Sky deal puts rugby into the top league

Sky Sports’ deal with Rugby League, worth ú75m, is a welcome shot in the arm for a sport that some have called `technically insolvent’. But will the resultant reduced audience have a negative effect on sponsorship, and will the UK follow the U

SBHD: Sky Sports’ deal with Rugby League, worth £75m, is a welcome shot in the arm for a sport that some have called `technically insolvent’. But will the resultant reduced audience have a negative effect on sponsorship, and will the UK follow the US, where broadcasters and media owners are trying to take over the management of sporting events?

The Rugby League’s £75m deal with Rupert Murdoch which will create a new international rugby “Super League” is regarded by some aggrieved fans as a pact with the devil. But as the details sink in, it is being acknowledged as perhaps the only step that could ensure the sport’s long-term commercial viability.

Murdoch’s plans involve the creation of a 14-team European Super League running alongside a planned “Star League” involving southern hemisphere clubs (MW last week). This is due to launch in March 1996 – adopting a new summer format when the next (and last) British winter season ends. The new schedule is a neat touch, dovetailing nicely with Premier League coverage on Sky Sports.

Eventually, there will be not only be world championship play-offs involving teams from each league but also increased exposure in other parts of the world from where, it is hoped, further teams will come. Murdoch is understood to be committing £300m to develop and support the whole strategy.

Good news for the sponsors? Perhaps. On the one hand, they welcome any move that will put the sport on to a more stable footing and into a new league of its own with the promise of massive international TV coverage. According to one report last week, 25 of the 32 professional clubs are “technically insolvent”. Others say the existing league “is not as healthy as that”.

On the other hand, a reduction of the number of people able to watch Rugby League coverage on TV (in the UK especially) must surely be inevitable with live TV rights eventually going the way of the football Premier League – straight into the hands of BSkyB. Yet anyone involved in sponsorship knows only too well that the most successful deals rely on media exposure, and lots of it.

Even so, few deny something had to be done. “We’ve encouraged the Rugby League to review the game and (last year) co-sponsored an audit into the game, its financing and spectators called Framing the Future,” says Paul Hughes, director of sponsorship at Bass whose Stones brand is involved with the Stones Bitter Championship. “We’ve been looking for a step change for some time and this is it.”

The full implications are as yet unclear. “It is fair to assume that if the new structure improves the quality of players and resources at club level then that can only feed through to the national and international game, which must be good for the sponsors,” says David Jones, group sponsorship head at Courage. Courage’s John Smiths brand sponsors the Great Britain, England and Welsh national teams. But, he adds, no one knows exactly how sponsorship and the “Super League” will be restructured.

Rugby League media manager Paul Harrison says he is confident the changes will not adversely affect sponsorship. The league has four main sponsors – Silk Cut, Regal, John Smiths and Stones – and the value of these deals is an estimated $16m. These four five-year contracts are up for renewal at the end of the next season. The focus for the next few months will be on establishing a new framework within which existing deals will be re-negotiated and new deals struck, he says.

But the most telling element of all is the shift of power within sport.

In the past, sports authorities received most of their funds from event sponsors. Today, TV rights have become increasingly lucrative. In the US, a growing number of broadcasters and media owners – notably Ted Turner – are attempting to take over the management or co-ownership of sports events themselves. Earlier this month, a new World League of American football was launched in Europe. Sponsored by Reebok, it is a joint partnership between the National Football League and Murdoch’s Fox Inc / News Corporation.

And then there’s the future role of the sports governing body. “If Murdoch owns the event, surely he may in the future create all of the rules, and that includes the future approach to sponsorship and distribution of further revenue,” says Richard Glynn, partner and founder of the specialist sports unit at solicitors Nicholson Graham & Jones.

Murdoch has already moved in on golf, American football and now Rugby League. Further such deals raise the spectre of sport increasingly dominated by sports broadcasters. And their motivation is different to that of the sports governing body. Murdoch, for one, views sport as an activity secondary to his primary concern – selling dishes and TV subscriptions.

“For the event sponsor, it could certainly reduce their impact,” Glynn adds. But the wider implication for sports is increased commercialisation. “As one sport gets more commercial, so others will be pulled up a notch,” he says. “Sports now have to raise sufficient funds to enable their sport to continue, which could strengthen the case for joint venture partnerships.”

There is growing recognition of a need for the closer involvement of media and sponsors to secure the future health of many sports. As sport becomes even bigger business, the onus must be on governing bodies, sponsors and media companies developing and sharing expertise, not only in traditional revenue generators such as sponsorship, merchandising and licensing, but also TV contracts, multimedia, stadium management, construction, tax and pensions advice as well as litigation.

One way of achieving this could be through joint partnerships enabling each partner – sports organisation, management agent, sponsor, financier and broadcaster – to contribute its own area of expertise. “Some sort of strategic alliance, maybe a joint venture, makes perfect sense,” according to one consultant. “It offers the potential for the sum of the parts to become greater than the whole.”

“There are more options now available – to clubs and sponsors,” says a spokesman for the Institute of Sports Sponsorship. “For the long-term health of both sides, each must be as imaginative as the sports governing and media owners have already become.”

As the impact of Murdoch’s latest “super deal” becomes clear, the ball is now in the sponsors’ court to play for a bigger stake in the game.

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