NRL, Monty Python and resetting the motorsport business model

Watching the Australian NRL try and get back on its feet in order to play rugby league under lock-down is like watching an antelope caught by a lion on a David Attenborough show.  It is not pretty.  Add to this that famous Monty Python “Not Dead Yet” scene where a ‘dead man’ claims to be alive in order to avoid “the cart”.  What the NRL are now required to do, in fact all top-level sport, is to change their business model, reset and go again.  In one swipe, the old model is now dead (can someone please tell the NRL).

Bizarrely two weeks go the NRL vowed to continue playing unless the Australian Federal Government told them not too.  There appeared to be no consideration towards players’ welfare, their families and communities that were heading into a lock-down state in both Australia and New Zealand.  It beggar’s belief that when the whole world is facing such a contagious virus, a game of sport is considered, by some, more important.  In the end it was the closing of State borders within Australia that curtailed their action.

Even now the NRL is asking for consideration by the Australian Government and exceptions so that they can get underway again by 1 July.  At this stage it would also need the NZ Government allowing (making an exception) for the Warriors to travel to Australia.

Key income for the NRL is dependant on broadcasting rights and sponsorship.  Get the game being played on TV and supposedly the money stream will be turned back on and with it sponsors will return.

In its desperate drive to play on, the NRL seems to have not taken into consideration that everything around it has changed.  We are yet to feel the economic fallout from the world in lock-down.  People will lose their jobs, businesses may have failed and broadcast money will be substantially less.  More than this, the NRL seem to think that they are an essential service and this on its own may receive a public backlash.  Their business model is dead.  Time to get a new one.

So, what is a business model?  Wikipedia gives a succinct description… ‘A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts.’

Take your local café for example.  The business owner has premises (bought or leased) in order to provide refreshments (coffee and cake) for customers. It’s a service industry where a product is provided for paying customers. A key to making this model successful is location (to capture a customer base and provide a high turnover of product).  A quality product can ensure returning clients while roasting their own beans can give the café more control of the raw ingredient and a point of difference to the competition down the road.  The lock-down means they cannot operate but once lifted, there is no reason why this business model cannot continue to thrive.  In essence, as long as the coffee beans can be obtained, few of the variables will have changed for this type of business.

As stated before, high level sport such as NRL or rugby are heavily dependent on broadcast money and sponsorship.  What the lock-down has done is curtail 99% of advertising as businesses cannot continue sales.  Have you noticed how thin the newspaper is, how few adverts are on the telly? Once the lock-down finishes and freedom of movement resumes, businesses will again operate, but this will depend on whether they are still viable, do they have a product to sell, have they been able to retain staff and is there still a sufficient customer base to maintain a required level of sales in order to have a viable business?  Then whether it is the corner café or any other business, viability may be determined by the level of debt and fixed costs (i.e. rent) that the business has to service.

Two key variables facing high level sport are advertising and sponsorship.  Chances are these will continue but not necessarily at the pre-COVID-19 dollar level.  Again, from the outside, it looks as though the NRL are presuming that we can carry on as we were pre-Covid-19.

Let’s look at NZ motorsport and start with club sport.  The business model is straight forward.  It can be like the example of the corner café.  A club provides a service for its members which pay (annual fees and event entry) to participate.  For example, the Canterbury Car Club runs the Mike Pero Motorsport Park.  It has a large membership base, minimal staff and offers a number of club racing days and several large events such as the Skope Classic.  It is not necessarily there to make a large profit, it is there for its members.  However, if membership, and/or entry numbers drop then that can cause cash-flow problems.

There are many over forms of motorsport clubs within NZ that shouldn’t have to change much post Covid-19.  Generally, they don’t have major debt commitments and overheads and can more easily cut the cloth to fit the suit.

Will the 2021 Castrol Toyota Racing Series be a viable option?

A potential problem this summer could be in putting a national championship program together.  The current Speed Works summer series may well be dependent on whether the Castrol Toyota Racing Series is able to go ahead, and this may be highly dependent on the state of our borders and the ease of race drivers and personnel coming into the country.

It is too early to make assumptions other than what happens with our borders will be a key determining factor.  What needs to be given some thought is if the TRS didn’t go ahead, do we currently have enough categories to make a summer series?

We have the TCR New Zealand category that has been given the NZ Touring Car championship status but is yet to put a grid together.  The current BNT V8s have launched their new TA2 car and admit that it may take some time given the foreseen economic recession for a good level of uptake.  The TR86 class has produced some of the best racing over the 2019/20 summer and has established itself as a successful category.  The next season will be dependent on continued commitment from Toyota Racing.

Formula Ford is still very strong in the South Island and we await MotorSport NZ’s decisions on how the next national series will take place which is likely to be a combination of four South Island and four North Island rounds.

Formula First, Central and Mainland Muscle Cars and Super Trucks continue to be great fillers for events.

These are decisions for each category’s organising committee to make in conjunction with Speed Works and MotorSport NZ.   What needs to be taken into consideration is whether what worked last year will stack up successfully this year (Does the business model need to change?). 

A key difference between motorsport in NZ and high level sport such as the NRL and Super 15 is that it is not dependent on income from broadcasting and sponsorship.  Rather it is very dependent on participants i.e. full grids.

As for motorsport across the globe such as F1, WEC, FE, WRC etc, well, that will be for another column.

As Talkmotorsport has discussed before, there may well be a stronger interest in local club sport events as race drivers just love to go racing.  Club events offer this ‘fix’ without the cost of travel and a commitment to a national series.

Covid-19 has not just affected Australasia, it is affecting the whole world. It is a major correction which touches every aspect of communities, towns, cities, countries and continents. To think that we can carry on as we once did is a foolish notion. It presents us with difficult times ahead but always with opportunities. For motorsport, we need to think through about our business model and will it still work in the future? Can someone tell the NRL?