Wednesday, 24 August 2016

Irish Rugby Needs a Carlsberg

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Two years ago the IRFU highlighted that an uncertain future for the Heineken Cup was a major risk to their finances and noted same at the union’s Annual Council meeting of July 2012. Noting that the English and French clubs had placed the competition under threat by signalling an intent to withdraw at the end of the current 2013/14 season. At that time IRFU treasurer Tom Grace warned that the delegates must not take the threat to the competition lightly. Albeit the ERC income had improved over the period by €1.8m for the union and contributing to a €7.8m surplus. Thanks mostly to Leinster and Ulster’s Heineken Campaigns.

In July 2013 the same IRFU revealed a €26 million loss in projected earnings from the sale of five- and 10-year tickets. With only half the 3,700 tickets actually sold. Leaving the Union needing to finance the professional game over the next six years through borrowings. With the hope being that the sale of 5,000 premium level tickets in 2020 enough cover the accrued debts and loans. 

With a number of senior players contracts due for renewal over the coming years this financial backdrop is not healthy for the Irish game in the medium team. Coinciding as it does also with the twilight season of the game’s biggest draw in these parts for the past decade, Brian O'Driscoll. Nor is it aided by the lucre on offer from Top 14 in France which has already taken hostage one national gem out of the central contract system, Jonny Sexton. 

Although the concerns of the move to France were poo-poohed by some spin merchants at the time as over exaggerated and negative. It is ironic that this week that Michael Kearney, the Ireland manager has expressed concerns at the rigours of French rugby for Sexton. And this only the Autumn Series and the Irish player's first few months at Racing Metro. All of which does not bode well for the longer term.

“We will find out on Tuesday if Racing are recalling Jonathan for the weekend, as they are entitled to do," Kearney said.

"It is out of our control and out of Jonathan's. He has a massive number of minutes under his belt at this stage, so we're just hoping he is given the weekend off."

Although Sexton had stipulated in his contract that he was to be free to attend Ireland's training camps, there is no clause governing his release from Racing in the lead-up to Irish international weekends. Hence he could very well be playing come this Saturday and in time not always be avilable. Not unlike professional soccer players for the Republic of Ireland who are not contracted to the Football Association of Ireland [FAI]

As agents in Ireland and France now busy themselves lining up Irish players with French clubs, the high salaries on offer threaten to unravel the benefits of a system the IRFU started in the dawn of the professional era. A system of central contracts that laid the foundations for the Irish dominance of the Heineken cup, RaboDirect Pro12 and a Grand Slam. With other Rugby Federations powerless to replicate the same system for players faced as clubs owned the playing assets. As it is in professional soccer. 

A new look Heineken Cup promises only one thing for certain, and that is short-term damage to Irish rugby and the an alteration to the current system.

But the warning signs have long since been about. It is now the speed of the financial pressures that maybe the only new variable for the IRFU and will only heighten the financial stress to preserving the system. One that has served the game since 1995, the date rugby went professional. The moment the IRFU chose to have players available for the provinces as opposed to their clubs. Ensuring availability for the World Cups and Six Nations competitions. A proven formula over the years with Ulster, Munster and Leinster reaching 8 European Cup finals in seventeen years. With a total of 6 wins. Added to by Ireland's Grand Slam in 2009 a title that eluded the nation for half a century. leaving the sport in rude health. Or so it seemed 

But like everything life, sport does not standstill, and changes have loomed for some time. Either by choice or enforced. Despite the PR battle it seems more of the latter than the former for the IRFU.

Unlike Ireland the game in England, Wales and France it is clubs where the players contracts reside, leaving them the power brokers in this game of bluff. With the sport attracting outside investors and millionaires – as in football – the financial might of some clubs has increased exponentially. Quickly enabling clubs to cut lucrative contracts for top players. Perhaps a reaction to the dominance of Irish clubs in Europe and has brought a search for a new systems for the European competitions. 

Regardless, what is beyond dispute is that Ireland receives a disproportionate distribution of income from the Six Nations and ERC. A consequence that has perhaps created a comfort level at the IRFU that may now leave Irish professional game facing major difficulties.

With new contracts for Jamie Heaslip and Sean O’Brien up for renewal such uncertainty does not help the players either. As evidenced by Donncha Ryan also considering a deal in France - reports last week suggested - with Perpignan. Which will all test the IRFU treasurer's resolve simply because some players are now at the peak of their game. Some are also Lions test winners, and anxious to seek their just rewards on the open market. 

With Sexton setting the benchmark at a supposed €750K per annum in Paris it is no surprise that the likes of Connor Murray or Simon Zebo might fancy some of that action too. Regardless of the physical demands of the Top 14. But as not everyone may negotiate the same favourable terms for national duty, unless the IRB mandate it, and so the chances of another Grand Slam win for Ireland may lie somewhere over another 50 year rainbow. Simply put, the IRFU’s dwindling income stream may become a self fulfilling prophesy. And if the 2020 debenture tickets are not subscribed in their totality then the €25m loan will become a burdensome debt that will need servicing out of match gate receipts. 

So emulating the experience of their co-tenants at the AVIVA, the Football Association of Ireland, who are currently living that their failure to convert the ten year ticket sales. The result of which leaves the FAI in significant debt. But with the ongoing hope that in 2020 the circle will be squared and the debts paid in full.

The recent news that Scott Tallon Walker designers of the AVIVA Stadium noted in their accounts pre-tax losses of €908,276 last year, show that the Irish economy is still not that robust. The company designed the 50,000-capacity Stadium, which opened in 2009. SIAC the company that built the AVIVA was granted court protection from its creditors last week in a move that could wipe out €126m of monies owed if it was to be liquidated, according to an independent accountant's report prepared by KPMG. With problems also shared by the company that manages the Aviva Stadium as it suffered last year a €2.3m loss despite playing host to dozens of sporting events, conferences and concerts. 

The Stadium owner New Stadium Ltd said 2012 marked the third year in operation for the Aviva Stadium.The company being an events business and with shareholders that include the Irish Rugby Football Union (IRFU) and the Football Association of Ireland (FAI). Accounts filed with the companies office show New Stadium had an operating profit last year before depreciation and amortisation of €5m, compared with an operating profit of €4.5m in 2011. The company has debts of €261.8m, including outstanding shareholder loans from the IRFU of €33.41m and €24.7m from the FAI.

At the IRFU though the CEO Philip Browne explained his views last month on the matters facing the union:

”In Ireland we pump about €23 million into Leinster, Munster, Ulster and Connacht in order to fund the professional game, whereas that doesn’t happen in England. The professional players are paid for by clubs, and the clubs then lend the players to their unions for the international team. So it’s a different philosophy.”

“Our philosophy in Ireland is that we are at the face of the entire game from clubs and schools right up to the international team. And the international team generates about 85% of the revenues for Irish rugby as a totality.”

“This is an argument that has gone on since 1995, when the game first became professional. The reality is that we’ve been waiting for this battle to happen for the last 17 years and I suppose we’re now at a point where the club owners in England and France are saying, ‘We want to control the professional game in Europe. We will leave some room for those we want to bring on board.’

However for the first time since the IRFU are no longer in total control of any of these impending decisions. Albeit they have a place on the board of the ERC it may now be a lone voice. The players agents will battle for their best interest and that of their clients. The TV companies have proved with the BT Sport Premiership Rugby deal that their competitive landscape offers new entrants - with large cheque books - new platforms. The Irish economy precludes any belief that the value of the ten year tickets will revert close to those guaranteed during the Celtic Tigers years. Or values even in 2020 that the IRFU would need to offer realistic long term hope that this is all viable.

With the Irish clubs already struggling given they were sacrificed for the sake of the professional game almost two decades ago, it will be a very long time before any Irish club could match the power and might of a Jacky Lorenzetti at Racing Metio. Or indeed a businessman like Mourad Boudjellal owner of Toulon. Where the other Jonny went to supposedly prolong his already glittering career, after winning the 2003 World Cup with England  Jonny Wilkinson that is. And he has yet to come back.

Our Jonny will be the same no doubt in due course given the numbers facing the IRFU at this time. Unless they can fix their business model.

Time for a Carlsberg...

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