Simply the best

Brisbane Broncos CEO Paul White

Long feted for their stellar on-field performance, the Brisbane Broncos club has been recognised as the best in the business off-field as well. In an exclusive BRW survey of rugby league chief executives, the Broncos club topped the table in management of talent and brand – two crucial elements for winning in the business of sport (see “How we did it”).

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When Broncos chief executive Paul White joined the club in January 2011, however, the picture of the perfect club was in tatters. The Broncos had missed the finals in 2010 for the first time in 19 years. With a background in mining, plus a 17-year career as a policeman and a long history playing and coaching rugby league in country Queensland, White was the ideal choice to put the shine back on the Broncos. One of his first plays was to swiftly dump underperforming coach Ivan Henjak.

Retiring Broncos captain Darren Lockyer

What drives White is exactly what his rivals noted when voting the Broncos as having the best business management – his desire to be the best. It’s a philosophy any business can learn from. From his seven years in mining, including project management roles with Xstrata’s zinc operations in Mt Isa and most recently as the human resources manager for Anglo American metallurgical coal in Australia, White brings a notion of “continuous improvement”. In a hoarse voice, a result of the Broncos win at Suncorp Stadium the night before, he talks passionately about how he wants to push the Broncos further.

Observers and rivals are quick to point out there are a number of historic and structural factors that greatly assist the Broncos. But what separates the club from the rest is how it has been managed to take advantage of them.

Broncos is the only stock exchange-listed club in the National Rugby League, with a market capitalisation of $33 million and Nationwide News as a majority shareholder. Founded in 1988, it was the first Queensland club and is still the only club in Brisbane – a city that is as pro-rugby league as they come. These points are not lost on NRL CEO David Gallop, as he puts the clubs’ success in context.

“They are one of a number of well-run businesses in our game but they certainly have a great history behind them,” Gallop says. “They are a one-city model and they have the strength of being a publicly listed company.”

Rival Cronulla Sharks chairman Damian Irvine says that while the Broncos have the image of being a “well-funded glamour club” and have had a monopoly on talent from the sunshine state for much of their history (until the arrival of the North Queensland Cowboys and Gold Coast Titans), they are also extremely well managed.

“There are examples of wealthy clubs that, unlike the Broncos, sit towards the bottom of the league table despite their well-funded models and wealthy histories,” he tells BRW.

David Hala celebrates after scoring a try

It would be anathema to White to become one of those clubs, so he attacks his job with a focused, yet simple plan. While his players are judged on fancy footwork, heavy hit-ups and try-saving tackles, he plays for bums on seats.

On a whiteboard in his office, which overlooks the Broncos’ training ground in suburban Brisbane, there are blue and black jottings of his three focus points for the organisation – membership and ticketing, commercial (including sponsorship) and football. “It’s a relatively simple business model,” he says.

The most significant revenue generator is membership and ticketing. White says his key challenge is to convert the average home crowd of about 35,000 per game to fully paid season members. “We’ve made some big improvements this year,” he says. “We’re over 14,000 in terms of our ticketed membership but we’d like to drive that number to 20,000 next year.”

Increasing ticketed membership numbers is how clubs avoid revenue fluctuations. Anything from a losing streak to wet weather or depressed economic conditions can influence the number of fans that flow through the turnstiles on game days. Taking their money upfront for the season is a much better plan. “For any business, the more control you can have over your revenue streams the better it is,” White says.

The Broncos’ average home crowd is among the highest in the league and so it should be, as the only team in Brisbane. However, it has fewer members than South Sydney Rabbitohs (19,000) and St George Illawarra Dragons (18,000) and it can’t ignore that Australian Football League (AFL) clubs such as Collingwood and Essendon put the NRL to shame when it comes to both membership and crowd numbers. Collingwood has more than 70,000 members and lure crowds of more than 60,000 to the Melbourne Cricket Ground throughout the season.

White is not put off by the numbers. “Probably in the AFL [membership has] been part of the fans’ DNA for some time,” he says. “I think that’s the great opportunity for our game. I don’t see it as an area of underperformance, I just think we’re probably at the start of a journey.”

In the first instance, White is focused on retaining current members and reducing membership churn. “It is much easier to sell to those who are with us,” he says.

To increase membership, White and his team are delivering education, marketing campaigns and incentives focused on price, flexibility and the benefits of memberships. “There was no greater example of membership benefits than our two final appearances, [when] members were given the first option to purchase the best seats on offer prior to them going on sale to the general public,” White says.

“In sell-out matches, such as our final home game against the [Manly Warringah] Sea Eagles, our members are guaranteed their reserved seat locked away at the start of the season.”

In line with White’s quest for continuous improvement, Broncos staff members went on a study tour to the US during the 2010-11 summer off-season and took in the spectacle of the National Football League.

“In the mining industry, once you’ve reached a benchmark level of performance, you’re then looking at what is the next level,” he says. “If you can’t find that level of performance within your industry you look wider, internationally.”

White says the main difference is “in the US, game day is an event from the time fans turn up in the car park”. Pre-game entertainment, food and beverage and merchandise sales are massive compared with NRL games. In the US, there are many more opportunities for clubs to derive revenue, even selling tickets for post-game press conferences. It’s a whole new ball game.

“That was a huge learning experience for our people to see the way [the NFL] put it all together,” White says. “We’re probably some way from there but that’s the sort of benchmark we need to be thinking [about] and our strategies need to be taking us in that direction.”

As well as the NFL, White is looking at strategies of European football clubs.

English Premier League club Manchester United – estimated by Forbes magazine to be the most valuable sporting entity in the world, worth about $US1.84 billion in 2010 – takes advantage of its large supporter base by making announcements and producing content on its website as opposed to delivering news via mainstream media. Driving traffic to its website delivers another revenue stream for the club.

Although the Broncos don’t command a supporter base quite the size of the Red Devils, they have begun testing the water with their own content, such as Broncos TV. And White proudly announces that Broncos have the most Facebook fans of any NRL club. He is also impressed with English rugby league club Warrington Wolves’ initiative to travel to Australia in 2012 to play pre-season matches – a revenue and brand driver for the club.

Gerard Beale attempts to break through the defence

While sport can offer a glamorous lifestyle, as a business, margins can be tight. Broncos had a net profit of just under $1 million in 2010-11. “For a sporting club, that’s recognised as a good result,” White says, but adds, “our gross margin is about 5 per cent, which is razor thin. Running a sporting club is a tough business.”

No doubt his contemporaries would agree. In the 2009 season, Broncos were one of only four clubs to make a profit. That turned around in 2010 with eight profitable clubs and six incurring losses (and two undisclosed), although many of the profitable ones relied on grants from their licensed clubs that turn losses into minor profits. Many rugby league clubs struggle to diversify their revenue streams away from financial propping up by their licensed clubs, which is mainly from poker machine revenue.

“Modern times have seen the traditional leagues club-funded model become a less reliable financial foundation to build a future on for rugby league clubs,” Cronulla’s Irvine says. “Broncos put in place a far more commercial structure early in their history and this has seen them well positioned in the current climate compared with clubs that rely on the leagues-club model.”

As well as a culture of innovation and continued improvement, White works to long-term goals instead of being sidetracked by the short-term goal of winning week to week.

“It’s not simply a case of saying you win games and your business is going to be strong,” White says. “I think if you take a view that it’s a singular priority, that’s when you do lose focus.”

This can mean making and supporting unpopular decisions.

In June, Broncos were set to play Canberra Raiders at home. New head coach Anthony “Hook” Griffin – an old friend of White’s from their playing days in Rockhampton – decided to rest five star representative players due to their State of Origin commitments. A number of others were given extended periods off to recover from injury. Then, on game day, the weather was miserable.

The resulting crowd of just over 20,000 was well down on the Bronco’s average of about 35,000. White estimates each increase of 5000 fans at a home game leads to about $100,000 in net profit and with a full team on the field they could have attracted up to 10,000 more spectators.

The fans were unhappy that the best players weren’t playing and the decision affected profitability but it was part of the long-term strategy for the players’ welfare over the season. Now at the pointy end of the season, the decision may have been a contributing factor to the Broncos’ staying power to correct 2010’s poor result and reach the semi-finals in 2011.

Also, the Broncos’ strong ladder position at the end of round games meant they played two extra revenue-raising home finals, which drew crowds of about 50,000. So despite the unpopularity and short-term financial impact, the decision led to a more profitable long-term outcome.

Another area where the organisation’s long-term vision is illustrated is talent management. The club is recognised as having one of the best development programs in the game but it doesn’t come cheaply. About $1 million is spent each year on an elite development program for juniors, paying five full-time staff to identify and mould about 40 young men (14-18 years) into talented young Broncos.

The cost is equivalent to about 4 per cent of the company’s $26.6 million revenue – and more than net profit – a point that is not lost on head coach Griffin. “[The cost] has hurt over the years,” he says. “When I first got here two or three years ago, it had been going for two or three years and there were questions saying do we really have to keep paying this.”

It’s an expenditure line that Griffin is ready to fight for because there is “light at the end of the tunnel”. He reaches for a nearby copy of Big League magazine and counts down the playing roster from the previous night’s final round game.

“We’ve finished equal second in the competition, two points off a minor premiership, with 10 out of the 17 players having come through our development program . . . eight of them are 22 years or younger, as well,” Griffin says, in a way that suggests he’s made the point to the club’s board or bean counters before.

The business-minded coach (he used to run his own financial planning business) notes that the talent coming through the development program is cost-effective, too.

With Broncos-ready juniors coming in on minimum salaries, it’s more like a job with yearly pay increases, Griffin says. While some junior players will advance up the pay scale more quickly, such as winger Jharal Yow Yeh – who was playing for Australia in his second year in the NRL – for most, the salary they receive is not equivalent to the glamour money paid to big-name signings. Where the Broncos are lacking specific positional players, there is more cap left to go out to the market and buy talent.

Young sensation Jharal Yow Yeh gets a pat on the head from future Broncos captain Sam Thaiday after scoring a try

White and Griffin have a good working relationship – their conversations are familiar and peppered with “mate”. Although White expects to be consulted, he elects not to play a significant role in decisions surrounding the playing squad. Equally, despite his many years as a coach, White is not tempted to stroll down to the locker room at half time and get in Griffin’s ear.

“I coached and played for 20 years but I’m not here to smell Dencorub,” White says.

When he was announced as CEO, the sports media lauded White as a “genuine rugby league person”. There is no doubting his love for the game – “I wish I could have continued to play forever,” the former centre says – but it’s no longer his job to worry about the team winning each week.

Instead his gaze has shifted from the field to the gates. Although it would have been a fairytale end to his first year in the job to see retiring captain Darren Lockyer hoist the grand final trophy, for White, his goal is “to see a sold-out stadium”.

“Everything that I’ve read and learnt from sporting organisations is that those who are successful, they sell out their venue.”

BRW

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