Anglo-Welsh Premiership: Can it cover the costs?

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.  

AEB: An Arrogant English Bastard's guide to the European Dispute

I’ve been reading Planet Rugby.  I know, it was a bad idea.  Some people’s hypocrisy defies belief.  Apparently “the English” are greedy, power hungry and don’t care about the growth of the rugby beyond their own personal fiefdoms.  All unlike the ever wonderful unions which are only concerned with getting more people to play the sport and have lovely Corinthian values and motives.

Now obviously that is bollocks.

But generally telling people they are stupid and ending there doesn’t tend to convince them.  I know, shocker!

So let’s have a look at some of those claims. 

Greed:

Jean-Pierre Lux, chairman of the ERC after his Zimbabwean election in 2011, had this to say in the Telegraph this week:

 
“ERC’s contribution to the Unions and clubs last season was €44.3 million (£37 million) – double the figure from 2005-06.
 
Under the current Accord, 85 per cent of the distribution is shared among six European countries with the remaining 15 per cent reserved for meritocracy based on which countries’ clubs progress furthest in the tournaments.
 
So from the nine European weekends last weekend, Premiership Rugby earned €10.8 million (£9.1 million), while the French clubs who were more successful, earned €12.1 million (£10.2 million). England and France are both guaranteed 24 per cent of the shared fund while 13.25 per cent goes to Ireland, Scotland, Wales, with 12.25 per cent reserved for Italy.”
 
Some might read that and say “hey you arrogant English bastards, you already get double everyone else so where’s the beef you grasping twats?”
 
But let’s look at those figures in more detail.  £37m is distributed to the clubs last season with 85% of that in “the share fund”.  So £37m x 0.85 = £31.45m.  

Now PRL on behalf on behalf of ERC receive 24% of that, or £31.45m x 0.24 = £7.548m.
 
£7.548m is then split by PRL’s policy of giving everyone equal shares so individual clubs get 1/12^th of that, or £7.548m x 0.083 = £628,999.99. 
 
So whilst Lux might talk of English clubs gaining so much because there are so many clubs they only receive £629k each from ERC’s coffers. 
 
Now how about the Scot’s? They only receive 13.25 percent, or £31.45m x 0.1325 = £4,167,125.  However they only have Glasgow and Edinburgh to support.  That means that Edinburgh get half of that cash, or 0.5 x £4,167,125 = £2,083,562 and fifty pence.
 
So Leicester receives 30% of the ERC money that Edinburgh gets. 
Under the French and English proposals every team in the new-Europe would receive the same income from the “share fund”.
 
Now please tell me, who is being greedy?  On what planet is everyone receiving a fair and equitable portion greedy?
 
Power hungry:

Also called a power grab by some.  I’m not denying that clubs are after more power in new-Europe.  But what is the status quo and what is the proposal by the clubs?
 
Currently England and France have 5 votes on ERC’s board with Wales, Scotland, Ireland and Italy having 2 votes each.  

In England those 5 votes are split half and half between the RFU and the clubs’ body PRL; in France the split is 1 vote for the FFR and 4 votes for the clubs’ body LNR, more on that later; in Wales the WRU and the clubs’ body RRW gets 1 vote apiece.  The other Unions/Federations keep all the votes for themselves.
 
So the bodies that represents 30 of the 38 clubs who actually play in ERC’s competitions (79% of competitors) gets just 8.5 of the 18 votes (47.22%).  This means that an overwhelming majority of opinion is still not enough to force changes through ERC’s current structures. 
 
Take the last election for ERC Chairman.
 
It was Jean-Pierre Lux up against Peter Wheeler.  Wheeler had the support of the clubs bodies PRL, LNR and RRW as well as the old boys at the RFU.  You might think that that means he won.  After all that is 10 of the 18 votes, a clear majority. 
 
But no.
 
You see the RFU and FFR only “loan” their votes to their clubs.  The FFR were not happy that one of their own blazers was about to be voted out by their own clubs.  Sacre bleu.  So using an obscure clause in their agreement with the LNR over “the higher interests of French rugby” the FFR pulled their votes backed Lux and caused this whole mess. 
 
Clearly the clubs are not happy with being disenfranchised in this way and having no control over their own future.  Who can blame them?  Would you be happy to have no say in the running of your life? 
 
The new proposals are that the competition is run by the people who are actually in it.  We wouldn’t deal with the likes of Phillip Browne (IRFU), Roger Lewis (WRU) or Andrea Rinaldo (FIR) but with Mick Dawson (Leinster Chef Executive), Mike Davies (Scarlets CEO) or Amelia Zatta (Treviso President).
 
Now look I’m not denying this is a bit dickish.  But the point is that it is no more dickish than the current status quo where the likes of the IRFU have a snobbish disdain for the muck and sweet of club rugby and refuse to deal with us. 
 
If the provinces in Ireland are in unison with the IRFU as much as they like to say then what exactly is the problem?
 
There are the same number of English clubs in ERC as from Wales, Scotland, Ireland and Italy combined.  With no clubs being better or more worthy than any other, all clubs should have an equal say in their own futures.

I cannot see how anyone can argue, with a straight face, that it is right that the views of 30 clubs is worth less than the views of 8.
 
Growth of the game:

Yeah, yeah, yeah we’ve all heard it all before.  The unions are wonderful organisations that fund all the grass roots development and only have the goal of spreading the gospel of rugby union where as the evil clubs want to gobble up all the dosh and refuse to spend a penny on the grass roots.
 
We in Leicestershire know how wrong that is, our club does a huge amount to engage and enthuse people into the game of rugby at all levels.  The Prima Tiger Cup is 20 years old and now sees teams from half the country compete.  The club is intimately involved with schemes like Paying 4 Health and the Leicester Sports Partnership Trust. 
 
This isn’t an anti-RFU point as they also put a huge amount into grass roots rugby, just look at their All Schools initiative.  It is just dismissing this myth that the clubs have no interest in the wider game.
 
So we know that all parties are interested and involved in the growth of the amateur game.  But what about the World game?
 
Well under ERC’s auspices we have seen Italy lose its pro-league and we have seen them snub the Romanian champions Timisoara, on the grounds of travel difficulties.  Timisoara’s airport handles over a million passengers a year, roughly the same as Cork.  As a guide the city is roughly the size of Leicester.  It is vital for new-Europe’s credibility that they embrace teams from Romania’s professional Superliga.

The need for a third tier of European Rugby is palpable.  There is a hotch potch of regional competitions like the North Sea Cup, for teams from Germany, Holland and Belguim; the Regional Rugby Championship featuring sides from Hungary, Austria, Serbia, Croatia and  Bosnia and Herzegovina, whose 2013 season starts this Saturday and the Baltic Rugby Club Union for sides from North eastern Europe.
 
Last year German domestic and North Sea Cup Champions Heidelberger RK won a unifying tournament between the champions of all three tournaments but have withdrawn from this year’s North Sea Cup seeing no point in playing in a competition that has no pathway to the Amlin Challenge Cup.  Heidelberg is a town the size of Northampton or Bath, both European Champions, so these emergent pro clubs in countries like Germany must be supported.   But ERC run by its endless committees have badly failed.

Premier Rugby is treated with scepticism by many and outright hostility by others but look what it managed to achieve in only three months this summer with the World Club 7s.  They managed to bring together sides from 5 continents including the Russian clubs so far ignored by ERC and also clubs from America.  They haven’t talked about including these nations.  They’ve done it.
 
So for anyone reading I hope you see that the English clubs aren’t the devil and that whilst you might not like how the media have portrayed the negotiations clearly their demands are reasonable and no less than anyone else would want in their situation.  So let’s have an end to name calling and agree that we’re right, okay?

2 Tigers on ERC European Player of the Year Longlist

2 Tigers players have been nominated for the ERC's European Player of the Season.  England test pair Dan Cole and Geoff Parling have been rewarded for their outstanding contribution to Tigers winning the Pool of Death.  

The pair are part of a 15 strong longlist of contenders that will be cut to a 5 man shortlist after the semi finals in late April.  The longlist has been compiled by a panel of journalists from ERC's sponsors in England, France and Ireland including former Tiger Will Greenwood.  The fact that all nominees play in these three countries is of course entirely coincidental.

The award will be voted for by each of the 44 clubs in this season Heineken Cup and Amlin Challenge Cup as well as members of the panel. 

Longlist:
Steffon Armitage (Toulon)
Rory Best (Ulster Rugby)  
Julien Bonnaire (ASM Clermont Auvergne)  
Mike Brown (Harlequins)
Dan Cole (Leicester Tigers)
Owen Farrell (Saracens)  
Wesley Fofana (ASM Clermont Auvergne)
Mamuka Gorgodze (Montpellier)
Charlie Hodgson (Saracens)
James Johnston (Harlequins)  
Joe Launchbury (London Wasps)  
Morgan Parra (ASM Clermont Auvergne)  
Geoff Parling (Leicester Tigers)
Ruan Pienaar (Ulster Rugby)  
Simon Zebo (Munster Rugby)

The Judging Panel for this season's award is: Stuart Barnes (Sky Sports), Will Greenwood (Daily Telegraph, World Cup winner and two-time Challenge Cup winner), Stephen Jones (Rugby Correspondent, Sunday Times), Emmanuel Massicard (Editor, Midi Olympique) and Gerry Thornley (Rugby Correspondent, Irish Times).

TV Cash to Force Celt Changes?

On Wednesday PRL announced a stonking new TV deal worth “up to” £152m with new players in the Rugby market BT.  You’d have thought this whopping TV deal would have been welcomed with open arms, especially in a double-dip recession, but no!  ERC immediately pooh-poohed the deal claiming that PRL had broken IRB rules, they don’t say what, and an ERC mandate, they don’t say how.  This is because as well as selling domestic league games PRL sold the rights to their clubs home games in some, as yet unknown, European competition(s).  4 hours later ERC & Sky announced a renewed deal for the Heineken Cup and Amlin Cup for 4 years beyond the current contract which ends in 2014.

PRL gave their notice to quit ERC on June 1^st, as did LNR (League National de Rugby) their equivalent in France, effective from June 2014.  You may have spotted a rather obvious problem with ERC’s plan at this point.  That is that ERC won’t exist past 2014, at least in current form and certainly not with English and French clubs, and even if it were to be saved at this moment in time it has no right to sell English club games beyond 2014.

Now ERC claim that PRL had no right to sell the package they did either; that is simply not true.  PRL have sold the rights to their own games in any future tournament, something they are completely within their rights to do.  After all the SANZAR nations sell their rights individually to domestic TV so the IRB clearly have no problem with this arraignment.

If reports are to be believed PRL’s deal is split into two parts: an £100m domestic deal and an £50m European deal.  ERC haven’t released the amount of their new Sky contract but last year PRL received £8m from ERC as their share of the collective spoils.  English clubs receive 24.5% of the ERC pot (alongside the French, the Irish, Welsh and Scots get 14% each whilst the Italians get 9%) which by my maths makes the overall total £32.65m.  That total includes the sponsorships paid by Heineken, Amlin, FedEx, Addidas, Land Rover and the TV rights to France, Italy, Ireland plus the TV rights to the Ulster, the Welsh regions and the Scottish regions in the UK.  This deal is, reportedly, worth £17m more for significantly less.  The French rights would be worth a similar amount to the English rights, with the sundry other deals also to be added on top it is hardly optimistic to state the total value would top £100m.   That is a 200% increase in revenues.

So why are ERC so exercised over PRL’s deal?  Obviously PRL have to some extent gone behind the backs of their European partners, but more than that ERC, or rather the constituent unions, are worried that the clubs are becoming too powerful and their own influence might be on the wane.

Will ERC really be able to turn their collective noses up to over £100m?  I doubt it, the Welsh game is in disarray domestically and is desperate for the cash, similarly the Scots, Irish and Italians heavily subsidise their domestic games with revenues from internationals.  The cash will surely be enough to buy the structural changes that PRL and LNR have been so desperate to achieve.