#360Business: European rugby’s finest must be competitive on and off the field

Martyn Thomas 10:06 24/11/2014
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  • Out of red, into black: Gloucester centre and England international Billy Twelvetrees

    Domestic rugby union in England is in fairly rude health at the moment. 

    – #360business: How PL fans are forced to pay price of brand loyalty

    With the World Cup now less than a year away attendances at Aviva Premiership games continue to rise, while clubs are also enjoying the fruits of a second year of an increased TV deal.

    The battle for control of European rugby has been successfully won too, giving the country’s elite a larger slice of the continental revenue pie.

    Yet, that buoyancy has yet to be reflected in the balance sheets of many Premiership clubs, with only four of the 12 teams currently competing in the top flight operating at a profit.

    One of those sides in the black is Gloucester, who earlier this month posted a record turnover of £12 million (Dh69m) and profit of £512,000 (Dh2.94m).

    It is the fourth year in a row that the Cherry and Whites have finished the year in the black, and came following a season of upheaval on the pitch that ultimately resulted in a complete overhaul of the club’s playing and coaching department.

    “I think it has been a really sensible business plan that has been put in place and executed well,” Stephen Vaughan, the club’s CEO, says. 

    “It’s been a number of things that have managed it and the back drop has been quite tough obviously because our squad costs have risen dramatically.

    "We brought in a whole new coaching team and 26 new players, so that was a big chunk of money that we needed to cover with the revenue streams.”

    Gloucester’s struggles on the pitch – they have finished in the top six just once in the last three seasons – have only increased the importance of the work being done behind the scenes.

    Unlike many of their rivals, the club do not have a rich owner to fall back on.

    What they do have is the second highest attendance in the league, and therefore the Cherry and Whites have had to be as innovative as possible in maximising their revenue from those supporters.

    Last season saw the introduction of a cashless payment system to parts of the club’s Kingsholm ground that gives members loyalty points, discounts and other benefits.

    Initiatives introduced in previous seasons, such as a club-branded lotto, have also paid dividends and Vaughan is keen for the club to be one step ahead of their rivals.

    That said, he admits scouring Europe for ideas, name-checking Harlequins, Leicester, Northampton, Leinster, Munster and Glasgow, and says he wasn’t afraid to look outside of rugby.

    “We don’t have the same model of certain clubs with rich benefactors, so we have to be a self-sustainable club by right,” Vaughan adds. 

    “There are a number of areas where we’ve looked beyond rugby.

    "I’ve been here for nearly two years and most of the new initiatives that we’ve done aren’t in place at other clubs.

    "For example, last season, we launched a lotto which I actually picked up from Arsenal.”

    Ultimately Gloucester’s impressive financial performance has allowed them to make some considerable gains in recruitment as they look to rejoin Europe’s elite.

    The likes of John Afoa, Richard Hibbard, James Hook and Greig Laidlaw have all come in to try and ensure the club’s exile from the new European Rugby Champions Cup is as short as possible.

    Under the new umbrella of European Professional Club Rugby (EPCR), Premiership clubs now have a greater say in how the continental game is run than ever before. 

    For the first time they also have access to an equal share of revenues generated by it, as England’s top flight, France’s Top 14 and the Pro12 split the cash three ways.

    In affect, funding is still slightly weighted to the Pro12 – who have been guaranteed £20m (Dh115m) – but with income predicted to top 100m Euros (Dh455m) in the next four years, it is clear why qualification is so prized.

    “Running a rugby club, or any sports club, is not like running a normal business where you can kind of sit back, think, ponder and wait for the market to pick up,” Vaughan adds.

    “You are as good as your last game and we had, by any accounts, a poor season, finished ninth and that’s unacceptable.”

    Unsurprisingly, most opposition to the new structure of European rugby has come from fans of the Irish and Welsh regions, who now have to qualify for the Champions Cup. 

    However, in terms of pure numbers clubs from the Pro12 should actually fare better from the new competition. 

    Welsh regions, for example, took home around £4m (Dh23m) from the old Heineken Cup, but this figure should rise to around £6.8m (Dh39.1m) in the increased pot.

    Working on a projected first-year income of £64m (Dh368m), the three leagues will split the first £60m equally, but the £4m on top would be given to the Pro12, with Ireland and Wales sharing the money as they both field four teams.

    Even during their often fractious dispute over how best to run their own game, both the Welsh Rugby Union (WRU) and the regions gave their backing to EPCR.

    The increased revenue they now receive should in turn help in their bid to entice the country’s best players back to the principality.

    Many of those stars are currently plying their trade in France, and if there is one concern from onlookers in the Premiership and the Pro12, it is that the new structure will make the Top 14 even richer.

    France is by far the most lucrative market for rugby union in the northern hemisphere.

    While Premiership Rugby were basking in their £38m (Dh218.5m) a season TV deal with BT Sport last year, executives at Ligue National de Rugby (LNR) were busy putting the finishing touches on a mammoth five-year deal with Canal Plus, worth an average 71m Euros (Dh323m) per season.

    That deal has since been ruled illegal by French courts, with the LNR told to re-open the bidding process by March 31, 2015, a move that will allow beIN Sports to enter and possibly push the price up further.

    The ruling hasn’t put off investors either, with sponsorship revenue for this season standing at around 16.5m Euros (Dh75m).

    France’s success is an interesting one as it has been built in part on a strong offering of the sport on France Televisions.

    As part of Canal Plus’ deal, selected games, including the Top 14 final, are shown on free-to-air television.

    Last season’s showpiece attracted an audience of 4.5m.

    Last month, the terrestrial channel also showed a Champions Cup double-header which was watched by an average of 2m people.

    On average between 700,000 and 850,000 fans watch live Top 14 rugby each week, and Canal Plus has continued to record increased subscriptions on the back of its popularity.

    Contrast that with England, where last season’s Premiership final was watched by 157,000 on BT Sport, and this season’s highest viewing figures were the 182,000 who tuned in for Northampton v Bath on September 27.

    There is an appetite for free-to-air rugby in England, with 434,000 fans tuning in every week for the Premiership highlights programme on ITV, but Vaughan admits more can be done.

    “We have a lot to thank BT Sport and Sky for, they are wonderful investors in the game and they quite rightly have a business model that relies on subscriptions,” he says.

    “I think we’ve got a wonderful product in the Aviva Premiership, it is such a shame that we’re getting hundreds of thousands of people watching rather than millions, as they do in France. 

    “I understand the business positions the broadcasters are in and how their business models are made but I think for the long-term prospects of the game, more terrestrial TV would be a massive, massive opportunity for us.”

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