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The Warriors' make-over

By Fiona Rotherham

Sunday 1st December 2002

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It is a nice touch. When you ring the head office of the Warriors rugby league team, you get a taped message from management thanking all season ticket holders and supporters who have helped the team "create history" for the club in the 2002 season.

That appreciation for the fans, attention to detail and sheer professionalism from club management has saved the Warriors from the brink of being kicked out of Australia's National Rugby League competition in 2000 and made them national heroes for playing their way into this year's grand final.

And it helps explain why some 4000 cheering Kiwis turned up at Ericsson Stadium to welcome home the weary Warriors, despite the fact it lost in the final to the Sydney Roosters.

The players got the idol-worship, but it's the management that ultimately deserves the accolade. As sports commentator Joseph Romanos says, look at any successful New Zealand sports team and you'll find the head office is also well run. "Over the past 15 years New Zealand golf has been the best administered sport in the country, and that has come through in the playing. New Zealand cricket is now run well with a business model board and the performance of the New Zealand team has improved."

So what went right for the Warriors? At its most basic, the right owner picked the right management who picked the right coach who picked the right players. Who won - or nearly.

The Warriors' success is a tale of two Watsons - multimillionaire Eric Watson, who took a 75% stake in October 2000 through investment vehicle Cullen Investments, and Mick Watson (no relation), who was appointed chief executive soon afterwards. Eric Watson inherited a company that had made a $2.8 million loss in 2000 and a team that rarely won a match. Sponsors were disillusioned and fans didn't bother turning up for matches.

Two years later, the club has made a small profit and is predicted to make a healthy one for the 2002 year. (Mick Watson says the club was the NRL's top performer financially this season and third last year but he won't reveal the figures). But former Warriors board member and Kiwi league international player Dean Lonergan reckons if the team continues to play well, the club could make between $3 million and $5 million profit in the next season.

Revenues of around $12 million come from sponsorships, gate and season ticket sales, along with a $2.5 million annual NRL grant. This season, crowds averaged 16,000 a match, with a capacity 23,000 crowd for the last home game, as against 13,000 the year before and 8000 in 1998. Some sponsors are signed on until 2004 or 2005. Oh, and in case you hadn't heard, the team keeps winning.

The Warriors was created in 1995 as the Auckland Warriors when an Auckland team was invited to join the previously Australian-only competition. It later became the New Zealand Warriors under former Maori iwi owner Tainui. The Warriors may be a regional Kiwi side whose only role in life is playing in an overseas competition, but a visitor from Mars might be forgiven for thinking them more than that. In just two seasons, they have become New Zealand heroes.

How? First you have Eric Watson, one of the country's canniest businessmen, whose Midas touch is reflected in his own worth ($220 million according to the National Business Review's Rich List) even if it doesn't always reflect in his shareholders' bank balances.

Watson's Cullen Investments took a 75% stake in the Warriors in 2000 from then owner New Zealand Rugby League. NZRL says it gave Cullen a 75% share for nothing and threw in an additional $150,000 in cash. Cullen Investments says both parties put in the same amount but won't say what that was, citing a confidentiality clause in the shareholders' agreement.

Under the deal, Watson took charge and had to underwrite any ongoing costs. At the time, Watson's business colleagues called buying the Warriors his most crazy decision ever - after all, the team had bled money and left the Tainui several million dollars out of pocket. Recently Watson told an Australian newspaper he wouldn't sell the team, even if offered $1 billion: "This isn't about money; this is about competition, transtasman rivalry and winning."

Even by Watson's standards, the turnaround has been phenomenal. "A high-profile millionaire takes the club low-profile and gets results," says Lonergan.

Commentators say Watson and his team instilled a culture of success into the Warriors. They cut the hype and returned to core business: winning rugby league matches. "Eric Watson had business acumen and the capability to set it right and to back it up if it got into trouble," says New Zealand Rugby League chairman Selwyn Pearson.

Watson's style is to be hands-off with his investments. So hands-off, he announced a permanent move to London in September and has already been replaced on the Warriors board by Cullen chief executive Phil Newland. Watson finds good people to run his businesses and leaves them to get on with it.

It was former board member and ex-Warriors captain Matthew Ridge who helped Watson appoint Mick Watson. Ridge knew him from his playing days in Australia when Watson was a rep for then Manly sponsor Pepsi. But Eric Watson made the final decision - the right one, as it turned out.

In a chairman's message on the Warriors' website earlier this year, Eric Watson said: "Under Mick Watson's leadership it's a lean structure but one where everybody knows his or her role and gets on with the job. That makes it possible for the coach and players to do what they need to do with minimum disruption and distraction."

Experts point to management not doing anything frightfully clever, rather doing the basics well.

"Prior to Eric Watson's ownership, the Warriors had been a problem child for the NRL," says David Gallop, chief executive of the National Rugby League, the organisation running the Australian competition. "In some ways, they're now considered one of the benchmark clubs ... In a short space of time, they've come from a seemingly impossible situation to be a genuine example to others of just how a club can be run."

Who is Mick Watson? He has a strong corporate background, having worked as general manager sales and marketing for Kellogg's in Australia for three years and, before that, in marketing and sports sponsorship roles with Pepsi and Coca-Cola. This contrasts with the club's previous chief executives and provides the leadership woefully lacking in the past. Initially disinclined to accept the role, Watson says he was talked into it by Eric Watson and Ridge. "They pitched it to me that I could become the best chief executive in this field. And an underperforming company is a challenge; I wanted to put my stamp on it."

He is described as tough, straight-up, fair and hands-on. When he arrived from Australia, he cut the corporate team from 26 employees to nine. He separated the business into four units - sponsorship and marketing, operations, communications and football, with each manager reporting directly back to him.

"If I am guilty of anything it is that when the heat comes on and things start falling to pieces, I tend to take over and do it myself because then I know things will get done," Watson says.

Players are subject to more discipline than ever before. They are drug-tested, their alcohol levels monitored after a big game and they are expected to turn up on time for matches.

"He's brought a new culture to the whole enterprise. He's more hands-on, more involved in the day-to-day running, there is more attention to detail. It is doing 100 things 1% better that brings it all together," says board member Bill McEntee. He admits the board has little say in what happens although it is kept well informed. "Why interfere if it is working? I think they will keep making the top four for the next few years. This is not a flash in the pan."

One of Mick Watson's first moves was to appoint a new coach. He wanted someone who could help develop the talent of the team's young Polynesian players rather than one who would bring name players with him. Through his sponsorship work with Kellogg's, he knew former Parramatta assistant coach Daniel Anderson. In fact, Watson says he wouldn't have taken the role unless Anderson was appointed.

Ridge had the coach checked out by his old Manly mentor, Bob Fulton, who gave him the thumbs-up. Anderson achieved such good results in the first few months that Watson extended his two-year contract to the end of the 2005 season.

Sports commentator Murray Deaker says the other essential management decision made during Watson's first months in the job was identifying Warriors' half-back Stacey Jones as an icon player. Eric Watson initially had trouble getting players to sign after cutting by up to half the big salary contracts they had with Tainui. "Jones was extremely well paid to sign, but once they got him, a lot of the others, who were young Maori and Polynesians, then agreed to sign," Deaker says.

The result has been the stability the club craved. Cleverly, Mick Watson earlier this year signed for three more seasons all the players the club wanted to keep.

Ironically, the only New Zealand team in the NRL is now owned by a New Zealander living overseas, run by two Australians and has Australians making up more than a third of the squad. Former owner Malcolm Boyle ruefully says their moves to New Zealandise the club backfired. "In the end we picked the wrong coach and the wrong chief executive and Eric Watson picked it right."

Anderson has done well improving team performance. But it is Watson's improvement to the club's bottom line that should allow it to continue its winning performance. "Where they went wrong in the past was to try to operate a sports franchise as a multinational business. It is a small business," Mick Watson says. The club now lives within its means and comfortably within the $A3.25 million salary cap and the players are confident they're going to be paid each week.

Peter Leitch, boss of the Mad Butcher chain and one of the Warriors' most ardent ambassadors, is impressed by Watson's management. "There is no gravy train at the Warriors. Everyone has to earn their keep and you can only have what the club can afford - that's another sound business practice. We don't go around staying in the flashest hotels, it's very much a hands-on operation."

This hard-nosed corporate behaviour has been conspicuously lacking in previous management teams. The first Warriors team, then owned by Auckland Rugby League, managed to make a pitiful $63,900 net profit the first year from turnover of $15 million. Lonergan says profit should have been $8 million as the team drew in capacity crowds. The money was squandered by big-spending chief executive Ian Robson paying over the odds for big-name players and entertainment, he says.

Financial extravagance meant by 1996 the Warriors reported a loss of $473,700 and was in a parlous financial position. It had future commitments on player salaries of $14.7 million, with nearly $5.7 million of that for the 1997 season, according to New Zealand Herald business commentator Brian Gaynor. Robson was sacked in 1997 and replaced by Bill MacGowan, who immediately tightened the purse strings. The club reported a small profit that year.

By late 1998, however, Auckland Rugby League became concerned the club was living well beyond its means and crowds were down to around 8000.

In February 1999, rugby league coach Graham Lowe, public relations man Malcolm Boyle and Tainui bought the club for $3.75 million. Lowe and Boyle put up a mere $50,000 each in return for a one-third stake. Tainui put up the bulk of the money for two thirds and was liable for ongoing funding. Former journalist Trevor McKeown was made chief executive. Boyle claimed in the National Business Review that "basic business solutions" would turn the troubled league club into profit. "We've got to keep costs down and drive revenues up while ensuring product quality," he said. But financial disciplines went out the window and the club is believed to have recorded a $2.2 million loss in 1999. Troubled Tainui had to inject $2 million in working capital to keep the club going and turmoil within Tainui nearly caused the club to fold.

Determined to rescue its flagship team, the New Zealand Rugby League stepped in and paid $400,000 for the club's assets - namely the NRL licence. The deal abandoned all creditors, dishonoured all existing contracts and saw the Tainui owing around $6.25 million. It also left the club's original owner, Auckland Rugby League, $1.5 million out of pocket.

Perhaps luckily for the Warriors, NZRL soon on-sold most of its stake to Cullen and others. Commentator Romanos points to rugby league as a sport dogged by poor performance due to poor management. "It would be interesting if New Zealand Rugby League had retained 100% shareholding, how well the Warriors would be going now."

One of Mick Watson's key achievements is gaining the confidence of sponsors, an important ingredient. The team's two major backers are Vodafone (with naming rights) and Lion Breweries, with Puma, EAS Systems and Bond & Bond also appearing on the playing strip.

Puma country manager Bob Vann says the new management is "certainly different" from before, with a very open and direct style. "There is no cloak-and-dagger stuff going on behind the scenes. In previous administrations there was." Puma has been a sponsor for four years and is signed until the end of 2004 with rights of renewal.

Questions were raised within both Puma and Vodafone when they continued sponsoring the team after its 2000 losses. Vann told his overseas bosses the point of the sponsorship was aligning the brand with a "challenger with great potential". The talent among the players was always there, it just needed the right people to bring it out, he says.

Vodafone wanted to stick with the club through good times and bad because that is one of the company's core values, says consumer affairs director Chris Taylor. But he sounds relieved the new management has been well organised from the start and delivers what it promises.

"[Mick Watson] understands that, as a sponsor, it is not all about names on jerseys or signage. Anyone can do that. It is about how well integrated what we do as a business is with the team's values. They are performing on and off the field." Vodafone recently renegotiated its contract for a further three seasons.

Lion Breweries replaced DB Breweries when Watson took over. It is understood DB paid more than $15 million for its sponsorship of the original DB Bitter Warriors. It downgraded its involvement as the team's performance plummeted towards the end.

One of Mick Watson's first moves was to replace DB with Lion Red because he believed it was a much better brand match.

Lion Red marketing manager Stephen Smith claims to be selling twice as much beer at Ericsson than DB ever sold. He also says sales lifted by 25% on a year-by-year basis in 200 North Island outlets during a Warriors-related "Neatpack" promotion this year. "We would have been happy with a 5% lift in sales but the Warriors are hot." Lion is keen to renew its sponsorship when its contract expires next year.

Bond & Bond, owned by Eric Watson's Pacific Retail Group, was introduced to the club through him. But PRG spokesperson Michelle Teague says there was no influence to sign the two-year sponsorship contract. It was viewed as a good brand fit because of its youth links, she says. Teague had heard horror stories about the attitude of previous management and players to sponsors. The new regime has "exceeded her expectations" especially in the first season. "They had a lot to do in a short time but I was never made to feel they were under pressure or couldn't cope."

What about the future? The good thing about rugby league from a money-making point of view is that, unlike manufacturing (where the more you make, the more you spend), costs such as players' salaries, ground hire and travel are relatively static no matter how much revenue comes in. So once you've covered your costs, any additional money is all bottom-line profit. In reality, few rugby league clubs make money and a number of other NRL teams are still struggling.

Pearson, chairman of NZRL, which still has a 10% shareholding in the Warriors, says any profit the team makes will be reinvested into the club rather than paid as big dividends to the owners. "When we started out we were making money from the Warriors but we were naughty squirrels and didn't put any nuts away for winter. Then, in the next two to three years when we needed it, we didn't have any food supply stashed and we starved to death. We never want to make that mistake again."

Remember this is about more than money. The big aim for 2003 is bringing the grand final trophy back to Auckland.

It would look quite good sitting next to the America's Cup.

Warriors, Mark Two

Who owns the New Zealand Warriors?

What went wrong:

too much spent on players' contracts and entertainment

board conflict

owners unwilling or unable to fund losses

lack of leadership from the chief executive

the team lost too often

What is going right:

club lives within its means

professional approach including meeting sponsors' needs

leadership from the top

discipline over players

the right coach to rebuild the club and win games

The outcome:

return to profit in 2001

healthy profit expected in 2002

home gates sales averaged 16,000 per game this season compared to 13,000 last year

sponsors renewed contracts through to 2004 and 2005

competing in the NRL Grand Final in 2002

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