professional at sport. This new reality would only be strengthened in the case of any sport putting their hand out for government stimulus support. As we see with existing government funding to major sports in turn requiring ASADA oversight of anti-doping policies and frameworks (including the AFL, even though it's not played internationally), we could see government demand the application of financial integrity measures in return, overseen by a beefed up Sport Australia, with disputes aired out in an expanded general division of the new National Sports Tribunal. These measures might include the requirement for fully independent boards, oversight committees, and powers to investigate finances and expenditure. Sport may even need to be restructured where proprietary limited (Pty Ltd) companies run the executive and commercial functions for and on behalf of wholly owned subsidiaries set-up as NFPs to run the sports, each level doing what they do best. These for-profit holding companies would generate and hold profits, and then invest funds for future applications and (hopefully) expansion, as superannuation funds and future funds look to do for their members. NFP subsidiaries could only spend what the parent company provides them over a 5 year business plan period. Fans could even buy and hold shares in the sport's parent company, as could other investors and the money markets at large.

Failing this, sports that cannot ensure self sustainability and financial integrity in the current model should be allowed to move down the tiers of professional sports where market forces dictate future fortunes, or not.  This might allow private investment and management, as we've seen successfully applied in the National Basketball League (NBL), to enter the market.  This would hold the same for teams and clubs, with poor performing clubs handing back their licenses to the league for redistribution elsewhere around the country.

4) what it would mean for sports fans:

Sports fans, forming a key stakeholder group in sports, and being a source of significant revenues in professional sports, might expect less sizzle with their half-time sausage in the short-term as sports adjusts to requirements to ensure financial integrity.  Some fans may also see sports retract in size (fewer clubs, less rounds) or clubs and teams even relocate as finances are managed better. However, in the long-term, fans could expect greater stability in the competitions they follow and support, as well as better integrity in their sports as healthier commercial outcomes are invested back into pro sports. In the for-profit model, fans could directly participate in the fortunes of sport as owners.



Read the article here: https://www.abc.net.au/news/2020-03-29/sport-post-coronavirus/12099598?section=sport



Contact us to discuss your business or investment in sport.



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#sportsintegrity



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