The Melbourne Storm fall-out

The shock of the Melbourne Storm breaching the NRL salary cap will have deep repercussions for sport and is likely to deter corporate sponsors from coming to play.

The initial shock of the Melbourne Storm breaching the National Rugby League salary cap will be nothing compared to the reverberations that will be felt in the companies associated with the club.

The News Limited-owned rugby league team has been stripped of two premierships and fined a total of $1.6 million after an audit found they had severely rorted salary cap conditions over five years and had been operating two sets of books to hide the scheme from the NRL. Three of the past four seasons of one of Australia’s most popular sports have effectively been declared void.

At the centre of the scandal is sports administrator Brian Waldron, who has been labelled the architect of the scheme following his tenure as chief executive of the Storm from 2004. Earlier this year he took up the same role at the new Melbourne Rebels Rugby Union Club, a position he stepped down from on Monday.

Also caught in the mix are Storm owners News Ltd, which now faces a number of questions regarding its future involvement in the club and the sport as a whole.

It was News Limited chief, John Hartigan, who called Waldron the "architect” of the scam and claimed he shouldn’t be involved in sport in this country. Hartigan is fuming, but News Ltd must take some responsibility for its apparently ineffective oversight of its subsidiaries.

The ownership structure of the media organisations involved in the screening and promotion of rugby league, including a number of News Ltd part-owned subsidiaries, is convoluted at best and does not lend itself to transparency.

News Limited owns 100 per cent of the Melbourne Storm, and has owned half of the National Rugby League since it begun in 1998. Additionally, News Limited owns 50 per cent of Premier Media Group, which produces Fox Sports – the number two broadcaster of the game – and 25 per cent of Fox Sports provider Foxtel, along with Consolidated Media Holdings (25 per cent) and Telstra (50 per cent) – the telco which is currently the major sponsor of the NRL Premiership. And, Consolidated Media owns 50 per cent of Premier Media Group.

And let’s not forget that the NRL’s probe into the salary cap breach was instigated by third party deals between players, notably the Storm’s captain Cameron Smith, and Foxtel.

Meanwhile, the Melbourne Rebels, which are set to enter the expanded Super 15 competition next year, will be fuming at the reputational damage resulting from Waldron’s alleged involvement in the scam and the destabilising impact his resignation will have on the club.

The Rebels, chaired by media player Harold Mitchell, are yet to sign a major sponsor, so they can operate without the need for Australian Rugby Union grants. They have also have been vigorously trying to recruit supporters. Those goals look extremely difficult now.

And then there is insurance firm AAMI, which just over a month ago won the bid for the naming rights to Melbourne’s new rectangular stadium, set to host the Storm, the Rebels and A-League soccer team Melbourne Victory, as well as training and administration for other sporting clubs, such as the Melbourne Football Club.

The insurer may be rethinking its decision to enter an eight year sponsorship, rumoured to be a large seven figure amount, given the questions now surrounding both the Storm and the Rebels due to the Waldron’s involvement.

And for betting markets, the effect has been likened to a stock market crash with TAB alone said to be looking at a $70,000 payout on wooden spoon bets placed on the Storm prior to the scandal.

The future of the Melbourne Storm is also in doubt. Not only has it lost a number of supporters and community respect, it has also lost two of its key sponsors, with ME Bank and superannuation fund HOSTPLUS dumping the club on Friday afternoon. However, the club is confident it can still attract sponsors.

With so many different companies burnt by their direct or indirect association with the Melbourne Storm scandal, it will be a hard task to attract more corporate activity to the sport. And it’s their involvement that lines the pockets of the clubs.

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