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What can New Zealand learn from Japanese rugby?
By Philip Bailey

The bailout of the Otago Rugby Union approved earlier this week means that the ORU has managed to stave off liquidation as well as potentially an end to 131 years as one of New Zealand's most well supported rugby institutions. It had been announced 3 weeks ago that it was facing $2.35 million in debt, which could have potentially risen above $3 million if it was not dealt with quickly and effectively.

Thankfully the situation has been resolved ( thanks to the Dunedin City Council agreed to effectively forget the repayment of $400,000 it was owed and a $500,000 from the NZRU) and the Otago faithful can rest easy once more, knowing they too will have a team to support in this year's ITM Cup.

Despite this apparent rugby miracle, it is obvious that New Zealand provincial rugby is still in dire straits. Otago are not (and have not been) the only ones suffering financially recently. The plight of many of the smaller unions has been well publicised.

New Zealand may be the reigning champions on the field, but they are falling behind off it. So, what exactly is the problem?

The problem does not lie so much with the Super Rugby Franchises. By and large these are well run with the top players in New Zealand contracted to the National Rugby Union and then leased out to the Franchises (this is partly why the top players are so well distributed throughout the 5 franchises). The problem is with the domestic provincial unions such as Otago, Manawatu, Tasman, Bay of Plenty, Southland and Hawkes Bay.

New Zealand provincial unions have had a problem with putting bums on seats in recent years. Attendances in general have been low, and despite optimism that attendances will rise following recent World Cup glory, a nation with little over three and a half million (spread over a vast landscape) is going to find it difficult/ near impossible to achieve the attendances being seen in the Home Nations, let alone some staggering numbers seen in France. Therefore, they will never come close to earning a similar match day revenue.

This increase in revenue has led to a huge increase in wages being seen in Europe and Japan over the last decade. How can New Zealand unions compete? This is a huge problem for NZ rugby administrators. The reality is that they can't under their current guise. While the lure of the Black jersey has been enough to keep a number of the top players signed on the books of the NZRU, the main problem area has been how the unions have dealt with those on the fringes of Super Rugby selection. Provincial unions have been lured into paying inflated wages for average players to keep their squads looking healthy from the European onslaught.

Otago in particular, who have been pining to return to their glory days, were one of the unions who were a tad over-zealous and naive in this regard. One of the key agreements of the rescue package says as much. It reads that the NZRPA, NZRU and ORFU are to work to reduce the 2012 player contracting spend by $290,000 from the original budget while the NZRU are to also approve all player contracts.

So while it seems Otago have managed to escape what had seemed an inevitably sad conclusion by the skin of their teeth on this occasion, next time the outcome may be less forgiving. Perhaps this is the moment rugby administrators in New Zealand need to have a cold hard look at how business is being conducted.

There is no clear solution (that is for sure). This has been a reality check however and the options need to be looked at. The fact that this situation has appeared at one of NZ's proudest and most historical unions proves that it is a dangerous time for all domestic unions in NZ. While it is difficult to compete financially with European based clubs based using the current business model, there is one other strategy that may provide a brighter future financially, or at least keep these unions safer from disappearing completely, something we would all like to see. That would be private ownership of domestic sides as seen in Japan.

It may seem counter-intuitive, but Japanese rugby is perhaps a model which could succeed. Although they remain a tier two nation internationally, their domestic competition is flourishing both on the field and off it. Key to their success in the domestic market is that they have been able to lure house hold names from around the world to compete with their local talent.

Recently, one can count English International James Haskell and World Cup Winner Ma'a Nonu as world renowned players who have plied their trade in Japan. They have been able to do this because the league is made up of mostly company teams.

They include the Sanyo Wild Knights, Richo Black Rams, Suntory Sungoliath, Sanyo Wild Knights, Toyota Verblitz, Coca-Cola Red Sparks, NEC Green Rockets, Fukuoka Sanix Blues and Toshiba Fuchu Brave Lupus.

While these names may seem rather uninspiring and it may seem even more hideous from some fans to ponder the existence of a Hitachi Highlanders at the Forsyth Barr Stadium, this may be the future.

A look at most professional sports around the world shows that the teams which prosper the most are the ones who are privately owned (most premier league football teams, basketball and NFL sides) or at least have ownership shared amongst their fans (for example FC Barcelona).

This is not a guaranteed solution, but a glance at the balance sheets of most provincial unions in New Zealand proves that alternatives need to be looked at.

For more on what Philip Bailey has to say, check out his blog: www.dumptackle@blogspot.com