Tournament years are when World Rugby turns its usual losses into windfall profits. Photo / Getty Images
COMMENT
The Rugby World Cup (RWC) is a huge event from both a financial and a sporting point of view.
The tournament is run by Dublin-based World Rugby, formerly known as the International Rugby Board. World Rugby's vision is to grow "the global rugby family", and rugby's new status as an Olympic sport will allow it "to reach out to new audiences within new and existing markets".
The quadrennial RWC is World Rugby's most important event. This is demonstrated by its windfall profits in 2011 and 2015, when the tournament was hosted by New Zealand and England respectively.
The figures in the accompanying table show that World Rugby reported total profits of £306.0 million ($602.7m) for these two RWC years, compared with combined losses of £232.7m for the five non-RWC years.
The simple RWC formula is that all broadcasting revenue, tournament fees, sponsorship and other commercial revenue goes to World Rugby, while ticket revenue mainly goes to the host country. The latter is responsible for most of the costs, including the lump sum tournament fee paid to the Dublin-based organisation.
For example, English Rugby generated £275.0m in ticket revenue for RWC 2015 while World Rugby had £129.0m of broadcasting revenue, £64.8m of sponsorship and £151.0m of merchandising and tournament fees during that financial year.
From an English Rugby point of view, RWC 2015 generated a surplus of £15m after running costs and tournament fees were deduced from ticket sales revenue.
World Rugby generated a surplus of £189.6m for its December 2015 RWC year after paying minimal tax because of its Irish residency. The funds are used to finance tournaments, meet administration costs and distribute grants to member countries and regional associations.
Merchandising revenue and the tournament fee have become increasingly important as they represented 43.8 per cent of World Rugby's 2015 revenue compared with only 33.8 per cent in 2011.
New Zealand paid a £55.6m fee to host the RWC 2011, but this fee hasn't been separately disclosed for the 2015 event.
World Rugby's latest financial statements, which are for the year to December 2017, show that it is in a strong financial position. At year-end it had total assets of £207.5m, mainly comprising cash and short-term bank deposits (£76.8m), global equities (£70.7m) and bonds (£36.9m). It has no borrowings.
World Rugby is a significant business, but it still has old amateur game features. It has more than 30 council members and several of them have held this position for a long time. Council members were hosted in lavish style when they visited New Zealand for RWC 2011.
World Rugby took a big risk when it awarded the 2019 competition to Japan, a non-traditional rugby country.
The original projections were that RWC 2019 revenue would be down by 20 to 25 per cent compared with the revenue generated in England in 2015. However, Japan's surprise victory over South Africa in the 2015 competition generated increased interest in the sport in Japan and the organisation of the current event has mostly been top class.
Broadcasting rights have increased compared with 2015 because World Rugby has negotiated deals with three Japanese broadcasters: J Sports, NHK and Nippon TV. This has been a significant achievement because most of the games are played in the early morning in Europe, which is not a great time for broadcasters.
Sponsorship deals have also been better than expected because World Rugby has attracted new Japanese corporates and global companies wanting to use rugby to access Asia's high-end consumers.
World Rugby chief executive Brett Gosper recently told the Financial Times that his organisation expects to generate revenue of around £360m from the Japanese tournament, compared with £330m four years ago, but profits are projected to be lower than from RWC 2015. This is because of additional organisational costs associated with holding the competition in Japan.
The first weekend has demonstrated that the event will be a huge success from a sporting, as well as a financial point of view.
Downtown Tokyo is not the same as Dublin or Cardiff on a test match day, as rugby supporters are few and far between in the Japanese capital.
This is understandable as Tokyo has more than 9 million people while greater Tokyo has more than 37 million inhabitants. The latter figure includes Yokohama, where most of the major games are being played, including last week's All Blacks/Springbok contest, the two semi-finals and final.
The atmosphere picks up dramatically as fans approach the stadiums, particularly in Yokohama.
The opening game, Japan versus Russia at Tokyo Stadium, had several major glitches, partly because supporters were warned to arrive 60 minutes before the opening ceremony, which meant travelling on Tokyo subways during Friday rush hour traffic.
Most people arrived between 5.00 and 5.30, with the short opening ceremony at 6.30, followed by the game at 7.45. This left considerable time for drinking and eating but the facilities at Tokyo Stadium were woefully inadequate, with huge one-hour-plus queues at bars, food outlets and toilets.
These facilities are suitable for most Japanese sports because drinking and eating are not major activities at events in that country. For example, Japanese major league baseball attracted total attendances of 25.5 million last year but most of these supporters sing and chant throughout games, with limited alcohol consumption.
Facilities at Yokohama were better on Saturday and Sunday, with a huge Heineken bar between the main entrance and seating areas, but RWC organisers have relented on food and from now on they will allow a limited amount to be brought into stadiums. However, no drink will be allowed in and Heineken, a major sponsor, will continue to be the only beer supplier.
It is a shame that World Rugby hasn't attracted a major wine sponsor, as the drink options are severely limited at the event.
Notwithstanding this, the Japanese are wonderful hosts and the first week of RWC 2019 has been a huge success. The atmosphere has been enthralling and the contrast between the serious New Zealand and South African supporters on Saturday night and the joyous Irish and Scottish supporters the following was quite startling.
New Zealanders and South Africans both know that anything less that winning the Webb Ellis Cup will be total failure, while the Irish and Scottish would like to bring the cup home but if they don't, at least they will have a great craic in Japan.
World Rugby has taken a big risk by going to Japan, but the early signs are that it will be a huge success from both a financial and sporting point of view. Business organisations need to take risks and World Rugby is demonstrating that if these risks are well thought out and successfully implemented, they can bring huge rewards.
New Zealand can take a great deal of credit because it initiated and organised the first World Cup in 1987, which was reluctantly supported by other countries. The old British Isles rugby blazer brigade didn't want to turn the sport from an amateur game into a business and lose their privileged position.
Ironically, some of them may now be World Rugby council members enjoying Japanese hospitality, fantastic food and wine in corporate boxes in Tokyo, Yokohama and throughout the rest of Japan.
Unlike most attendees, it is highly unlikely that these council members are forced to queue for one hour or more for their food and drink at RWC 2019 games.
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