McMahon said 2003 would be his final year as chairman as the Essendon Football Club and also stated he intends to challenge the AFL about the interstate salary cap inequities. Chief executive Peter Jackson addressed the members and discussed the club’s financial situation and its off field performance in 2002. Following is a copy of his speech.
My CEO’s report is presented in the clubs financial report and I assume members have read it. I would like to take this opportunity to expand on a few points in it.
I did say at last years AGM that I thought 2002 would be the clubs most challenging year in recent years, both on and off the field. Well, it proved to be the case.
The financial performance of the club was challenged by a number of factors:
Firstly – the extraordinary high number of home night games (9 – as a result of the new tv deal) adversely affected membership and seat sales, particularly for family, junior and elderly members. It cost this club $400,000 in lost revenue.
Clubs have no direct influence over their draw. AFL controls the fixture. We can request some things. We certainly did not request 9 home night games. We requested at most an even balance of day and night games.
We lobbied the AFL hard during 2002 on this issue, and to their credit, they have responded. We have 5 night games this year and perhaps more importantly 3 of 4 MCG night games are day games. We still have a lot of away night games.
Whereas we are pleased there is a better balance of day/night home games, we remain concerned about whether those members having not renewed in 2002 will remain disillusioned with the game and not renew in 2003. That’s the trouble in business, once you lose a customer/member, it is very difficult to get them back.
Secondly – crowds were well down in some important games. The night games at MCG were very poorly attended, especially games against Carlton and Richmond. As a result gate receipts were well down.
Thirdly – hospitality and sponsorship market was very tight during the year and we did not reach our targets in those areas.
It is therefore pleasing that we were able to produce a profit result of $1 million. Whereas some of this was clearly due to one-off factors including recovery of a doubtful debt and sponsor buy-out of a contract, we also reduced operating costs during the year to maintain a reasonable profit.
It is a credit to my management team that this result has been achieved.
Trading conditions for 2003 will be equally as challenging. For this reason, we have focused heavily on cost control to ensure the club can continue to produce a sound profit result, as this is vital to the ongoing long-term stability of the club.
I would like to make a mention of the on-field performance of the team during the year. I did say 2002 would be a challenging year, but did not expect it to be because of the extraordinary injuries we experienced.
In 2002 we had a similar injury run to 1997 when we fell away to 14th. St Kilda and Carlton had a similar number of games lost due to injury and could not perform on the field.
Despite our injuries, we still finished 5th and that is a very good effort.
Also like to make mention of our captain James Hird and his courage. I know he doesn’t like being singled out, because other key players missed as many if not more games as James i.e. Matthew Lloyd, Joe Misiti, Mark Mercuri.
But the courage he displayed in the first game back against western bulldogs was extraordinary and a testament to him as a player, a captain and a person.
My report goes into some detail on the reasons behind the trading of players by the club this year. Whereas we need to look forward, I would like to expand on this subject a little and in particular explain to members the uncertainty that has existed over the recent years due to circumstances beyond the club’s control.
The current CBA was negotiated and TPP figures for 2000 and 2001 agreed, in an environment of high expectations for player salaries, given the pending tv deal. Those expectations were stated by the AFL to a number of clubs (certainly Essendon), to be 10-12% pa increases over the life of the CBA, based on a smoothing formula, examples of which were included in the CBA.
Accordingly the negotiating environment in 2000 and 2001 was very much in favour of the player. As a consequence, Essendon signed longer-term contracts (4-5 years) for its very best players, to ensure certainty for the future.
It is now a matter of public record that the stated expectations of 10-12% pa increases have not materialised. Increases in 2002 and 2003 were about half those levels and were only announced to clubs on 19 July 2001. Discussions are now about a very low, or even nil, increase for 2004.
The contracts drawn up in 2000 and early 2001 are of course still in existence.
The new CBA also lead to strong pressure from both AFL and AFLPA to maximise the number of fixed contracts. Clubs were forced into this, in many cases against their will, because the AFL eliminated injury allowances. The uncertainty created by base and match payment contracts was untenable when injury allowances no longer existed, so clubs had no option but to increase the number of fixed contracts.
That situation has changed in the face of pressure from clubs, and the injury allowance has been re-instated, in a fair form. There were however various models introduced before the current model was finalised, causing additional uncertainty along the way. Irrespective of that, many of those fixed contracts still exist.
These two factors, the change in expectations and the pressure for fixed contracts, has made management of the TPP very difficult over the last 2 years, and makes it all the more difficult to unwind those contracts now when needed.
The 95% rule, that was included in the CBA required all clubs to pay 95% of the salary cap has also been inflationary. It has meant players who have not performed are paid equally to players who have performed. Natural market forces and expectations drive up the demands of these players who have performed and fair enough too. I make mention in my report of the player pay rankings of Essendon players. It is clear our players individually and collectively, are not overpaid relative to the rest of the competition. In fact far from it.
In the December issue of the AFLPA's newsletter, CEO Rob Kerr talks about the ethics and professionalism of clubs in observing that players in contract can be forced to be either traded to another club or to take a salary cut, he states
“I wonder how someone who has never been exposed to the AFL trade system would view this process. No doubt the conclusion would be that ethics and professionalism are not necessarily a strong suit of the game”
He adds later that:
“many players have been faced with the realisation that their contract is not necessarily a deal the club wishes to honour”
Rob is referring to clubs in general, not necessarily EFC. However, it is fair to say for me personally the words did cut deep. I don’t like my professionalism or ethics brought into question, but I can understand how they could be under the circumstances of the trade this year. I have a lot of sympathy for the intent of rob Kerr’s words.
However my response to this is that as long as the environment remains so uncertain, and the rules subject to change, this behaviour is going to continue. Clubs and administrators simply can’t afford to be seen to exceed the salary cap even if the reasons are beyond their control. Because when they do, there is absolutely no sympathy or understanding on how that can happen. We’re not talking about the recent events of Carlton FC or even this club, and its actions in the mid 90’s, all of which were clearly a breach of rules.
We are talking about the consequences of contracts negotiated in good faith by both parties, based on a certain set of circumstances and expectations, that are then changed at short notice.
Clubs and players need an environment with a clear set of salary cap numbers and rules, with the knowledge they won’t change, for a period of at least 3 years. Then we can go about adjusting contracts in accordance with that environment, with professionalism and ethics.
Ladies &gentlemen, as members thank you for your support through the year. To the players thank you for their support over recent years. And to the management team and staff of the club, thanks for another great year.
May 2003 be a vintage year.
