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SBD Global/March 5, 2014/Leagues and Governing Bodies

Australian Football League Looks At U.S. Sports To Find Best Revenue-Sharing Model

Australian Football League studies U.S. sports to find best revenue-sharing model.
Australian Football League CEO Andrew Demetriou said that a luxury tax on football department spending would probably put a handbrake on the rate of growth in this area. The AFL is currently working on a new revenue-sharing model to level the playing field between the league’s big spenders and its financially struggling teams. "[Clubs] are spending at such a rate that we need to find a mechanism to almost disincentivize them from doing that," Demetriou said. The AFL implemented a salary cap in ’87. However, the league’s salary cap, which is a soft cap, limits only the total player payments of a club and not its complete football department spending. This has led to calls for a separate cap on football departments or an overhaul of the league's salary cap in recent years. Demetriou said, "When you got a salary cap and clubs can’t spend any more on their players, they'll spend elsewhere on their football to get a competitive advantage." He told SBD Global that the process of reforming the league’s revenue sharing has been going on for 12 months so far, and there is still more work to do. In order to find the best possible solution for its equalization efforts, the league has gathered information on salary caps and revenue-sharing models from various int'l leagues, in particular U.S. leagues. Demetriou said that the AFL has collected information from the NFL, MLB and the NBA to get an understanding of how their revenue-sharing models work. All three leagues use different types of salary caps: the NFL is using a hard cap; MLB has a luxury tax; and the NBA is using a luxury tax in addition to a soft cap. While comparing and evaluating the various models, the possibility of introducing a luxury tax of some sort has gained support within the league and its stakeholders. “One thing that has certainly emerged, which has got a lot of support, is a luxury tax on football department spending other than players,” Demetriou said.

TALKS CONTINUE: Demetriou added that nothing has been finalized yet and talks about equalization measures continue. The AFL has set up a working group, which includes club presidents and CEOs and works in association with the league. The working group tries to come up with options and financial models and acts on behalf of the industry. "Our objective is to try and have something finalized by mid-year for introduction in 2015," Demetriou said. The final decsion on the issues lies with the league's independent board, the AFL Commission.
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