Rugby crowds unlikely in 2020 but matches need to be played

The Irish Times, May 23rd 2020, Gerry Thornley

Irish rugby, and the sport internationally, is facing its most critical few months since the advent of professionalism 25 years ago next August. Were the sport to return in some guise before the end of the year, including international matches, then the IRFU’s relatively solid foundations and the strength of their current commercial relationships should see it recover from this current crisis.

But resuming games, even behind closed doors, is the lifeline for the sport.

Otherwise, further multi-million euro losses would probably lead to the IRFU making cutbacks across its 500-plus workforce as well as its wage structure and funding of the underage game, with the increased likelihood of clubs going to the wall.

This week has provided some of the more sobering messages for major sports since the outbreak of the coronavirus pandemic.

On foot of the Premier League’s chief medical advisor, Mark Gillett, stating that it could be a year before crowds attend Premier League games, the Ulster chief executive Jonny Petrie concurred with regard to rugby matches.

“The reality is that it’s going to be behind closed doors or certainly restricted crowds for quite some period of time.”

Massed gatherings, especially indoor, but also outdoor, and all the more so for shouting and singing fans at sports and musical events, have been proven to be particularly infectious environments for the spread of the coronavirus.

Having already incurred losses of €7-10 million in the current financial year, which ended in April, the IRFU are thus unlikely to recoup the estimated loss of €3.5 to €4 million in gate receipts from the Italian Six Nations game even if it is successfully rescheduled.

Further shortfall

Even if the three November Tests (or alternative home games against Six Nations rivals) take place behind closed doors, that would mean a further shortfall of around €9 million in gross gate receipts. Were the absence of crowds to extend into the 2021 Six Nations and the bumper home game against England as well as France,  that could, according to IRFU chief executive Philip Browne yesterday, cost the Union another €16 million.

However, the potentially even more damaging scenario is no rugby at all before the end of the year.

That would mean the IRFU and Irish rugby missing out on additional millions of euros from broadcasting deals and sponsorship.

To begin with, successfully rescheduling the postponed 2020 Six Nations games, including Ireland’s matches away to France and at home to Italy, would mean completing the near €85 million generated by the tournament in television income. That in turn would complete the estimated €110 million fund in participation and prize money.

Two thirds of that is distributed equally between the six countries and according to insiders the likelihood is that two of three tranches have already been shared out.

Hence, completing the 2020 Six Nations would probably see another payment of €4.5 million-plus to each of the six unions or federations.

Furthermore, the Six Nations would then be able to divvy out the €15 million prize fund. Ireland are currently fourth, which would be worth an additional €2.2 million or so to the IRFU. However, were Ireland to finish third that dividend would increase to around €2.8 million, rising to €3.9 million for finishing second or, at a push netting €5 million-plus for winning the title.

Throw them all together therefore, just completing the 2020 Six Nations would generate in the region of €6.7 million to €9.5 million for the IRFU. Added to hosting the November internationals, even behind closed doors, could salvage at least €10 million from the wreckage according to Browne yesterday.

The Six Nations dwarfs all else for the IRFU, so much so that the November internationals would not be nearly as lucrative, especially without the anticipated sellouts for the visits of world champions South Africa, Australia and Japan – a fixture given added appeal by the hosts’ World Cup win over Ireland.

Broadcasting rights for the November Tests at the Aviva had already been agreed with RTÉ and Channel 4, and along with Guinness’ sponsorship of the series and other commercial deals are reckoned to be worth €3-5 million for the IRFU.

In addition to Guinness, Vodafone sponsors the Irish team and Bank of Ireland sponsors all four provinces. John Trainor, founder and chief executive of Onside, a consultancy company which specialises in sports marketing and sponsorship, works with many of the premier rugby sponsors and rights holders in the Irish market.

At risk

Trainor estimates that a third of the spend on sports sponsorship and broadcasting rights globally is at risk as a result of the coronavirus pandemic – about €15 billion in 2020.

“In Ireland, the market had grown in 2019 by 10 per cent which would have seen total spend in sponsorship of €224 million and within that about 70 per cent goes into sport, which equates to over €150 million in sports sponsorship in Ireland.

“The contraction range in terms of the impact on sports sponsorship in Ireland could be anywhere within a range of 10 and 30 per cent, and that’s for 2020.

“If we fast forward to 2021 and 2022 it’s hard to call it, but if we reflect on our experiences from 2009 you could probably expect another 10 per cent next year and maybe, depending on how the economy does or doesn’t recover, we might see a return into some modest, single digit growth thereafter.

“We have seen from past recessions that the recovery will come and it won’t be five or 10 years before we’re in recovery mode.

“Speaking with our clients and stakeholders in the market place, it feels that about four in 10 practitioners in the industry are talking about reductions or pulling out spend, maybe one in three are going to maintain their current investment levels and about one-in-four who are actually starting to think that maybe this is a good time to be thinking about sponsorship, or thinking about it differently in terms of what it could provide for their business.”

The IRFU has established relationships with its partners, who themselves have strong business models of their own.

“When you’ve got the likes of Guinness, Vodafone and the Bank of Ireland then the strength of those brands, the heritage that they have in rugby and their long-term view is significant,” added Trainor.

“Vodafone, for example, have just renewed their agreement with the IRFU for another four years so a lot of these brands are in for the long haul.”

The timing of this coronavirus pandemic also stalled the proposed investments of an estimated €334.4million and €140.6 million by the private equity firm CVC for 14 per cent and 27 per cent shares in the Six Nations and the Pro14.

Significantly, confirmation on Friday that the CVC deal with the Pro14 has been concluded, and for the same sum, proves that the coronavirus pandemic has not affected its valuation.

Whether or not the Six Nations valuation holds, and likewise the estimated €334.4 million in a new TV rights deal for the Six Nations beyond 2022, remains to be seen.

Yet Trainor maintains the latter deals may only be impacted in the short term. “More importantly, if you look at it through the long-term lens, guys like CVC are not at the table looking at the potential for rugby. I don’t see them going anywhere.”

While CVC, perhaps, and others will drive much of rugby’s growth or re-growth, Trainor adds: “Ultimately, the public will drive all of this”.

“If you look at the growth that there has been in rugby over the last decade, interest levels among the [Irish] public have grown from probably 30 per cent to 60 per cent over the last decade. I don’t see that all of a sudden dropping back down to 25 or 30 per cent.”

The current Six Nations deal (agreed in 2015) with BBC, ITV and other broadcasting companies runs until 2022 (and until 2023 with France TV) and presumably a quasi one-off, Six Nations tournament would offset the loss of the IRFU’s existing November internationals against Australia, South Africa and Japan.

There is a view within the upper reaches of the game that such will be the demand for live Test rugby that a renegotiated, one-off deal may well prove even more valuable given a potentially bigger global audience.

New research by Onside released this week found that 45 per cent of Irish rugby fans are currently supportive of the idea of playing the postponed Italy match and November games behind closed doors and “viewed digitally or in a reduced capacity crowd scenario”. Within this, one in five rugby fans in Ireland would be open to some form of live attendees at the Aviva Stadium games later in the year.

TV exposure

Furthermore, like it or not, a significant proportion of any sport’s value is its TV exposure.

“As long as there’s behind closed doors scenarios then the dent on overall sponsorship value will be less significant, so a lot of businesses would be able to stick with sponsorship in such a scenario for a 12-month window, or even a two-year window to be honest,” says Trainor.

But if there were no games? “That would devastate the industry, and would absolutely annihilate any business case for getting involved in sponsorship and could potentially wipe 70 or 80 per cent off the value of the rugby wing of the wider sponsorship industry.”

However, running off an ‘additional’ Six Nations could potentially tamper with existing broadcasting and sponsorship deals, and rival deals for November series.

Moving into next year, a 2021 Six Nations in which all games are held behind closed doors would be costly for the IRFU and the country, not least as the biennial visit of England is the bumper game.

Aside from earning €4million-plus in gate receipts for the IRFU, research by communications group Teneo indicated that the corresponding match in 2019 generated an additional €9.6 million for the local economy, going up to  €12.4 million when accommodation is included.

Nonetheless, completing a 2021 Six Nations behind closed doors would ensure all six unions or federations of roughly €17.5 million apiece, rising to €22.5 million for winning a Grand Slam.

The IRFU has a turnover of around €90 million per annum, and receives €2.5 million from the Government each year. According to a report by Investec, commissioned by the Federation of Irish Sport, for every €100 the Government invests in Irish sport, the industry creates up to €195 in tax revenue.

Government investment in sport – whether spectator or participation – is a win-win return, whether in tax revenues, sports tourism, employment and both the mental and physical health of our people.

Sport needs the economy, but the economy needs sport too, and for the sake of Irish rugby, it needs to happen this year.