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VIDEO: Stormers CEO - SARU financial model needs to be 'revisited'

The Stormers’ new equity partner, Red Disa, has thrown its weight behind the other professional franchises in a debate around the South African Rugby Union’s funding model.

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The big four – even before Red Disa came on board – had a beef with SARU around Test match guarantees and television revenues.

SARU is asking for ZAR85-million in guarantees for the rights to host Test matches – ZAR20-million for the All Black Tests at Ellis Park and Cape Town, ZAR15-million for the Ireland Tests at Loftus Versfeld and Kings Par, while the Pumas are expected to fork out ZAR10 million to host a Test against Argentina and the Cheetahs ZAR5-million to host Portugal.

And the franchises are also relying on SARU for their cut from TV revenue, even though they bring the bulk of that revenue to the table.

New Stormers CEO Johan le Roux said it is an ongoing ‘discussion’ around the various aspects of the funding model.

Le Roux said it is not a fight between the big four and the smaller unions.

“It is more about understanding the different roles and the different financial needs,” he told @rugby365com.

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“The international franchises are all loss-making.

“The rugby environment is not sustainable until all participants can wash their face.

“It is difficult when you want to put out a competitive team, to compete against teams like Stade Rochelais.

“We are loss-making and if you can’t put out a team that competes, the fan numbers start dwindling and sponsors become less attracted to the brand.

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“It is very difficult. We want to put out a competitive side, but the shareholders can’t be expected to fund losses continuously.

“The model has to be relooked.”

He admitted economics will change after the SARU equity deal is concluded, as well as when South Africa becomes full partner in the URC and EPCR competitions.

“We will then have a clear line of sight on what that [funding model] will look like,” he told @rugby365com.

Le Roux said there are many ‘ongoing conversations’ with SARU.

“The big unions are on the same page and we will continue to engage SARU,” he added.

(New Stormers CEO Johan le Roux tells @king365ed that the four ‘professional’ franchises are on the same page…)

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He explained that a large part of their revenue turnover – specifically the international competitions United Rugby Championship and Champions Cup – is funnelled through the South African Rugby Union.

“This creates financial uncertainty, when we are looking for stability,” he said of a SARU that has been in the spotlight for some time.

“I look forward to engaging with SARU, along with the other international franchises [read Lions, Bulls & Sharks], to debate a financial model that allows us to field competitive sides in Europe without the owners having to fund continuous losses.”

Le Roux also pointed out that the sport is about winning on the field, but that could prove very elusive.

“Even with all the best players, coaches and support staff, you can still have a team that doesn’t click – for unknown reasons.

“Without consistently winning, everything else becomes a very hard sell.”

That is why Dobson was ‘promoted’ to the position of Director of Rugby – to give him control over the entire playing programme.

(WATCH AS new Stormers CEO Johan le Roux explains what his biggest beef with the SARU financial model is….)

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Turning to the ‘discussions’ with SARU, the Stormers CEO said the ‘uncertainty’ in the SARU model is the biggest concern.

“The broadcast revenue flows via SARU in different forms,” he explained, adding: “It can change.

“It is very difficult to invest in business and keep funding losses if you are not sure about half of your revenue.”

He said this includes the Test guarantees, the PONI model and the distribution.

“It is an enormous part of our business,” Le Roux said.

“Not having a clear line of sight, what those numbers look like going into the future, is a real problem for the business.

“The discussions with the other unions about the model going forward is ongoing.”

Some of the elements of SARU’s four-year funding model – like Test matches and the PONI players – are done every year.

“It is a complex environment, because there are many elements to it,” he added.

“The whole model must be discussed,” he said, adding: “There is a lot to be said for transparency, to understand where the medium-term and long-term funding are going.

“It is a big desire for the franchises to have a line of sight on those revenues.

“SARU has a wide mandate.

“It is very difficult to sit at the bottom and get what is left, rather than understand what the broadcast revenue is and we get a percentage of it.”

He said the constitution also needs a relook, especially since Western Province/Stormers is the last of the franchises to become professional.

@king365ed
@rugby365com

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