Sponsor talks could seal rugby union’s fragile fate
The chaos within the RFU threatens to put sponsors off renewing their contracts. That would spell disaster for the financially embattled clubs.
This is a big week for rugby union. The Six Nations tournament comes to an end on Sunday. The organiser of last November’s World Cup will reveal how much money the home countries will share for hosting the event, and on Thursday the International Rugby Board meets to discuss whether the fact your great grandmother once paid a flying visit to a country makes you eligible to play international rugby for it.
But once this week is out of the way the really important business begins. The Rugby Football Union (RFU) Management Committee meets on April 5 to debate the future structure of the professional game. It is coming under pressure from some club owners for a British league, and they may break away if the RFU does not agree to their demand. The future of rugby union sponsorship will depend on this. Over the next two months, the talks to renew two of the three largest sponsorship contracts in the sport will have to be concluded. And the outcome will say a great deal about the health of the sport, which was described by an all-party committee of MPs as in financial danger, and where most of the professional clubs are not breaking even.
If Six Nations sponsor Lloyds TSB and sponsor of the top two divisions Allied Dunbar renew their contracts – as they are expected to do – it will be presented as a good day for the sport. The Lloyds deal, worth &£12m over three years according to Ipsos-RSL figures, is recognised as being successful for the bank. But while Allied Dunbar, which paid &£7.5m for its sponsorship in 1997, has enjoyed its association, it has to be questioned whether it is good in the long term for a financial institution to be associated with businesses which are losing money hand over fist.
But if the sponsors did the unthinkable and turned their backs on the sport, it would be catastrophic. It would not just be the loss of money, but also the message it would send out to any other potential sponsors – that the sport is a basket case. Not even the dot-coms would come to its rescue, because the sport only delivers big TV audiences for the three months of the Six Nations tournament and the Internet sponsors want mass audiences all the time.
But why would the sponsors pull out? The sponsorships have been successful in terms of awareness at least. But there is a real concern that the relationship between the RFU and its main sponsors has been badly damaged by the shambles that is emerging over the future structure of professional rugby in the UK.
The sport’s third main commercial paymaster, Heineken, agreed to pump &£20m into a four-year deal to sponsor the European Cup in November after being assured that it would remain the premier European tournament. By the middle of December, the RFU had decided – without speaking to its sponsors – to endorse an English-only league and a restructured season, which would have meant the whole of the European Cup being played in January, and the Six Nations – which is played over three months – packed into a six-week schedule at the end of the season.
The sponsors and several of the larger clubs, which are demanding a British league to support flagging club rugby in Scotland and Wales, opposed the changes advocated by former England player Rob Andrew.
As a result, the RFU has had to cool its support for the English league blueprint, although only last weekend Andrew launched another attack on those promoting the British league, claiming they were acting out of self-interest.
Ipsos-RSL figures show that sponsorship of UK rugby union has more than doubled from &£10m to &£22m between 1994 and 1998. It estimates the figure will be &£25m for 1999. That coincides with the time the game went professional (1995, to be exact) – an event that many now see as one of the most damaging decisions ever taken, because it has fuelled high wage demands that the clubs cannot afford. So although sponsorship of the sport has doubled and clubs such as Wasps, Saracens and Newcastle can attract on average &£300,000 per season in shirt sponsorship from Ericsson, Kenwood and John Smith’s, the finances of the sport make as much sense as a man being eligible to play rugby for Scotland on the grounds that his grandfather was born in Bristol.
The Select Committee on Culture, Media and Sport, which investigated rugby at the end of last year, blamed the sport’s present situation on “the clubs’, sponsors’ and players’ unrealistic expectations of the revenue that could be generated by rugby union”.
Derek Wyatt, Labour MP for Sittingbourne and Sheppey and a member of the select committee, says: “Rugby’s decision to go professional was probably the most stupid thing it could have done. There was no structure in place. A lot of clubs are now looking at bankruptcy. The committee was assured that club rugby had a future, but I don’t see that it has.”
Wyatt, once a small shareholder in the Richmond club which was folded into London Irish last year, is not alone in his pessimism about the future of club rugby in the UK.
Everyone agrees the sport needs to do something to become financially viable, but partly because that will mean more clubs reverting to amateur status, merging or closing, few agree on what its future should look like. Meanwhile, sponsors are being asked to negotiate in the dark.
Tom O’Sullivan was formerly deputy editor of Marketing Week