NRL in turmoil; as clubs struggle

When David Gallop went public this week about the NRL’s concerns for struggling Sydney-based clubs and their short to mid term survival, few realised the seriousness of the problems circulating Rugby League as a whole.

Dwindling crowds, reduced injections from League’s clubs due to the pokie tax, woeful membership numbers and an overcrowded Sydney market in terms of NRL teams are causing major headaches for the games operators.

As the AFL does their best to eat into the Rugby League market by targeting Western Sydney, Gold Coast and a brave buy-out attempt of League HQ at ANZ Stadium, Homebush – we are also hearing news of South Sydney once again hitting rocky roads as their new owners struggle to come to terms with how tough things really are.

Only a week ago we saw the likes of Penrith and St George Illawarra playing in front of crowds that were only marginally above the desperation 5000 mark.

Times are certainly tough and in an extremely competitive sporting landscape – the NRL needs to get strategic and do so very quickly, or risk again going through a similar torture to the Super League War. Sydney’s base of NRL clubs especially need to improve their earnings, while boosting crowds through the gate is important – equally important is the amount of club memberships, something almost all Sydney clubs are failing to capitalise on. Clubs need to create slick marketing campaigns and target their supporters on game day at their homeground. Punters are already paying $10 for cold pies and warm beers, offering an on the spot $5 club membership would be an easy sell – especially if the marketing department arranged some attractive girls in skimpy clothing to draw in the supporters. (You get the idea, I’ll leave the marketing to the various clubs now however)

While interstate clubs, notably Brisbane and the Gold Coast, are flourishing, the game’s traditional home is under siege and stubbornly refusing to heed the warning of NRL chief executive David Gallop, who insists clubs may die unless things change.

Sydney clubs would prefer to blame the New South Wales Government, and its poker machine tax, for their plight. They would rather flog a horse that shows no signs of life than contemplate the more realistic alternative – relocate or merge, a concept that led to rancour during Super League and its aftermath.

Gallop isn’t the only prominent NRL identity suggesting Sydney clubs are in danger. Gold Coast coach John Cartwright promoted the idea of a 12-team competition recently in a magazine column, claiming that Sydney should be divided into four zones.

In effect, Sydney clubs are holding back the game. They are holding earning capacity of players because they can’t afford to pay more money, something that has resulted in superstars Mark Gasnier and Sonny Bill Williams looking overseas for opportunities.

They are holding back the game’s exposure on a national level by refusing to contemplate relocation.

Behind the scenes, an undercurrent of support is growing for the game to revisit expansion at the expense of overcrowding in Sydney. Most won’t say it publicly, but some chief executives privately believe the only way to grow the pie is to make the game truly national.

That means returning to Adelaide and Perth, two clubs sacrificed in the wake of the Super League peace deal. It means putting a plan in place and sticking to it. It means leaving financially stricken Sydney clubs with three choices: Merge, relocate or die.

It’s not a new idea, but it resonates more than ever as Sydney clubs grumble about the unfair situation created by the NSW Government.

The NRL held a two-day conference with chief executives this week at which they discussed their plight and bounced around ideas to raise revenue. What came out of it? It appears very little.

The game still has no direction. It doesn’t know where it will be next year, let alone in five years. The AFL has plans to move into western Sydney and the Gold Coast, with timetables in place. Super 14 is talking about expanding its product and lengthening its season. The A-League, still in its infancy, is looking to add clubs in Queensland and possibly elsewhere.

“At the moment the game is under threat more in Sydney than anywhere else,” Brisbane chief executive Bruno Cullen said of rugby league.

“That’s one issue. The other threats that are coming to our game are the other truly national codes – the AFL and soccer, and to a lesser extent rugby union. They can get the big money for sponsorship and television revenue because they are national.”

Rugby league, on the other hand, is preoccupied with the survival of Sydney clubs when the answer lies elsewhere. With the NRL locked into long-term television contracts with the Nine Network and Fox Sports, there will be no sudden influx of money. That means, unlike the AFL, the NRL can’t afford to prop up ailing clubs. Against that backdrop, frustration grows outside Sydney, a mood which led to the Super League revolution in 1995, which in turn led to a split competition in 1997.

“When you strategise you have to know where you’re at to know where you’re going,” Melbourne Storm chief executive Brian Waldron said.

“What I do know is there is a team called the Sydney Roosters that from my understanding has less players participating in rugby league at junior and senior level than we do in Melbourne.

“There are two teams in (southern Sydney) and surrounding areas (Cronulla and St George Illawarra) that arguably are sharing a low potential supporter base. That’s just my perception.

“The reality is you have to get some research to determine where you’re going. There will be some research that will tell you there’s some markets that you can generate enormous revenue in outside of Sydney, or it may just be rationalisation.”

Waldron, who comes from an AFL background, advocates increased ground-sharing among the Sydney clubs, as is the case in Melbourne, where the AFL sides play most of their games at either the MCG or Telstra Dome. Waldron also supports the NRL leveraging stadium officials to get better deals for its clubs.

Another option for cash-strapped Sydney clubs could lie with privatisation, a concept which has taken hold at the Warriors, South Sydney and Manly.

Each of those clubs survives thanks to wealthy benefactors – Eric Watson at the Warriors, Russell Crowe and Peter Holmes a Court at the Rabbitohs, and Max Delmege and Scott Penn at the Sea Eagles.

“We have the private ownership model in the game now,” said Wests Tigers chief executive Steve Noyce, who has managed to operate his club with minimal to no leagues club support. “That’s something the game hasn’t had a lot of. That’s possibly something people need to look at as well.”

Manly chief executive Grant Mayer said any rugby league investor needed to understand there wouldn’t be significant returns, a fact borne out at Souths where Holmes a Court and Crowe lost $4 million in their first year.

Sea Eagles co-owner Delmege, who bought a share in the club in 2001, is only now starting to realise the benefit of his investment – and only because he is starting to understand the power of the club’s brand.

“Private ownership has got to realise that owning a football club is not about making money — it’s about other opportunities,” Mayer said. “It took Max Delmege six years to see some opportunities for himself after pouring so much money into the club.”

As for the future of Sydney clubs, Mayer said: “The danger is the costs involved with running a footy club are growing – and revenues aren’t.

“Clubs have to find new ways to make money. If you’re competing with seven other clubs in Sydney, that’s a big ask.

“I have no doubt the dark cloud hanging over the game is 100 per cent accurate.

“Literally, a club could fall over within 12 months. I think it would be a wise club to act before its forced upon them and relocate now.”

The NRL is conscious of the benefits of expansion, and $8 million remains on the table for a club which packs up and moves.

South Australian Rugby League general manager Bruce Walker, who won a premiership with Manly in 1978 and toured with Australia that same year, has been lobbying clubs to move games to Adelaide, a city he says is crying out for the NRL.

Like his West Australian counterpart Bill Nosworthy, who wants a team in Perth, Walker believes Adelaide would have sufficient corporate support to back a side.

Initially, he advocates a partial move involving a side potentially playing six games in Adelaide and six at its Sydney home.

To support that bid, he endorses the NRL offering $4 million – half the $8 million on offer for a complete move – to a club which plays half its home games in South Australia.

A partial move would then be the precursor to a club permanently basing itself in Adelaide, and also Perth, by the time the next television deal begins in 2013.

“They could really test the waters by doing that – six games down here and six games at home,” Walker said. “You would get a lot of sponsors to be involved in that. You would make money.”

NRL chief executive David Gallop questions the benefits of a side playing half its game interstate. Asked whether the NRL would consider putting $4 million on the table for a club that partially relocated, with a view to permanently moving its base, Gallop said: “Partial relocation is problematic. We would really prefer a complete move to a new area. But we have got an open mind on any proposal.”

Gallop is reluctant to force Sydney clubs to move, although he understands the benefits of a national competition.

“The game has been through incredible turmoil,” Gallop said in reference to the Super League war. “We have just added a team (Gold Coast) which is successful. We’re not interested in a race to get dots on a map.

“We will be in new places in the short- to medium-term but it’s not the time to be putting more pressure on our existing clubs by adding teams.

“We would love to be in places like Perth and Adelaide, but the local game is not ready.

“It’s not like it was in the AFL where they had thriving competitions.

“We’re building towards it and there will be a point where we can consider those areas.”

Even if it wants to, the NRL is unable to force clubs to relocate under the terms of their current licence agreements.

As such, clubs need to move of their own volition, something Cullen says would benefit the game immeasurably by producing greater sponsorship revenue, which in turn would be drip fed back to the clubs.

“All this talk about rationalisation is not about getting more money in the pool, it’s about survival,” Cullen said.

Waldron is even more emphatic.

“I have been on record since the day I walked into this business, when I heard David Hill (former head of sport at Channel Nine and now a heavy-hitter with Fox Sports in the US) at my first ever chief executives conference say we had the best television product in the world in sport,” Waldron said.

“I have said right from the start the only reason we don’t generate more money than our competitors is because we’re not truly a national game.

“Rationalise the Sydney clubs and make it a national game. Make it a national game and you’ll stop having to worry. We’re not talking about now, we’re talking about a generational approach.

“It’s something that has to happen in the next 10 years.

“What we can’t forget is we still have a magnificent product. It’s a wonderful product. It’s not broken.”

One thing has become patently clear this week: Something needs to change.

“What’s the definition of insanity? Doing the same thing over and over and expecting a different result,” Waldron said. “Many would argue we are insane at the moment in our game.”