ARU funds Rebels’ private owner to keep expansion club afloat
The Australian
April 1, 2016 12:00AM
Wayne Smith
Senior sport writer
Melbourne’s Adam Thomson runs the ball against the Highlanders at AAMI Park last start.
The Australian Rugby Union has given the Melbourne Rebels’ private owner Andrew Cox financial support worth more than $6 million for five years to stop the bleeding from a club that has cost the game between $15 million and $20m since its inception.
Because the deal is front-end loaded, it is understood the Rebels are being paid $2.6m for 2016, the initial year of the deal, but that payments are reduced considerably in value over the remaining four years.
The other four Australian Super Rugby clubs — the Waratahs, Brumbies, Queensland Reds and Western Force — are allocated $1.7m a year for the five-year term of December’s $285m broadcast agreement with Fox and Ten, rising by $50,000 a year. This is over and above the $3.9m that all five clubs, Melbourne included, were allocated last year under the previous broadcast deal to run their club and fund their players.
The Rebels also receive any additional money the ARU periodically gives the clubs, such as the $50,000 they each received to help with marketing.
While the Rebels might receive an additional $900,000 from the ARU in the initial year of the arrangement, the deal peters out so dramatically that in year five, the Melbourne club will receive only $100,000. The benefit for the ARU is that it is now not faced with propping up a club that, on average, was losing $3.5m a season.
Cox is understood to have been granted three more unfunded extensions, each of five years, before the club passes into perpetuity.
Although Cox and the ARU have signed a confidentiality agreement, they agreed to speak out about their arrangement in response to a letter in circulation condemning the arrangement, particularly at a time when the ARU is under fire for not funding club rugby and is battling to keep afloat the other “expansion team”, the Western Force.
The letter also casts doubt on how the deal was arranged: former Melbourne Rebels CEO Rob Clarke, now the ARU’s chief operating officer, introduced Cox to ARU boss Bill Pulver.
Cox has insisted the deal with the ARU was entirely proper and transparent.
Pulver yesterday said it was in the ARU’s interest for Cox to succeed and prove that private ownership worked in Australia. The ARU is of the view that giving Cox assistance now is the best way for the private owner to establish the business in the hope it will be cost-efficient in the future.
“The funding arrangement expires after five years and Cox will get what every other Super Rugby club gets,” said Pulver. “But we chose to go with him because he has a proven record of turning distressed businesses around. We desperately want him to be a success. He can become a role model for other entrepreneurs.”
Asked if private equity clubs could be self-sustaining, Cox said: “That’s the plan.”
Cox understandably doesn’t see himself in quite such heroic terms, but rather as a businessman who believes the only way sporting franchises can make a profit is if they are in private hands. “The private sector should be able to make these businesses run, because they have the flexibility to make decisions quickly.”
He questioned the figure being publicised ($6.2m over five years) given that the other Super Rugby clubs also were receiving funding from the ARU in the interim.
For all the criticism the deal has attracted, it was unanimously supported by the full boards of the ARU and the Victorian Rugby Union, headed by Tim North.
Last year, the Rebels generated $9.5m in revenue but had expenses running to $12.5m. This year Cox hopes to have no additional expenses and to bring income up to break-even before moving into profit next year.
Under Cox, club membership has risen by 30 per cent this year to 8500 and the Weary Dunlop Club, for members who pay $2000 for premium membership, has doubled.
And while the club does not yet have a front-of-jersey sponsor, Cox is confident that deal will be done shortly.
Meanwhile, on the field, the Rebels are enjoying their best year yet. They have won three games out of five, as many as they won in 16 games in their initial season of 2011.
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