From World Cup glory to a financial precipice. Where did the $48 million go?

By Piccolino / Roar Rookie

Rugby Australia (RA) has just released its 2023 Annual Report,  posting a $9 million loss and revealing an equity of negative $13 million.

Back in 2003, RA was sitting on $35m equity following a successful home World Cup.

Where did this $48m go? And what can we learn for the future?

Rugby Australia’s revenues are growing

Since 2001, RA revenues have grown from $58m to $124m in 2023.
However this growth hasn’t been smooth, with the 2013 Lions tour giving a revenue injection of nearly $50 million, while COVID-19 cut revenues by $45 million in 2020.

But given revenues are (slowly) rising overall, the real story is where the money was spent.

Rugby Australia (and clubs) overspend then bank on future paydays, flying ever closer to the sun

As revenues increased, RA expenses also rose from $51m in 2001 to $130m in 2023. By 2008, the $35m World Cup ‘war chest’ had already fallen to $8m.

This was primarily due to offering an additional $2-4m each year to member unions, a $5 million write-off for the Australian Rugby Championship (ARC) in 2007, and increased Super Rugby (SR) and Wallabies high performance funding as teams expanded.

Despite this investment, RA revenues remained flat for the next decade, before the sugar hit of the 2013 Lions tour.

Having spent the World Cup windfall, spending continued to climb from $69m in 2010 to a peak of $130m in 2017.

Most of the cost rises were linked to an increased $285m broadcast deal signed in 2015, of which SR clubs were entitled to a portion, and much of the remainder funded the National Rugby Championship (NRC) until it folded in 2020.

The 2017 RA Annual Report also cited ‘unbudgeted funding of $28m to Super Rugby clubs over the past five years’, which set off a chain of events leading to RA removing, then reinstating, the Western Force in Super Rugby.

All this spending left no buffer to cope with a COVID-19 revenue collapse, leaving RA (and many SR clubs) in a vulnerable financial position.

Based on previous earnings, the 2025 Lions tour and 2027 World Cup can get RA on a level footing to pay off its current $80m loan. However, they are unlikely to provide another war chest that underwrites the future of the game.

Rob Valetini consoles Nick Frost after the Wallabies went down to Wales at the 2023 Rugby World Cup. (Photo by Hannah Peters/Getty Images)

One area where spending has remained low is community rugby. Funding cuts have seen player counts decline from a high watermark in 2016 of 273,000, to around 185,000 in 2023.

In 2001, RA invested 12% of revenues ($7m) in community rugby. This fell as low as 4% of revenues in 2017 before recovering to 9% ($11m) in 2023.

So where does this leave us? In releasing the 2023 Annual Report, the CEO advised he will ‘set up a sustainable financial model’, aligned to a new broadcast deal in 2026.

How might a sustainable model look?

Fundamentally fans want to see wins, tense matches, local rivalries and quality play. Poor Australian performances and poor turnouts suggest these needs aren’t satisfied by SR Pacific.

If spending cuts are necessary to keep RA and clubs afloat, this would further erode competitiveness with New Zealand teams.

Alternatively, the 2021 SR AU grand final turnout of 40,000 suggests crowds would support a domestic competition with salary cap. This offers all of the above wants, although may reduce quality of play.

Could an end of season NSW/QLD/Rest-of-Australia State of Origin series boost quality for fans, and Wallabies connections leading into the test window? Or could this offer three strong teams to compete with New Zealand teams in an end of season tournament?

If player budgets were to tighten, would the Wallabies need to call up more oversees players to maintain performance? With tight funds, any solution will have trade-offs.

Pathways must not be forgotten

While RA and clubs must contain spending, it is promising in 2023 to see increased investment in community rugby, as this is where we find our future players, coaches and fans.

Career pathways also need expanding, but we are at risk of reducing to four SR clubs and ARC/NRC has repeatedly been found prohibitively expensive.

Could an October start to the competition be a cost-effective solution? Byes and night matches would be needed during the heat of summer, but emerging players could get game time in Spring before Wallabies return for the Autumn run into finals. Could this also increase club revenues and attract NRL spectators in their off season?

RA’s financial reports tell a 20-year tale of declining performance, participation and finances. But where there is shadow there is sunlight.

RA can do more than hope for increased broadcast revenues. It can work with the community to reassess opportunities and find solutions that ensure the success of Australian rugby in the future.

The Crowd Says:

AUTHOR

2024-05-03T21:16:23+00:00

Piccolino

Roar Rookie


I see your point. I still lean towards expanding SR AU with a shorter SRP at the end, over having SRP followed by NRC because: - SR AU will be of a higher standard given they will be professional rather than semi-pro. It allows a higher level of training and resources. - SR AU would be cost recovered. As I said below, I think both approaches add an extra tier but it is a matter of how you structure it. That said I do agree funds could be found from replacing the current pathway system, and I like the community focus with NRC that is hard to replicate in a professional tier.

AUTHOR

2024-05-03T21:06:29+00:00

Piccolino

Roar Rookie


Yeah agreed. Already AU teams basically play home and away domestic matches and a single match with each NZ side. It wouldn't take much to restructure this to have a domestic comp and SRP single round comp. Then expand the domestic portion from there.

2024-05-03T14:33:46+00:00

kingplaymaker

Roar Guru


I see-an interesting perspective. To be considered. Thanks for the reply and the discussion.

2024-05-03T01:46:35+00:00

AndyS

Roar Rookie


Ideally both of course, but realistically more and better players going into SR. WRT crowds IMO the primary audiences should be recognised as different too. The NRC should be community based and very much the culmination of the season, and at least some of it should still feel like club rugby. Some of the games I went to did that well, with families, kids and dogs walking around, the kids running around on the field in the break and after the match, and people meeting the players up close. Whereas SR is that professional separation, controlled and secure event type of thing, for people who mostly don't consume any other form of rugby and have no alignment to the community. The more overlap the better obviously, but that'll only happen if the NRC offers a completely different feel and experience to SR. But the money is an issue, for sure. I personally can't see us ever getting what is really required without a major structural reform of rugby in Australia, and even then elements of the amateur game will be as big an obstacle as the professional game. But I do think there is also a lot of money wasted at professional level doing inefficiently things that would be better done at the top of the amateur level. I wonder if you added up all the money spent at SR level on academies, extended playing and training squads, and the programs directed at turning amateurs into professionals, how much the number come to across five teams. And whether even half that money might do a better job of getting all those players and more 80% of the way there, while the other half could then be much better focused on the players mist genuinely likely to make it.

2024-05-02T23:14:24+00:00

kingplaymaker

Roar Guru


Ok, that makes sense then. Assuming a more developed grassroots game are you thinking more in terms of 1) More/better players produced or 2) Bigger crowd numbers? I’m uncertain of the panacea of grassroots and also cautious of its cost.

2024-05-02T23:08:41+00:00

AndyS

Roar Rookie


That is not quite what I said. What I said is that no form of Super rugby will succeed without that base underneath it. We can have a domestic comp, and if that is all we have above amateur rugby it will be NRC level at best. We can contemplate all manner of ‘SR’ comps, but they either will not be SR standard, or Australia will struggle to be competitive without that base underneath it. . What you keep proposing are single layers of professionalism because that is all they can afford…its what we’ve got now, and it doesn’t really work, but no such comp will regardless of how much glitter is sprinkled on it. We can change the standard of the comp to make one level work for us, and that level will be at NRC standard. Or we can change the number of levels to ensure the upper level comp meets the desired standard, which needs more than just a couple of those NRC standard teams playing a couple of extra games, or a couple of ‘All-Star’ exhibition matches. But there is no magic bullet to make one level also the ‘SR’ standard we’re wishing for. It worked once upon a time, but everyone has moved on and Australia has stood still.

2024-05-02T21:42:21+00:00

Rugbynutter

Roar Rookie


What I don’t understand with super rugby being such a short season why they don’t have a short single round domestic super rugby competition leading into cross border or after cross border super rugby competition with say Fiji included. Surely that would get much needed revenue but lower costs as not paying extra wages. The squad players could surely cover the wallabies who can’t play..ok may need to recruit some extra club players but still.

2024-05-02T14:51:15+00:00

kingplaymaker

Roar Guru


For some reason the reply I try to send keeps producing an error message. 'You mention that the form of Super rugby could succeed with a different base underneath, Alas I'd doubt that. Every country with a remunerative and popular presence of the sport has a national league. They may also have an international one as well but the main competition is domestic. The only successful exception is Ireland, which plays only in an international league but is largely popular because the team wins. Wouldn't things be ok if Australia won you might ask? Well, then New Zealand would lose, fans in New Zealand would stop watching and Super rugby would be in trouble. That's the problem with Super rugby-if one country's teams are on top the others must be losing. It's inherently unstable. A national competition means that Australian teams always do well and win a trophy. You can have Trans-Tasman as well with the same number of games as now, but you need a national competition. I'm not talking about my own interest here but objectively what the fans demand to see.

2024-05-02T14:49:25+00:00

kingplaymaker

Roar Guru


For some reason the reply to this particular post isn't working.

2024-05-02T09:55:11+00:00

AndyS

Roar Rookie


I guess we'll see what actually constitutes 'overhaul'. If they are so dumb as to follow RAs lead, we'll, at least we can look forward to their company in the rankings soon and the Bledisloe might become a thing again. Of course, when you have something to sell, things like this also happen... https://www.stuff.co.nz/sport/350202405/npc-unions-land-new-partner-move-away-nz-rugby Will be interesting to see if NZR looks to step back or step up, but I can't picture anyone in Australian rugby having any sort of discussion like this... https://thespinoff.co.nz/sports/19-08-2023/is-the-npc-still-fit-for-purpose-three-questions-with-a-provincial-rugby-ceo Gives a good sense of what they think differentiates the two levels though.

2024-05-02T08:09:17+00:00

Micko

Roar Rookie


But even NZ can't afford their third tier setup Andy! Not only have they sought outside financial assistance (Silver Lake), but now they seem determined to overhaul their whole NPC setup.

2024-05-02T02:33:46+00:00

AndyS

Roar Rookie


And increasingly, neither do the derbies. What is failing isn't the specific arrangement of SR, where it would all come good if only we could just find the magic arrangement of deckchairs. It's the fundamental structure of the sport. Whether people like the arrangement or not, they can shuffle the chairs all they like, even spend all their money on decorations, but it's not going to matter when they've neglected hull maintenance...

2024-05-02T02:14:46+00:00

kingplaymaker

Roar Guru


'Super rugby isn’t the cause.' But this means that it isn't a major problem and that in itself it's attractive to the public. You make an interesting point about community rugby but it seems at this stage very much to be in the nature of a long-term solution. But with total crowds that are sometimes less than a single NRL crowd, it would be unlikely to work quickly enough even if it did. Also, there are presumably two results of it you're thinking of. Better players and bigger crowds. The first could follow but the NRL is stealing everything right now and there's no reason it wouldn't take them, and it's not clear why the second would eventuate even if the players stayed. Super rugby is based on the idea that playing New Zealand clubs is something fans love. They also don't care that there's no national trophy. It doesn't matter what I think personally of this but it just doesn't seem to appeal to fans.

2024-05-02T01:11:18+00:00

AndyS

Roar Rookie


Super rugby isn't the cause. A total reliance on Super rugby is the problem, and will be the problem for any future version on which they rely totally. At is most basic root, the problem stems entirely from the implicit belief that the entire sport should be run for the benefit of the professional game. As long as that is the case, it'll never have money and will just keep sliding.

2024-05-02T00:33:52+00:00

kingplaymaker

Roar Guru


Sure, but clearly RA has little money. We’ve seen that much in evidence this past week as never before. They could fund community rugby more and it might produce more players unless they weren’t snapped up by the NRL the moment they appeared as well. But to get the money back they’d need to have a more popular format than Super rugby. It just isn’t popular and doesn’t pay. It’s inescapable that there’s no solution to the problem Super rugby causes than to do something, whatever that is, about Super rugby itself.

2024-05-02T00:25:11+00:00

AndyS

Roar Rookie


And that is the rub. NZ fund their provinces, which funds those local HP programs, including the NPC, with that local community as its primary audience. Australia doesn't meaningfully fund community rugby, and tries to impose an NRC that is a pale imitation of SR, for the primary benefit of SR, trying to engage the same audience as SR, with a weakened version of SR. In essence it just doubles down on what doesn't work, but at least it is cheap. Because as everyone knows, the cheapest solution is always the absolute best solution in the long run... Although having amateurs playing a little bit more amateur rugby would also be pretty cheap. As is nothing at all, but looked at globally that is looking less cheap by the year.

2024-05-01T23:40:56+00:00

kingplaymaker

Roar Guru


This all sounds useful and if it's as free as you say then why not.   But I don't think it will make a viewing public who have profoundly rejected Super rugby became enamoured of it. I don't know if you remember John O'Neill's proposal by the way. Best of the best from Shute Shield and Hospital Cup to use existing identities. Now obviously that's not very national.

2024-05-01T23:25:02+00:00

kingplaymaker

Roar Guru


'A couple of one off seasons didn’t, but are you arguing that the Curry Cup and NPC “don’t make much difference?”' Who can say if they do or not? It's impossible to compare because Australia is in the unique situation of having 17 NRL teams each with the budget of RA devouring its youth talent pool. Who knows how it would be otherwise. But I'm not against the third tier if it's free. Maybe it works. My point is more that it can't rescue the popularity of the game which has flagged for other reasons to do with the second tier.

2024-05-01T23:10:32+00:00

AndyS

Roar Rookie


Part of the problem KPM, is that we see the NRC as different things. You think of it as just a place for SR players to get more game time, to fix the lack of skills they have due to limited HP development before entering a fully professional environment where there are a million and one competing priorities for their time. And to be fair, that does reflect the very top-down focus of the NRCs to date, being SR Lite. . Whereas IMO, and I suspect Piru’s too, what the NRC needed to be was primarily an introduction to professionalism for the developing players and a hard focus on speed and skills, trying to fix the lack of skills before it becomes an issue and ensure that the ones picked for SR are actually the right ones and to make the transition easier. It would also give established professionals somewhere better to continue playing during the off season, certainly better than sitting on the couch. It would also make them more accessible to the public, put them into leadership positions, and probably also involve them in mentoring the developing players. No doubt there might also be some local stalwarts of the game, not quite good enough for that last step but great team men, examples and teachers. But the main focus would always be on the best local players, representing their community, first and foremost. And for those that have made the jump to professional ranks, the community they were developed in themselves, and maybe their last true ‘club’ before it simply became their job.

2024-05-01T22:48:14+00:00

piru

Roar Rookie


There were third tiers before and they didn’t make much difference. A couple of one off seasons didn't, but are you arguing that the Curry Cup and NPC "don't make much difference?" Third tier isn’t quality opposition. It's higher quality than club, which is the point. We currently send club players up against seasoned All Blacks and hope for the best. Then wonder why we fall behind

More Comments on The Roar

Read more at The Roar