SA rugby forced to tackle the odds for financial survival

Having been cut adrift by their major backers, SA Rugby has run into a perfect storm and they have to implement drastic measures to stay afloat.

That’s the view of Kelvin Watt, long-time sports industry insider, who believes SA Rugby’s precarious financial situation isn’t entirely of their own doing.

He believes, however, SA Rugby needs a reality check on   the demands they place on  the marketplace, while their image requires some spit and polish.

“Economically, South Africa is a tough, uncertain place,” said Watt. “Rugby sponsorship by its nature is not cheap sponsorship. Big corporates are cautious at the moment because of the political situation, the economic situation.

“Coupled to that we’ve probably had our worst year or 18 months in the game at most levels from a performance perspective. That makes things very difficult,” said Watt.

As executive chairman of Nielsen Sports, Watt has an intimate knowledge of industry trends and habits through market data analysis.

SA Rugby’s financial position has been in gradual decline. They reported a R23.3m loss in their last financial year on the back of a sponsorship exodus that they tallied to be worth around R130m.

It wasn’t always like that. Sponsors gravitated to the sport and SA Rugby could afford to be selective about who they wanted to be associated with.

“There was a time when sponsors queued to sponsor rugby,” recalled former SA Rugby chief executive Johan Prinsloo. “It added value to their business and the exposure they got was great. Sponsors didn’t just get involved because of exposure but they believed that there was a future for all players in rugby. There were young players coming through and the sponsors wanted to make a difference.

“Unfortunately, there have been many things over the last while that have  disappointed and some of that relates to performance,” said Prinsloo, who left the CEO’s post in 2011.

Another former SA Rugby CEO, Rian Oberholzer, was quick to remind the largesse rugby benefited from has also dried up elsewhere. “All sports are struggling to attract sponsorship. You have exceptions like soccer.

“The effect that’s had over the last while is that your broadcast rights have  by far outstripped sponsorships,” said Oberholzer.

As much as the game and world has evolved since Oberholzer was in office, some of rugby’s challenges remain  unchanged. Back then in outlining its sponsorship procurement for 2001 SA Rugby in its annual report noted: “Despite tight economic circumstances in the South African market, rugby sponsorship reflected a positive increase of 30% against the year 2000’s figures.”

What’s different you may ask. Back then British Airways/Comair became SA Rugby’s official carrier, while Castle Lager and Nike were national team sponsors who did the heavy lifting.

In 2009 when Prinsloo was around SA Rugby noted in its annual report: “Notwithstanding the global recession from which the South African economy is slowly emerging, Saru’s commercial division has weathered the storm, garnering a sponsorship programme which augurs well for the game.”

Sasol was the main driver of the Springbok sponsorship engine while Canterbury was the apparel supplier.

Now SA Rugby lists Asics as Springbok and Steinhoff as Springbok Sevens sponsors, while an assortment of associate sponsors and official suppliers complete the package.

Sponsors are starting to trickle back and SA Rugby president Mark Alexander was bullish they could soon announce new partnerships. Already they’ve struck up a partnership with FlySafair to be their preferred domestic carrier.

“Rugby is incredibly good business for an airline,” Watt noted cheerily. “The majority of that travel occurs over weekends when the business traveller is not travelling.

“Historically for airlines a deal with SA Rugby is a good one. Teams travel in groups of 30-40 guys. “That is a really good deal for SA Rugby and the airline. They have to search out more of those opportunities.”

In the same breath Watt warns there are some sobering realities rugby’s domestic custodians need to wake up to.

“As one CEO put it to me there are unintended consequences around sponsoring rugby,” said Watt. “Although on the face of it rugby looks a good investment, it does have this problem of being a predominantly white sport for a lot of people so it can create some negativity.

“It is something that rugby needs to work very hard to dispel. On the ground rugby has taken some great strides forward. That is perceived to be a big problem at a lot of corporates.”

He believes the organisation should communicate their message more effectively.

“I think the pace of transformation has been slow,” said Prinsloo. “Opportunities have to be created and, frankly, development needs to strongly come to the fore.”

It’s not the only reason it should shed its elitist tag.

Rugby, Watt argued, could also increase its appeal by being creative and developing a deeper understanding of value when they engage the sponsorship market.

“It is also a matter of pricing. Rugby sponsorship is very expensive.

“In some places rugby is pricing itself too expensively for the market.

“There are very few corporates that can afford the quantum of sponsorship that franchise teams and the Springboks are actually looking to get.”

To be fair, SA Rugby has changed its approach to sponsors. They have apparently already lined up two sponsors for the Currie Cup but they need two more to make up the numbers.

“The way forward may be to look at offering sponsors more bite-size chunks. Unfortunately they’ve let the Currie Cup get damaged. So instead of looking for R45 million for the Currie Cup they can try and sell it off in four bite-sizes of R12.5 million-R15 million. That is something the market can take. They are sort of halfway there with two partners so if they can bring in two more they are suddenly looking at R50 million-R60 million. That is the way for them to start looking at things.”

While Prinsloo stressed  SA Rugby had an obligation “to look after their sponsors”, Watt advocated  greater understanding of sponsors’ real needs.

“The one big thing that has fundamentally changed is that sponsors are no longer just looking for logos and exposure to hospitality and tickets. They are looking for direct business opportunities. This is not just a rugby issue but across the board.”

Sponsors, it is universally accepted, prefer a sure thing. Instability and uncertainty tend to spook investors and the prevarication in deciding how the Super Rugby competition will look next year would have done more harm than good.

“There is obviously a great deal of uncertainty about the future of Super Rugby with where it is going. That has held people back,” said Watt.

However, he said superficial change would have to be accompanied by deep structural reconfiguration.

“Rugby needs to take a good look at its entire commercial situation,” argued Watt.

“It is not business as usual. The world has changed around them. It changed around professional sport.

“We need to understand professional sport needs to be played in a professional environment. We cannot play professional sport with amateur structures.”