All Blacks

All that glitters is not gold in new SANZAR deal

All that glitters is not gold in new SANZAR deal

widening sanzar gapThe gap between the ARU and its partners share of the SANZAR broadcast deal is set to widen from US$40m to US$100m, according to reports. The reason for this growing discrepancy is simple – Australian rugby has no third tier.

The much awaited SANZAR broadcast deal post 2010 is set to be announced in the coming weeks and the estimated value of the new broadcast rights ramp-up to around $US400M – a substantial increase on the old mark of $US323M. However, of the $77m increase, the ARU is set to only receive $7m. This will leave the ARU very much out in the cold, and under funded, in relation to its SANZAR partners.

Under the last SANZAR agreement, the ARU received 29% ($US93M) of total revenue with NZ and SA getting 33% ($US107M) and 38 % ($123M) respectively. As part of the protracted negotiations surrounding the awarding of the new Super 15 franchise, all SANZAR Nations agreed to split revenue from the new deal equally as each country would have 5 teams.

The trade off for this concession to the ARU was that the new broadcast deal only included Super 15 games and Tri-nations tests with each Nation being able to negotiate its own deals for rights to their respective in-bound international test and domestic competitions. When these revenues are added to the bottom line, things look decidedly paltry for the ARU.

It has been estimated that with Currie Cup and in-bound tests, SA Rugby has been able to negotiate an extra $US58M, an increase in revenue of 46% on the old agreement. The NZRU, whose NPC is estimated to be worth $US20M, will increase revenue by 13%, even before in-bound test revenue is factored into this figure.

With no third-tier competition to hock, the ARU stands to only increase revenues by 7% or $US7M before in-bound test revenues are considered, not a great prospect given the poor TV ratings of this year’s tests.

What is clear from these estimates is the ARU has very little scope to earn significant revenue outside of what it receives from its share of the SANZAR deal. Although the ARU increased its earnings from sponsorships and gate receipts by almost $A9M from 2007 to 2008, this increase included the sugar hit provided by the first overseas Bledisloe.

Indeed the fact not one Wallaby game sold-out this year does not bode well for those expecting to see these two income streams increase at the same trajectory for 2009.

It is now time for the ARU to re-visit the idea of a domestic third-tier competition as it is the only way the organisation can keep pace financially with its SANZAR partners.

Speaking in June, our esteemed leader John O’Neil said of a third-tier competition, “Once we get the broadcast deal bedded down and once we’ve got a decision on where the new (expansion Super 15) team is going, and once we understand what we can and cannot afford, then we can turn our minds to the third tier.”

Australian rugby can wait no longer.

The idea of a new domestic competition has gone beyond a purely player development argument to now be an income increasing one. With very little else of value to sell, the ARU must quickly come up with a proposal that will attract Australian free-to-air TV stations, who are falling all over themselves to find local content to fill their multi-channel schedules.

Much was made of the money pit that was the ARC. In its first and only year the competition lost over $A5M and was budgeted to lose another $A3.3M in what would have been its second year (2008). An analysis of those two figures suggests the longer the competition may have gone, the greater the economies of scale and opportunities to reduce costs and, as the competition matured, the more attractive it would have been to prospective broadcasters. Sadly, we’ll never know.

With significant cracks appearing in the ARU’s private equity model to fund the new Melbourne Super 15 team, and the very real prospect the ARU will have to pay for the new team itself, this could become a burden on the ARU’s bottom line and eat up the estimated increase in revenue.

G&GR has made several attempts to contact the ARU for comment on the current situation but these calls have not yet been returned.

It’s time for the ARU to come up with something tangible and of value, or, sell off the family silver to pay for its future obligations. Let’s face it, as far as silverware in the ARU’s cupboard goes – there’s fuck all of that anyway.

All Blacks

Mr Consistently Average

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