Features

April 19, 2017

Australian Rugby Union’s wicked problem

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By Hunter Fujak

Although the continued decline of the Australian Rugby Union is by no means fresh news, the sharp transition from internal administrative challenge to outward public relations nightmare has been particularly notable.

In holding an hour long open press conference last Monday to announce a reduction in Australian Super Rugby teams from five to four, it was evident that the ARU thought the hardest decision had already been resolved. The ARU, as part of the greater SANZAAR alliance, spent many months deliberating on the league structure. Yet upon announcing the new structure, the ARU believed a decision on which team to remove would be made within 48 to 72 hours. What appeared like an obvious choice to remove the Western Force is becoming increasingly less clear by virtue of legal writs, further legal threats, fan rebellion, and intense media commentary. The ARU now face a classic wicked problem of who to remove, and appear to be rapidly losing control over the process.

How did we get here?

Super Rugby was launched as a 12 team competition across Australia, New Zealand and South Africa in 1995, heralding the start of the professional Rugby era. The competition maintained a steady structure until 2006 when two teams were added, including the Western Force. Further expansion occurred in 2011, resulting in the addition of the Melbourne Rebels resulting in a symmetric 5 team, 3 conference/nation competition. In 2016, the competition was further expanded to 18, with additions from Japan, Argentina and South Africa resulting in four unbalanced, travel intensive conferences of varying quality.  

The Warning Signs

The 18 team conference system was near instantly criticised for lack of competitive matches and confusing structure. During the 2016 season, the three newest expansion teams won a combined 7 of 45 matches. Further controversy surrounded the finals system, with the ACT Brumbies automatically qualifying in fourth position as Australia’s top representative despite finishing eighth in terms of actual performance.  Over this time period, Australia performance continued to erode and this represents one of the key catalysts to the announced change. In 2016, Australian teams managed to win only 12% of matches against New Zealand opposition.

The warning signs for Australian rugby however had been evident for several years prior, a point confirmed by former CEO John O’Neill. Since hosting the 2003 Rugby World Cup, which delivered a $40 million windfall for the code and caused a spike in junior participation, Google Trends data (below) illustrates that rugby union interest has been on a consistent downward trajectory and is now at its lowest point on record. There were also enough warning signs in 2011 to suggest further expansion was a poor strategy. At the time of the Melbourne Rebels introduction in 2011, fellow expansion team Western Force had yet to reach the finals in five attempts. As of 2017, neither of Australia’s two expansion teams had made the finals in their combined 17 attempts. Although the lack of on-field success in the west should have proved cautionary in 2011, the premiership success of Queensland that same year no doubt glossed over the risks of over-expansion.

This view was confirmed by ARU Chairman Cameron Clyne during their press conference announcement“It became clear almost immediately upon expansion this was a financial problem. We heard those warnings, we didn’t have the option and we wanted to make five teams work. This has been on the cards almost since the expansion occurred in 2011.”

ARU Google Trends

The Wicked Problem

Although the begrudging consensus appears that reducing Australia’s Super Rugby participation is the correct long-term strategy, the debate now turns to which team to remove. Here is where the ARU have arguably made the greatest management misstep by seemingly not anticipating the stakeholder backlash which would ensue. The attempted forced expulsion of South Sydney from the NRL should have forewarned the ARU about the commitment of seemingly weak sport organisations to persevere in the face of extinction. Unlike the ARU’s predicted 48 to 72 hour deadline, South Sydney’s battle with their governing body would last two and a half years before their eventual readmission.

Another key learning from the NRL’s attempt to rationalise teams at the turn of the millennium is that periods of crisis make difficult environments for strategic decision making. In the case of the NRL, their desire for immediacy resulted in ill-fitting mergers and the removal of teams based on criteria focused upon short term performance metrics rather than long term strategic vision. This however, represents a wicked problem for the ARU as both teams appear to contribute to the problem and solution in relative equal measures.

Who survives?

At the core of this decision are two inter-related problems. Firstly, Super Rugby clubs run at a considerable loss and therefore require significant additional ARU funding to administer. Second, playing talent is spread too thin across five franchises, resulting in poor playing performance which ultimately negatively impacts the commercial value of the franchises and league.

As of 2017, neither of Australia’s two expansion teams, the Western Force or Melbourne Rebels, had made the finals in their combined 17 attempts.

As of 2017, neither of Australia’s two expansion teams, the Western Force or Melbourne Rebels, had made the finals in their combined 17 attempts.

Finances

The Western Force is operated by the ARU via a partnership agreement, having been unable to successfully operate as a stand-alone financial entity. Flying to Western Australia also creates significantly more overheads than an entirely east-coast presence. In contrast, the Rebels are privately owned and therefore represent a potentially smaller long term financial burden to the ARU. Furthermore, removal of the Melbourne franchise is likely to lead to legal claims for financial compensation which would likely offset much of the cost savings of removing them (although the Western Force also appears to have pending legal claims). Importantly, Melbourne represents the second biggest media market in the country and therefore a strong Melbourne club can arguably generate more long term broadcast revenue than a strong Western Australian club.

Playing Talent/On field performance

Perhaps slightly overlooked in discussions thus far has been the central importance of junior development on future elite performance. If, as stated, the core driver in commercial decline has been poor performance led by weak playing depth, then a central criterion for survival must be the contribution of teams to junior development. In this respect, the Western Force will no doubt be reminding the ARU that Western Australia has the third highest playing figures, behind NSW and Queensland. Indeed the Force have ten home grown players in their 2017 squad and are beginning to contribute players to the national team. Cutting the Western Force when they are finally beginning to bear junior development fruit certainly appears counter-intuitive to improving the depth of Australian Rugby playing talent.

Next Steps

As a more recently established and privately owned entity, it may be easier for the ARU to financially incentivise the Melbourne consortium to cease operation. However, basing such a significant strategic decision on ease rather than long term strategic vision would represent a further management misstep by the ARU. The ARU’s choice in franchise to remove however represents a difficult catch-22 scenario. The Melbourne Rebels may be a lesser financial burden and may become financially more lucrative in time, but are unlikely to yield the junior development benefits of Western Australia in the short to medium term (and arguably long term). Do the ARU remove the Force to reduce its funding costs to redistribute into junior development, but in the process destroy Western Australia’s growing pathways? Or do they remove the Rebels who are further behind in developing self-sustainable elite pathways and accept the potentially higher costs and benefits of WA Rugby? Whichever path is taken, it is likely to have a significant impact on rugby’s presence in Australia for generations to come.


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