Australia
Players fear ARU not acting in Australia's best interests
Greg Growden
November 20, 2014
Nothing attracts Australia's Super Rugby TV audience quite like an Australian derby © Getty Images
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The Australian Rugby Union is hoping for a considerable financial boost from its new broadcasting deal, but still it will not be flush with funds. The ARU is understood to be close to finalising a broadcasting deal with Fox Sports Australia, which could see the code receiving around $A40 million per year; this compares well with the current deal of $A25 million per year, but some insiders argue the new deal, which starts in 2016, may be closer to $A30 million per year - in which case, the ARU, which has already intimated that it may be insolvent by early 2015, is in enormous financial trouble. ARU officials have been eager to take credit for any increase, but the reality is that any substantial boost in the broadcasting deal fee will be due to overseas content - in particular from Europe. Sky Sports in the United Kingdom is the major source of the increase, and high-ranking television sources have told ESPN that Australia's involvement, in particular the role played by ARU chief executive Bill Pulver, has been "minimal". ARU sources, meanwhile, have told ESPN that a great deal of the anticipated extra television rights money - around $A8 million - is required to "balance the books". This includes around $A3-4 million for the ARU to continue propping up the ailing Melbourne Rebels organisation. The Rebels, who are looking for a new private owner after the departure of Harold Mitchell, have for some time been a major blot on the ARU financial landscape. Any money left over will then be required to keep the Australian Super Rugby franchises on side, as their ARU funding has dropped dramatically in recent years. After being around the $A4.3 million mark for each province in 2011, the funding has collapsed by around $800,000 per Australian team. The situation whereby Australian rugby continues to be short of cash deeply concerns the Australian Rugby Union Players Association (RUPA), whose officials believe fervently that better planning would have averted this problem. As a senior rugby official said this week: "It is like watching a train wreck about to happen." RUPA officials, meanwhile, are underwhelmed by the SANZAR decision to expand Super Rugby from 15 to 18 teams in 2016, with new sides from South Africa, Argentina and Japan. There is confusion how much these three new teams will receive from the SANZAR coffers, and whether it will cut deeply into Australia's revenue stream.
RUPA officials argue the confirmed tournament expansion is dreadful for Australian rugby, spelling out their argument in intricate detail in a 100-page report that was presented to the ARU before the SANZAR decision. RUPA commissioned the report, titled 'Strategic Review of Super Rugby Competition Models' from the consultancy firm Global Media and Sports, and ESPN has obtained a copy of the report. The report says: "If the ARU were to support the currently proposed Super Rugby competition model … then they would arguably not be looking after the best interests of Australian rugby." The report argues that the new format will lead to a slide in TV ratings, match-day attendances and interest in the competition in Australia; hence the report suggests the new format of the competition will prompt increased financial losses for the Australian Super Rugby provinces and the ARU. RUPA, instead, argued that a 10-team Australasian conference, involving just Australian and New Zealand teams, would have been a smarter option for Australian rugby, and more financially viable, as it would entice, rather than turn off, local viewers. The revamped Super Rugby competition sees the Australian teams player one less home game every second season, which is another major concern. The franchises rely heavily on the home gate, and one less home match will hit them hard; it could easily determine whether they make a profit or a loss for the season. The revamped competition will also reduce dramatically the number of Australian Super Rugby derbies, which the RUPA-commissioned report says "are critical for the financial viability of the Australian Super Rugby teams, in terms of attendances, sponsors, merchandising". The report, which emphasises that the Australian professional football market is saturated with 47 teams from four different codes, includes a quote from Clyde Rathbone player to push its argument. The former Brumbies and Wallabies winger wrote for Fairfax Media in March that: "Supporters want to watch matches that connect them with human struggles - few things bring about this struggle better than contests between bitter rivals. So it's concerning that SANZAR has mooted reducing the derbies that form the lifeblood of Super Rugby in Australia."
The report continued: "RUPA has material concerns that the SANZAR Super Rugby competition model has not been comprehensively analysed either as a business case or with respect to fan engagement. The competition model may also have a detrimental impact on New Zealand Rugby as well. Data advises that Australia and New Zealand Super Rugby TV ratings would increase by up to 48% (Australia) and 55% (New Zealand) if an Australasian Conference model was adopted." The report includes figures of Australian Super Rugby live pay-TV ratings between 2010 and 2013, with Australian derbies attracting the highest ratings of around 115,000. By contrast, games featuring Australian teams playing New Zealand teams in Australia produced ratings of around 97,500; games featuring South African teams playing in Australia produced ratings of around 85,500. Australian teams playing New Zealand teams in New Zealand produced average ratings around 84,750, while Australian teams in South Africa attracted a paltry 19,750. The report also stressed it was "imperative" that Super Rugby in Australia involved "free-to-air coverage in suitable time slots to maximise the game's exposure". The report said: "Without free-to-air coverage, rugby's growth will forever be limited by the penetration rate of pay-TV in Australia." The report delved into Australian rugby's parlous financial state, describing it as "an erosion". "One of the principal reasons for the degeneration of the game's finances has been the game's inability to provide a substantial and sustainable mix of products to the Australian sporting marketplace. Another principal reason is the limited investment into Super Rugby either by the ARU, the Super Rugby teams or external investors, as compared to the AFL, NRL and A-League."
Queensland Reds are Australia's "only" profitable Super Rugby franchise
© Getty Images
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The report referred to a 2013 financial report commissioned by the ARU, which highlighted the "perilous position of the ARU, with a forecast negative cash balance in 2015" and showed consolidated losses for Super Rugby around $A15 million per annum. There was an estimated negative ARU cash balance in 2015 of $A6 million. "Australian rugby is now at the point where it appears that the only Super Rugby franchise that is profitable is the Queensland Reds, with the Rebels being a significant loss maker. The current financial position of the other three franchises is quite challenging, especially with the position of the Waratahs and the Western Force continuing to decline quite dramatically. However, after community rugby investments, all Super Rugby teams are in loss. "The impact of the decline in revenues, over nearly every year for the past six years, excluding the Lions tour, on the Australian rugby economy, has been further exacerbated more recently by rising costs to the addition of an extra franchise. These declining revenues have also been responsible for an under-investment in the future of the game through the reduction in community and state rugby payments and a substantial reduction in working capital. "Australian rugby's perilous financial position is reflected in the fact that it is now the fourth-ranked football code in Australia … it trails the other football codes in participation, audience and broadcast revenues. The A-league is now a larger TV sport than Super Rugby. "Television audiences in Australia are higher when the Australian teams play at home, with the Reds being the standout, and the Waratahs has the largest potential TV market. While the Rebels' financial performance is very poor, its TV ratings are higher than the Western Force. Attendances are also decreasing in Australia and New Zealand. South Africa continues to be a standout. "One positive statistic is that the Wallabies, especially against the All Blacks and the Lions, continues to be 'must watch' TV." The report also delves into the Australian player drain, arguing that "the ARU needs to seriously consider the adoption of a more realistic and flexible approach to player selection and contracting in order to accommodate the impact of the international player marketplace." © ESPN Sports Media Ltd
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