Rugby: Union outlook bleak

Tasman have thrived since cutting costs. Photo / Getty Images

Provincial unions have struggled because of the recession but 2011 looms as one of the most difficult seasons yet.

The ITM Cup is being squeezed into an eight-week competition to ensure it doesn't affect the Rugby World Cup but the 'Big Show' means it will be even more difficult for unions to find sponsors.

Last week it emerged Southland owed creditors $700,000 on top of estimated losses of as much as $478,000 for 2010. Taranaki are expected to post a loss of around $100,000.

Southland and Taranaki aren't the only unions struggling and NZRU chief executive Steve Tew said they were keeping a "close watch" on at least three other unions.

But the travails of the 2011 competition make it difficult to ascertain if the revamped ITM Cup format is sustainable.

"We have all known 2011 was going to have its challenges," Tew said. "While the World Cup presents an opportunity for the sport and nation it puts some pressure on this competition.

"We will be taking the approach that we will have to wait until 2012 and 2013 to see how things really wash up when we get a normal year - because this year is going to be very condensed."

Unions could do worse than look at the example set by Tasman. They were nearly kicked out of the competition in 2008 (Tasman and Northland were originally dropped from a revamped provincial competition but later reinstated) and were almost shut down by the bank.

They posted a $2 million loss in 2008 but as a result of some major cost-cutting, they recorded a $543,358 profit the following year. Tasman chief executive Peter Barr said they would record a "six-figure" profit for 2010.

They cut back on a number of programmes, including the sevens, B, colts and women's sides but re-introduced the Bs and colts as finances improved.

"It doesn't matter if it's rugby or tiddlywinks, you can only afford to pay what you can afford," Barr said. "We all have aspirations of winning the competition but you don't want to do that at the risk of going broke."

Tasman spend about $850,000 on player salaries and Barr believes the salary cap of $1.35 million could quite easily be reduced to $1 million.

"I'm not prepared to pay over the top for players," he said. "Too many unions are paying far too much for players and they are now realising what we realised a couple of years ago. New Zealand's economy is not big enough to have 19 professional teams.

"There's no reason why we can't have a semi-professional ITM Cup. Bringing the salary cap down to $1 million would mean we could all live quite comfortably."

Tasman, however, were unperturbed about finding themselves in the bottom seven in the ITM Cup. Other unions are less phlegmatic and many adopted risky strategies last season to improve their chances of qualifying for the top division.

Southland reportedly spent close to $2 million on player salaries, which they were allowed to do as existing player contracts were brought into line with the new salary cap.

Otago are another union who had to make radical changes. They posted a loss of $700,000 in 2009 and will record a small loss in 2010. They also finished a dismal last in last year's ITM Cup, winning only two of their 13 games.

Chairman Wayne Graham believes the business model is badly flawed and the salary cap should drop as low as $700,000 or $800,000 in a semi-professional competition.

A full review of the ITM Cup is expected at the end of 2012.