1. Bidding System Review - F/S and Academy May 2015

2. 2© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Background to the existing F/S and Academy Rules Father / Son ruleClub Academy rule The F/S Rule originated in 1954. The rule provides Clubs with priority access to the sons of ex-players for the purpose of preserving the important “father-son” tradition in our game. The F/S Rule has undergone many changes throughout recent years, some in relation to eligibility criteria and many in relation to the process by which an eligible player becomes listed by a Club. Prior to 1997: F/S players bypassed draft 1997: Clubs used a 2 nd round pick for first F/S player and 3 rd round pick for second F/S player 2001-03: Trialled one F/S player limit per year 2003: Clubs used a 3 rd round pick for first F/S player and 2 nd round pick for a second F/S player 2007: Current bidding system In 2007, given the increasing importance of the National Draft as a competitive balance measure, it was deemed that the F/S rule was delivering windfalls to clubs out of proportion to the best interests of the competition. The current bidding system was introduced to ensure Clubs paid something closer to “fair value” for players selected. The F/S Rule is very popular with fans and an important and unique tradition of our game. Despite the fact that it compromises the purity of the draft, the AFL believes the rule should be retained.  Introduced in 2009 for the four Clubs in NSW / QLD. At this time: o 11% of players on AFL lists came from NSW/ACT and Queensland, though these areas have 54% of Australia’s population; o the traditional recruitment model for recruitment in other codes was for Clubs to directly recruit children as young as 12; o this connection with local Clubs was a significant advantage for the other Codes in attracting first choice athletes and was actively promoted by these other Codes as such.  The AFL required an approach that would use the Club brands to enable our code to compete effectively to attract first-choice athletes, coupled with the opportunity for the athletes to then play in their home states.  Under the model, each of the four AFL Clubs would use partner with the AFL to identify, attract and develop players as young as 10 years of age, taking their development through to drafting age and growing the national talent pool in the interests of all AFL Clubs.  In return for their role, and as an important incentive for investing in their Academies. the four partnering AFL Clubs were given the opportunity to list eligible players under the same bidding system that applies to F/S eligible players.  The Club Academies were a key pillar in the AFL’s expansion strategy and. increasing talent outcomes in the NSW and Queensland markets remains a huge challenge and opportunity for growth of the game.

3. 3© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Issues with the existing bidding system The existing systemIssues  A bidding system is in place to determine which Draft pick a Club uses to secure a potential F/S or Academy player.  The aim of the bidding system is to provide Clubs with priority access to players while still ensuring reasonable “value” is paid in terms of the draft pick that is used.  The bidding system was introduced in 2007 following concerns about the fairness of the old F/S Rule which allowed Clubs to recruit eligible players at the fixed cost of a 3 rd round draft selection.  The bidding process takes place prior to the trade period as follows: o Each Club nominates the eligible F/S and Academy players they intend to select prior to the bidding process (“Nominating Club”). o In reverse ladder order starting with Pick 1, Clubs can bid for nominated players (“Bidding Club”). o If a bid is made for a player, the Nominating Club can match the bid with its next available selection to secure the player, otherwise the bidding Club will secure the player. o A Nominating Club can secure multiple players under this process. If its selection in a particular round has already been used, its selection in a subsequent round may be used to secure the player.  The existing bidding system is an improvement on past systems, however, it has become apparent that the system is arbitrary and inconsistent and fails to meet the goal of ensuring “fair” value is paid to secure a F/S or Academy player.  Under the current system after any bid is made, the required “price” for securing a player could fall at any one of the next 17 picks in the draft. Because of this, the Nominating Club may receive far too great an advantage in selecting a player. For example, it is possible for the Club that has won the premiership to receive the number one selection in the draft utilising pick 18. This is an outrageous windfall in itself, but if there was a second player bid for at pick 2, they would also receive that player for just pick 36.  The potential anomalies arising in the existing system were obvious from the outset. However, the view at the time was that this was an improvement on past systems and any luck one team may have would be viewed as part of the “swings and round-abouts” of the AFL competition.  However, the reality has become clear in subsequent years. The competition cannot tolerate a disproportionate advantage being given to one team over the rest: the “swings and round abouts” actually play out in premierships, finals appearances and wooden spoons.  A key issue is that these anomalies are only set to arise more frequently in future years as the Club Academies begin to regularly produce players.

4. 4© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. The new system has been finalised by the AFL Goals in developing a new systemThe solution  objective and fair;  works consistently across all scenarios including in extreme cases;  flexible enough to encourage and facilitate the listing of F/S and Academy players to Nominating Clubs;  provides a clear and transparent incentive for Clubs to invest in their local academies and to select F/S players. AFL, with the aid of the Player Movement Advisory Group examined many differing models for an improved bidding system. Finally, a system was chosen by the AFL that:  Assigns points to value each Draft pick  Updates the draft order when F/S and Academy players are selected  Applies a discount to encourage F/S selections and investment in Academies The new system is explained in the following pages

5. 5© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Assigning points to each draft pick The concept of a Draft Value Index  A key issue with establishing “fair value” in the current system is that there is no objective way to equate the value of one draft selection to another.  We have solved this problem by establishing a Draft Value Index (‘DVI’) which assigns a relative points value for each pick in the National Draft.  The idea for this came from published works on a theoretical mathematical model DVI. We developed this idea further using actual data relevant to the AFL  Points were calculated using statistical analysis of player salary data from 2000-2014 – an indicator of the relative ‘market’ value of players at each draft pick.  The methodology was reviewed in detail and endorsed by Professor Jeff Borland (University of Melbourne, Department of Economics)  In addition to academic sign off, on a practical level the DVI has been heavily “stress tested” by the Player Movement Advisory Group (“PMAG”), consisting of Club List Managers and General Managers of Football. We have found that the DVI is a good indicator of the general value of picks relative to one another and also agrees with trades actually executed by Clubs.  As described in the next section ultimately the points assigned by the DVI are used to create an objective, fair and consistent approach to valuing F/S and Academy selections. “Overall the construction of a DVI for the AFL National Draft is a high quality piece of work. It compares favourably with similar work that I have seen for international competitions such as the NFL and NBA. The methodology for constructing the DVI displays a solid knowledge of the literature on this topic and good judgment in its choices about the details of application to the AFL. Overall I agree with the main aspects of the methodology. The empirical derivation of the DVI has been done in a careful and highly competently manner, and obviously reflects a huge amount of work. Some aspects of the derivation of the DVI, such as the application of player salary data as a measure of player value, are best-practice and an improvement over methods that are commonly applied in other international sporting competitions.” Professor Jeff Borland University of Melbourne, Department of Economics

6. 6© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. AFL Draft Value Index graph Round 1Round 2Round 3Round 4 Raw data (AFL player salaries) AFL Draft Value Index graph R 2 of raw data = 74.82%

7. 7© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. AFL Draft Value Index Round 1Round 2Round 3Round 4Round 5 PickPointsPickPointsPickPointsPickPointsPickPoints 1 3,000 19 948 37 483 55 207 73 9 2 2,517 20 912 38 465 56 194 74 – 3 2,234 21 878 39 446 57 182 4 2,034 22 845 40 429 58 170 5 1,878 23 815 41 412 59 158 6 1,751 24 785 42 395 60 146 7 1,644 25 756 43 378 61 135 8 1,551 26 729 44 362 62 123 9 1,469 27 703 45 347 63 112 10 1,395 28 677 46 331 64 101 11 1,329 29 653 47 316 65 90 12 1,268 30 629 48 302 66 80 13 1,212 31 606 49 287 67 69 14 1,161 32 584 50 273 68 59 15 1,112 33 563 51 259 69 49 16 1,067 34 542 52 246 70 39 17 1,025 35 522 53 233 71 29 18 985 36 502 54 220 72 19 Examples of actual trades in recent years 2014, Geelong and Adelaide: Geelong 14 and 35 for Adelaide 10 and 47 1683 points for 1711 2013, St Kilda and Hawthorn: St Kilda 24 and 59 for Hawthorn 19 943 points for 948 2013, Collingwood and WCE: Collingwood 11, 31, 49 WCE 6 and 44 2222 points for 2113

8. 8© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Updating draft order and applying a discount The mechanism for updating the draft orderApplying the discount  Under the new system, the existing bidding system is retained whereby Clubs bid for F/S or Academy players in accordance with the reverse draft order. However, this will either occur live on draft night or shortly prior to the draft in order to reflect a far more accurate market value for each player.  The value of the bid determines the points that must be “paid” by the Nominating Club to secure the player.  In order to pay for the player, the Nominating Club’s next available pick move backwards in the draft order to the value of the points required.  If the points required are greater than the value of the next available pick, the remaining points are subtracted from the Nominating Club’s next selection and so on, until all points are paid.  If a Nominating Club does not have enough points to secure a F/S or Academy selection in a given Draft, the points required will carry over to the Club’s first selection the following year. o In this case, points will be deducted prior to the trade period to ensure the Nominating Club pays it points debt, rather than trades picks away. o Clubs will not be eligible to participate in the bidding system if they still owe points going into the next draft.  An incentive is required to encourage Clubs to invest in their Academies and select F/S players, however we do not want Clubs to receive too great an advantage for doing so, especially in early rounds.  A Nominating Club will be required to pay an amount of points equal to the discounted value of the Bidding Club’s pick to secure the player.  Developing the discount level has been a key focus. Important feedback in relation to the discount was: o it must incentivise investment in Academies and selection of F/S players; o the concept of “fair value” is most important in the early rounds; o in the later rounds it should be easy for Clubs to take a chance on F/S and Academy players so as to encourage these players being listed by the relevant Clubs.  In the first round, a maximum discount of 20% will be applied  The discount will then be fixed at 197 points (the discount for pick 18).  Structuring the discount in this way ensures: o “fair value” is paid in the early rounds o the listing of F/S players and local Academy graduates is facilitated in later rounds because the discount rises steadily from 20% in Round 1 to 100% at pick 56 (if a player is bid from this point, a Nominating Club need only use their last pick in the draft to list the player).

9. 9© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Example: Isaac Heeney – Swans had picks 18, 37, 38, 57 and 70 remaining Melbourne bids for Isaac Heeney at Pick 2 Sydney choose to match bid and select Isaac Heeney using their next pick 20% discount applied to value of Pick 2 – Sydney owe 2,013pts Pick 18 moves to back of draft and Sydney owe further 1,028pts – draft order is updated Pick 2 = 2,517pts 2,517pts x 80% = 2,013pts Pick 37 moves to back of draft and Sydney owe further 545pts – draft order is updated Pick 18 = 985pts 985pts – 2,013pts = (1,028pts) Pick 37 = 483pts 483pts – 1,028pts = (545pts) Pick 38 = 465pts 465pts – 545pts = (80)pts Sydney receives Pick 2 which they use on Isaac Heeney Explanation Process Outcomes Pick 18 moves to the back of the draft (Pick 88) Pick 37 moves to the back of the draft (Pick 88) Points are subtracted from Sydney’s next available pick, Pick 18 Points are subtracted from Sydney’s next available pick, Pick 37 Points are subtracted from Sydney’s next available pick, Pick 38 Calculations Existing Bidding System Proposed Additions to Existing Bidding System Note: Example is based on actual bid for Isaac Heeney, using Sydney’s available selections in the National Draft (rather than at the bidding) to show the outcomes if the bidding was incorporated in the National Draft. Pick 57 moves to pick 64 and no more points owed – draft order is updated Pick 57 = 182pts 182pts – 80pts = 102pts Pick 57 moves back to pick 64 Remaining points are subtracted from Sydney’s next pick, Pick 57 Pick 38 moves to back of draft and Sydney owe further 80pts – draft order is updated Pick 38 moves to the back of the draft (Pick 88)

10. 10© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Example: Darcy Moore, Collingwood, 2014 Bulldogs bids for Darcy Moore at Pick 5 Collingwood choose to match bid and select Darcy Moore using their next pick Maximum of 20% discount could be applied to value of Pick 5 – Collingwood owe 1,503pts Collingwood get Pick 5 for Pick 6 and no more points are owed – draft order is updated Note: Remaining 249pts are not used by Collingwood Pick 5 = 1,878pts 1,878pts x 80% = 1,503pts Pick 6 = 1,751pts 1,751pts – 1,503pts = 249pts Collingwood receives Pick 5 which they use on Darcy Moore Explanation Process Outcomes Collingwood give up Pick 6 Points are subtracted from Collingwood’s next available pick, Pick 6 Calculations Existing Bidding System Proposed Addition to Existing Bidding System Note: Example is based on actual bid for Darcy Moore, using Collingwood’s available selections in the National Draft (rather than at the bidding) to show the outcomes if the bidding was incorporated in the National Draft.

11. 11© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Example: Jack Steele, GWS, 2014 North bids for Jack Steele at Pick 15 GWS choose to match bid and select Jack Steele using their next pick 20% discount applied to value of Pick 5 – GWS owe 890pts Pick 23 moves to back of draft and GWS owe further 75pts – draft order is updated Pick 15 = 1,112pts 1,112pts x 80% = 890pts Pick 24 moves to Pick 27 and no more points owed – draft order is updated Pick 23 = 815pts 815pts – 890pts = (75pts) Pick 24 = 785pts 785pts - 75pts= 709pts GWS receives Pick 15 which they use on Jack Steele Explanation Process Outcomes Pick 23 moves to the back of the draft (Pick 90) Pick 24 moves back to pick 27 Points are subtracted from GWS’s next available pick, Pick 23 Remaining points are subtracted from GWS’s next pick, Pick 24 Calculations Existing Bidding System Proposed Additions to Existing Bidding System Notes: Example is based on actual bid for Jack Steele, using GWS’s available selections in the National Draft (rather than at the bidding) to show the outcomes if the bidding was incorporated in the National Draft.

12. 12© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Example: Billy Stretch, Melbourne, 2014 Adelaide bids for Billy Stretch at Pick 30 Melbourne choose to match bid and select Billy Stretch using their next pick Given bid is after pick 18, fixed discount of 20% of pick 18 applied – Melbourne owe 456pts Pick 38 moves back to pick 71 and no more points owed – draft order is updated Pick 30 = 629pts 629pts – 197pts = 432pts Pick 38 = 465pts 465pts – 432pts = 32pts Melbourne receives Pick 30 which they use on Billy Stretch Explanation Process Outcomes Pick 38 moves back to Pick 71 Points are subtracted from Melbourne’s next available pick, Pick 38 Calculations Existing Bidding System Proposed Addition to Existing Bidding System Notes: Example is based on actual bid for Billy Stretch, using Melbourne’s available selections in the National Draft (rather than at the bidding) to show the outcomes if the bidding was incorporated in the National Draft.

13. 13© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Example: Jack Hiscox, Sydney, 2014 Fremantle bids for Jack Hiscox at Pick 33 Sydney choose to match bid and select Jack Hiscox using their next pick Given bid is after pick 18, fixed discount of 20% of pick 18 applied – Sydney owe 366pts Pick 62 moves to back of draft and Sydney owe further 242pts – draft order is updated Pick 33 = 563pts 563pts – 197pts = 366pts Pick 69 moves to back of draft and Sydney owe further 194pts to be paid back in 2015 – draft order is updated Pick 62 = 123pts 123pts – 366pts = (242pts) Pick 69 = 49pts 49pts - 242pts= 194pts Sydney receives Pick 33 which they use on Jack Hiscox Explanation Process Outcomes Pick 62 moves to the back of the draft (Pick 93) Pick 69 moves to the back of the draft (Pick 93) and Sydney owes 194pts in 2015 Points are subtracted from Sydney’s next available pick, Pick 62 Points are subtracted from Sydney’s last available pick, Pick 69 Calculations Existing Bidding System Proposed Additions to Existing Bidding System Notes: Example is based on actual bid for Jack Hiscox, using Sydney’s available selections in the National Draft (rather than at the bidding) to show the outcomes if the bidding was incorporated in the National Draft.

14. 14© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Example: Zaine Cordy, Bulldogs, 2014 Fremantle bids for Zaine Cordy at Pick 52 Bulldogs choose to match bid and select Zaine Cordy using their next pick Given bid is after pick 18, fixed discount of 20% of pick 18 applied – Bulldogs owe 49pts Pick 61 moves back to pick 66 and no more points owed – draft order is updated Pick 52 = 246pts 246pts – 197pts = 49pts Pick 61 = 135pts 135pts – 49pts = 86pts Bulldogs receives Pick 52 which they use on Zaine Cordy Explanation Process Outcomes Pick 61 moves back to Pick 66 Points are subtracted from Bulldogs’ next available pick, Pick 61 Calculations Existing Bidding System Proposed Addition to Existing Bidding System Note: Example is based on actual bid for Zaine Cordy, using Bulldogs’ available selections in the National Draft (rather than at the bidding) to show the outcomes if the bidding was incorporated in the National Draft.

15. 15© Australian Football League 2014. This document is confidential and intended solely for the use and information of the addressee. Next Steps