It is hard to believe that Rugby Australia finds itself in such financial trouble. That is the view of many sports fans. Their reasoning being that Rugby is played by the private school boys, the men from the top-end of town, the lawyers, doctors, stockbrokers and accountants.
It is a point that is hard to argue with.
Yet Rugby Union had a great deal of ground to make up when it finally broke away from its amateur status in 1996. The English Premier League was founded in 1992 and established professional sports were changing the way they did business. Rugby had a lot of ground to make up if it wanted to be amongst the big boys.
The changes in English football had actually started a lot earlier than 1992. In fact they started in 1982. Tottenham Hotspur had built a new West Stand at White Hart Lane, and they were struggling to meet the repayments. Irving Scholar who had been a lifelong Spurs fan and who had made his fortune as a real estate developer, offered to lend financial assistance to the club. HIs offer was rejected. Scholar then quietly set about buying up shares in the team, offering highly attractive prices. Before long, Scholar had gained control of the football club.
Scholar then became chairman of the club and then with his partner they formed Tottenham Hotspur PLC which owned Tottenham Hotspur Football Club. This was done to bypass a Football League regulation that stated that “no Director shall be entitled to receive any remuneration in respect of his office as director.”
As the Director of a listed company, which Tottenham was the first to become in 1982 the directors of the PLC could receive remuneration. They could also receive a higher dividend on their shares than stipulated by the Football Association. Was it therefore any surprise that other clubs soon followed suit?
Was it any surprise that Scholar was a key player when the English Premier League was formed? Once again it was all about making money and breaking away from the archaic regulations of the Football League. Scholar has been credited as having played a significant role in the commercialisation of English football clubs. Could Professional Rugby match or compete with Football in this space?
While Football was launching into a new stratosphere Rugby Union was only just looking to turn professional following the 1995 Rugby World Cup. It could not have been a better time to do so with South Africa having been welcomed back to the fold in 1992. They hosted and won their first World Cup Tournament. The Rugby World rode that emotional high.
Sadly however the foundations that needed to be in place were never put in place. There was though suddenly the opportunity for some to make money from the sport. To the outside world it looked as if they would soon be mixing with the big boys. They had a lot of ground to make up. Rather than looking to do that in phases they rushed, blinded by the money that the sport had never previously had. However as we all know all that glitters is not gold.
Rupert Murdoch’s News Ltd had set up Rugby League’s Super League and Rugby Union in Australia was terrified that it would lose its players to the rival code.
In April 1995 a phone call was reported to have been made from News Ltd to Queensland Rugby Union president, Dick McGruther letting him know that he need not worry. No players would be lured away to league because Murdoch and his millions were ready to invest in Rugby Union. A sport that News Ltd allegedly thought ‘was an international code with wider appeal.’
On May 15 1995 McGruther and David Moffett, who was at the time the chief executive of NSW Rugby Union, met News Corp director, Sam Chisholm, in London. Richie Guy, who was chairman of New Zealand Rugby Union and his then deputy, Rob Fisher were also present at that meeting. Four days after the meeting in London, SANZAR (South Africa New Zealand Australia Rugby), a private company owned by the three national rugby unions, was formed. Within six weeks of that announcement a deal was announced. News Corp had agreed to pay $US550 million over 10 years until 2005 for the exclusive, worldwide television rights to all rugby played in the three countries, from provincial competitions to international tests.
The deal was announced on the eve of the World Cup Final in South Africa on June 23 and Moffett was the first CEO of SANZAR.
As was revealed after the announcement some players had already secretly signed undertakings with the World Rugby Corporation, fronted by former Wallaby Ross Turnbull. This was going to be a fully professional set up as well. In essence the two differences were that the WRC was proposing a privatised and franchised structure to operate worldwide. The ARU was looking to keep rugby in its existing communal ownership. Which is the model that it has tried to maintain.
At the time Moffett stated “SANZAR exists to maximise the return to its shareholders — ARFU, NZRFU and SARFU — from the sale of broadcasting rights, which we’ve done, and from sponsorship, licensing and merchandising.”
The public were told that the money would not be spread evenly between the three participating bodies. Most of it, believed to be in the region of 95% after commissions and adjustment for existing television rights, was to go to the players. So how were the National Bodies supposed to support themselves?
Despite players now being paid Australian rugby remained wholly administered by non-profit making bodies. Yet the Councils that were made up of representatives from affiliates which were the voice of rugby were slowly gagged. The power slowly shifted to the executive bodies. The explanation given was that new commercial pressures meant that rugby had to develop a more corporatised administrative model. Yet was that the case across the country? Was there a structure put in place to best serve the sport’s needs or did the positions just evolve over time?
It is worth noting that Super Rugby existed before the creation of SANZAR in 1995. It was however contested initially between six teams from Australia and New Zealand. Then from ’93-’95 it became a ten team competition as South Africa entered the fray.
For the next ten years it increased to a 12 team competition. In 2006 it expanded to become Super 14’s, with the Western Force in Australia, The Cheetahs in South Africa joining the competition. Some would say that it was during this 15 year period that the competition was at its peak.
The Melbourne Rebels joined in 2011 so that each country had five teams in the competition. Sadly at this point the format of the tournament was altered, and teams no longer all played each other. Fans found the new format which had been proposed by the ARU hard to follow. There was also a break midseason for a Test Match series to be played, which killed the momentum of the League. However the test matches generated much needed funds and so were non-negotiable.
Then in 2018, while the successful post amateur Leagues in Europe were cutting the number of teams SANZAR opted to increase the number to 18, and now Japan and Argentina had sides in the tournament, which added to the costs of participating and extra travel. It also assisted the Argentina national team. (A Loss Of Faith In The Game They Play In Heaven)
These two decisions were bad ones for Australian Rugby. The sport struggled to support five teams. The strain on the bodies of those in the pool of players selected for International duty became intense, and not surprisingly performances suffered.
More bad decisions followed. If sport is a business, which was what we were being told, then the handling of those business decisions left a great deal to be desired. They ended up alienating many of the businesses consumers and supporters, but more importantly hurt the sport and the brand. There was once again, as had been the case in the very early amateur days a lack of trust and a lack of belief that the right people were in charge of the sport.
Ironically it was a News Corp newspaper that broke the news of Rugby Australia’s debt. It was a Newscorp company Fox Sports that has opted not to continue to broadcast Rugby Union. Which is a reflection go where the relationship is now at 25 years on.
Yet should the Rugby Australia financial figures really come as a surprise? Was Rugby really in such good shape? Hosting the 2003 Rugby World Cup possibly mislead many. It was reported that the then Australian Rugby Union had received a tournament surplus of $44.5 million after hosting the event. Sadly that money was not put aside or invested. It would appear it was used to plug holes or pay staff.
Was it a case of Rugby Australia and their board, to take the words of Captain Tom “Stinger” Jordan from the movie Top Gun, “Your ego is writing checks your body can’t cash?” Were they writing checks that as a body they simply could not afford in order to keep up with the other codes?
Was the ego of those running the sport ultimately the one thing that has held the sport back? That these experts from the top end of town actually did not bring the level of expertise required to the boardroom table?
It is interesting to note that former Chairman of the Board Cameron Clyne, who stepped aside as CEO of the National Australia bank in 2014 was crticised in the Sydney Morning Herald at the time of his leaving that post. Elizabeth Knight wrote, “Unfortunately Clyne didn’t manage to dispose of the bank’s troubled UK operations and can be criticised for underestimating the rot in that market, and the weight this anchor would place on NAB.” Maybe lightening really does strike twice!
Rugby Australia is likely to receive a $16 million rescue package from World Rugby. Just how far will that stretch to cover the shortfall in the accounts published, but not verified by KPMG? If as expected they have to honour all of the Wallabies contracts there will be little left.
After over a century of being an amateur sport was rugby blinded by the millions offered back in 1995? Did they ever have the right structures in place across the country to support the game at grassroots level, and have five teams playing Super Rugby?
If insolvency is around the corner then hopefully those who occupied Board positions and were a part of the decision process that has led to the sport finding itself in this predicament are held accountable.
According to the Institute of Company Directors,
“The insolvent trading provisions are some of the most important in the current company law. These provisions compel board members not to allow the organisation to trade while insolvent (unable to pay debts as and when they fall due) and not to allow the organisation to become insolvent.
You will breach this duty if you fail to prevent your organisation from incurring a debt when a reasonable board member would have been aware that there were reasonable grounds for suspecting the organisation’s debts could not be paid as and when they fell due. Even if the organisation was solvent at the time of incurring the debt, an offence is committed if the organisation becomes insolvent by incurring the debt in question.
In other words, if the organisation is in a death spiral, you have to close down while there’s still enough money in hand to pay everybody what they’re owed.
Penalties for insolvent trading are particularly severe. Civil penalties of up to $200,000 or disqualification from directorship may be imposed.“
USA Rugby has already declared itself bankrupt and has received money from World Rugby to bail it out. As a result they are looking to restructure their game, with an interesting new Governance set up. (USA Rugby Proposes a New Governance Model After Filing For Bankruptcy). Do similar structures need to be put in place in Australia and would those currently in power relinquish some of if not all that they currently hold?
Insolvency would be terrible for the sport, however it would offer a new beginning. Whether its a new Board or a new organisation, let us hope that those who step in and replace the current leaders lay strong foundations for the long term good of the game, and build up from those foundations rather than handing down the crumbs left over from those at the top table.
