'Pay cut' threatens SA Rugby

In a move that could have serious financial implications for South African rugby, Newscorp has signalled its intention to pay a lot less for a new Sanzar rugby broadcasting agreement.

Already reeling by the falling value in rands of the US dollars it earns as part of its share in the Sanzar deal, SA Rugby Pty (Ltd) could be forced into a crisis if its major source of foreign revenue were to be cut.

It was during the 1995 Rugby World Cup, at a press conference at Ellis Park, that Louis Luyt, supported by the presidents of New Zealand and Australia, made the revelations that would strip rugby of the last vestiges of amateurism with the announcement of a 10-year US$550-million deal with Rupert Murdoch’s News Corporation Ltd for the television broadcast rights of rugby in the three major southern hemisphere nations.

This deal resulted in the formation of Sanzar (South Africa, New Zealand, Australia) and saw the launch of the Super 12 and the Tri-Nations.

But the deal is now nearing its end and early next year rugby administrators in the three countries will have to re-negotiate a new broadcast agreement that will take effect from 2006 and it seems they will find it hard to sell their television rights for as much money.

After the boom in the value of sports broadcast rights in the 90s it is known that Newscorp’s pay television stations are keen to downscale their exposure after paying too much for rights for US football and baseball leagues as well as the Nascar series.

An indication of the falling value of sports broadcast rights is illustrated by BskyB’s deal to broadcast England’s Premier football league.

According to an article that appeared in The Australian, in June 2000 BskyB paid £1.1-billion for a three-year deal which allowed it to screen 66 live Premier League matches a year. Under the latest deal BskyB has paid £1.024 billion but can now screen all 380 Premier League matches either live or on delay.

Murdoch said at the company’s recent annual meeting in Adelaide the he expected to pay “probably less” for the rights to Tri-Nations and Super 12 rugby. He added that while the prices of sports rights had fallen in recent years, they were still "certainly terrifying".

Murdoch’s son Lachlan, News Corp’s deputy chief operating officer, expressed the opinion that rugby should be ready for a "hair cut" in the next round of negotiations.

Another menacing development for South African and New Zealand officials keen to protect their Currie Cup and NPC competitions is that News Corp might push for a deal in which they pay the same but for more product – i.e. more matches over longer periods.

This would account for Australia’s advocacy of increasing the number of teams in the Super 12 to 14, but could also open the door for a return to longer tours.

Reduced dollar earnings will not only have serious consequences for SA Rugby (Pty) Ltd, already alleged to be facing a potentially massive tax bill as a result of its Sanzar deal earnings, but will almost certainly lead to pay cuts for players.