Review of the Registered Clubs Industry in NSW - Clubs NSW

6 Strengthening the financial viability of the registered
clubs industry
6.1 Key findings on clubs’ financial viability
In examining clubs’ financial viability, IPART looked at what clubs earn and what
they spend. It also considered the indicators of an individual club’s financial
viability and signs of financial distress, and examined how clubs’ viability varied by
size. In addition, it considered the reasons why some clubs are prospering while
others are declining. Its key findings are discussed below.
6.1.1 Most clubs are heavily dependent on gaming machine revenue
A typical club generates most of its income by offering gaming machines, food and
beverages, and other sporting and entertainment activities to club members and
guests. In a submission, ClubsNSW identified gaming machines as the predominant
source of revenue for clubs. 89 It indicated that, on average, gaming machines account
for 63.2 per cent of a club’s total revenue, while bar and food revenue account for
16.6 per cent and 7 per cent respectively. 90
The extent to which clubs rely on gaming machines differs according to club size.
For larger clubs – those with gaming machine revenue greater than $10 million a year
–this source of revenue accounts for 76.9 per cent of total revenue. For smaller clubs
– those with gaming machine revenue between $0 and $200,000 a year – this source
accounts for 10.2 per cent of total revenue. 91
Once the costs of providing club services and activities are met (eg, the costs of goods
sold, wages and other employee expenses and taxation), the net profits generated are
used to make these services and activities affordable and accessible to club members
(ie, many clubs provide services and activities to members for free or at a discounted
rate). The net profits are also used to enhance or expand the club’s facilities, provide
sponsorships and make donations to related sub-clubs (eg, junior sporting clubs, RSL
activities), and to provide community facilities and support.
In terms of profit, ClubsNSW highlighted that, on average, gaming machine profit
accounted for 174.6 per cent of a club’s profit. That is, for every dollar of profit
generated by the club, gaming machines contribute $1.74 and the remaining activities
make a negative contribution of $0.74. This demonstrates the extent to which gaming
machine revenue subsidises other club activities. 92
Table 6.1 summarises ClubsNSW’s data on the sources of revenue and profit for
registered clubs. IPART’s analysis of its case study clubs supports this data.
89 Based on data from ACG, Socio-economic impact study of clubs in NSW (2003), 2003.
90 ClubsNSW submission, 4 April 2008, p 26.
91 ACG, Socio-economic impact study of clubs in NSW (2007), 2008, p 17.
92 ClubsNSW submission, 31 July 2007, pp 98-99.
Review of the Registered Clubs Industry in NSW IPART 87