The Maori have gone, the Australian provincial championship has gone and now European clubs are sweating. Gregor Paul details how the downturn is hitting rugby.
KEY POINTS:
The credit crunch has worked its way from Wall Street to Main Street and is now making its presence felt at rugby headquarters around the world. Rugby is feeling the bite and there is no sense of this being the season of goodwill. Anything but, in fact, as
the outlook for 2009 is increasingly gloomy, with budget cuts kicking in everywhere.
The New Zealand Rugby Union, despite fixing its foreign exchange at an improved rate and extending and improving its sponsorship deal with adidas, has axed both the Maori and Heartland XV programmes for next season and is reducing the number of days the All Blacks will assemble.
The B competition that shadowed the Air New Zealand Cup has been axed and the Black Ferns will have only limited activities.
"While we have benefitted from some upside in 2008, based largely on favourable exchange rate movements, we are projecting a loss in 2009 and within that budget we still have significant revenue at risk," said NZRU chief executive Steve Tew. "As a result, we have taken what we believe to be a sensible approach to our budget and have proactively reduced activity while we can manage the impacts rather than have changes forced on us."
Even confirmation that the Junior All Blacks will be reinstated to play in the Pacific Nations has failed to lift spirits, as the Australian Rugby Union simultaneously announced they would be removing their Wallaby A side from the competition.
The ARU doesn't have the money to support a shadow Wallaby side and has also suspended its state round-robin tournament.
Hovering in the background is the bigger worry that all this bad news is descending just months before the Sanzar alliance begins negotiations with News Corporation about extending broadcast rights.
Not that it's much of a consolation but the Southern Hemisphere can perhaps find solace that their plight is not as bad as their colleagues in the north.
Almost as quietly as it was announced, the plan to create a second-tier professional league in England may have to be shelved.
In November, the Rugby Football Union revealed it had secured funding through the sale of broadcast rights and its own reserves to help support the creation of a fully professional second league to replace the existing 16-team semi-professional national championship.
But that decision will almost certainly be reviewed, as it doesn't make sense for the RFU to be talking about expansion when the Guinness Premiership clubs are looking to cut their salary cap by $2 million for next season on account of the financial pain many are feeling.
The bottom line is the bottom line, so to speak. To launch a new league in the current environment would carry major financial risks.
As chief 2011 Rugby World Cup organiser Martin Snedden said last week: "The sponsorship market has dried. Honda pulled out of Formula One last week and in a market like this, the first thing that gets looked at is sponsorship."
The turbulence in England is both good and bad news for New Zealand. No one wants to see the sport lose the commercial footing it has fought so hard to gain but, at the same time, New Zealand has fallen victim to the financial clout of the Europeans.
The past three years have seen steep rises in the money offered to leading All Blacks to play for European clubs. In 2004 and 2005, the big names were able to command about £180,000 a season, with some of the very best nudging up close to £250,000. Those numbers have jumped, with Carl Hayman earning £330,000 at Newcastle and others such as Doug Howlett on similar packages elsewhere.
The increased pay deals were the result of rugby enjoying a sustained economic boom. After struggling to make ends meet for the first decade of professionalism, many of the bigger clubs started to break even or make small profits in recent years.
Rugby's popularity had surged, with crowds growing annually, increasing the appeal to sponsors and broadcasters. The salary cap was pushed up, rising this year to £4.2 million, and confidence was sky high.
It was in the midst of the boom that the RFU began thinking about expansion but, such is the way with these things, by the time they agreed the format, the economic climate had worsened.
This season, Bristol have seen a drop in crowds and are dangerously short of money. They are operating on the smell of an oily rag, which is why they agreed to grant Andrew Blowers an early release last week. Bath, hampered by the lack of capacity at the Recreation Ground and their lack of success, recently posted a loss of 350,000 and are forecasting the same again next year.
Newcastle, following the nationalisation of their main sponsor, Northern Rock, are in strife, which is why the Premiership clubs have flagged a potential cut of 700,000 in next season's salary cap. A cut in the spending power of the big clubs would be helpful to New Zealand, as it would most likely see a freeze, if not a reduction, in remuneration packages offered to All Blacks.
Possibly more important to New Zealand is the impact the economic gloom will have on the second tier expansion plans. Another professional, 12-team league would create an estimated 360 new jobs, possibly more.
New Zealand would be a key recruiting ground for the new clubs. They wouldn't necessarily be able to afford the top line talent but they could easily pick off promising provincial players and fringe Super Rugby contenders.
Every agent and administrator in New Zealand knows the threat a new league in England would create, which is why there are many highlighting the current economic predicament as good reason to at least suspend the project.
"I do not have a position on it as to whether it is the right or wrong decision," said Rob Nichol, head of the New Zealand Rugby Players Association. "But if you stood back and looked at it from our point of view, we were just beginning to think that there were a few environmental factors up north that were just starting to curb the whole player market up there."
Aside from the tighter fiscal conditions, Nichol also hopes that the recent results in the UK might have had a bearing on the clubs' recruitment policies.
"With the realisation in Europe and more particularly the UK concerning the strength of their national teams and the need to develop their own players, that might have also curbed the market.
"With the professionalisation of a second division, it will be interesting to see what effect that will have. It's likely to generate interest, I would think. If new competitions develop and evolve it's a sign of growth, so that's a good thing... but given the current economic climate, you just hope you're not setting something up for a fall."
That's the key point for New Zealand's players to grasp. If the new English league pushes ahead, players need to tread with some caution.
It shouldn't be forgotten that the Australian National Championship started with some fanfare last year but folded after one season and a $5.5 million loss.
There is also the unfortunate example of Carl Hayman to highlight the fragility of the current climate. He signed one of the biggest deals of the professional era but just months later Newcastle were in turmoil and now he's had significant sums of his salary withheld.
After years as the poor cousin, New Zealand might just be the best place for players right now. The NZRU has deep cash reserves.
The power of the All Black brand continues to win major investment and salaries here will definitely hold steady against a possible drop in Europe.
HOW THE CRUNCH IS BEING FELT
New Zealand
* Have axed the New Zealand Maori.
* Have axed the Heartland XV.
* Reduced the Black Ferns Programme.
* Have suspended the $500,000 contestable fund for community rugby.
* Have axed the B competition that shadows the Air New Zealand Cup.
Australia
* Have withdrawn the Wallaby A team from Pacific Six Nations.
* Have suspended the round robin state competition
England
* Are considering a £700,000 cut to the Premiership salary cap.
* Are expected to review plans to create a second tier professional competition.
