How can one justify borrowng money to give to the IRB.

[gluck]

I know I had a similar thread, but now the emotion has subsided I just don't get the following

1. How can the IRB justify an arbitary fee if the world cup does not generate that much money.
2. Do they not understand that the fee or loss is not real money it is a debt.
3. How can the NZRFU justify borrowing money to pay for the so called development of rugby.
4. Is rugby not a business if it is then how can it be valued at 39 million dollars more than it generates.
5. What if the NZRFU defaults on its payments.

I just don't get this fee is does not seemed to be based on a business model.

[Geeves]

gluck like any business decsion and any tender, you don't have to apply or accept the terms.

Once you do then you are stuck with the terms or you default.  A bit like the 2003 clean stadiums issue, when once again NZRFU didn't read the rules.

No one forced the NZFRU to apply to host the RWC.  When they appled to host the RWC the fee is actually a fixed cost (i.e. it is real money).

As the business model was generated before the GFC it probably looked sound from the risk managmenet perpective.  The problem is that whoever undertook the risk management strategy should have forseen the real possibility that the RWC is like most international sporting events, costs the country who hosts it.  There are very restrictive condtions on hosting the RWC, I think the NRRFU did not do its own due diligance correctly.

The world is full of firms, countries that don't do this.  But if its stated in black and white and you accept those terms whithout having a clause to cover your arse (i.e. if it looks as though the RWC is going to make a loss additional revenue from addtional sponsors will be sort) its a reflection on the NZRFU.  As stated elsewhere the RWC is the IRB principal reveune stream, they use it to maximise their income.  If the model is wrong, then change it but if you sign up for it, accept it.

[Hamish]

I might be stating the obvious but I think it's possible that two different topics around RWC costs are getting mixed up.

The first topic (the one raised by Steve Tew) is that it costs all tier one nations significant money to attend a World Cup regardless of where it is held.
This is because the play less tests in a World Cup year from which the national unions can derive income. The national unions receive no income for participating in a World Cup (ie from sponsorship, broadcasting or ticket revenue). Because they play less tests, their revenue stream is reduced (ie less money from broadcasters, sponsors and ticket revenue). Hence the remark that it costs money to participate in a WC.

The second topic is the costs of hosting a World Cup. The IRB charge a set fee to the host nation and pick up all the revenue streams (broadcasting and sponsorship) except ticket revenue. When the NZRU bid for the World Cup, there was an expectation that there would be a shortfall between to hosting fee and ticket revenue of $39m. In other words the loss was budgeted for (and underwritten by the Government). So the $39m loss is not unexpected.

Tew's argument is that all nations need to be better compensated for their participation and is in no way related to the hosting costs.

The bigger industrial issue to be resolved between now and the next cup is between the International Players Association (Union) and the IRB.
If the IRB don't become more accomodating from a player standpoint (ie payments) then there is the very real possibility of a strike/lockout.

[ruggerfan]

He's also talking about changing it for 2015, not 2011.

2003 "clean stadia" issue was more about businesses within a few hundred metres of some of our stadiums. It came out later O'Neil took a bit of a chance "guaranteeing" this.