Stadia commercialisation

Money in Sport ConferenceMelbourne, Australia17-18 March 2015

Should sports own stadia?

1© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Topics for discussion

KEY TOPICS

The evolution of stadia

Stadia commercialisation and revenue opportunities

Development, ownership and operating costs

Should sports own stadia?

2© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Stadia have evolved significantly to meet spectatorand market expectations…

FROM THIS… …TO THIS

The primary place to ‘consume’ sport content1Just one of a range of alternative channels to ‘consume’ sport contentJust one live entertainment product in the increasingly competitive market for discretionary spend

3© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Stadia have evolved significantly to meet spectatorand market expectations… (cont.)

FROM THIS… …TO THIS

Suburban, single use venues in the ‘spiritual heartland’2 Centralised, multi-tenant/multi-use stadia

AFL/VFL1980 AFL 2015

4© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Stadia have evolved significantly to meet spectatorand market expectations… (cont.)

FROM THIS… …TO THIS

Simple facilities3State-of-the art facilities with a continued focus on new revenue streams, varied and emerging corporate products, differentiated seating, venue memberships, premium catering, spectator zones, ‘smart stadia’, etc.

5© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

The rise of the smart / connected stadium

Changing spectator demand - Online connectivity a ‘must-have’Better match day experience - Opportunity to further engage fansExtra revenue potential - New sales channels, new products etc.

Drivers of change:

Incremental revenues from a

smart / connected stadium

BENEFITS• Enhanced match day experience

• New sales channels

• New sponsorship opportunities

• Increased time spent at the stadium

• Monitoring of fan behaviour

• Increased fan loyalty

• Higher attendance

• Exposure to a wider audience

SOLUTIONS• Free Wi-Fi access

• Constant access to social media

• Smart cards

• Instant replays and videos

• Cashless payment

• Smart-phone applications

• Continuous ticket sales

• F&B sales channels

• Navigation system

6© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

The rise of the smart / connected stadium (cont.)

7© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

This evolution has been essential just to ‘stay in the game’

VFL / NSWRL AFL / NRLLeague expansion

Consolidation,commercialisation and

stadium investment

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

PopulationTo

tal a

ttend

ance

Total attendance

NRL AFL Population

19883 expansion

teams

19954 expansion

teams

1998Melbourne

Storm2007

Gold Coast Titans

1987Brisbane

LionsWest Coast

Eagles1991

Adelaide Crows

1997Port Adelaide

1994Fremantle Dockers

2011-12Gold Coast

SunsGWS Giants

15yr - 1.52%15yr - 0.78%

15yr - 1.11%

8© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Spend on sport and recreation is increasing, however, game day admission spend is decreasing relative to household expenditure

0

0.02

0.04

0.06

0.08

0.1

0.12

1984 1988-89 1993-1994 1998-1999 2003-2004 2009-2010

% o

f Ave

rage

Hou

seho

ld E

xpen

ditu

re

National Expenditure on Spectator Admission Fees

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

1984 1988-89 1993-1994 1998-1999 2003-2004 2009-2010

% o

f Ave

rage

Hou

seho

ld E

xpen

ditu

re

National Expenditure on Sport and Physical Recreation

0

2

4

6

8

10

12

14

16

18

1984 1988-89 1993-1994 1998-1999 2003-2004 2009-2010

% o

f Spo

rt an

d Ph

ysic

al

Rec

reat

ion

Expe

nditu

re

Expenditure on Spectator Admission Fees

Australia

Spend on game day admissionis failing to maintain pace with

household, and more specifically sport and recreation, expenditure

Major events (e.g. Olympics)appear to be the exception

9© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Complementary revenue

opportunities

Stadia commercialisation: revenue

Corerevenue streams

External revenue

opportunities

Club /museum facilities

Functions & events facilities

Residential real estate

Commercial precincts

Leisure services(e.g. sports

centre)

Hotel

Restaurant/ entertainment

precincts

Retail precincts

Other sporting events

Entertainment and cultural

events

TicketingCorporate hospitalityFood and beverage

Naming rightsSignage

Supply rightsVenue memberships

Third party

Core sporting calendar

10© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Stadia commercialisation: expenses

1 2 34 5 67 8 9

0 + -

$Management and administration$

Event days costs* (event staff, event security,cleaning, traffic management, etc.)$

Utilities$

Stadium maintenance$

Turf and grounds maintenance$

Insurance$

Cleaning$

Asset security$*Typically paid by hirer.

11© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Stadia commercialisation: the investment

Per seat build cost

$5k $10k $15k

FINANCE$240m@ 5% (risk free)=$12m annual interest repayments

$15m+ annual costbefore opening the gate or repaying principal

CONSTRUCTION30,000 capacity @ $8,000 per seat=$240m

CAPITAL REPLACEMENT$240m@ 1.5%=$3.6m annual contributions

+

12© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

The result: Majority Government investment in stadia

Limited private sector investment

Government investment, particularlyin Tier 1 stadia, on the basis ofeconomic and social benefits

High capital cost

Limited external revenue opportunities

Core and complimentary revenuestreams insufficient to generate a

return on investment after R&M andlifecycle asset replacement

+

=

0%2%18%70%75%80%91%93%100%100%100%100%100%100%100%100%

0% 50% 100%

Docklands StadiumStadium Australia

MCGSydney Showgrounds

Kardinia ParkCentral Coast Stadium

Gold Coast StadiumAdelaide Oval

GabbaLang Park

Robina StadiumSCG

Melbourne RectangularNew Perth StadiumPerth Rectangular

Newcastle Stadium

Stadium financing

Government Sports Other

Over $4bn spent/committed on stadia over past 15yrsAlmost $1bn in Government funding promises for next 5yrs

13© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

The result: Primarily Government ownership of stadia

WESTERN AUSTRALIA

Tier 1: 1Tier 2: 2

NEW SOUTH WALESTier 1: 3Tier 2: 11

TASMANIATier 1: 0Tier 2: 2

SOUTH AUSTRALIA

Tier 1: 1Tier 2: 1

VICTORIATier 1: 2Tier 2: 2 ACT

Tier 1: 0Tier 2: 2

QUEENSLANDTier 1: 2Tier 2: 3

TIER 1Government = 7

Non-Government = 2

TIER 2Government = 20

Non-Government = 3

14© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Sport ownership of venues – ‘Master of our own destiny’

KEY CHALLENGES

Club financial sustainability1

Prioritisation of on-field outcomes 2

Limited content3

Multi-use/multi-purpose access4

Australian sport is littered with failed sporting franchises –even without the financial burden of venue ownership.

History suggests sporting franchises with venue ownership/management responsibilities have tended to focus and invest in on-field outcomes to the detriment of good practice in facilities management.

In their own right individual sporting franchises are unlikely to have a sufficient event calendar (i.e. content) to support the cost of stadium infrastructure.Sporting bodies (e.g. the AFL/NRL/FFA) may have greater ability to secure content across a number of franchises/teams.

Sporting franchise venue ownership/management generates inherent issues for competitor teams/sports to secure ‘fair’ access to the venue.

15© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

‘Master of your own destiny’ – Be careful what you wish for…

Do we see scope for sports to own their stadium?

SPORTING BODIES

Maybe??

Greater access to content

Opportunity to tailor for the code

Spreading of risk across more than one team

But…Financial and capital risks remain high

Requirement for ongoing investment

SPORTING TEAMS

NO

Not core business

Significant financial and capital risk

Single team would have limited content

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. The views and opinions contained in the presentation / paper are those of the author and do not necessarily represent the views and opinions of KPMG, an Australian partnership, part of the KPMG International network. The author disclaims all liability to any person or entity in respect to any consequences of anything done, or omitted to be done.© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Australia.The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.Liability limited by a scheme approved under Professional Standards Legislation.March 2015

Peter BallPartnerKPMG Sports AdvisoryT. (07) 3233 9449E. pball@kpmg.com.au

kpmg.com.au