A sporting licence to print money

The IRFU budget for having one quarter-finalist in the Heineken Cup per season, which means that Ulster’s participation in the knock-out stages come April has already ensured that the union’s coffers will meet the minimum requirement from the competition.

Nonetheless, were Munster and Leinster not to join them this weekend, it would mean quite a significant hole in the union’s budget compared to recent times – in the region of €3 million.

The union may not have budgeted for the financial windfalls which their provinces earned for them in the last few years, most notably last season’s record haul, but they must have become quite fond of it all the same.

Contrary to the message being conveyed by the English club owners especially, the ERC’s turnover has shot up in recent years to €50 million plus. To all intents and purposes, it is a non-profit organisation and, after running costs, the surplus is distributed amongst the six participating countries.

Thus, in addition to the basic participation payments (which last season, akin to their Welsh and Scottish counterparts, would have seen the IRFU earn in region of €5.2 million) each club which qualifies for a quarter-final, a semi-final or the final of the Heineken Cup will earn a payment for that club’s country. Based on ERC’s 2011/12 distribution, the payment was €450,000 per club.

Last season, Ireland had three quarter-finalists for the first time, two semi-finalists and two finalists. This equated to €3.15 million – exactly half the meritocracy pool of €6.3 million.

Utterly disingenuous

The French (whose payments go directly to the clubs) were next, on €1.35 million, followed by the Scots on €900,000, with the English (whose payments also go directly to their clubs) and Welsh on €450,000 each for having just one losing quarter- finalist apiece.

No wonder the English and Frenchwere miffed, although it is utterly disingenuous for them to put out the message that Irish rugby receives more per team than anyone else. The

English and French each receive almost €10 million each from the participation agreement. Indeed, based strictly on the ratio between the numbers of teams participating and basicpayments, that wouldactually be the Scots.

Last season’s additional haul of €3.15m which the IRFU received was entirely from the meritocracy payments.

The previous season, when the meritocracy payments would not have been dissimilar, the IRFU would have received roughly €1.8 million, from having Leinster and Ulster in the quarter-finals, with Leinster going on win the competition.

That season, the French would have been the main beneficiaries with four quarter-finalists and two semi-finalists (circa €2.7 million) while in 2009-10, by dint of having four quarter-finalists, two semi-finalists and two finalists, the French would have scooped exactly half of the overall meritocracy payments.

In any event, when the IRFU are paying out international contracts to Irish home-based players, it is worth noting that they can receive a handsome payback on their investment at provincial level too.

This is worth bearing in mind regarding the current negotiations between them and Jonny Sexton’s agents. With Sexton at the helm, Leinster have won the last two Heineken Cups, and those two runs to the final alone reaped in the region of €1.35 million in meritocracy payments for its country, each year; or €2.7 million in total.

Similarly, Ulster’s run to the final last year would have earned the IRFU €1.35 million – more than the €1 million they are believed to have given Ulster for their recruitment of overseas players such as Ruan Pienaar, Johann Muller and BJ Botha/John Afoa two and a half years ago.

The old maxim about having to speculate to accumulate applies, and that’s aside from all the other manifold benefits rugby-wise and commercially.

In addition to their commercial revenue, such as sponsors’ bonuses, the only real windfall for the provinces is by way of earning ahome quarter-final.

Unbudgeted game

This is a completely unbudgeted game, and Toulouse were the first to cotton onto its value, earning eight home quarter-finals between 1998 and 2010, all of which were moved to Le Stadium and all but the first were in and around 37,000 sell-outs.

Nor does this include the monies which the home quarter-finalists generate from hospitality on the day.

Were a club to keepa quarterfinal at its normal home ground, the gate is shared, after costs, 50-50 with the away club. Clubs are given an incentive to move to a bigger venue by being awarded a 65 per cent share of the gate, after costs, while the ERC stipulates that 35 per cent share for the away club cannot be less than the original 50 per cent share.

Here again, though, the IRFU is a winner, as the home province splits their share evenly with the union. Hence, if an Aviva Stadium quarter-final earned €1.2 million in gross gate receipts after a 20per cent reduction in costs for ground hire, last season €420,000 would have been given to the Cardiff Blues for showing up (which is about all they did do) while Leinster would have split their €780,000 or so take from the game with the IRFU.

The same was true of 2010-11, when almost 50,000 turned up for the win over Leicester. Furthermore, the IRFU would also have received a handsome take from the Aviva being rented by Leinster for home quarter-finals in each of the last two seasons, as well as by the ERC for the semi-final two seasons ago.

Admittedly, everybody is a winner, as Leinster would still be making more money from a home quarter-final than would have been the case for a 20,000 capacity quarter-final against Clermont in the RDS three seasons ago.

Akin to the IRFU, Leinster chief executive Mick Dawson says that the champions of the last two years don’t budget for reaching the knock-out stages. “But it’s very important and I suppose what happens regularly you get used to. So to not be there would be very disappointing for us and our supporters.

But if we don’t make it, we will be very, very keen to compete as best wecan in the Amlin.”

While Dawson would not divulge how much Leinster themselves would have earned financially in each of the last two seasons, he did say: “Certainly you’d get bonuses from sponsors and gate money from a home quarter-final, but while moneyis very important it’s not so much about that. It’s about showcasing your club and putting yourself out there as one of the top teams in Europe.”

Ulster’stake

The IRFU would also have taken half of Munster’s 50 per cent take from their home quarter-final at Thomond Park last season, and ditto from Ulster’s take.

Therefore, given a 26,000 capacity at Thomond Park, the total gate receipts would be in the region of €900,000, of which about €180,000 would be deducted for costs.

Of their €360,000, Munster would share that equally with the union and, uniquely in last year’s case, so too would Ulster, which means the IRFU’s share if the gate was €360,000, with Munster and Ulster taking home €180,000 each.

Nor is being re-routed to the Amlin Challenge Cup to be entirely sniffed at, given an away quarter-final or indeed a home semi-final is also not budgeted for. Hence, two seasons ago, Munster would have earned a similar take from their Amlin semi-final at home to Harlequins.

The provinces would make some extra monies from hospitality, although that is nothing like the earner it used to be, and sponsors no longer pay the bonuses they used to –  unless they reach a final or win the Heineken Cup.

In Munster’s case also, Thomond Park hasn’t been hosting as many concerts, as was projected.

The redevelopment of Thomond Park cost about €39 million, and with the ensuing drain on cash flow, Munster are on record as having incurred a loss of €1 million last year.

Ulster’s position vis-a-vis a possible home quarter-final this season is more complex due to the redevelopment which is currently underway at Ravenhill towards making it an 18,200 capacity ground by the summerof 2014.

As things stand, so to speak, both the end-of-ground stands/terracing at the Aquinas and Memorial ends of Ravenhill have been demolished; a process which started last November.

Neither of the new structures are scheduled to be entirely completed by the time of the quarter-finals,onthe first weekend in April, although there would also be some scope for

temporary structures to increase the current capacity of 10,940, perhaps up to 16,000 or so.

The IRFU hierarchy will be watching the weekend’s events as keenly as anyone.

They could have one, two or three quarter-finalists, one of which could be at home. Plenty of wonga to play for.

2010-11 meritocracy payments from the Heineken Cup

French teams: €2.7 million.

Irish teams: €1.8 million.

English teams: €1.8 million.

Est IRFU share from gate receipts: €610,000.

Estimated Leinster share from home quarter-final: €390,000.

Estimated Ulster share from away quarter-final: €325,000.

Estimated Munster share from home Amlin Cup semi-final: €180,000.

2011-12 meritocracy payments from the Heineken Cup

Irish teams (to the IRFU): €3,150,000.

French teams: €1,350,000.

Scottish teams: €900,000.

English teams: €450,000.

Welsh teams: €450,000.

Estimated IRFU share of gate receipts from quarter-finals in 2011-12: €745,000.

Estimated Leinster share from home quarter-final: €390,000.

Estimated Munster share from home quarter-final: €180,000.

Estimated Ulster share from away quarter-final: €180,000.