The Wrap: Why rugby can’t rely on government intervention to save itself

Strange times like these throw up surprising twists and turns.

Without any current rugby to write about, Mark Ella in Saturday’s The Australian gratified readers with a humorous and revealing account of his multiple encounters with the Queen and Prince Philip. It made for delightful reading.

In the same edition, Ella’s ex-Randwick and Wallabies teammate Simon Poidevin shared his view on how the COVID-19 crisis will play out for Australian rugby. The context was an article by John Stensholt and Jessica Halloran, stating that Rugby Australia was “staring at a $90 million budget black hole”.

Before we come to Poidevin, it’s never helpful to start with a faulty premise.

If the effects of the virus continue for a whole year (Stensholt and Halloran provide no indication of their expertise in this area), then yes, it is possible that Rugby Australia’s revenues will be impacted to this degree.

But their alarmism doesn’t take into account commensurate reductions on the cost side. Clearly, if match-day revenues are down (revenue $20 million for the 2018 financial year), then direct costs for match-day operations, marketing, player payments and team costs will also be extinguished.

In fact, in such a 12-month stand-down scenario, it isn’t hard to find cost reductions in the tens of millions of dollars from Rugby Australia’s profit-and-loss account. Unpalatable for sure, and still subject to many variables (such as the extent of loss of sponsorships), but like any business, Rugby Australia will cut its cloth to suit its circumstances.

No doubt the dissection of various financial models will take centre stage at today’s Rugby Australia annual general meeting. Remember that a $5.1 million operating surplus for the 2018 financial year was already projected to be a loss for the 2019 financial year. This is because the years containing a World Cup involve fewer Test matches and thus deliver less revenue.

Nevertheless, even substantial deficits in the tens of millions across the next two financial years would be far removed from the bankruptcy scenario painted by many, particularly taking into account the potential for financial assistance from World Rugby that is lurking in the background.

One of the features of this global crisis has been the immediate, almost instinctive propensity right across society and business for people to turn to government to bail them out of their predicament.

This is understandable, although it will be interesting down the track to reflect back on events and discern if one outcome will be an increasing or decreasing propensity for business and individuals to rely on government, and to what degree.

Poidevin nailed his colours to the mast, not only suggesting that government money would be required to keep rugby afloat, but that “the government may also propose restructuring of the game”.

Simon Poidevin rushes to support Jason Little. (Photo by Barry Batchelor – PA Images/PA Images via Getty Images)

It’s an incredible proposition. Australia is going through its greatest national crisis since World War II and there is an expectation that government will provide resources and time to restructure rugby?

Poidevin’s motivation becomes clearer when he also states that it is time to “focus on club rugby in Sydney and Brisbane.” This is akin to subscribing to the notion to never waste a good crisis.

In other words, what the highly touted but hitherto unsighted Australian Rugby Clubs Association was unable to do – force primacy in Australian rugby back to the Shute Shield and Queensland Premier Rugby – government intervention around devastation caused by COVID-19 will do on its behalf.

With the rate of infections and deaths expected to continue to rise for some time yet, with poverty and severe mental-health issues a likely outcome for many, and with a business economy set to remain severely depressed for an extended period, it is fanciful to suggest that government will have any role to play in reshaping rugby to suit the interests of any group.

It is more likely the role of government will be a considered one. Not to react in a knee-jerk way to one-off requests from sports that are all bleeding, but to reflect more broadly the role that sport plays in society, both in terms of fitness and recreation as well as its ability to bring people together in a positive way around a common purpose. To aid the healing, as it were.

In this sense, sports will be considered similar to the arts – another area that broadly provides enjoyment and focus for a large percentage of the population. Another area, too, where employment has been decimated.

Expect to see money not doled out to national bodies to fund professional clubs and competitions, but targeted to ensure that community clubs and state bodies are able to ensure that junior and grassroots structures are healthy enough to resume, so that the fabric that underpins sports participation in our society resumes as close as possible to where it left off.

Ironically, it is possible that – depending on the severity and length of the crisis, and the extent of travel restrictions afterwards – proponents of a domestic solution for Australian rugby may get some of what they want.

(Photo by Mark Kolbe/Getty Images)

The main argument against a domestic solution is that a national, semi-professional competition, or an elevated Shute Shield, would not contain Australia’s best players. But if those players were no longer afforded the same opportunities to play overseas – through travel restrictions or through a sharp reduction in salaries available – then that obstacle is potentially removed.

A domestic competition suddenly becomes far more enticing if it contains all or most of Australia’s leading players, which in turn opens up possibilities for Super Rugby to become domestic-based or conference-based, with the potential for international play-offs. Where that would leave Argentina is only one of many potential hurdles for SANZAAR to overcome.

Even so, things are not as simple as what some people might think. What proponents of a club-based solution in Australia have never (or refused to) come to grips with is the distinction between professional and amateur rugby, and the need for both separation and co-existence.

Even under the most extreme doomsday scenario, when the pandemic eventually passes, global professional rugby will still exist. And for young, aspiring rugby players in Australia and elsewhere, making a living from the game will remain a desirable pursuit.

Therefore, for as long as Australia remains in international competition with New Zealand, South Africa and northern hemisphere nations, then it must compete with them in whatever arena applies.

In last Monday’s column I stated that the ability and intent of World Rugby to play an important role in ensuring that the game remains secure in all of its main global markets should not be underestimated.

As if on cue, World Rugby’s international federations executive committee and professional game committee met that night, with a view to devising and proposing a process to mitigate the consequences of the ongoing pandemic.

The following press release explained how: “This includes detailed financial risk assessment and modelling and examining opportunities to optimise the rugby calendar and its value for all across the international and club environments when it is safe and appropriate to resume rugby activities.”

In short, the home unions will look to share revenue from the November Test schedule – normally theirs to keep – with the southern nations, whose own home Test matches and revenue source has been lost. It is another ironic twist that Australia was this year due to host Ireland, typically a popular, big-drawing nation.

(Cameron Spencer/Getty Images)

World Rugby is estimated to have made a profit of A$332 million from last year’s Rugby World Cup. It has stated that its priority, in light of this crisis, is to ensure the ongoing viability of its tier-one nations. If it is able to broker increased levels of co-operation between nations who are all bleeding (north and south), and potentially provide additional cash by way of unsecured, no-interest loans (or similar), then the damage will be minimised, and the need for national unions to go cap in hand to governments and bankers reduced.

The global situation places into sharp focus the decision last year by Italy and Scotland to scupper the proposed global nations league – an initiative that would have delivered A$12 billion for rugby over 12 years, without the need to relinquish any control of the game.

While this initial proposal is dead, given that CVC has not yet stepped into the breach and taken equity in the international game, there will no doubt be interest among many nations in resurrecting a global solution that derives strength in numbers, and which would help insulate the game against events like this pandemic.

It is this global fellowship, mocked by Sydney Morning Herald journalist Malcolm Knox a few weeks ago when he sneered at rugby’s “international pretensions”, that potentially provides Rugby Australia with a comparative advantage over the primarily domestic NRL and AFL.

Those sports generate far higher revenues than rugby in Australia, but they are also more highly geared, have far greater numbers of highly paid participants, and are more heavily reliant on domestic free-to-air TV networks and Foxtel, all of whom are suffering acute financial stress.

It is indeed ironic that for Rugby Australia, for the first and only time in the professional era, there was competitive tension around the broadcasting rights issue process. Now it remains to be seen who will be around to bid, when the dust settles, and what will be offered to the broadcasters by way of content.

One thing for certain is that those who criticised Rugby Australia for refusing Fox Sports’ initial offer need to think again. This health crisis, which is also a financial and economic crisis, is also a technological tsunami.

A society where increasing numbers of people work remotely is something widely understood to have been coming at some point in the future. It is no longer a gradual transition. Rather, change is being thrust upon us faster than we could ever have imagined.

Subscription television is just one of hundreds of business models whose day of reckoning has arrived much sooner than anticipated. Fox and Kayo are today bleeding subscribers and advertisers, and with unemployment tipped to skyrocket, even when the virus passes, it is fanciful to expect people to be lining up again to pay $130 per month for their service.

Further, all of the News Corporation media’s efforts to talk down the value of rugby’s rights have been proven to be wasted breath. COVID-19 achieved this on its own.

The barbs thrown at Rugby Australia CEO Raelene Castle are also shown to be wasted.

(AAP Image/Daniel Munoz)

Even if Castle had managed to negotiate and sign the deal of the century, it would now be off the table anyway. Force majeure clauses are being tossed around like confetti in the business world.

COVID-19 is greater than all of this. Only when there is a clear path forward – for the broadcasters and for rugby – will positions be able to be reset, parties able to consider what it is they are dealing with, and an arrangement struck.

In the meantime, rugby fans are left to cherry pick from whichever old classic matches they care to enjoy. My favourite so far has been to relive the magic of All Blacks fullback Christian Cullen. His career highlights make for breathtaking viewing. The crowning glory was his 1997 try against the Wallabies at Carisbrook.

Others might elect to take in the musings of Michael Cheika, who suggested last week on Fox Sports’ League Live that Australian rugby players might now begin to switch in increasing numbers to rugby league.

It was an interesting thesis, although for anyone curious to understand why this might be the case, Cheika’s words provide little clue as to why.

“As we become a bit more entrepreneurial, I think there might be a bit more cross-over back the other way going forward as (rugby) league’s looking for a different edge. And obviously league’s going to change its shape as well, I imagine, over the next little while with what’s happening (with the coronavirus pandemic).

“There could be some players going back the other way – or sharing, hybrid games. All those types of things are on the cards going forward.”

Feel free to leave a comment below to explain what that all means – the rest of us will be eternally grateful.