RUGBY WORLD CUP:

THE FI­NAN­CIAL WIN­NERS

Finweek English Edition - - FRONT PAGE - BY CIARAN RYAN

The 2015 Rugby World Cup ( RWC) kicked off on 18 Septem­ber at Twick­en­ham when host coun­try Eng­land faced off against Fiji.

The Boks squared of f against Ja­pan in their open­ing match on 2 0 Septem­ber at the Brighton Com­mu­nity Sta­dium.

For those in­volved in the world of rugby, this is a huge money spin­ner. The tour­na­ment will likely bring in £ 2. 2bn ( R45.4bn) for t he UK econ­omy, ac­cord­ing to an eco­nomic im­pact as­sess­ment study by EY. Close to £ 1bn ( R21.3bn) will be added to the UK’s na­tional GDP. A to­tal of £ 85m ( R1.75bn) was in­vested in in­fra­struc­ture in prepa­ra­tion for the tour­na­ment, sup­port­ing 41 000 jobs around the coun­try.

The big money is in the sale of TV broad­cast rights to the tour­na­ment. The RWC is one of the most watched i nternational com­pe­ti­tions in t he world. In 2007, the RWC at­tracted a cu­mu­la­tive TV au­di­ence of 4.3bn peo­ple. In 2011, t he tour­na­ment at­tracted an es­ti­mated 3.9 b n cu­mu­la­tive global TV au­di­ence i n 207 ter­ri­to­ries. As a com­par­i­son, the 2014 Fifa World Cup in Brazil was es­ti­mated to have reached a cu­mu­la­tive au­di­ence of 26bn.

Rugby does not en­joy t he uni­ver­sal ap­peal of soc­cer, but t he RWC view­er­ship fig­ures are nev­er­the­less im­pres­sive.

Ac­cord­ing to sports man­age­ment ex­pert Michael Gold­man, who i s as­sis­tant pro­fes­sor at the Univer­sity of San Fran­cisco and Ad­junct Fac­ulty at Gibs, plans are in place to ex­pand the ap­peal of the game to new ter­ri­to­ries. “Brett Gosper, World Rugby’s CEO, has spo­ken re­cently about their in­tent to grow the RWC to more coun­try par­tic­i­pants, partly in or­der to grow TV deals and other com­mer­cial di­men­sions. Ger­many and Rus­sia were specif­i­cally men­tioned. The tour­na­ment gen­er­ates 90% of World Rugby’s rev­enues, and tour­na­ment broad­cast deals con­trib­ute 60% of to­tal rev­enues.”

Just as the 2012 Tri-Na­tions be­came the rugby cham­pi­onship to bring Ar­gentina into the fold (along­side SA, Aus­tralia and New Zealand), Su­per Rugby will ex­pand to 18 teams in 2016, with new en­trants from Ar­gentina and Ja­pan, and a sixth fran­chise for SA. Ex­pand­ing the num­ber of com­pet­ing ter­ri­to­ries in­creases TV view­er­ship and rev­enues for the par­tic­i­pat­ing rugby unions; this no doubt helped the SA Rugby Union (Saru) se­cure new and en­hanced com­mer­cial agree­ments with Sam­sung, Coke and Mar­riott. Su­per Rugby ad­min­is­tra­tors are par­tic­u­larly ex­cited about Ja­pan’s entr y to t he tour­na­ment, as this could open the door to the gi­ant Asian mar­ket.

Broad­cast­ing rights for the RWC are re­garded as a l icence to print money. Ad­ver­tis­ers love it be­cause view­er­ship fig­ures go through the roof. In the UK, ter­res­trial broad­caster ITV out­bid SkyS­ports and the BBC for the ex­clu­sive rights to the 2011 and 2015 tour­na­ments. Gold­man says the deal may have been worth £60m (R1.2bn) – dou­ble the fee paid for the pre­vi­ous two tour­na­ments. This ex­plains why over­seas te a ms ar e a bl e to af­ford big pay­checks for their play­ers. ITV says advertising sup­port for the RWC is par­tic­u­larly strong among young males. Saru’s 2014 an­nual re­port shows how much broad­cast­ing rights bring to the do­mes­tic game. Last year it clocked rev­enue of more t han R800m, of which R317m was from broad­cast­ing rights and R340m from spon­sor­ships. Ticket and mer­chan­dise sales gen­er­ate rel­a­tively lit­tle rev­enue for SA rugby.

SA hosted only three home tests this year be­cause of the RWC, which rep­re­sents a sig­nif­i­cant drop in in­come for lo­cal rugby.

Saru’s broad­cast­ing i ncome will ex­ceed spon­sor­ships from 2016, when it is ex­pected to ac­count for about 60% of the union’s to­tal in­come. Spon­sor­ships are likely to catch up to­wards the end of the f ive-year broad­cast­ing rights cy­cle. This is also an im­por­tant source of in­come for the par­tic­i­pat­ing clubs, all of which get a share in the prof­its of the RWC. This in­cludes broad­cast­ing, spon­sor­ship and other rev­enue.

Su­per Rugby teams sell their own spon­sor­ships and share in broad­cast­ing rev­enue, with a por­tion r eta i ned by Saruto cover costs. The cur­rent Bok squad is top-heavy with Storm­ers and Bulls play­ers, and their re­spec­tive clubs will have to pay their Spring­bok fees. This typ­i­cally puts a strain on club fi­nances, with the ex­pec­ta­tion that the re­turn will come in the form of more bums on seats in fu­ture club fix­tures.

HOW THE BOKS WILL EARN

When SA hosted the RWC in 1995, the sport was not yet pro­fes­sional, so the Boks the­o­ret­i­cally earned noth­ing for their ef­forts. There were game and win bonuses for play­ers, so they did not leave com­pletely empty-handed. But the pay was noth­ing com­pared to what it is to­day. Shortly af­ter the 1995 RWC vic­tory, each Bok player was of­fered a four-year con­tract.

Vet­eran Bok cam­paign­ers play­ing abroad can ex­pect to earn as much as R4m to R5m this year, and even as much as R6m to R7m once the ef­fect of the weaker rand is taken into ac­count.

The f ig­ures of­fered by clubs i n Europe and Ja­pan are al­ready way ahead of those in SA, but the fig­ures will look even sweeter once con­verted into rands. On this ba­sis alone, we shouldn’t be sur­prised to see another wave of lo­cal play­ers head­ing off to Euro­pean and Ja­panese clubs. Of the 31-strong Bok squad an­nounced re­cently by man­ager Heyneke Meyer, seven are play­ing for over­seas clubs on mul­ti­mil­lion rand-a-year pack­ages. Those play­ers earn­ing rands will feel l i ke poor cousins along­side the likes of Morné Steyn, Bryan Ha­bana, Fourie du Preez and Schalk Brits, all of whom play for

THE RWC IS ONE OF THE MOST WATCHED IN­TER­NA­TIONAL COM­PE­TI­TIONS IN

THE WORLD.

over­seas clubs. By way of com­par­i­son, only two Aus­tralians in the RWC squad play for over­seas teams. The rest play their trade in lo­cal Aussie teams. Not a sin­gle mem­ber of the All Black squad is listed as play­ing over­seas.

Though the weak rand may have put more day­light be­tween the earn­ings of lo­cal and over­seas play­ers, SA-based pro­fes­sion­als can sub­stan­tially im­prove their take-home pay with spon­sor­ships and ap­pear­ance fees. And, given the pub­lic­ity around the RWC, this is a great op­por­tu­nity for play­ers to make some ex­tra cash. But to get the re­ally big spon­sor­ship deals, you need to be a Vic­tor Mat­field or a Bryan Ha­bana – faces that are in­stantly recog­nis­able to the ma­jor­ity of South Africans – and that can take years of hard graft and out­stand­ing per­for­mances on the field. Off-the-field be­hav­iour also counts: no spon­sor wants to throw money at a rugby player with a “ques­tion­able” rep­u­ta­tion.

Eben Ven­ter of Ster­ling Sports, which rep­re­sents sev­eral high-pro­file rugby play­ers, says a player’s in­come is de­pen­dent on their brand eq­uity. “That’s why play­ers l i ke [ New Zealand’s] Sonny Bill Wil­liams earn more on en­dorse­ments and spon­sor­ships (than matches) – be­cause of their strong brand eq­uity. Play­ers at the top level can earn up to R50 000 for a sin­gle ap­pear­ance of a few min­utes and still earn a per­cent­age for im­age rights over a pe­riod of a month, depend­ing on the length of the cam­paign. In most player con­tracts, the unions or clubs spec­ify that the spon­sors of the union or club have first right to im­age of the play­ers. When an agent or a player gets ap­proached for an ap­pear­ance or spon­sor­ship, the club [ap­proves if] it is not in con­flict with the spon­sors of the union.”

Play­ers’ col­lec­tive im­age rights are owned by their union, MyPlay­ers, which makes an an­nual dis­tri­bu­tion. On top of that, play­ers also have per­sonal en­dorse­ments. Fig­ures are hard to come by, but some play­ers are ru­moured to be earn­ing R4m to R6m a year from this.

Play­ers’ in­comes in­crease dra­mat­i­cally dur­ing the RWC, says Ven­ter, not only for par­tic­i­pat­ing play­ers but for those play­ers that are ap­proached to merely ap­pear at so­cial func­tions and par­take in gen­eral rugby pub­lic­ity. “[It’s] like silly sea­son. A client of mine, an ex-player, made in the vicin­ity of R120 000 on broad­cast­ing alone dur­ing the pre­vi­ous RWC,” says Ven­ter.

Spon­sors are look­ing for a re­turn on in­vest­ment, and that means splash­ing their brand in front of the cam­eras as promi­nently and as of­ten as pos­si­ble.

Gold­man says in terms of per­sonal endorsement spon­sor­ships, rugby play­ers have not been able to take ad­van­tage of this op­por­tu­nity in the same way as football play­ers have. With a few ex­cep­tions (such as Bryan Ha­bana), most play­ers have not been able to gen­er­ate sig­nif icant off-the-f ield spon­sor­ship in­comes. Typ­i­cal per­sonal endorsement deals would in­volve a set of ap­pear­ances, advertising im­ages and prod­uct us­age rights, in re­turn for cam­paign-based or

con­tract pe­riod fees. Im­por­tantly, these per­sonal endorsement deals would need to care­fully man­age any conf lict­ing cat­e­gory spon­sor­ships for the teams, leagues, and tour­na­ments that the player com­petes in.

For young up-and-com­ing play­ers with the right amount of tal­ent, there are a num­ber of schol­ar­ships avail­able to ease them into the world of pro­fes­sional rugby. Some of these cover full fees at pri­vate academies, while oth­ers will partly cover costs.

For the truly gifted, the route from high school to pro­fes­sional rugby – ei­ther as a mem­ber of a Cur­rie Cup or Su­per Rugby team – can be as lit­tle as 12 to 18 months, at which point they can ex­pect to earn up­wards of R500 000 a year as a start.

ECO­NOMIC BEN­E­FITS OF THE RUGBY WORLD CUP

The eco­nomic ben­e­fits of host­ing an in­ter­na­tional sports tour­na­ment such as the RWC are not al­ways clear-cut. For ex­am­ple, how do you mea­sure the PR ben­e­fit of bil­lions of TV view­ers see­ing the best your coun­try has to of­fer?

SA is reck­oned to have re­ceived a 0.54% bump in GDP from the 2010 Fifa World Cup. A to­tal of nearly 310 000 for­eign tourists ar­rived in SA for the tour­na­ment and spent about R3.64bn dur­ing t heir stay, which av­er­aged 10 days. There is no doubt t hat t he global ex­po­sure SA re­ceived dur­ing t he tour­na­ment lifted tourism f ig­ures in sub­se­quent years – that is, un­til min­is­ter of home af­fairs Malusi Gi­gaba de­cided to tighten visa re­quire­ments ear­lier this year in his bat­tle against hu­man traf­fick­ing. Tourism num­bers dropped 6% in the first quar­ter of this year com­pared with the same pe­riod in 2014, a loss of 150 000 visi­tors and R1.6bn in rev­enue. In one fell swoop much of the good gen­er­ated by the 2010 Fifa World Cup was un­done.

Doubts have been cast over t he eco­nomic ben­e­fits to SA from host­ing the Fifa 2010 World Cup once it be­came clear that many of the sta­di­ums, roads and much of the other in­fra­struc­ture up­graded for the tour­na­ment were sub­ject to bid-rig­ging. Fines in ex­cess of R1.5bn have al­ready been paid by the car­tel mem­bers ac­cused of ramp­ing up the costs of this in­fra­struc­ture. Of the R30bn spent by SA on the 2010 Fifa World Cup, we may never know how much of this was due to bidrig­ging. That has to be fac­tored in to any as­sess­ment of the eco­nomic ben­e­fits de­rived from the tour­na­ment.

An eco­nomic im­pact study by EY sug­gests the UK stands to benef it hand­somely as the host coun­try for the 2015 RWC. For a start, at­ten­dance fig­ures are higher for a Euro­pean host coun­try, given the shorter travel dis­tances for sup­port­ers. The UK has shown it­self to be an able host of large sport­ing tour­na­ments, as demon­strated dur­ing the 2012 Lon­don Olympics, reck­oned to be one of the best ever or­gan­ised.

RWC 2015 HOST CITIES

13

Match venues

11

Host cities

48

Matches

20 Par­tic­i­pat­ing teams

15

Fan­zones

44 Days of the tour­na­ment

2m+

Face­book likes

6 000

Vol­un­teers

2.3m

Tick­ets

BROAD­CAST RIGHTS FOR THE RUGBY WORLD CUP

*Cu­mu­la­tive view­er­ship

*Cu­mu­la­tive view­er­ship

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