So we’ve heard a lot recently about the possibility of the Welsh regions, or perhaps their underlying clubs, joining an expanded Aviva Premiership. Most people have chosen to evaluate the sporting case, which is reasonably sound, but what about the business case?
We aren’t charities and the whole relationship with ERC fell apart because of their inability to finance the games rather than their merit.
First off what are we generating at the moment? The BT deal has been said to be “worth up to £152m” leading to much speculation about various clauses. Never underestimate the ability of Mark McCafferty to be stupid but from all corners it seems to be two deals, a Premiership deal and a potential European deal.
The previous Sky/ESPN deal was widely reported to be worth £54m over 3 seasons. So £18m a season or £1.5m to each club per season. The BT Deal’s premiership portion is said to be a 50% increase which would be £27m per season (£108m over the 4 years so fitting in the “up to” scenario), or £2.2m per club per season.
Aviva paid £20m to sponsor the league for 4 seasons back in 2010 and last summer it was an announced they had extended their deal. No numbers always make me sceptical and assume at best a plateauing of revenue. McCafferty insists there is an increase in that deal but assuming not we still have £5m in the pot from Aviva.
As out lined in this article the ERC contributes roughly £630k to an English club. This is why PRL can afford to be so bullish with ERC over its future. ERC by starving us have made us self reliant. The BT deal increase covers the ERC short fall and then some. Of course we all want that cherry on top but it won’t make or break us.
Shortcutting the sums from the Tigers accounts we can see that PRL roughly distribute £3.5m to each club a season and that in any circumstance that should be in line to rise next season.
So, I hear you ask, what has this got to do with the Welsh clubs? Well the Welsh clubs inclusion has to match or increase the amount PRL distribute to each club or it isn’t worth it.
So do the numbers add up?
Presuming a 16 team league, on whatever configuration you like, the numbers are steep. PRL currently distributes around £40m each season it would have to find another c.£14m to fund these new teams without affecting the others central revenue.
The new BT deal pays £27m to show 3 games a week from 22 rounds of action plus the play offs, 69 games in total. Or £392k per game. Now here come some of the big assumptions. If BT were happy to pay that rate for more content then the 8 extra rounds of fixtures would generate £9.408m. That’s pretty close. If we copied the French model of play offs with quarter finals between places 3 to 6 we’d have 2 more games and £10m to play with.
Wales has a population of 3m people, more than the North East but less than Yorkshire, but has higher levels of Rugby viewership than those regions making them more valuable to broadcasters. BT would have their own focus groups but if we take just 1% of the population being motivated to sign up, or retain BT broadband, by this move that would see 30,000 paying customers for BT. I think that is a reasonable estimate as it is lower than their combined average attendances and half the attendance the national team gets most games. Based on a price of £30 per month, including line rental, that would yield £10.8m p.a. to BT in broadband sales with customers signing up for BT Sport through other means at £12 a month on top.
Match ticket sales are an important source of revenue for clubs. Rather surprisingly, if you follow certain people’s claims about the Heineken Cup, the Premiership has a higher average attendance than the Heineken Cup. And if you think that is skewed by things like the derby with Saints or the Christmas fixture being Premiership games then consider that in the last two home games we sold almost 2,000 more tickets to see London Irish than for Montpellier.
A question would where does the LV Cup fit in all this? The LV yields c.£500k in competition money, making it more valuable than the Heineken Cup per game, and crucially 2 home games. Even with all the discounts, offers and Season Tickets Tigers would still expect to clear something like £500k from ticket & hospitality sales, per match, at the B grade prices. More when you factor in merchandise and catering sales.
Losing the LV money and the extra game do make the figures trickier. Will that c.£1m be recouped in higher attendances across the 4 new league games vs. the 3 Heineken Cup games and the 2 LV Cup games?
You would expect the League games to achieve roughly 8% higher attendances than an equivalent Heineken Cup match and 23% higher than a LV Cup game based on recent seasons’ attendances. Those figures would suggest not being able to cover the loss of game let alone the LV Cup competition money.
But then travel to Wales is significantly cheaper than transporting a squad of 23 players, plus spares, plus coaches and doctors, physios, their equipment etc etc all the way to Montpellier or Treviso. Or even Belfast. So there are savings to be made.
Reduced exposure in Europe would not be a positive for sponsorship sales and increased exposure in Wales would not make up for that. But by covering the total number of games I think it is fair to call that revenue neutral without any harder data to back it up either way. The home market is where the bulk of spending is targeted and that wouldn’t change; after all is Caterpillar or Goldsmith’s really paying us for one game a year in France?
So is there a business case for an expanded Premiership including Welsh sides? There is if BT is willing to pay for it. If the pot cannot grow to cover it then sadly we need to find other options. Home games pay the bills and any solution needs at least 16 of them. A 14 team Premiership with an enhanced Europe would be the best of both worlds, if only we can get all parties to agree with us.