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Rugby Australia's impending financial crunch won't be the death of rugby in Australia

Rugby Australia has finally come to the undesirable position where the long-term debts to the game are finally coming due and it will cost dearly, it seems.

The current TV revenue sourced from a bumper $275m five-year deal signed in 2014 averages around $60m a year in income for the administrative body, by far its largest source, making up around 50 percent of total revenue.

This is a mountain of cash compared to the reported paltry offer from Fox Sports of around $20m a year for the next rights deal, one that has been recently withdrawn from the table.

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It does not bode well that the value of their premium product has just caved by over 50 percent in the eyes of the current broadcaster.

Optus, an Australian telco with cash to burn, has stepped in to reportedly offer $30m a year. This is still a disaster for Rugby Australia with a 50 percent broadcast revenue reduction that would force the administration into cost-cutting measures like never before to avoid reaching into debt to maintain the status quo.

There will be no onus on Optus to make the venture into rugby a success either as it will be used as a side-show marketing ploy to push subscriptions in their core business.

With annual cash operating outflows of around $130m and inflows barely breaking above that, a $30m hit is going to be significant for Rugby Australia. Any way you look at it the numbers don’t add up.

Around $31m of Rugby Australia money is funnelled back to state unions to fund Super Rugby teams, $18m to pay Wallabies players, $10m to fund a high-performance unit.

And then there is the wastage, with states spending ‘unbudgeted expenses of $28m over five years’ in order to fund their Super Rugby teams, with the bill fitted by Rugby Australia.

You can imagine there will be haircuts in these areas and every other corner of Rugby Australia’s tightening budget.

It will be a painful cash crunch. However, this is still unlikely to be the death knell for Australian rugby.

Australia’s rugby production line – the GPS private school systems – is still largely in place, which doesn’t cost Rugby Australia a cent, and there is enough coming out of it to make something with.

In 2019, the U20 side beat New Zealand at home 20-0 in the most comprehensive win they’ve ever had over their trans-Tasman rivals before making the final of the World Rugby U20 Championship.

A few months later, the Australian Schoolboys side pulled off their first win over New Zealand since 2012 on opposition soil in Hamilton.

The talent is there in the schoolboy system to be developed into Wallabies, but Rugby Australia is going to have to prove it can do it with less financial resources than before.

Luckily this emerging talent often comes cheap. Older stars on higher-value contracts have mostly moved on in their careers. Quade Cooper, David Pocock, Will Genia, Sekope Kepu, Bernard Foley are all now overseas and Israel Folau’s contract has been terminated, easing the high-profile player cash-burden for the national body.

A move towards fee-based compensation for the Wallabies similar to the Rugby Football Union would also reduce the risk of poor contracting by Rugby Australia. This might be a necessity if the Giteau’s Lule is scrapped and more and more players are contracted to clubs outside Australia.

Over the long-term Rugby Australia will need to find a way to have this talent playing at home again, fixing the broken model they have in place now.

Cost savings can be made immediately by scrapping the unnecessary operating cost that is the National Rugby Championship, a made-up third tier to satisfy SANZAAR requirements.

It is quasi-amateur with the pro’s forced to play for no extra compensation and amateurs also playing for free. There is next to no viewership market for it and is destined to join the Australian Rugby Championship collecting dust in the closet.

Australia’s third tier has always been club rugby and that is where the opportunity is. It has survived with little to no help, with the costs often lumped on the players. Some would say the national administrators have already done everything in their power to kill it, unsuccessfully.

The Shute Shield has bucked the trend of stagnation within Australian rugby and become a viable TV-product in its own right with independent management, resulting in a turnaround of sorts with a thriving turnout for the final making a lasting impression.

There is a way, over the long-term, to build club rugby towards a professional set-up by opening up the possibility for outside investment in local clubs from private hands and openly embracing small player payments that would grow over time and expand towards professionalism, funded by those willing and able to take on the risk as club owners.

It must be remembered that this is what the NRL – a largely domestic competition with club owners – has become, a billion-dollar TV product within Australia and New Zealand.

Rugby union is still a niche code within the Australian competitive sporting landscape, but a scalable solution could still achieve growth and build a stronger foundation for the game than is currently in place. Club rugby in Australia still retains a sense of tribalism, attracts decent local crowds and is the heartbeat of rugby in the country. A Saturday afternoon at a packed-Premier game with cheaper beers at the local park is arguably a greater rugby experience than sitting in a mostly-empty Stadium at night.

Whilst it isn’t likely to be a massive commercial rights product anytime soon, with private funding it could get there naturally over time as rugby league has. Maybe, more importantly, it can drive the market for player retention in the game during that pivotal time between school and becoming ready to play professionally. One state union can only fund a handful of academy contracts.

It doesn’t need to become a national competition with ballooning operating costs from day one either, over time allowing natural market forces fuelled by outside money to drive growth at a state level first.

Those asking how would this potentially fit down the line side-by-side with Super Rugby are asking the wrong question. Wouldn’t it be more desirable for Rugby Australia to have a completely self-sufficient domestic professional landscape?

The hard part will be whether Rugby Australia and state administrative bodies will concede some of their power and control in many areas of the game to work towards solutions like this.

The mounting financial pressure may force that decision for them, the plummeting rights value in Australia is a flashing warning light.

Radical strategic action is required and no options should be left off the table. The game won’t die but the administrators will eventually if they don’t find a way to grow the value of the product.

England’s attack coach Scott Wisemantel leaves to join the Wallabies:

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Rugby Australia's impending financial crunch won't be the death of rugby in Australia