The Cost of the Game?
The Cost of a Game
Introduction:
This study focused on amateur rugby in the Wellington Rugby Football Union (WRFU). The
research examines the financial performance of rugby clubs in the union with a particular focus on
the nature of spending at individual club level and the factors which drive that expenditure.
Objectives:
The key objective of the project was to establish the nature and pattern of expenditure occurring
at club level over a five year period. Expenditure was categorised according to whether it was
playing or non-playing related, and then classified according to whether it was fixed/variable and
discretionary/non-discretionary in nature.
Methodology:
The annual reports of all WRFU clubs were analysed for the five years 2008-2012, enabling
revenue and expenditure trends to be identified, as well as the composition of assets and liabilities
at each club. In addition to this, semi-structured interviews with a purposive sample of clubs, and
one focus group were conducted to gain a deeper understanding of the types of costs faced by
various clubs.
Expenditure per Player = Playing Match related Non-discretionary Expenditure (PMFN&PMVN)
Andrew Milne
Dr Carolyn Cordery – School of Accounting and Commercial Law
Professor John Davies – School of Management
Victoria Business School
Email: [email protected]
Number of Active Senior Players
Figure 3: Expenditure Breakdown: Four Major Categories plus Other (2011-2012)
11%
4%
12%
28%
15
10
Type of Expenditure
Fixed
Variable
Discretionary
Non-discretionary
- New Car for Coaching Coordinator.
- Replacement of 32 inch TV with 60 inch TV in
Clubrooms
- Clubroom routine maintenance.
- Wellington City Council rates
- Electrolyte Sports Drinks provided to all teams.
- After-match catering at all home games.
- WRFU registration Fees.
- Gear.
- Laundry costs.
Playing - Development (PD)
31%
1. Clubrooms and facilities.
NC
Non-Playing- Member/Admin/Social (NM)
Playing
2. Member/Admin/Social.
NM
3. Match Related.
PM
4. Development Related.
PD
-5
2008
2009
2010
2011
2012
Surplus
9
5
9
10
10
Deficit
-9
-13
-9
-8
-8
The Developed Expenditure Categorisation Framework then categorises expenditure within the four categories above as
fixed/variable and discretionary/non/discretionary. The four largest individual expenditure categories are highlighted. It is notable
that three out of the four categories involve expenditure that is considered non-discretionary by club treasurers.
Developed Expenditure Categorisation Framework (Average: 2011-2012)
Figure 2: Revenue Streams for the average club (2009-2012)
Type of
expenditure
Fixed –
Discretionary
FD
Fixed –Nondiscretionary
FN
Non-Playing Expenditure
Clubrooms & Facilities
Member/Admin/Social
NC
NM
- Insurance – can
choose level of cover.
- R & M – most will only
consider if grant is
available.
NCFD
11.2% *
- RWC co-ordinator –
one off expense item.
- Depreciation
- Cleaning
- Sundry facilities
expenses
- WCC rates
- EFTPOS rental
- Mortgage costs
- SKY TV
- Bar license/security
- Interest
- Bank charges
- Donations
-Postage/Stationery
- Computer expenses
- Sundry admin
expenses
NCFN
4.2%
- Shop trading costs
- Festival and function
costs
Playing Expenditure
Match Related PM
Development PD
- Premier blazers – only 1st
team needs these.
Physical and Social Infrastructure
$45,790
26%
Member Fees
$12,876
7%
Sport –wide support
$11,175
6%
Other
$32,313
17%
Figure 2 depicts the proportions and magnitudes of the five different revenue categories at the
average club. i.e. revenues, averaged across all clubs from 2009-2012.
Clubs are heavily reliant on gaming/external funding i.e. Gaming and community trust grants and
sponsorship. Physical and Social Infrastructure comprises trading revenue, rents, interest and
competitions. A significant finding is that member fees provide only 7% of total revenue.
Expenditure Guide:
• Fixed costs are costs that do not change with a change in the level of activity within an
organisation.
• Variable costs are costs that vary in direct proportion to changes in the given level of activity.
Discretionary and non-discretionary expenditure can be distinguished on a “need vs. would like to
have” basis.
• A discretionary expense item can be described as something which an organisation would like
to spend money on but not essential for its operations.
• A non-discretionary expense is an item which is non-negotiable and cannot be cut from an
organisation’s budget.
15.7%
Variable –
Discretionary
VD
Variable –Nondiscretionary
VN
Overall
5.7%
32.6%
Figure 4 indicates the total expenditure per player of each club in the Union and the average across all WRFU clubs
for 2012. The latter average expenditure across the Union (green line) of $982 per player, provides an indication of
the costs involved in the sport. While requiring players to pay a sum of this magnitude per season could be
considered both unreasonable and undesirable, this analysis gives clubs an idea of the costs involved in delivering
rugby at the grassroots level. The brown line highlights the disparity between member contributions , in the form of
member fees, and the expenditure per player.
Noting the red dashed line splits clubs between small and large, for small clubs, the expenditure/player increases as
the player base grows, illustrating diseconomies of scale. By contrast, amongst large clubs there is no such discernible
pattern. Therefore, while a large player base may be seen as a positive for the smaller clubs, unless they are able to
cover the increased costs, taking on more teams may only increase the costs of operations.
Figure 4: Scatter Plot of Expenditure/Player in each WRFU club (2012)
0.9%
$1,600
$1,400
13.3%
0.4%
- Premier team match expenses
– as long as there is a premier
team.
0.8%
- CCO/RDO salary and
expenses
$1,200
Average Expenditure/Player =
$982
$1,000
$800
$600
$400
Average Member fee/player =
$120
$200
3.1%
- Bus/minivan running costs – if
only for Prem. team this should
jump up two boxes.
- Weekly team meals / Aftermatch catering.
PDFN
18.1%
- Summer rugby
academy
- IRANZ courses
3.2%
- Team uniforms and playing
equip.
- Medical/Tape
- WRFU subscriptions
- Ground rental - WCC
- Laundry
- Sundry playing expenses
3.9%
11.5%
* % of Total expenditure: 2011-2012 Union Average
PMVN
1.7%
- Junior section
24.4%
31.1%
50
100
150
200
250
300
350
400
No. of senior players
7.4%
2.5%
- Printing/ Advertising
-Trophies/photos
- Prize giving
- Supporters/ corporate
club
$0
0
34.4%
NCFD
Figure 3 provides a breakdown of expenditure within the major expenditure categories for 2011 and 2012. The
proportion of Playing – Match related (PM) expenditure has increased while all the other categories have
consequently decreased.
- Trips and friendlies
- Pre-season
tournaments
0.0%
- Electricity
- Gas
- Telephone and tolls
Other
Overall
41.1%
Gaming/External Revenue
$96,474
50%
Non-Playing - Clubrooms and Facilities (NC)
22%
Developed Expenditure Categorisation Framework:
The expanded framework is a 4x4 matrix in which expenditure is also assessed as either Non-playing related or Playing related.
Non-playing costs are then split between Clubrooms and Facilities and Member/Admin/Social costs. Playing costs are split
between Match Related costs and Development costs.
Non-Playing
-10
34%
20%
5
0
34%
Playing - Match Related (PM)
Expenditure/Player
Figure 1 reveals a worrying pattern within the Union. Around half of all clubs (and a larger
proportion in 2009) have been incurring a deficit each year. Although an amateur rugby club is
without doubt a not-for-profit organisation, it is unsustainable to record deficits year upon year. At
the WRFU level, in 2009, the WRFU professional game was unable to generate the revenues that
had allowed the WRFU to redistribute funds down to the clubs as shareholders, as in previous years.
This not only had an impact on club revenue, lowering them below expected levels, but also had a
significant impact on overall performance in that year, an illustration of how poor performance at
the professional level can have a flow-on effect at the grassroots level. A number of clubs recorded
deficits in 2011 and went on to post further deficits in 2012.
Figure 1: Union-wide Performance: Number of clubs in surplus/deficit (2008-2012)
-15
Inner ring = 2011 club average
Outer ring = 2012 club average
4%
What is the nature and pattern of rugby club expenditure?
Expenditure Categorisation Framework with Examples:
Contextual Financial Analysis:
Number of clubs
Cost of the game:
Only a small number of clubs had any sort of reference point for setting member subscriptions. All did so in a similar
manner. This method is outlined below. This methodology can be applied to all sports clubs to provide a reference
point for setting member subscriptions and establishing a dollar value to market to paying members.
Findings:
•
Revenue is falling across the union whilst expenses are rising.
•
50% of revenue is provided by gaming/external sources. i.e. gaming grants and sponsorship.
•
There were minimal examples of clubs seeking to reduce their reliance on gaming/external funding via the
development of stable alternate revenue streams
•
Only half of clubs are operating at surplus in any one year.
•
The average expenditure per player is $982 per player. This is significant, given the average fee charged to
playing members is $120.
•
Around 75% of expenditure is considered Non-discretionary. This means that clubs must incur these expenses
rather than choosing not to.
•
The two most significant major expense categories that rugby clubs have to bear are Playing – Match related
and Non Playing – Clubroom and facilities related. These two categories were a relatively greater burden
smaller clubs than on larger clubs.
0.4%
21.0%
** 3.8% of expenditure was unclassified/other
96.2% **
I would like to acknowledge the support of Sport New Zealand and Victoria Business School in making this research possible. I
would also like to thank the WRFU and all clubs within the Union who contributed to the research project.