Using your logic almost every club in world football has gone bankrupt at some stage. Sporting clubs are almost never profitable, they are supported by wealthy individuals and consortiums for various purposes. 

Like saying what would happen to the premierleague if both Manchester clubs, liverpool and all the big london clubs went down a division..... simple, the 2nd division will be watched more! oh and it would never ever happen.

If we followed BL model then it would work this way:

The licence is issued to a Company.
The company is owned by a Club (minimum 51%) and other investors up to 49%.
In the application for the licence, the finances to operate for the next year have to be fully apparent (Real cash money).  Licence is renewed annually.
If the company goes bust it loses the licence but the Club continues to exist.  
Clubs are owned by their members.

Follow this model for all Clubs wishing to compete in the A League and A2 League. 
To play in the 2nd division you have to be set up just like this.  It should actually be much easier for them. They are clubs already.  SMFC could do it easily.

The real problem is for the existing "clubs".  Taking a problematical one as example - Brisbane Roar.
Initially they were set up just the way I am talking about.  They (Lions) formed a company, got a licence, brought in moneyed backers.

Because of (so we are told) bad financial deals with grounds etc the Club could no longer fund the licence.  The licence was handed back.  In this case the licence was re-issued (sold) to a new company, but one without a Club behind it.  At this point the Company had no affiliation with a real club any more. The system broke.

The answer?  Brisbane Roar the company, has gradually been led by necessity to start building a real Club by default.  It could/should finish the job.  Launch a real club, with real members and genuine community roots.  It's by no means impossible.   Would the Bakries or any other owners do this? 
Actually I believe they would.  The Club itself becomes a risk owner in the company, positively contributing real funds and real members (customers).
The members get something.  They get a real club that can negotiate with a new owner, investor, or whatever to take on that part of the Company that owns and controls the licence. They are a real entity that represents something.  People would actually care.  For the investor the Club are the customers and it is in the interest of the investor to see it grow and prosper.  Win stuff even.
The Club doesn't just fold (like GC United) if an investor shoots through.  The owners of the company (club and investors) get a return for effort and money spent.

Victory could do this easily and I believe WSW and Adelaide would have few problems.
The one that needs reform the most would probably push back against it the hardest - Melbourne City.  Or they might not.

Won't work in the foreseeable future.  Not enough money in a low pop massive continent where football is not the dominant sport, does not get massive hand outs from govt or bonanza like TV rights, where all sport is struggling for growth anyway against new forms of entertainment and where there is little community connection with most of the teams (cos they are new or cos historically they have tiny followings). 

Plus all the other problems mentioned by others above.  IMO most of the posts supporting pro rel simply ignore the problems and really just want it because  if we had a country with heaps of well supported (by people and sponsors) teams it would be great. Sure, but that's not the reality.

#ProRel has got to be good for #OzFootball long term but it needs a viable 2nd tier of 16 before it begin climbing the step to @A-League #longWhiteCloud

Plenty of new teams and owners want to play in the A-league. THEY SHOULD BEGIN THEIR LIFE in the lower tiers. Earn your way to the A-league. 

agree.  there needs to be an immediate expansion by 2 teams at least.  but after the next teams there should be promotion only from the 2nd tier until the top division reaches capacity.  then full p/r after that.

Please!
Enough claptrap.
Promotion and relegation will be a good thing for Australia, BUT NOT because of all the rubbish spouted by people who are blindly wedded to the idea.

What does the evidence say.
Will it bring bigger crowds?    NO-  With smaller teams, the average crowds will be lower across the league.
Will it bring more interest to the league from outside football?      No- people that don't care now, won't care about new smaller teams in a second division.
Will it make the season more exciting?      Meh, to some it will, to some it won't. There will still be many dead rubbers between mid table teams that there is no danger of being relegated. There will still be 'early' finishes where the teams being relegated/promoted are known many, many weeks before the end of the season. Of course, we have a similar situation at present with "finals" and that hasn't driven a huge surge in interest.
Do we already have a form of it?      YES. The stupid finals system we already have can be viewed as form of promotion/relegation. Finish in the top 60% of the league regular season and you are promoted to the finals. 
Will it encourage investment?       NOT unless it is fully professional. We already have NPL clubs trotting out excuse after excuse about why they won't go fully professional. If they don't want to be professional now, moving up a league is not going to entice them. Some will be happy to spend just enough to avoid relegation and finish lower mid table. If you are a cautious investor, you will likely NOT invest if the team can be relegated to lower division.

All in all the usual guff trotted out by Eurosnobs and plastic NPL fans is NOT reason to bring in promotion and relegation.

Now don't get me wrong, I would like to see promotion and relegation with a fully professional second division and having promotion and relegation between the 2 divisions, but not due to the false claims made by some.

What form of P & R do I support and why?
I support a fully professional league of 2 divisions, because this will allow young players to train and play full time and will bring about an exponential growth in the standard of football and the standard of our young players coming through. A fully professional 2 division league will also be more attractive to outside investors who don;t have to fear being relegated out of that structure. I support P & R because it rewards sporting achievement.

For me, those are reason enough to support a limited type of P & R.

Heard Andy Harper on the radio on this issue. He said that we need a second division but, in his words, "...Need to kick the second division down the road"
As far as Harper is concerned pro/rel should NOT be an agenda item for the new FFA board.

Realistically even if a 2nd div was up and running tomorrow, Pro/Rel would be at least 5 years away to allow clubs time to establish themselves and adapt to the professional enviroment

When it comes isn't that important. What is important is that there is a plan in place. If it's 5,10, 15 years down the track, that's fine, but there needs to be a clear and strict timeline. Nobody is going to work towards achieving it if there is no timeline. The current FFA have never planned anything, so nothing has happened. Simple as that.

Nice post. Makes sense to me.

There is promotion/relegation at almost every level in Australian football. It works in our local league, works in our NPL (not my preferred way). It can work from our top division, a second division to link the NPL’s to the A-League is the missing link to having a proper football pyramid.

A proper football pyramid was trialled and failed during the NSL era.

And that was with all the football kulcha at its disposal.

Well a closed system is failing now. Perhaps we should give up on football in Australia. 

I agree with SutherlandFan. We have an existing P&R system that people know. It's not a foreign concept. 

A stand alone closed off league was also trialed in the NSL and failed

Was the league structure to blame or those involved?

Many are good at pointing out what won't work but offer up no suggestions as to what will ?
Seems to me that the only people who get things done in life are those who are busy doing what others say can't be done .
I can remember in pre A-League days people saying we could never support a professional league ......guess what ? ....13 seasons and still going.

but the NSL did toy with promotion and relegation in some seasons in a haphazard way
in fact, there was one season when the NSL had 24 teams in the league

In split conferences. Never again.

Like the 5 years  MV, SFC, BR, CCM, Heart, GCU, NQ and WSW were given ?

It wasn't the Pyramid that struggled

In an era when they had no where near the amount of money that is floating around like now. We have 120 Million all up per year in football and its still not enough. 

Tis tough grieving the loss of Lowy family

If we are at some point going to have a full pyramid, aren't split systems/conferences going to be a must at some level? 

Lets assume that a 2nd div could actually afford the cost of travel all over the country to be a fully national 2nd tier. If there was P/R to a 3rd tier how does that work? no way a 3rd tier can be fully national is there? If we say its the NPL winner (just an example), what happens to the relegated team? where do they end up? in the conference/league that the promoted team came from or in their own original NPL 'conference'.

thats just one of the myriad issues that needs to be worked out before we can get to full P/R.

Have to say MarkfromCroydons post is seeming most logical and workable if any p/r is going to arrive any time soon(ish)

A fully professional second tier?

Is there though? And if there is does it work on senior first grade performance or overall club performance? Thinking of the last two versions of the NNSW NPL here. First off they had P/R based on first grade which led to teams only spending money on first grade and the ludicrous situation of a club being relegated from the NPL after most of their grades came in the top couple but first grade came last. Currently they do not have P/R between NPL agreements and participation in the NPL is based on factors other than team position in the previous season.
NSW NPL had club P/R based on overall performance but have now gone back to first grade only results.

At local level it works because each team can be promoted and relegated according to their own performance without concern about the performance of other age groups. 

The pyramid is based on constantly changing plans and positions.

Why are we going to have a full pyramid and how is it going to work?  I look at a recent success in growing elite football which is Japan and they don't have a full pyramid and they grew their system from the top down.  They have P/R between their professional tiers and the only way to get in those tiers is by bidding when either a vacancy or expansion takes place.  Similarly Brazil doesn't have a full pyramid.  Their national and elite state competitions are for professional clubs only and their is no link between the professional tiers and the amateur leagues in the states in the form of P/R.  The interesting thing with Brazil is that the national league system came only when modern transport made it viable and they have linked it to the professional state competitions but the existing separation of state professional and state amateur has remained in place.

I accept that some other countries do have full pyramids but the real question for us is what suits our situation best and how are we going to get there?  Personally I see P/R following the amateur/professional separation like Brazil as where we should be heading and I like the planned expansion of Japan which has both expanded their tiers and added tiers to increase the footprint of the professional game.

Another post making sense.

I'd like to see a 10 team league replace the youth league with Canberra, Tasmania, Geelong, Wollongong, North Queensland, Gold Coast, Brisbane II, Adelaide II, Sydney II and Melbourne III
$700k FFA handout ($7m) with each club to attract $500k sponsorship to operate at about $1.2m a year. Semi professional with no salary cap and a 3+1 rule
Only requirements are 5000 seater stadium with ACL lighting and facility requirements met, and $1m capital to prove serious
After 1 year, top 2 teams are promoted and become teams 11 and 12 (A League salary cap scrapped immediately). They will obviously receive $3m from FFA to help increased professional costs. They will already meet all other requirements
After 3 years there can be P/R. An unconditional 1 in / 1 out system. Most likely second tier club in, second tier club out unless A League teams really underperform in which case they shouldn't be in the league
The league can be paid for initially by a reduced payment to A League clubs as they don't have to field a youth league team anymore (and whatever pooled sponsorship it can muster, or even a small broadcast deal). When teams 11 and 12 are promoted they are paid for by the $7m expansion money
When we renegotiate we'll have a sensible and valuable model. No reason our TV deal couldn't double. Whatever small change the clubs use helping to get this off the round will more than come back their way later on

japans P/R system is way to go, imo.

The european leagues took 150years to get to where they are now.

The real issue is the FFA have no long term plan for anything.