Rugby’s Broadcast Deal and The Possible Fallout

Raelene-Castle-Adressing-media

If you’re a Rugby fan or even just a casual Rugby observer, then you’ve no doubt heard about Rugby Australia’s search for a new broadcast deal. Rugby Australia (RA) has taken the broadcast package out to the open market. There’s reported interest so far from Fox Sports (given they already put a figure to RA last year), Optus and the Ten Network (who currently broadcast Wallabies games on free to air).

Now amid the growing COVID-19 pandemic, the cancellation of all sport, RA announcing they’ve put on hold any negotiations regarding the broadcast deal and reporting a provisional loss of $9.4 million at it’s most recent AGM. It might be a good time to look at the possible implications once (if) we return to normal. Assuming broadcasters still have money to spend once we get through these unprecedented time.

The last broadcast deal from Fox Sports was reported to be worth $285 million over 5 years back in 2015 ($57 million per year).  RA declined Fox Sports initial offer which was somewhere in the realm of $50 million per year. Somewhat disappointing for both sides given there’s a 25-year history between the two organisations.

The interest from Optus is reportedly worth  $30 million per year. While the interest from the Ten Network has no reported figure. It is believed that a deal with the Ten Network would not be exclusive and may not include a cash component. Allowing for a hybrid pay-tv and free to air deal.

This type of deal has the potential to put more eyes on the sport. The risk? Taking less money may diminish the quality of the product by almost halving the contributions to the teams.

What do the finances look like for Australian Super Rugby teams?

According to annual reports available from the Waratahs (2018), Brumbies (2018 & 2019) and Reds (2018) I am yet to get a response from the Melbourne Rebels in regards to theirs. The average revenue for a Super Rugby Franchise is $19,955,896. Of that figure on average RA contributed  $7,550,947. However, it appears this figure is tiered based on the teams finish from the year before with the brumbies receiving roughly $9.2 million (in 2019) and $8.5 million (in 2018), the Reds receiving $7.5 million (in 2018) and the Tahs receiving $5.5 million (in 2018). The numbers indicate that $30 million is distributed to the clubs and the remaining $17 million is kept by RA. Or, roughly a 70/30 split of the funds. If we now apply those splits to $30 million (instead of $57 million) those numbers look drastically different.

Now that we know 70 per cent of the broadcast revenue goes to the super rugby clubs. We can make an educated guess based on the numbers above on how much each team will receive.

Instead of having $30 million to play with the clubs now have $21 million to split between them. If we split that evenly it works out to be $5.25 million each. Or $2 million less than the previous 5 years. However, knowing there’s some kind of tiered system approach, if we simplify it slightly and assume the team in 1st earns 30% of the figure ($9.2 million is roughly 30% of $30 million) and work backwards it could look something like this:

1st place – $6.3 million (30%)

2nd place – $5.6 million (26.6%)

3rd place –  $4.9 million (23.3%)

4th place – $4.2 million (20%)

What does this mean for Australian Super Rugby teams?

At those numbers, there isn’t a single Australian Super Rugby team who would be able to survive as they’re currently constructed. Each team would have to attempt to wipe $4-6 million off their books.

For many teams, this will mean letting a significant portion of the playing group go and attempting to sign players at a much lower rate or, at the minimum for a standard player contract. Additionally, many of the professional staff who aren’t managers (marketing, media, gameday operations, commercial sales and operations) and the high-performance staff (assistant coaches, assistant S+C coaches, assistant physios) will all be laid off and/or made redundant.

Sadly, the community Rugby space probably takes a bit of a hit with many development staff having to be moved on. One possible solution in this space is to rely on the clubs to provide rugby development in the state under the guidance of a development manager. It will be much cheaper for the state bodies (providing some funding to each club rather than paying their own staff) and gives clubs some ownership of the pathway.

Speaking of pathways almost all of those programs will get cut. Junior Academies and Senior Academies in particular given the staff who run these are among the first to be stood down.

What does this mean for Rugby Australia?

With rugby Australia’s cut which is now only $9 million. Unfortunately, this will mean pretty significant layoffs to an organisation that’s already stretched incredibly thin.

Secondly, competitions run and funded by RA will be cut. Goodbye NRC, Goodbye JRC, Goodbye Super W, Goodbye Junior Gold. I know what you’re thinking… Hey Liam what about 7s? Won’t that be effected? Actually, it won’t, 7s is funded predominantly by Sport Australia as an Olympic sport, additionally (for women) the pathway competition The Aon Uni7s series, is funded by Universities and thus isn’t as reliant on RA funding.

Usually, when an organisation is going through a reactive change, first people to go are the marketing, PR and media staff. Additional cuts will come by getting rid of any casual and event staff. Then, they’ll start to look at all the other programs and program staff that they run (many of which were mentioned above).

Lastly, players will probably be forced to take huge pay cuts. Probably somewhere in the range of 30-50%.

Final Thoughts

You might be reading this and thinking that the future of Rugby in Australia looks bleak. Any notion that Rugby will be anything like its current iteration is certainly ludicrous. However, ill ask you this question. How often in life/sport/business do you get an opportunity to completely tear it down and start again? We have an opportunity now to look at everything we got right and wrong. Then, rebuild the game in the image of what’s best for the game.  Hopefully, allowing Rugby to re-emerge as a better more sustainable product.

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