I had this email to me by Liz Goldenberg, thought I would post it here
for discussion. It seems that the Welsh Clubs are not the only ones
with financial problems, the English clubs are just better at hiding
Success or bust for game's big players
Last Friday, the board of English Rugby Partnership (ERP), two
accountants from Deloitte & Touche, representatives of the Rugby
Football Union and the senior clubs filed into a meeting at a hotel
conference room in Maidenhead.
On the agenda was the long-term viability of domestic rugby in Great
Britain and the development of a strategy for the future. The decision
to meet followed the disclosure that the 12 teams in the Courage Clubs
Championship first division last year, the first of the professional
era, collectively had lost more than ?10 million.
The audited accounts for 1995-96 and the management accounts for last
season give the most accurate picture available of the financial
health of clubs. They do not make pleasant reading. That the game
would haemorrhage money because of enormous start-up costs, chief
among them player salaries and improved facilities, had been
understood and accepted; but the consensus agreed was that the sheer
scale of the losses is unsustainable
Kim Deshayes, the chief executive of ERP, said: "Clubs will have to
look long and hard at the commercial realities of life and, by the end
of next season, see if the kind of investment they are making in terms
of players' wages is sustainable in terms of their income. We are in a
situation where television income is flat for the next four years and
that is always going to be the No 1 source of income."
Deshayes added that it had been "prudent" to take a strategic look at
the feasibility of the club game. He said: "Overall we are very
optimistic but we are not complacent. Not one first division club made
money and they would not have expected to. But it is not a situation
we would want to see continue. We are not here to bail clubs out. That
is to no one's benefit. We are working on behalf of the clubs
collectively to maximise revenue and to assist them but it is down to
them to make sure the books balance."
Guaranteed income primarily from television and sponsorship will top
?10 million this season for the top 24 clubs, whose collective
turnover was more than ?40 million last year. Each second division
club receives ?250,000 and each in the first division ?500,000 with
more for those successful in Europe. However, those amounts do not
begin to cover wage bills which spiralled to ?934,000 for London
Irish, who lost ?500,000 last season, and well over ?1 million for
Harlequins. The average wage bill per first division club is estimated
to be ?1.5 million. That is why good management and commercial acumen
is vital to clubs, some of whom may well struggle to survive. It is
also why individual owner investors, such as Ashley Levett at
Richmond, are crucial in keeping their clubs afloat, at least in the
Levett has already poured ?5 million into Richmond whose chief
executive, Symon Elliott, has said that salary bills are too high and
that excessive transfer fees are a recipe for disaster. Levett said:
"I think every owner will say that their investment has been bigger
than first anticipated.
"Everyone has a level. No one can just leave an open tap on. But
everyone is looking at this on a three-to-five-year plan. If I am
wrong then in three years time that will be the end. I am not a
bottomless pit. But I am investing for the long term and having talked
a lot to other owners we believe that in two or three years the club
game will be worth much more. In five years' time we will be one of
the top clubs in Europe. My ambition is to build a superclub and I am
confident we can do that."
Richard Baldwin, a tax partner at Deloitte & Touche, who helped
produce the company's report on football finance and who has been
running the rule over rugby with partner, Gerry Boone, is optimistic
the sport can avoid the pitfalls which have befallen others.
"It is obvious that clubs are spending more than they earn and that
gap needs to be bridged. But it is encouraging that they are taking
the initiative and not waiting like some sports until the writing is
on the wall.
"It is not all gloom and doom but clubs can't go on spending the way
they are. The trick for rugby union as a sport is to build a
successful model ? along the lines of the FA Premiership ? but it is
up to the clubs to decide how they spend their money. We can only be
guide them with the right framework."
Ultimately what is needed are more customers and more expenditure by
spectators once inside grounds. Chris Butcher, a leisure analyst for
Mintel International, said: "They have got to generate more secondary
revenue ? the 'dwell time' inside the stadiums ? and get fans in
earlier. Commercially they are not as geared up as football clubs.
That is inevitable ? but there are a lot of opportunities and if they
can grasp them there is hope."
Butcher, the author of a report entitled The Rugby Business earlier
this year, is certain that there will be some consolidation. He
foresees the growth of superclubs and a resulting gulf between the
haves and have-nots.
Pontypridd RFC .. Welsh Champions 1996/97 Season
"I measured 95dB for a Starfleet Cruiser, which struck
me as pretty loud for a space vacuum"
John Wilkinson. Environmental Health Officer bemoans
loud film trailers. New Scientist. 9th August 1997