The investment requirement of the game at both Elite and Community levels requires us to be commercially successful to deliver the growing financial resources required.

Objectives

To develop sustainable and profitable revenue streams for the funding of the game
308 The health and development of the game at both a professional and a Communitylevel is dependent upon secure income streams so that investment can be made on acontinuous basis. Continuity is important to deliver growth in our game throughmaintenance of development programmes in the Community game and improvingstandards at the Elite end. As a combination they are key to meeting our objective ofsecuring growth in the game overall.

309 To secure our income streams, the RFU must remain commercially successful. We mustlook for each and every opportunity, consistent with RFU Policy, to improve ourrevenue streams. In some years we will lose sponsors as their priorities change. Wemust ensure that we are always seeking new partnerships so long as they are inkeeping with the interests and ethos of the game and are reflected in the distributionof funds to Clubs and CB’s.

Limit our exposure to TV revenues to 20-25% of total revenues
310 The TV rights markets can be volatile and, depending on the time contracts come upfor renewal, substantial swings in values can occur. As a matter of policy we shouldminimise our exposure to any one revenue stream through diversification of ourcommercial activities in order to avoid any major interruptions to our ongoing rugbyprogrammes. This is particularly so with television revenue as it is vulnerable to anumber of uncontrollable factors. We therefore intend to limit our exposure totelevision revenues at a level of between 20% - 25% of total revenues through thedevelopment of other revenue streams.

Establish a select number of ‘Rose’ branded joint venture companies relevant to our core activities
311 The growing success of the England team over recent years, culminating in Englandbecoming World Champions at RWC 2003, has given growing consumer focus to theEngland ‘Rose’ Brand which is now one of the major assets of the RFU. Theestablishment of Twickenham Experience Ltd as a joint venture company with majorpartners has shown the commercial value of our brand equities when aligned with asound commercial enterprise. It is therefore a key business objective to exploit our corebrand equities through further business joint ventures, related to our core activities,that will further grow our commercial revenues.

312 The RFU’s core activities are broadly based upon the provision of match day and nonmatch day consumer benefits such as hospitality, catering, merchandise and retailing(whether at Twickenham or elsewhere) and commercial exploitation of the stadiumfacilities. Having considered a number of non-core opportunities in the first StrategicPlan we now believe that our strengths lie within rugby and Twickenham stadiumrelated activity and we will not pursue other options over the Plan period. We willhowever continue to evaluate opportunities where the RFU may have a unique sellingpoint (USP) or leverage with the consumer as and when they arise. Current possibilitiesbeing considered are the RFU Travel Company and extending our Rugby Storefranchise, selectively, to High St locations.

To maximize revenues and minimise costs through increasing the RFU’s ecapabilities
313 The RFU has recognised in a number of areas the potential benefits of electroniccommunication, in a game that is geographically diverse and that has a vast array ofpoints of contact, by setting e-day as June 30th 2004 for the start of the process of conversion to fully electronic means of communication. We believe that we should target a rise in the number of unique users per month of our web site to 750,000 by season 2007/08. This will provide a number of commercial opportunities in the areas of merchandising, ticketing and purchasing.

To be and remain the second most popular team sport in England
314 We have set our stall out to grow the game in England over the period of the Plan and, in marketing terms, we have a wide and varied scope for growth. We can certainly now claim that Rugby Union is the second most ‘popular’ sport in England due to the RWC 2003 effect. Popularity in isolation is not necessarily going to deliver growth to the game. We need to develop our marketing and PR programmes to achieve this position but we must be wary of trying to do too much, too quickly withtoo little funds. We should concentrate on doing a few things well and invest accordingly.

315 Rugby Union is undoubtedly a growing spectator sport and delivers above its weight interms of media exposure in the context of other major spectator sports. This weighting is due to the type of audience that the sport has, skewed towards up scale men with astrong South East of England bias. That is not to say that Rugby Union is not inclusive- it is - but the values of the game are adopted by those that play and watch. This audience is notoriously difficult to reach in advertising terms and therefore delivers good commercial value to our partners.

316 The key to future commercial success is to achieve growth whilst retaining the quality of the audience and the ethos and values of the game. We aim to grow our viewing audiences over the course of the Plan and we will undertake quantitative comparisons with our nearest competitors to measure the growth.

Strategies and Plans

Maintain a balance of Satellite and Terrestrial TV coverage
317 Television represents a significant proportion of both the RFU’s revenue streams as well as those of PRL. Not all this revenue is directly under the control of the RFU as major revenue earning TV contracts are now negotiated by the Six Nations Committee and ERC. The sustainability of good TV revenues balanced with good exposure, however, is crucial to the growth objective of the game. Contracting solely with terrestrial broadcasters would not deliver the required revenues; contracting solely with satellite broadcasters would not deliver the required exposure.

 Click here to see a table which outlines for each competition, current rights holder and uk tv channel the property is currently broadcast on.

318 The RFU has followed a policy of contracting both with Sky and a terrestrial broadcaster ensuring coverage on both platforms. We believe this remains the right policy to ensure the right balance of revenues and exposure. Whilst gradual acceptance of Sky is reflected in growing viewing figures in multi channel homes,terrestrial coverage is still required to ensure wide exposure for our game.

319 The growth in the number of homes that are able to receive Sky has risen dramatically over the last few years and currently stands at over 7.2m homes and is still growing. In addition, a growing number of pubs and clubs have the facility to show matches and although this audience is not currently capable of measurement, it represents a significant and growing market. The RFU has negotiated with Sky a subscription rate of £90 per month for a rugby club subscription (including a free digibox) under the terms of the new Sky agreement. This is good value, particularly when taken in the context of driving business into club houses.

320 The Six Nations Committee has contracted Six Nations TV rights exclusively to the BBC which guarantees the game excellent exposure. However, because the BBC has limited channel capacity, the scheduling of matches together with their kick off times has become an issue. In an ideal world the RFU would like all its matches at Twickenham to be on Saturdays, kicking off at 1430. Unfortunately this is not now possible or realistic.

321 Broadcasters, when entering into a contract, have to take account of the potential reach of the broadcast, the fees to be paid to the rights holder and the times at which matches will be shown. The BBC has paid a considerable sum for the live rights to all fifteen matches of the Six Nations tournament. Understandably, it will not broadcast two matches at the same time on the basis that this would dilute its return on investment. The solution that the Six Nations Committee have agreed with the BBC is that two matches will be shown on a Saturday and one on a Sunday for the first four weekends of the tournament and on the last weekend all three matches will be shown live on the Saturday.

322 Inevitably this has an effect on kick off times and each of the Six Nations countries has to share the burden of early and late KO times as well as Sunday matches. These ‘non’traditional kick off times do effect the ‘traditionalists’, who believe that 2.30 or 3 pm kick off times on Saturday should be sacrosanct. They also affect those who live a considerable distance from Twickenham in that late kick offs times do not enable them to get home on the same day.

323 However there are benefits from the new arrangements to other rugby stakeholders.Rugby is certainly benefiting from larger TV audiences resulting from BBC exposure and there is evidence that Community clubs can boost revenues across the bar on days when England matches kick off late in the afternoon. Achieving the right balance is the target, but the RFU and the Six Nations Committee will inevitably never be able to satisfy everyone’s needs at any one time. We will continue to monitor the situation and we are well aware of the concern of some CBs and member clubs over this issue.We therefore propose to undertake a qualitative/quantitative survey each year across the membership as to their thoughts, wishes and concerns regarding TV coverage of rugby to assist us in making sound and reasonable judgments going forward.

Develop our e-commerce capability

324 Since 2001 we have developed a new and substantial website that provides informationand services for both the Community game and the general public. The success of thewebsite is demonstrated by the fact that it now attracts approximately 500,000 uniqueusers each month. In 2001, approximately 250 merchandise lines were available in theon-line Rugby Store shop; today there are 2,100. We have now passed the initial targetwe set ourselves in the first Strategic Plan of 25% of our merchandise sales being on-lineby achieving 34% of sales on line in 2003/04. We are now aiming at reaching 50% ofour merchandise sales on-line over the Plan period.

325 It is clear that our website now needs to move to the next stage of development, ensuring that the growing size does not slow down access, that the content remains fresh and interesting and that the administration elements are user friendly. Ongoing investment in both content and functionality will hold the virtual rugby community together in a way that gives up to date usable information and provides the opportunity for the RFU to offer a wider range of commercial transactions.

326 We must continue to explore new ways of generating revenues through our website and have recently trialled on-line betting, advertising, ‘Rose’ branded broadband and a number of commission based link opportunities. As the volume of unique users grows we will continue to explore this area but we recognise the need not to overload the site with ‘commercial clutter’ and items that reduce the speed of access for users. We will seek to achieve and maintain the appropriate balance to deliver a first class service to our customers.

327 In Australia, the ARU has moved substantially towards removing the need to print many of the handbooks and other ‘official documentation’ by offering items for free to its membership on line which in turn can be printed off by the end user. In the UK,the racing industry has moved its meetings lists (including declarations) on line so thatt rainers can print off the appropriate papers rather than receive the ‘tomes’ they have traditionally received. Those trainers that wish to have the printed version can continue to do so but the cost of production is divided amongst those that want it that way, making it an expensive book to buy.

328 We therefore intend, within RFU policy relating to electronic communications as set out in paragraph 411, to move towards providing much of the RFU’s standard print items on–line at no cost to the end user. For those members who wish to continue to receive printed versions these will remain available but it is only equitable that the users who require hard print copies should bear their cost of production.

329 Commodity purchasing is an area that we believe can be put on-line in order to provide cost effective control of transactional purchases. We believe that an e-system of purchasing should be implemented within the RFU over the Plan period offering a range of items selected from an e-catalogue thereby achieving purchasing economies of scale and the reduction of the number of suppliers used throughout the Union.After a trial period within HQ this could be extended to benefit CBs and member clubs. We should set ourselves a target of achieving 90% of low cost purchase orders to be placed this way by the end of the Plan period.

Continue to develop an effective licensing programme

330 Licensees are becoming more comfortable with the strength of the ‘Rose’ brand and a growing number of licences have been signed. We do, however, need to protect ourmarks in the major markets around the world in categories that we believe may become relevant to the expansion of our licensed product range. We plan to undertake a review of existing trade mark registrations and the territories in which we need to protect them in order to have a systematic approach. This will include travel, apparel and a range of other value items such as electronic games. We will also concentrate on retail licensing opportunities.

331 The RFU mascots, whilst providing a useful service to a niche market, have not provided any major licensing opportunities. The mascots will continue but the pursuit of licensing opportunities using these characters will be discontinued.

Evolution of the RFU Sponsorship Strategy

332 Within the world of rugby, England is the leader in terms of sponsorship, both by volume and value, and we are often asked for advice by other Sports Governing Bodies in England on sponsorship and commercial structure.

333 There have been two major events in recent years that have impacted the evolution of the RFU sponsorship strategy. These are the success of England in winning RWC 2003 and the negotiation of the LFA with PRL and PRA. We have, as a result, come through two years of marketing economic downturn, where advertisers and sponsors have been reluctant to invest, in reasonably good shape. The economic situation has now stabilised and some growth has returned in the commercial markets. We believe this is likely to continue in the short term unless the ‘terror threat’ has an adverse affect upon global economic sentiment and we expect to benefit accordingly.

334 The key strategic areas for the professional game, that are essential to maximising our commercial revenues, whilst ensuring delivery to sponsors, are:

a) Continuing success of the England team.
b) The seamless sale of rights for certain RFU and PRL properties as and whenappropriate;
c) The co-operation and professional delivery of rights by England squadplayers in conjunction with the PRA;
d) The maintenance of an outward looking account management structurethat proactively delivers the rights that a sponsor has bought.

335 RWC 2003 has had a positive effect upon the number of sponsors who wish to become involved with the sport. This has enabled the RFU to become more selective whilst ensuring package values improve. We believe that this is likely to result in a 20% upward shift in revenues over a four year cycle as existing contracts expire and either new sponsors enter or old ones renew.

336 Our success in selling sponsorship over the last three years has, unfortunately, resulted in a growing lack of inventory to do new deals. We therefore need to revise our sponsorship strategy and withdraw from some of the lower value deals currently in place in order to drive higher margin business and release under valued inventory. Higher margins are driven by increasing the value associated with the use of the ‘Rose’ logo and the England team associations together with minimising the volume of inventory supplied.

337 Critical to our new sponsorship strategy is the aim of continually seeking to leverage all major sponsorship deals to include an investment in Community Rugby. It has proved difficult to attract serious sponsors to our range of Community properties,principally due to lack of TV exposure. The Commercial Department will establish a small group to come up with ‘out of the box’ solutions to this issue. The principle properties that we will seek to secure commercial support for are as follows:

• FDR
• NCA
• England Counties XV
• England Students XV
• English Universities XV
• England U16 and U18

338 Barter arrangements are likely to feature more frequently in future but we will only agree deals in areas where the product offered is relevant to delivery of Union activities and secures a net cash benefit for the RFU. We will establish areas of premium RFU expenditure suitable for contra deals to maximise financial benefits to the game. Any such arrangements must also minimise any possible exposure to tax and available inventory.

339 An area of significant potential revenue, which we have consciously not exploited, is the sale of Stadium naming rights. Sale of these rights has been in existence in the USA for over 50 years but is relatively new in Europe and has often been used as a method of stadium development financing. Major stadium brands such as Wimbledon, Lords and Ascot have not gone down this route and it may not be appropriate for Twickenham. We should explore the potential value of naming rights for Twickenham so we are aware of latent values but should also consider the negative effects on the RFU and Twickenham stadium and the potential devaluation of other sponsorshiprights.

Further develop the RFU Marketing Activities

340 To date we have taken a broad approach to the RFU’s marketing activities and have invested considerable time and effort into identifying the audiences that are key to the future growth of the game. We have used this data to target accurately our advertising spends for our retailing business and to sell tickets to non capacity matches. We now need to move the process on into segmented product areas in order to drive additional revenue from the following:

i) Non capacity matches at Twickenham;
ii) Retailing, e-tailing & mail order;
iii) ‘Rose’ branded broadband;
iv) RFU Travel;
v) The England Rugby Supporters Club;
vi) The Twickenham WSS Sevens tournament.

341 The RFU must continue to market and maintain a wide and positive exposure of the game in order to portray the English game as a vibrant, growing and attractive mainstream sport. This will reinforce all the Community Rugby initiatives in terms of recruitment and retention of players and Volunteers as well as spectator growth.

342 Club marketing initiatives are key to the recruitment and retention of players of any age group and of Volunteers. We propose to provide the game with a selection of nationally branded materials, information and images that can be adapted for local use, and based upon best practice examples of rugby or sports clubs. Examples of this could be:

• Empty belly poster designs
• Graphics (specifically designed clip art)
• Photography
• Specific ‘Rose’ adaptations

Such a programme will potentially reduce club costs in terms of design and providemembers with an extensive pre-approved catalogue of images that will avoid anycopyright difficulties. It will also provide a nationwide consistency of image for thepromotion of English rugby.

343 Spectator growth can fuel growth in participation, but this is not necessarily driven by terrestrial TV exposure. As important will be those people who have been exposed to the game and have taken an interest in it. New participants are more likely to be interested if they are introduced to the game through a sympathetic third party and, as a result, have had the complex rules and strategies of the game simplified in order to make the game enjoyable. We propose to seek to educate the viewing and spectating public in partnership with our contracted broadcasters and supported by a focused and targeted consumer PR programme to explain the intricacies of the game.

344 In order to achieve effectiveness in our marketing, we must continue to invest in research every year. It is imperative that both quantitative and qualitative measures are tracked. This investment in research should not be cancelled due to any  budgetary pressure within a particular year in the normal four year cycle.

345 The RFU’s brands are strong but their positioning remains somewhat confused. All use the ‘Rose’ as part of their logo and benefit from its power and strength. For example England Rugby is THE brand but what is England Rugby? It can be described as the whole game, the first England XV or the joint venture between PRL and the RFU. This, together with addressing the branding issues of England’s other teams – the ‘A’, U21,U19 & Sevens - needs to be addressed. We intend to appoint a Brand consultancy firm to recommend a solution.

346 The RFU supports a number of rugby and non-rugby charities throughout the year. This has worked well, raising considerable funds for charitable causes. Outside of those charities that have benefited however, very few people would know of the RFU’s Community investment. Many charities now link with brands in order to provide cause related marketing opportunities - promotional as well as data capture - whilst raising funds for the charity. We propose to replace the current somewhat shotgun approach by finding a national or international charity partner, in addition to our existing ‘rugbycharities’ and the Wooden Spoon, with whom we can partner. This would be agreedon fixed term periods allowing for changes in the future.

347 Alongside developing a link with a chosen national or international charity an annualfocus will be given to the two RFU game charities – SPIRE and the RFU Charitable Trust. A single weekend within the season will be promoted rather like “Red NoseDay” as the specific time when the game’s participants focus on fund raising to support these two important entities. Many current players are unaware of  the charities, the work they do and some of the circumstances in which they are required to help the less fortunate participants in our game.

348 There is also a lack of awareness for the mandatory insurance cover provided to players.The SPIRE weekend would have the second objective of increasing understanding in thisimportant area and encouraging players to assess their own risks, liabilities and theadequacy of the cover provided for their personal circumstances.

Develop a range of commercial enterprises to fully exploit the ‘Rose’ brand equity

349 TEL continues to deliver a good return to the RFU in addition to the initial cash injection that valued that company at £42m. In the light of this we have explored a number of areas that were in the first Strategic Plan and have refined the list to those areas associated with the RFU’s core activities. In this Plan only the following three developments are being proposed:

a) Development of the ‘Rugby Store’ brand into selected high street locations.Our retail sales have grown from £1m in 1999 to £8m in 2003/04 and there is clearly a significant opportunity for further growth. We are currently seeking expert independent retail advice for the development of the business plan and the identification of appropriate sites around the country.

b) The England Rugby Supporters Club (ERSC) was established in February 2003 and needs continuing development. There are now 21,000 members and 1,450 junior members generating a considerable amount of revenue for the RFU in addition to their membership fees. Between March 2003 and April 2004 ERSC members have:

• Spent £203,000 in retail mail order
• Spent £258,000 in store at Twickenham
• Spent £660,000 in 6 Nations travel
• Bought 20,449 match packages/tickets
• Bought 130 tickets for the 2004 Summer tour

The club needs to continue to grow and develop. The key is being able to deliver unique experiences and offers to club members.

c) A ‘Rose’ branded Travel Company. This venture would take advantage ofthe RFU’s route to market for Rugby travel as a core revenue stream and the potential of the wider business and holiday travel section. The key to this venture remains in the ability to provide tickets at face value for key away games. These would only be sourced from Unions as an additional allocation over and above the current allocation for our member clubs which would not be affected in any way.

The two main business developments of the Rugby Store and RFU Travel will be subject to the production of detailed business plans, both of which will be presented to the Management Board for approval.

Maximise corporate box revenue

350 The corporate boxes at Twickenham offer the opportunity to deliver approximately £6.5 m in revenue per year. It is a way of generating revenue that delivers a substantial ROI but continued investment is required to maintain quality standards. The stadium has been developed in different phases over the years and there are, as a result,varying standards of finish for the corporate boxes (and the access to them) depending on when they were constructed. With the introduction of new boxes as part of the South Stand development, we must ensure that we have consistent standards to a high level throughout the stadium. We also need to complete a feasibility study into the attractiveness of constructing corporate boxes at level 6 in the East Stand.

International Match Tickets

The demand for international match tickets far outstrips supply. The RFU has obligations to supply tickets to many different stakeholders and commercial partners. Inevitably nobody gets as many tickets as they would like. The current allocation policy of the RFU is about right but certain improvements can be made over the Plan period and these are set out below.

Objectives

Increase the number of International Match tickets allocated to Member Clubs

351 We understand the importance of access to international match tickets to our Member Clubs. The policy that has been in place for a long time is that a minimum of 50% of international match tickets are allocated to Member Clubs. We intend to find ways of increasing that allocation over the period of the Plan and we are now focussing our efforts of finding ways to achieve this objective. The principle avenues open to us are through the SSDP and the re-negotiation of reciprocal ticket rights with other Unions.It is also important to ensure that there is total transparency as to the use of tickets for our members. The recently produced booklet “Twickenham Ticketing - The Facts” will be updated each year with the information also posted on our website.

To grow the value of the RFU’s ticket revenues over the Plan period

352 Ticket revenues for the major international matches at Twickenham are a major and key revenue source for the RFU, accounting for around a quarter of our total revenues.We need to ensure that, subject to market conditions, we grow this revenue stream in a sensible and controlled manner to ensure that we can increase our investment in the Community and Elite game year on year.

To maintain the number of debenture tickets between a minimum of 11,000 and amaximum of 15,000

353 Debenture tickets are a very cost effective way of providing capital for developments at Twickenham. Whilst we also want to maximise the number of tickets available to Member Clubs, it is important that we always retain a minimum number of debenture tickets so that we can periodically secure new capital injections on renewal. This minimum number of debenture tickets is set at 11,000 with a maximum ceiling of 15,000.

Strategies and Plans

To minimise the Black Market in Twickenham tickets

354 In 2003 the RFU developed and implemented a strategy to address the Black Market through the development of the Official Licensed Operator scheme. This scheme allows member clubs to raise revenues through the sale of some or all of their ticket allocation to the three Official Licensed Hospitality Operators. Those Operators, appointed through a tender process, pay to the RFU a set of royalties in exchange for being allowed to purchase those tickets. TEL also benefit from the royalty in compensation for their loss of exclusivity to corporate hospitality at Twickenham.

355 In support of this scheme, the conditions of sale for Twickenham tickets were changed with the new conditions coming into force in time for the Six Nations in 2004. The two home matches in that season saw a marked reduction in the volume of black market hospitality and the policing of the scheme was effective, albeit there were some teething problems. We propose to maintain a high level of policing of Twickenham tickets and to publicise the results of any investigation that is positive. We will continue to develop the sources of information open to us, but the principal tactics used will be:

a) Police co-operation dealing with ticket touts;
b) Security groups;
c) Mystery shoppers;
d) The buying public.

We will further reinforce this with advertising and PR and we will take appropriate legal action if necessary. Any tickets that are held back for breaking the terms and conditions will be redistributed across the general club allocation.

356 We have set up a procedure to deal with any information received regarding potential breaches of the ticket conditions of sale as follows:

a) Investigation by the International Ticket Working Group (which is a subcommittee of the Finance and Funding Standing Committee);
b) Recommendations on any infringements are passed to Finance and Funding for action;
c) There is a right of appeal for any individuals/clubs sanctioned to the RFU Disciplinary Officer.

A strict timetable will be introduced for each stage of the process.

Average ticket allocations for 2004/05 season

Develop a revised and robust policy for Twickenham ticket allocations

357 Tickets for international matches are the main ‘currency’ for developing the RFU’s commercial activities and broadening its business base. All sponsors and commercial partners require a ticket allocation as part of their sponsorship package. Any new business venture may also need a supply of tickets with which to operate in the same manner as Twickenham Experience. A pool of tickets is required to support our commercial partners and for the development of the business ventures set out in this Plan.

358 The first RFU Strategic Plan developed the concept of a ‘Ticket Currency Pool’ to provide this pool of tickets for commercial exploitation. The pool was to be created from tickets that were released from three sources:

a) Reducing the ‘Black Market’;
b) Non-renewed debentures;
c) Additional capacity in the stadium.This idea, whilst not affecting club allocations, was clearly not well understood and led to some suspicion that released tickets were not necessarily being used/allocated inaccordance with policy. We therefore propose to  discontinue the concept of the ‘Ticket Currency Pool’. To provide absolute transparency going forward, we propose to move to an absolute maximum fixed number of tickets that can be used for commercial purposes to remove any uncertainty or doubt. We propose that this maximum limit be set at 6,300 tickets (including the TEL allocation) before completion of the South Stand Development (but subject to a pro-rata reduction in the event that the stadium capacity falls below planned levels during the redevelopment). Any tickets released back from all other sources, as set out below, will all be re-distributed to Member Clubs.

359 On completion of the South Stand development, the capacity of the stadium will increase by an estimated 8,427 seats. We propose that 4,214 of this increase are automatically set aside for increasing club allocations and the balance of 4,213 set aside as ‘premium’ use tickets for a mixture of capital and revenue funding uses,including new debentures that are an essential part of the SSDP funding plans. Upon completion of the new stand we propose that the maximum fixed limit for tickets for commercial use (including the TEL allocation) be raised to a maximum of 8,300 tickets. Should the commercial ticket allocation not be fully used for any particular match, the released tickets will, firstly, be offered to Member Clubs and then to the public.

360 By setting a fixed maximum to the number of tickets to be made available for commercial use, we are able to allocate all future non-renewals of debentures to the Member Clubs’ allocation subject only to the two adjustments covered in the following paragraph.

361 The redevelopment of the South Stand requires that the Control Centre be moved from its current position in the South West corner to the North West corner. This will result in a loss of 122 seats which we propose to cover from non-renewed debentures. In addition, as part of the Section 106 Agreement we have had to agree that 400 tickets for international matches will be offered through a ballot to local residents. This represents an increase of 350 tickets for local residents and again we propose to take these from non renewed debentures.

362 There is a further opportunity to increase the number of seats available to memberclubs, particularly for matches against SANZAR opposition. Currently, the RFU provides an allocation to SANZAR Unions at the same level as for the Ireland Six Nations match, at 4,800. In the spirit of reciprocity this is patently out of kilter with the RFU needs for summer tour tickets to these countries. Moreover many of the 4,800 tickets historically supplied to SANZAR countries have ended up on the ‘Black Market’.

363 We are therefore seeking to renegotiate a substantial reduction in the number of tickets that are offered to SANZAR Unions, thereby releasing a large number of tickets for reallocation to Member Clubs for these matches. The reciprocity arrangements for the Six Nations matches will be more difficult to renegotiate but we believe that there may be some opportunities with some of the countries.

364 To fall in line with the RFU’s e-day policy we propose to move to an electronic based communication system for ticket allocations and confirmations. Obviously as not everyone is on line, some of these will be handled by post as now, but deadlines will be cut to match those who are on-line. This will speed up the whole system and eliminate substantial postage costs. We plan to implement this at the back end of 2004/05 season.

Create a new Ticket Policy sub committee

365 Over the last two years we have introduced an Official Licensed Operator scheme together with new ticket conditions of sales to control the worst excesses of the ‘blackmarket’ and ticket touting. We have also moved to having fixed allocations for Member Clubs and have adopted a pro-active enforcement policy. We believe these changes require a new sub committee to be established with the following remit:

i) To monitor the operation of the Official Licensed Operator scheme;
ii) To review the ticket allocations system and make recommendations for change as appropriate;
iii) To investigate cases of any breaches of the ticket conditions of sale and to recommend sanctions;
iv) To advise the Management Board and Council on ticket policy matters;
v) To keep under review all legal issues in the above areas.

Formal terms of reference will be drawn up by the Management Board for this subcommittee with appropriate adjustments made to other terms of reference.

366 This sub committee would report to the Management Board and be made up of representatives of Council, professional staff and the ‘grass roots’. Its membership should also be balanced geographically with representatives from the North, Midlands, South West and the South East (including the home counties). The sub committee would absorb the responsibilities of the current International Ticket working party and its membership would be made up as follows:

• Chairman - to be appointed by the Management Board.
• Commercial Director
• Ticket Office Manager
• Managing Director, TEL
• John Motum - current Chairman, International Ticket Working Party
• Council or Grass Roots representative from the North
• Council or Grass Roots representative from the Midlands
• Council or Grass Roots representative from the South West
• Council or Grass Roots representative from the South East

The Chairman of the sub committee should be a member of Council and beconversant with ticket matters including the legal aspects of conditions of sale and theOfficial Licensed Operators scheme. In addition, two of the regional representativesshould come from the ‘Grass Roots’ and not be members of Council. Nominations forthese posts would be made by CBs to the Chairman of the Management Board.

Develop a ticket pricing strategy to protect the RFU’s long term revenue streams

367 The generation of funds for investment in the game is crucial to meet the objectives of growth. Ticket revenue represents around a quarter of the RFU’s revenue each year, depending on the number and quality of matches each season. This revenue stream is substantial and is key to enabling the RFU to carry out its responsibilities to the game and to maintain its distribution of income to CBs and Member Clubs.

368 Pricing is normally driven by the law of supply and demand. Shortage of supply will drive demand upwards and allow prices to be driven with it as we have seen with the burgeoning ‘Black Market’ in recent years. As rugby becomes more popular with a wider public, demand for Twickenham tickets will increase. Tickets for the major internationals at Twickenham are, in relative terms, under priced as evidenced by the excess demand for those few matches and the top prices now charged for similar matches by otherUnions.

369 The RFU must be careful not to confuse ‘value for money’ with low prices. We mustal so recognise that by maintaining an artificially low price level for tickets we will further stimulate the ‘Black Market’. We must also balance the need to ensure that our price structures provide affordable prices for our traditional supporters with the need to provide the right levels of revenue to maintain and grow our investment levels to secure the wider growth of the game envisioned by this Plan.

370 In order to maintain an economic price and therefore a solid income stream, the Council agreed in July 2004 to introduce premium seat price for tickets in the lower and middle tiers in both the East and West stands that are placed within the 22 metre lines in the 2004/05 season. It was agreed that the price of these tickets should rise to market rate within three years (the market rate in 2004 would have been £75 perseat). All other price bands would attract only moderate increases each year, and all ticket pricing each season remains subject to Council approval.

371 We also intend to investigate the feasibility of introducing additional price tiers for the consideration of Council. We should also explore other potential opportunities, such as premium pricing for prime seats and handling charges for visiting Unions, which are currently levied on us by other Unions.

Twickenham Experience

Twickenham Experience has been a major success in terms of delivering good revenue streams to the RFU and improving the quality of our hospitality offering. Careful development and access to new facilities in the South Stand will further improve our financial return.

Objectives

TEL to become the leading provider of quality Corporate Hospitality in the UK

372 TEL has now been in operation for three years and in that time has made considerable improvements in the quality of product provided to hospitality customers at Twickenham. In terms of the experience, 94% of clients surveyed regard this as good to excellent and this reflects the effort and attention to detail which has been dedicated to this operation, with all packages now comfortably accommodated onsite. This has been achieved through the redevelopment of The North Tryline and erecting a double deck structure on the River Suites. Previously 1,000 clients were located over the A316 at the Richmond Tertiary College.

373 With all customers now on-site the focus is on further improving the quality of our product offering so that TEL becomes the undisputed leader in the provision of Corporate Hospitality in the UK.

Ensure that all TEL Customers are placed in quality on-site permanent facilities

374 It is the target of TEL to house all its customers in permanent on-site facilities over the course of the Plan period. It is through the use of permanent facilities that TEL will achieve a product offering unmatchable by the competition at Twickenham (who will remain in marquees) and by the product offered by operators at other major sporting venues. This objective can only be delivered through the re-development of the South Stand.

To sell out TEL’s contracted maximum number of covers for the four major matcheseach year

375 TEL has the right to 4,000 tickets for sale in hospitality packages. It is important that TEL sells out this maximum capacity at all matches against SANZAR opposition as well as against the traditional Six Nations opponents.

Reduce TEL’s dependence on Sub Agents and reduce Commission payments

376 Changes to the current sales force will require some form of new contract. With this in mind, the objective is to reduce commission levels whilst maintaining sell out status for all major events. This will be achieved by increasing direct sales through TEL’s appointed agent thereby reducing the dependency on Sub Agents.

377 Currently Sub Agents put in little effort and provide no commitment in selling ‘B’match packages. We will move to make it policy that all Sub Agents need to commit to supporting ‘B’ match packages. This will assist in reducing the long list of SubAgents inherited by TEL leaving a smaller number for TEL to work with to develop a more pro active relationship.

Further improve Conference and Banqueting Sales to £3.5m p.a.

378 TEL has successfully increased Conference and Banqueting sales from £780k to £1.56m over the last two years through a proactive sales effort together with the implementation of a detailed marketing plan. Importantly this area has been given a dedicated operational focus with results this year showing 93% of clients rating our services as good to excellent.

379 With TEL’s presence now effectively established in the Conference & Banqueting market place it is appropriate now to raise our targets and focus on achieving sales of £3.5m p.a. This will provide a solid base for further development when the quality facilities associated with the SSDP are available in 2007.

Increase the return from Public Catering to £3.50 per head per match

380 The focus over the last three years has been to increase the availability of product and to speed up service for customers. As a result, Public Catering sales have increased from £30k per match at the Australia game in 2000 to in excess of £150k at both Six Nations games in 2004. The spend per head at Internationals has increased from £1 to £2.12 per head and to £6 per head at domestic matches.

381 With the appointment of a dedicated manager for Public Catering we should now set ourselves challenging targets for revenue generation in this area. Moving forwards,  quality is the objective and to create a different level of choice and service to encourage a greater spend within the stadium rather that the surrounding areas. We are therefore targeting achieving a spend per head at International matches of £3.50 by the end of the Plan Period.

Strategies and Plans

Actively participate in and support the SSDP

382 The SSDP provides an excellent opportunity for TEL to secure the infrastructure that will enable it to meet all its key commercial objectives. It will have unrivalled on-site permanent hospitality facilities and extensive and flexible Conference & Banqueting facilities. With a quality hotel brand such as Marriott operating on site, the additional business to be secured by TEL is substantial.

383 In terms of looking forward to the next three years, TEL’s primary focus will be on the development, pre planning and successful operation of the new facilities created by the construction of the new South Stand. A key element to this will be the negotiation of an effective operational agreement with Marriott and positive discussions are currently underway.

Develop and Launch a new ‘Gold Standard’ service branded ‘The Captains Club’

384 The Captain’s Club will be a top end of the range hospitality product sold at premium prices offering ‘Gold Standard’ service levels from the arrival at the stadium to departure. The product will include high comfort levels, top quality cuisine, and waitress service ‘in seat’ during the match.

Develop a Sales and Marketing Plan to deliver TEL’s financial targets

385 TEL will produce a sales and marketing plan and an operational strategy to take into account the recent re-organisation within the Compass Group and to ensure that the new facilities provided by the SSDP achieve anticipated sales levels together with providing the improved quality levels targeted. The plan should also establish and deliver a professional conference and banqueting service that delivers year round business.

386 We also need to improve the service standards for our Box Holders by providing arange of improved menus and value added benefits. This will be actioned in 2004/05 to ensure that improved service levels and product quality are in place prior to the sales programme to be launched for the new boxes associated with the SSDP.

Further develop the TEL Management Team to meet the new challenges

387 To deliver the challenges posed by the new business opportunities available from the SSDP, TEL will need to further develop and strengthen its management team. This should be part of the development of its detailed business plans for the implementation of the SSDP and needs to be in place prior to the end of 2006.

388 There have been changes in TEL’s organisational structure in the last twelve months where elements of the P&G team were combined with the TEL team to improve operational efficiency. These have been successful and have also resulted in improved communication and service delivery to clients. Further attention needs to be given to this area to refine the structure, finalise descriptions for all roles within it and then to develop the performance of the team.

South Stand Development Project

The last opportunity for development on the Twickenham site is the redevelopmentof the South Stand. We have been successful in securing Planning Consent for a major increase in our commercial activities as well as completing the ‘bowl’ of the Stadium.

Objectives

To Create a World Class Stadium for a World Class Team

389 The RFU has over the last 15 years redeveloped the North, East and West Stands of Twickenham Stadium. It is now planned to redevelop the South Stand of the stadium to create a truly World Class facility of which the game in England can be justifiably proud. The redevelopment project is scheduled to commence in June 2005.

390 The development of the South Stand of the stadium also provides an opportunity to upgrade the existing facilities in the North, East and West stands in order to meet modern international standards and to improve the quality and operation of the existing North and West Car Parks. The redevelopments of the original North, East and West stands were completed on a minimum cost basis and their facilities do not match international standards and will be inferior to those planned in the South Stand. Similarly the North and West car parks have for some time now been substandard both in terms of the amenities they offer and the quality of surface they provide. It is intended that these areas will be upgraded as part of an overall “MasterPlanning” exercise.

To increase the Capacity of the Stadium to 82,000

391 The redevelopment of the South Stand will increase the Stadium’s capacity from 73,600 to approximately 82,000 through the completion of the seating bowl. The additional capacity will have higher comfort levels than that of the capacity it replaces delivering a better experience to our customers. The additional capacity will ensure that the number of tickets available to Member Clubs will increase by around 4,200 (an increase of over 10%).

Incorporate new Commercial Revenue generating Facilities

392 Through the redevelopment of the South Stand the RFU is presented with the opportunity of adding a number of additional revenue earning facilities. These include a 156 bedroom 4 star Hotel, a 40,000 sq ft Leisure Club, improved Conference and Banqueting facilities, new event day Hospitality areas, a new ‘destination’ Rugby Store and an upgraded Museum. In addition, the development will include 40,000 sq ft of office space which will enable the RFU to amalgamate its offices and free itself from the current lease payments for Rugby House.

393 In developing the mix of new commercial facilities much thought was given toproviding facilities that:

i) provide the RFU with 365 day a year revenue streams;
ii) work together to enhance the commercial performance of existing on site operations such as improved Conference and Banqueting facilities which will assist in developing TEL’s non match day business;
iii) are complimentary businesses that will improve each others performancee.g. the Hotel will enhance the Conference & Banqueting business and viceversa and Hotel guests and Leisure Club members will provide the RugbyStore and the Museum with week in week out business.

To contract with quality ‘Blue Chip’ brand Companies as trade partners

394 As with TEL, it is our intention to contract with quality trade partners for both the Hotel and the Leisure Club. Heads of Terms have been agreed with Marriott regarding appointing the Marriott Hotel Group to manage the hotel and with Virgin over VirginActive managing the Leisure Club. We intend to enter into long term agreements with both companies, with appropriate financial performance commitments, to give the RFU long term security.

Reduce the RFU’s dependence on TV Revenues to 20 - 25% by end of the Planperiod

395 The Television sports rights market place has shown considerable volatility over the last ten years. Rights values hit high and unsustainable levels in the late nineties driven by the Pay TV operators. They also slumped by 40-50% in a very short period after 9/11 and the collapse of a number of Pay TV operators. TV contracts tend to be for periods of three to five years, therefore it is somewhat of a lottery as to what state the TV rights market is in when you have to negotiate a new term contract. A high dependence on TV revenues can therefore place in jeopardy a sport’s long term plans if it is unfortunate as to the timing of its renegotiations.

396 The RFU has, like all its fellow Unions, historically had a high dependence on TV revenues. We have been successfully moving this downwards over the last three years through the development of other revenue streams. The completion of the SSDP will enable us to make a significant and immediate reduction in our dependence level from 27% to 20% providing increased protection to the game that the RFU’s funding support to the game will not be adversely affected by the state of the TV rights market at any point in time.

Strategies and Plans

Utilise the best Industry Experts to advise and assist in planning

397 The RFU has retained the services of architects Ward McHugh who designed and developed the North, East and West stands. They successfully completed all these projects within the budgeted costs. Ward McHugh are using Stace as the QS and OveArup for engineering, both of which are very experienced in their respective fields.

398 During the design and feasibility process for the South Stand the RFU has utilised the services of a number of industry experts to ensure that what is built is commercially viable and sustainable. PKF have advised on the Hotel feasibility study, Strutt and Parker on the leisure club and Deloittes on the overall project’s financial feasibility. Each party has confirmed that they believe that the potential return on capital to the RFU(between 13% - 16%) as indicated in the Deloitte Financial Feasibility Report is both achievable and robust.

SSDP Steering Group and the Council Advisory Group

399 The SSDP is being managed by a Steering Group made up of representatives of the above experts plus RFU professional staff and Volunteer members. The Steering Group meets monthly and reviews all aspects of the Project’s progress.

400 In addition a Council Advisory Group has been established comprised of six RFU Council members with appropriate professional knowledge and expertise plus the RFU CEO and Stadium Director. This Group provides an opportunity for all Council members to be in contact with the project’s progress and to field any questions or concerns with members of the Group. This Group will remain in place throughout the project’s implementation.

Work closely with the Local Community and LBRuT

401 We have developed an effective Community Relations programme over the last five years which has enabled us carry the vast bulk of local residents with us over the planning of the project. This resulted in minimum levels of objections when the project went before the Planning Committee and resulted in unanimous consent being secured from the Committee.

402 As part of the planning approval process for the South Stand the RFU has signed a Section 106 Agreement in which it has agreed to fund a number of initiatives that will allow it to minimise the impact of the new stand on the local Community. This also includes a number of initiatives that will benefit the manner in which rugby supporters get to and from the stadium including:

i) Improved directional signage
ii) Improved access over the A316
iii) Improvements to Twickenham Stadium
iv) Improved bus operation

The cost of all improvements is circa £2.5m which is included in the overall build cost.

The Proposed Funding Arrangements

403 It is estimated that the overall Gross Build Cost of the redevelopment will be around £90m which it is proposed will be funded via a combination of RFU cash, new debenture seats, external debt and a contribution from the minority shareholders in TEL (principally the Compass Group PLC).

404 It is anticipated that the general stadium upgrade work will be costed as a separate financial evaluation to the South Stand and will be completed within approximately 12 months of the finish of the South Stand i.e. by June 2008.

405 With a start date of June 2005 the project will take approximately two years to complete but at all times throughout the construction period the RFU’s normal events will still be held at the Stadium. It is anticipated that at no time during the construction period will the Stadium’s useable capacity fall below 63,000 seats.

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