The better the risk, the greater the opportunity; BUSINESS OF SPORT.
Since becoming a bona fide professional sport, rugby has developed at breakneck speed. Players are bigger, training methods more intense, while the game's international schedule permits little time for cigars and port while on tour, even with the Lions.
Commercial considerations, television contracts and sponsors are as much a part of rugby as any other sport and given the Lions' increased media profile, one currently miniscule sector of the sport business is set to enjoy a significant expansion before the team plays its final Test in Johannesburg on July 4.
Irish bookmaker Paddy Power has long been renowned for its novelty bets, but following an unusual success at football's European Championships last year, the company is set to expand its sports risk insurance offering during the forthcoming Lions series.
Prior to the Euro 2008 final, Paddy Power's insurance subsidiary, Airton Risk Management, signed a 'conditional rebate' deal with a German electrical retailer which effectively underwrote the retailer's commercial liability.
The retailer ran a nationwide campaign offering to reimburse customers 100 euros (pounds 94) on all purchases of 500 euros or more for every goal (to a maximum of eight) Germany scored against Spain in the final. The scale of the potential liability approached ten million euros, a proportion of which Airton syndicated elsewhere. Germany failed to score, an outcome which pleased the retailer and delighted Airton who envisage developing the business further during next year's World Cup.
Beforehand, Airton is understood to be in talks with several retailers and is offering to underwrite the risk on special promotions linked to the Lions winning all three tests.
Conditional rebates are popular with companies because they can generate a significant increase in sales without denting profits.
One of Airton's early successes was with an Irish BMW dealer, Frank Keane, with whom the company devised a promotion based around the 2007 Rugby World Cup. The dealership offered any customer buying a BMW during July and August 2007 a 10,000 euro cash rebate if Ireland won the competition. The promotion attracted considerable media attention and had a beneficial impact upon car sales, although throughout the tournament, Mr Keane knew his potential liabilities were covered.
Rod O'Callaghan, a director of Airton Risk Management, is convinced change is imminent.
"We are already pricing sports risk on two billion euros of bets a year," he said.
"We thought 'why don't we leverage up that expertise'. We would expect to be competitive because sports risk is our business." Other bookmakers are exploring the possibility of establishing their own sports risk insurance businesses, particularly as Airton has provided clients with an estimated pounds 45million of cover since it was established in June 2007.
Several leading European football clubs already hedge against future uncertainty by removing the potentially adverse financial impact of paying performance-related bonuses to players by insuring against outcomes such as winning their domestic league titles. Sponsors too have turned to insurance companies to mitigate their risks as sponsorship invariable includes a provision for increased payments (to a player or club) in the event of a specified success.
Leading bookmakers recognise that as they're already pricing billions of pounds worth of sporting risk on a daily basis, this is an area of the sports business they're well positioned to exploit.
The anticipated expansion of the sports risk sector provides a further indication of sport's wider appeal, especially to retailers, many of whom are already working on their promotions for next year's World Cup. If ambitious bookies have anything to do with it, retailers will be in a position to offer enormous conditional prizes to customers, thus driving sales and boosting profits.." Companies can generate a significant increase in sales without denting profits
Germany's failure to score in the Euro 2008 final against Spain almost came as pleasant surprise rather than a nasty shock for Airton Risk Management and a German electrical retailer
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|Publication:||The Birmingham Post (England)|
|Date:||Apr 23, 2009|
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