Australia

ARU knew extent of financial problems in 2010

Greg Growden

Bill Pulver has faced a tough first year as ARU chief executive © Getty Images Enlarge News: Pulver warns of receivership without change Features: Australian rugby shooting itself in the foot

Provincial administrators were warned four seasons ago that Australian rugby was in danger of going broke unless drastic steps were taken - including the reduction of player salaries and Super Rugby grants.

But the Australian Rugby Union (ARU) board, including now chairman Michael Hawker, appeared reticent to take harsh measures, and Bill Pulver has said repeatedly in the past year, his first year as union chief executive, that the Australian game remains in financial trouble and cuts are required to avoid potential "receivership".

ESPN has obtained a copy of the presentation the ARU made to the Brumbies in August 2010, which portrayed a grim picture. New South Wales Waratahs, Queensland Reds, Western Force and various state officials were involved in similar presentations so they had "a clear appreciation that Australian rugby is in structural decline". Melbourne Rebels were not involved, as they did not join the Super Rugby ranks until the following year.

The presentation provided details on how the game between 1997 and 2009 had lost considerable ground to Australian football, rugby league and soccer. Rugby had risen above soccer to be Australia's third-most popular football code in 2000 and 2002-2004, but now it lagged well behind, the franchises were told in the presentation. The presentation indicated that sponsorship revenue had flattened out and gate takings were erratic while the Wallabies were struggling in the Test arena.

The presentation forecast a substantial drop in revenue at the Waratahs and the Force, indicating the Perth franchise would run at a considerable loss each year between 2011 and 2015. It showed that Wallabies television ratings and Test crowd attendances had both declined by an annual rate of 5%, and that Super Rugby attendances were in decline. The Reds were the only province to have enjoyed a rise in crowds.

ARU officials told their provincial and state counterparts at these presentations that player salaries had to be slashed in order to improve Australian rugby's position. The ARU board, in April 2010, had endorsed a plan whereby it would attempt in the Collective Bargaining Agreement negotiations with the Rugby Union Players Association (RUPA) that year to "reduce player salaries as a proportion of revenue". This despite the fact that such a move "may have an impact on on-field performance and attract negative publicity".

The plan also said the code had to be "customer-oriented - enthusing fans, sponsors, hospitality customers and broadcasters" by focusing on improving rugby's entertainment value. As important was the plan to make "Super Rugby the most exciting professional code in Australia", improving Australian rugby's depth of players, and being more focused on Sevens football.

Michael Crawford accused Australian rugby in August 2011 of "behaving like most Western government in recent decades, i.e. spending more than it earns, and using the central body to supply the extra funds ... unfortunately for this approach, unlike national governments, ARU has zero ability to print extra dollars"

The plan stressed that the ARU would have to cut back on distributions to the provinces, and that grants had to be limited "to what ARU can afford". The presentation also emphasised that "private investment" at provincial level was "imperative".

A year after the presentation, the ARU received another reminder that important measures were required. Michael Crawford, a management consultant who was then adviser to the ARU, provided in August 2011 a "helicopter view" of the code's problems to union management. "The overall market share position is a sad one and clearly shows a state of relative decline," he wrote.

Crawford said that Super Rugby innovations and the inclusion of the Rebels was important, but "they are not enough to close the widening gap with AFL and NRL, which codes will continue their own innovations".

"Rugby's great point of difference, its international character, is also its greatest strategic weakness. Under current practice, all product development [in the broadest sense] is limited to the pace of international action [including that of SANZAR] and that pace is glacial compared with AFL and NRL.

"Relative to its Australian competitors, Australian rugby is in the perverse situation that not only does it have fewer resources and revenue, but it innovates more slowly. It is the reverse of the smaller, more nimble, competitor. Its resources are dependent on the Australian sports market but its competitive pace is dependent on an international bureaucracy, partners in SANZAR with inconsistent interests, and domestic team governance mainly operating on an amateur basis in a cut-throat, commercial and highly competitive market."

Crawford accused Australian rugby of "behaving like most Western government in recent decades, ie spending more than it earns, and using the central body to supply the extra funds".

"Unfortunately for this approach, unlike national governments, ARU has zero ability to print extra dollars. Its funding of state unions and Super Rugby franchises has depended on raiding the once-off windfall ARU created with [the 2003 Rugby World Cup]."

Crawford, who created an influential strategic plan for Australian rugby when the game went professional in the mid-1990s, said the code in Australia was "guaranteed to continue its relative decline" if the ARU did "not innovate in the product market, with Sevens or something else, at least as fast as its competitors".

The ARU underwent significant change in 2013, with Pulver replacing John O'Neill as chief executive. Several ARU board members have also departed, and much of the 2010 plan is now in action. But only after a hiatus.

Reduced match payments for Wallabies, mooted by Pulver in an exclusive interview with ESPNscrum in May 2013, were finally introduced alongside a Super Rugby salary cap in the CBA announced five months later, and the ARU chief is nothing if not fervent in his support of Sevens.

But rugby has still lost ground to its rival codes, with Pulver telling the audience at Australia's Super Rugby launch in Sydney that "the financial model is not sustainable".

This statement compares ill with the subsequent chest-beating and drum-banging of National Rugby League chief executive Dave Smith, who said on Monday that league would become the most played sport in Australia after the organisation had spent $A200 million over the next four years to develop the game. The NRL signed a billion-dollar broadcast deal in August 2012, and it made a record profit of $A49.6 million in 2013. Smith's plans include the establishment of an $A80 million sustainability fund to safeguard the code's future.

Soccer, too, seems to be in rude health, with Football Federation Australian launching a nation FA Cup-style knockout competition on Monday. Meanwhile, we still await details of the ARU's National Rugby Championship that was announced last year with a mooted September kick-off.

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