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Financial fragility exposed: There must be a better way

Empty Suncorp Stadium
Copyrights: Carles Rabada/Unsplash (Photo)

Financial fragility exposed: There must be a better way

COVID-19 has thrown into stark relief that there is no financial buffer for business continuity and limited sources of revenue.

The ever-escalating arms war between codes, professional franchises, and local clubs continues to stretch the sustainability of traditional team sports to breaking point. The impact of the COVID-19 pandemic threw into stark relief the fragility of multi-national sporting codes. They froze all activities, suspended on and off-field employees, cut payments dramatically and are scrambling to restart as soon as possible in a still contagious world, desperate to save some television revenue.

In Rugby League the lack of financial buffer highlights the hand-to-mouth nature of the game. The elite flagship competition for Australia and New Zealand is the National Rugby League. In March 2020, the NRL acknowledged that money received from television revenue is distributed as soon as it is received in the current season. With the competition grinding to a halt after desperate efforts to keep playing in empty stadiums, they announced there was only enough in reserve to cover three months without games.

Ironically the franchises and regional bodies most critical of this are themselves reliant on subsidies and grants not only from head-office but also in many cases from separate entertainment venues associated with the brand, particularly from gaming machine revenue. These venues are closed in response to COVID-19 and some franchises rely heavily on these to maintain their current operating model. Nobody disputes that those who provide the product should get a share of the earnings, from television rights for example, but even with gate-takings, merchandise and sponsorship franchises are not financially independent. While it is true that they are not only there to turn a profit, surely sustainability is a desirable goal.

Most shocking is that this is not new. In the break-away Super League competition wars the financial position of Australian franchises were reported publicly. In a Federal Court decision from 1996, figures from 1991 to 1994 showed that franchises were heavily reliant on grants to off-set generally unprofitable football operations. 25 years ago franchises could not support themselves, and it seems nothing much has changed.

At community level the impact is intensified. In New Zealand the rugby league community has long played a role in the development and support of Maori and Pacific peoples who make up the majority of participants and are generally over-represented in negative social statistics. This low socio-economic demographic combined with declining participation numbers across New Zealand has reduced sustainability of rugby league clubs and increased reliance on charitable revenue. Community funding is derived largely from gaming machine funds and is heavily impacted by the closure of entertainment venues across New Zealand due to COVID-19.

This echoes the Australian elite reliance on the same sources of revenue. This must surely impact on community, development and other social programmes provided by the sport at all levels. Everyone is in survival mode.

This financial fragility is alarming. The arms-race mentality makes it almost impossible to escape the high-risk reality of this model. Everyone wants to be better equipped and attracting the best talent. Any entity could choose to sustainably operate with reduced costs and prioritise community development.  But they can’t do it alone.

In the elite world, star players would get paid less and leave for another more lucrative franchise or another sporting code altogether.  Teams would be less competitive and hold less appeal for supporter and sponsor spend, including the life-blood that is television rights.

At local level clubs learning to do more with less would lose desirable benefits - professional quality training equipment and playing kit, off-field apparel, dedicated facilities and financial benefits and incentives for players and officials. Nobody wants to go first and risk coming last.

So we find the survival of one of our major codes with strong community benefits remains tied to the ageing platform of television and to third party subsidies simply to survive hand-to-mouth – and has been for a very long time.

COVID-19 has thrown into stark relief that there is no financial buffer for business continuity and limited sources of revenue. This is a high-risk system with a vicious cycle at work. There must be a better way.

Jamie Walker LLB, MBA is group learning and development manager for a large New Zealand company. He has been a rugby league volunteer for 20 years including governance, administration and managing domestic representative teams in New Zealand. He is a fan of the sport. These opinions are his alone. 

 

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Jamie Walker

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Tuesday, May 12, 2020 - 16:52