26 Oct 22
Professional club rugby in England is in crisis. Two clubs have gone to the wall in as many weeks, and of the remaining eleven clubs, no more than a couple can claim any degree of financial stability with a track record in the black.
Many commentators argue that a central contract system could be part of the solution that resets the relationship between club and country and helps build the foundations for financial security within the club game.
The key arguments in favour of central contracts are that they:
- mitigate the club vs country conflict aligning the playing calendar, player availability and promoting player welfare;
- relieve clubs of the high cost of marquee players; and
- assist national team success as a result of much greater control and access to international players.
But the wealthy benefactors who have supported clubs with multi-million pound losses for decades are loathe to give up either control of Premiership Rugby or their own players. Further, the hard-nosed bean counters at CVC (owners of 27% of PRL) bought in on a similar understanding that control of marquee players was key to the value of their investment.
As for the RFU, they already pay around £9million a year to the players in match fees and a similar sum again to the clubs under the Professional Game Agreement (“PGA”) between Premiership Rugby and the RFU.
As the current eight year PGA nears expiry, could a system be created that helps shore up the finances of the clubs and aligns interests without making the clubs feel that they’re selling off the family silver? In so doing, could the fractured governance of club rugby be addressed? There are many different types of central contacting systems which offer potential solutions. We have analysed various examples to see if a model could be implemented which is fit for the English club game.
In cricket, the chasm between the domestic and international game is even deeper than in rugby. The central contract system operated by the ECB takes the principal burden of paying England players off the counties. The playing group is reviewed annually and when central commitments allow, players are seconded back to their counties including ring fencing key county commitments such as the One Day Cup Final.
The growth of the IPL, which has increased the market value of the top white ball players, has placed further stress on the model. This has squeezed the counties’ control of their players, who can now insist on being released for overseas tournaments, such as the IPL in addition to their England commitments. Despite no IPL involvement, Yorkshire were famously almost “Rootless” this season with the ex England captain playing only three County Championship games for his county in 2022.
The model has helped the England team succeed in both red and white ball formats, as well as given the top players far more flexibility and revenue opportunities than seen in other sports. The variety of contracts on offer gives England management access to a wide group and caters for long term development as well as control of core players. However, the county game is struggling, and the value the counties get from their England players is minimal.
Central contracts in Rugby Union
The Irish RFU are in the fortunate position that they own the top tier of domestic club rugby in Ireland comprising the four professional provincial teams, Leinster, Munster, Connacht and Ulster. This allows a clear central contract system giving priority to the national side. With one party in control, provinces can be directed to rest players, play them in different positions and to develop certain types of player or skills required by the national team.
The New Zealand Rugby Union has a similar system where it licences provincial franchises all beholden to its central contracts for international players. The long and successful careers of players such as Richie McCaw and Jonny Sexton have only been possible with the benefit of careful and robust central management. In addition to long and successful careers the blight of concussion and player welfare is less of a concern when centrally controlled players in Ireland and New Zealand can play only 20 matches a year whilst English players regularly hit their maximum allowance of 30.
US sport enjoys a long history of central governance. The likes of the NFL, NBA and MLB are unfettered by issues of club v country. There is no “country” and leagues control the narrative, bypassing teams to negotiate terms with players directly though collective bargaining agreements. The teams may cede significant control to their leagues but the extraordinary success of their leagues means that NFL and NBA teams dwarf the value of European competitors. According to Forbes recent report analysing the top 50 clubs in world sport, Premier League giants like Manchester United (19th), Liverpool (22nd) and Manchester City (24th) don’t even make the top 10 while Dallas Cowboys head a list of nine NFL and NBA teams in the top 10.
Other than a clear endorsement of the commercial value of strong central sports governance, the differences in the US system are too many to allow for many meaningful lessons. However, the youngest league, the MLS, with the World’s favourite sport in the US, offers some pointers. MLS started from a low base and at the heart of its financial survival was a central contracting system as well as central control of team franchises. Bar a couple of designated outliers, the entire squad for each MLS franchise is centrally contracted. The salary cap and terms are controlled centrally and benchmarked against League revenues ensuring financial prudence. As with other US sports, the teams’ influence on league decisions is minimal but both parties are aligned in their interest to increase the value of team franchises and their compensation is an average increase in the value of MLS franchises of 500% in the last 10 years.
On the field of play the club game is in rude health. The quality, style of rugby (epitomised by Harlequins run to the Gallagher Premiership title in 2021), heritage of the clubs and jeopardy (nine of the current eleven teams have won the league) are all commercial gold dust. However, the model that was scrabbled together in a matter of months as the game, grudgingly, went professional in 1995 promotes paralysis and conflict and shackles commercial potential. It should not be the case that French club rugby can secure a domestic broadcast deal, at €113Million a year, nearly treble the value the English game secured.
Can lessons be learnt from other systems to craft a system for English rugby?
In our view it could be achievable by focusing on three elements: investment, access and control.
There can be no argument that the clubs cannot afford the current system. Regardless of any wider discussions, cost cutting and greater transparency over club finances will be core elements of the current negotiations. Despite the salary cap, playing salaries regularly comprise well over 50% of a clubs’ turnover and in exceptional circumstance north of 100%. Top end salaries of £800,000 for one player (in a squad of 30 odd) where turnovers average around £15Million simply don’t add up. However, with England’s latest squad 36 strong, taking full salary responsibility would be a huge undertaking which the RFU’s coffers are unlikely to be ready for.
However, the ECB have demonstrated that central contracts do not need to be a blunt tool of “one size fits all”. A variety of contracts could be implemented securing control of a smaller number of core players, development contracts for young players and hybrid contracts to develop strength in weaker areas/key positions.
Could aligning interests with the clubs, promoting long term national success and providing a platform for a successful domestic professional game justify significant further investment from the RFU?
Could such an increase in RFU investment secure compromises from club owners that a proper restructure requires? Taking significant liabilities off clubs’ balance sheets would inevitably be the price required by the RFU, but it needn’t be pure sunk costs. Such a significant level of investment could also allow the RFU to push for a share in the future commercial success of PRL. If this opportunity only kicked in at a threshold higher than PRL’s current commercial revenues, it could be hard to argue against.
Inevitably English rugby will be operating in an environment with fewer clubs and hence fewer matches. Also, negotiations between the RFU and clubs will not affect World Rugby’s requirements for clubs to release players for international duty during prescribed periods under Regulation 9.
So in practice, the additional access to players secured by the RFU under a central contract system need not dramatically reduce the club’s access to their marquee players. In fact, the restructure could lead to a grading of fixtures and carefully crafted fixture lists. This system would lend weight to key derbies, expected top of the table clashes and the “Big Matches” played at major stadia. Clubs could be guaranteed access to marquee players for all higher grade fixtures and key club commitments.
For England, of course, greater access to players has been the key priority for England coaches for many years and has been fundamental to the success of teams such as New Zealand and Ireland.
In return for the investment, the clubs would have to cede control in two areas.
Firstly, the RFU would employ the centrally contracted players and take primary control of their management, training and welfare as well as clearer control over fringe players. The current system with the mismatch in compensation for international release and hefty club salaries discourages clubs from bringing players through for the national team. In addition as both the clubs and national team maximise their time and access to the players, welfare is far more difficult to protect.
Again, in practice, with less PRL matches, the clubs will not need to cede a great deal. Critically, the clubs would still retain the players’ image rights and promotional duties in a club context and ensure access to participate in key matches, perhaps, in a more meaningful and structured way.
The second limb of control to be ceded would be the clubs’ absolute control and veto power over PRL. In exchange for the investment made by the RFU, a single executive (either PRL itself or Simon Halliday’s suggested joint venture between RFU and PRL) would control professional club rugby in England. Various assurances and protections would be needed for the clubs and CVC in ceding this control, but empowering the executive will be key.
Perhaps a third limb could involve concessions from the RFU to, similarly, give the league greater autonomy and lighter touch regulation.
Could reciprocal concessions on control create the nimble, authoritative and professional decision making that is critical to any professional league? That style of governance has been central to the extraordinary commercial success of US sports and the Premier League in England with owners seeing dramatic increases in the value of their club assets. Commercial success is fundamental to the viability of professional club rugby and by creating the most favourable environment for that success the club owners and RFU could reap a long-term dividend.
Perhaps the “nuclear option” of central contracts is precisely what is needed for a peaceful and profitable resolution to the crisis crippling professional club rugby in England.