Show Us Your Medals Blog

My article on private investment in Irish sport in this month’s Magill magazine:

Show us the money

Imagine a team that are champions of Europe. They have a fan base of many thousands stretching out across the globe. Their red shirts are instantly recognisable and their support is legendary, following the team anywhere in the world. Jerseys, jackets, key-rings, pens, flags, posters….people just can’t get enough of them and their star players. There are sponsors queuing up to sign on the dotted line and be associated with the team. It has a rich history of lore and legend and stories told of famous victories and a pedigree to be envied in any sport.

But it’s not Manchester United of £245m annual turnover but Munster Rugby, budget €5m. And yet, the comparisons between the two clubs and teams are similar. On the back of winning their second European Cup, the province is on the verge of becoming one of Europe’s biggest sporting brands. With their huge fan base, successful team, and commercial opportunities galore, the potential for Munster to become the Man Utd of rugby is obvious.
So where are the Irish Glazers, Abramovichs or Gilletts queuing up to invest and exploit the potential? Why aren’t the Tony O’Reillys, Sean Quinns and Denis O’Briens of the Irish business world looking to get involved with the most successful and lucrative Irish sports franchise?

For this country’s obsession with sport it is remarkable how little real business investment has gone to our various professional teams and clubs. A damning indictment of our lack of sporting successes or a slight from Irish business that would rather be associated with the likes of the English Premier League? While a greater return on investment can be had from English soccer clubs than League of Ireland ones, now that the Irish provinces in Munster and Leinster are proving themselves in Europe along with the resultant sponsorship, TV money and profile, surely it is only a matter of time before serious business investors look for a piece of the Munster/Leinster rugby pie.

And if the Irish are reluctant or unwilling to get involved, then the alternative is unthinkable. For there are millionaires and billionaires in the US and UK looking closely at the development of rugby in commercial terms. They see the parallels between what has happened to soccer clubs and the Champions League and to what could similarly happen with major rugby clubs in Europe. What then, is to stop a sports-savvy American billionaire looking to invest in the next big thing in European sport? In rugby. In Munster.

Picture the scenario which is probably happening right at the moment. People are doing their research, crunching the numbers and coming up with future growth and returns estimates. One name stands out large. Munster. They tick all the boxes in terms of customer base, commercial potential, brand recognition. All the words that are manna to an investor licking his lips in anticipation of the millions to be made.

It’s not quite as cut and dried as all that of course. Irish rugby has been unique – and successful – in centralising its system of player contracts. Irish international players such as Paul O’Connell and Donncha O’Callaghan have their contracts paid by the IRFU while the IRFU also pays an annual stipend, in the region of €5m, to Munster to run its business.

As one Munster source explained, since the money comes from Dublin, any monetary outlays have to go through the IRFU while direct contractual negotiations and agreements for non-Irish international players are conducted by the province themselves.

It’s still a fine balancing act however. From a mere €5m the Munster rugby province has to be run. There are also dividends each year from the ERC (around €8m), sponsorship deals, gate receipts and TV money from the Magners League and Heineken Cup competitions, as well as hospitality and merchandise income on top of all that. But is it enough to sustain Munster at the highest European level and get Leinster to the top table in Europe? Contrast the €5m with the estimated budgets of top English or French clubs of €20m upwards.

‘‘Eventually, we want to have a situation where we are self-reliant and where we can eliminate the IRFU subsidy. We have done well financially over the past few years, but we are not at that stage just yet,” Munster CEO, Garrett Fitzgerald told the Sunday Business post earlier this year.

But as for having a Roman Abramovich type benefactor, one Munster rugby source said they wouldn’t want to go down that road. ‘This is about developing rugby and rugby players in Munster, not just going out and buying the best in any position.’ he said ‘Money doesn’t guarantee you success. Just look at Stade Francais.’

Stade Francais the ‘Real Madrid’ of European rugby have been bank-rolled by wealthy businessman, Max Guazzini, but Stade Francais’ buy-to-win policy has yet to bear fruit in Europe and they have still to win the Heineken Cup.

A mixture of wealthy backers and a centralized structure might work but this Munster rugby source wouldn’t be drawn on questions in relation to any approaches that may have been made by potential wealthy backers.

Perhaps the current IRFU-led set up would not be as attractive for investors who know they would not have complete control. At the same time, it is obvious Munster rugby don’t want to become a moneybags club like those in England or France. Their identity and locality still plays a big part in who they are as a club and a team.

Are these just romantic notions however, that don’t take cognisance of the brutal and cut-throat reality of the sports business world? Rugby is still in its infancy in commercial terms, in comparison to soccer or US sports, and there are a lot more experienced sports business people who are ready to take rugby to the next level. For soon it will take budgets of €20m, €30m, even €50m, to win in Europe. And what then? What will Irish rugby’s answer be?

Irish investment has tended to go elsewhere it seems. Sean Quinn is a keen supporter of Fermanagh GAA while JP McManus’s altruism to Irish sport has proven the exception to the rule. He famously promised £50m to the building of a national stadium and also gave €5m towards the Gaelic Grounds development in Limerick. Most recently, O’Brien’s commitment to the FAI has also proven to be a rare act of business investment in Irish sport.
Denis O’Brien has already committed himself to financially aiding the FAI by paying half of Giovanni Trapattoni’s wages – estimated to be costing O’Brien in the region of €1.5m a year. There is no return on O’Brien’s money (although some would say good PR could be one) and it could be argued that by investing in the likes of Munster or Leinster, that the PR return would be immeasurable again.

Compare and contrast this to Russia where their oligarchs are pumping millions each year into Russian sport. It is not for financial gain or profit but merely part of Putin’s vision of making Russia a world leader and respected international country once again.

There are currently 10 new stadia being built across the vast country and cost is of no concern to the oligarchs. Roman Abramovich spends $55m each year on youth football alone in his native country. Sochi, beside the Black Sea, which won the Winter Olympics bid for 2014 is spending $12bn on facilities and infrastructure and Putin’s next aim is for Russia to host the 2018 World Cup.

Sport is a political weapon and Putin’s judo background has enabled him to have the vision to couple sporting greatness with prestige on the world stage. Ordinary Russians do not care much about political corruption if they think Russia is a mighty power once more and can see their sports’ teams and athletes win medals for their country.

Two of the last four UEFA Cup champions have been Russian and now Russian football wages are attracting some of the best soccer talent there is. Wages of £50,000 a week are not uncommon in the Russian league and the proof, as they say, is in the pudding. It won’t be long surely before a Russian team becomes Champions of Europe for the first time – a fitting symbol Putin would no doubt agree, for Russia’s new international stature.

Or contrast the sporting patriotism of Russian wealth with US businessmen who have turned sports’ franchises into lucrative investments. Malcolm Glazer bought the NFL’s Tampa Bay Buccaneers in 1995 for $192m, the team then went on to win its first Super Bowl seven years later and is now valued at $963m. Glazer also famously went on to take over Manchester United in a £790m buy out and the club has most recently reported a 27% rise in turnover to £245m for 2006/07.

The harsh realities of the sports business world means that the continued rise in popularity of rugby union coupled with Munster’s continued success makes the province a tempting and tantalising sports franchise ripe for further commercial exploitation.

How much longer the IRFU will be able to hold onto their prize jewel remains to be seen and if business sharks are circling, wouldn’t it be so much better to have Munster in the hands of Irish business people? It may well soon be time for the likes of Denis O’Brien, Tony O’Reilly or Sean Quinn to do step up and do their bit for Irish rugby.