Ruck'n Maul Special Report
ARU 'could run out of cash' in 2015
October 8, 2014
Australian Rugby Union chief executive Bill Pulver is banking on broadcasting rights revenue © Getty Images
The Australian Rugby Union (ARU) has warned its stakeholders of the serious threat that it could be insolvent by 2015.
ESPNscrum has been told by numerous high-ranking sources that a presentation at the ARU annual general meeting several months ago pointed out how Australian rugby was in financial strife. The presentation explained that an "unsustainable business model based on periodic windfalls" and diminishing revenue was "leading to insolvency in 2015". The ARU listed one of its key challenges for the next year as avoiding insolvency in 2015.
Earlier this month, a senior ARU official told colleagues of the fear that by April next year; the ARU "could run out of cash". A graph shown during the ARU AGM presentation indicated that revenue had recently decreased at a dramatic rate, after the board suffered combined losses in 2011-2012 of $19 million. Following a $143 million revenue figure in 2013, it was predicted to drop to around $100 million this year, with another substantial revenue slump predicted for 2015.
Due to the dire financial situation, the ARU has dramatically cut costs and lowered staff numbers, while chief executive Bill Pulver has placed enormous emphasis on attempting to improve its broadcasting rights revenue.
Earlier this week, it was revealed that Fox Sports Australia and Ten Network Holdings were expected to secure the local broadcasting rights for the next five years for around $175-200 million. The figure has been primarily generated by the ARU's share of a substantial increase in international rights, rather than from domestic rights. With Super Rugby ratings declining, and National Rugby Championship ratings embarrassingly poor, Pulver's plan to get Super Rugby on free-to-air TV is expected to fail.
The AGM presentation indicated there was "resentment and frustration" at national and provincial level, while "distrust" had affected Australia's hopes of success at various levels.
It indicated that one Super Rugby province required "substantial" financial assistance from the board. It is understood that the Melbourne Rebels have recently required around $8 million to be propped up.
To attempt to balance the books, staff costs have been reduced by more than $3 million, and operating expenses by more than $2 million, while the ARU has received extra funds by selling two additional end-of-season tour games - England (for around $3 million) and Wales ($1.5 million).
Plans to improve its financial position include reducing costs by several million dollars, pushing for private equity at provincial level, an office relocation and organising additional fixtures - including hybrid matches, a World XV game against the Wallabies and matches in Japan - next year.
The presentation also revealed that for 2013 it had given itself a mark of 80 out of 100 for fulfilling objectives. This included 45 out of 45 for certain administerial steps including achieving financial targets, and extra marks for being able to "re-launch the code".
Ewen McKenzie and Bill Pulver were all smiles as the former was appointed Wallabies coach in July, 2013 © Getty Images
However in the team performance category, poor on-field efforts by a variety of Australian teams forced it to give itself only five out of 25.
Winning the British & Irish Lions series, Bledisloe Cup and Rugby Championship would have each achieved five marks. However the Wallabies failed in all three areas, giving them an underwhelming nought out of 15. While the Australian women's sevens team failed to meet its required objective, the five points were achieved by the men's sevens team, which had to finish with a world ranking of six or better. They finished with an average of six.
It is not as if the ARU's financial woes have just suddenly been discovered. As ESPN revealed in February, provincial administrators were warned four years ago that Australian rugby was in danger of going broke unless drastic steps were taken- including the reduction of player salaries and Super Rugby grants. But the board, including now chairman Michael Hawker, appeared reticent to take harsh measures.
In February, ESPN obtained a copy of the presentation the ARU made to the Brumbies in 2010 which portrayed a grim picture, and explained in detail that "Australian rugby is in structural decline". The presentation indicated that sponsorship revenue had flattened out and gate takings were erratic while the Wallabies were struggling in the Test arena.
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