Australian Rugby Union announced today that they will explore the potential for private investment in domestic Super Rugby teams.
Is this a wise decision?
The report from the ARU, where they announced a number of major strategic initiatives is provided below. The initiatives include supporting a dramatic transformation of Super Rugby and additional competition opportunities for Australian teams.
The ARU is also determined to tackle development challenges facing the code, with participation figures falling last year for the first time in a decade.
An injection of capital from the private sector at Super Rugby level – under tightly controlled conditions – is viewed as an essential next step in the game’s evolution.
The ARU “Strategic Imperatives”, endorsed by the Board on March 26, were detailed at the Annual General Meeting where a loss of $8.4 million was reported for the year ending 31 December 2007.
A reduced Tri-Nations series and a match program not as strong as the previous year contributed to a $4.8m downturn in gate takings, corporate hospitality and licensing.
Net broadcasting revenue was also down by $2.5m on 2006 due to a contracted schedule forced by the 2007 Rugby World Cup.
The major increase in expenditure was $5.5 million on the Australian Rugby Championships.
ARU chairman Peter McGrath said the Board was now committed to looking forward and growing the game at all levels.
“If we want Rugby to have a greater footprint in Australia, if we want to have a stronger competitive position against the other major football codes, then we need to advance,” he said.
“We need to push for an expansion of Super Rugby and explore the introduction of private equity, which has not previously been permissible under ARU policy.
“Private equity is not a dirty word. When managed correctly, it has been a major contributor to the success of various sports around the world.
“We are now a mature professional sport. It is time to look at embracing it.”
ARU Managing Director and CEO John O’Neill said the strategies to improve Australian Rugby’s standing both nationally and internationally had been extensively researched and discussed – starting with an internal three-day planning conference in January.
“Doing a bit better than we are at present is not enough,” he said.
“We have to do more than tinker. The challenges we face as a game have been outlined previously and with Rugby in a position to control its own destiny, doing nothing is not an option.
“We need transformation at the professional level, and that can be achieved through the injection of capital from alternative sources that have an affinity and affection for the game.
“Private equity, however, will need to be tightly controlled and controlled nationally to ensure enduring benefit for the code while also recognising the interests of equity partners.
“The ARU Board has unanimously endorsed these principles. ARU will now set up collaborative working parties with key stakeholders within the game to progress the process.
“There will be clarity as we move forward about the rules and the potential opportunities for Australian Rugby and its partners.
“ARU also has a Management working party considering possibilities for future competitions.
“Clearly, any changes to Super 14 require the agreement of our SANZAR partners and inevitably they will have their own ideas for change.
“We look forward to sharing an exchange of views.”
Mr O’Neill said an introduction of private equity, and the ensuing boost to the Australian Rugby economy, would assist all levels of the game not only the professional arm.
“We view this as an exciting opportunity for Rugby,” he said.
“Meaningful gains in youth participation and development right across Community Rugby can be achieved if the game overall has a broader financial base.”
Ian Noble
Guest
Judging from the English model, any investor in rugby must have money to burn, a massive ego and a passion for the game. For an investor to expect a reasonable return on his money will be kidding himself. Sheek I agree with you the strength and interest in the NH game are the national competitions with the bolt ons of the Heineken Cup and the EDF cup. Perhaps changing the Super 14 to 2 pools, (home and away possibilities)which would change each year, with the top two/four teams then playing a knock out phase, with a grand final. It would spice up the tournament along the lines of the HC. The strengthening of national compertitions would probably strengthen the spectator base as they will more readily associate with their local team.
sheek
Guest
Private equity in Australia rugby is inevitable. Indeed we were discussing the possibility in other threads. I would still prefer the Super format to be truncated & more emphasis given to a national comp. But obviously I'm a lone voice in this regard. Anyway, as O'Neill said, as long as private equity is rigorously policed, it's the way to go. Australian rugby can't generate more revenue without outside help (from business).
Midfielder
Guest
IMO ........ clever ............. and long overdue ............... will combine passion no one will put money in without having a passion for the game. ............... However to be able to invest I assume business smarts so the best of both worlds ........ passion with smarts .......... very good move IMO
Spiro Zavos
Expert
One of the problems with the marketing of elite rugby in Australia (to answer the question posed by Next Year!) and the high price of rugby tickets is that there are so few big-money games in each state. With the Super 14, for instance, teams will have 6 or 7 home games depending on what they had the year before. This is why it is imperative for Australia to have 5 teams, like South Africa and NZ. A Super 15 would mean that each side had 7 home games each year. I'd then like to see a second round played in each of the countries of each of the local teams playing each other for the second time (this is what Pro Netball is doing). That would mean another 2 home games. Then there should be a finals involving the top 6/7 teams. This would mean that there would be at least 9 home games, and probably 10 to 12 for the strong teams, almost double what happens now. With the 6 or 7 home games the Super 14 teams are very dependent on good weather, a strong start to the season and a crowd-pleasing draw to ensure their financial viability. This is why the ticket prices are so high. More games would mean lower prices, bigger crowds, and probably more revenue - a virtuous circle. But more games is the key. And if some form of sponsorship can help bring about the expanded tournament, with the ARU keeping things in check, then they should go for it. We are only into the 12the year of professional rugby and there no way the present business model is going to be the business model in 20 years time, let alone 10 years time.
Zac
Guest
Mudskipper - the Ebbsfleet model has the crowd voting on the team selection. So, yes, I think it's fair to say we can choose to drop Lote and / or bring back running rugby. Wouldn't that be nice...
Next year!
Guest
A good idea ? Hmmmmm ........well at least they are exploring it. Kento is right the cash situation has probably forced their hand - but is private equity really a short term soution which in effect has the potential to disguise a greater problem - the drop in crowd numbers and in turn popularity which we all know will open the cash gates again. One question I always ask myself is why are Rugby tickets always more expensive than the other codes (or is just me) ? A quick run over ticket prices for major games in AFL, RL, & the A League sees Rugby coming in close to the top of the expensive end. Could it be an idea to drop the ticket prices and go for the volume $ through the gates and then in turn leverage the greater crowd numbers (assuming they get them!) to the broadcasters and advertisers ? This is probably an age old question but you can't help wondering this when Rugby ticket prices are so high and crowds are down.
mudskipper
Roar Rookie
If we buy shares can we vote for the style of play at a AGM?
True Tah
Guest
Maybe private owners would improve the marketing situation we have with the Tahs, and maybe they could do something about getting games on FTA? How would the clubs like Sydney Uni, Randwick feel about this? It would definitely improve the management at the Tahs, and we would be able to stop the likes of Hoiles, G.Smith etc migrating to other provinces. Dont know if there would be many takers, I heard that some millionaire guy in NZ offered to purchase the Bay of Plenty side, but it came to naught.
sheek
Guest
Zac, Please accept my share of $1 towards fighting fund to takeover Force/Waratahs/Reds/Brumbies. Let's grab all 4 of them!
Zac
Guest
In light of the 'crowd-funding' phenomena as witnessed in the UK by Ebbsfleet United being bought and run by the fans (http://www.theroar.com.au/2007/11/15/ebbsfleet-a-hellish-vision-of-the-future/), this opens up the possibility of The Roar's crowd banding together to buy The Force / Waratahs, Reds or Brumbies. Any takers?
Kento
Guest
Will it be the "Investec HSBC Qantas Waratahs"? Will privatisation lead to the scenario in the UK where the owners won't let their players go for international matches? I'm not sure this is the best move; but perhaps their hand was forced by the cash situation.