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Is Premiership Rugby a Busted Flush?

Some of the biggest news in Coventry recently has been the announcement that Wasps, our treasured rugby club, has gone into Administration. Whilst this is sad news in itself, you don’t have to look very deep to realise that this isn’t just an unfortunate isolated incident. Is there any coming back now for Premiership Rugby?

In what in political terms seems like years ago – September – Wasps stepped out at the Coventry Building Society stadium to seal their first win of the season against Bath. It was their first win, but also their last game. Maybe their last ever game, as the club was placed into Administration on 17th October. This has resulted in the loss of livelihood for the 167 employees, which of course included some of the current England squad.

For a club that had survived a move to Coventry a few years earlier, and that was founded in 1867, this was an ignominious fall from grace. Although a proportion of its financial issues stemmed from that move in itself and the ticking timebomb of the repayment to the bond holders, once Covid came along, the figures simply didn’t add up.

In the neighbouring county of Worcestershire, a similar story had unfolded a few weeks earlier. Worcester Warriors had suffered the same fate. Although in this instance, the company that held the players’ contracts had been wound up in the High Court of Justice for failing to meet a sizeable HMRC debt. Administrators were appointed over the other connected companies, and while a rescue plan is now on the table with at least two potential investor groups, it is still unclear if it will return to profitability.

Covid of course crippled every Rugby Club (and nearly every other sports club) across the land, but perhaps with professional rugby there was already a fundamental problem bubbling under the surface exacerbated by the various lockdowns. In fact, there are rumours on various rugby social media platforms that there may be more clubs facing similar financial issues.

Report
In 1999, Premiership Rugby introduced a salary cap in a bid to make things fairer in the sport and to help clubs better control costs. However, the Saracens famously broke these rules in the latter part of the 2010s, resulting in hefty fines and club relegation.

Following on from this abuse of the salary cap, a report was commissioned by the Rugby Union CEO Darren Childs, and conducted by former minister Lord Myners CBE.

It found that in the seasons 2016/17 and 2017/18 that only one Premiership club – just one – made a profit. This (in 2018) meant that the clubs lost around £40million collectively against an income of circa £200million, a large proportion of which came from a new broadcasting deal with BT.

In many cases, these losses were temporarily plugged by the rich owners of the clubs, much like the system in the football premiership. Of course this model is unsustainable, and seemingly the super rich owners of Rugby Clubs aren’t quite as rich as those involved in football.

The professional game started 27 years ago now, and despite investment from the likes of CVC Capital Partners (who now own 27% of the Premiership), the audience just isn’t growing fast enough to keep pace with the salaries. Does that story seem familiar?

For whatever reason, rugby simply doesn’t have the same financial appeal as football and ultimately, if it is to be financially viable, drastic changes are going to need to be made.

French and Australian leagues have managed to keep going through drastic cost cutting exercises (which includes players’ salaries). The RFU’s current response to the problems is to re-raise the salary cap to pre-pandemic levels. Is that really an answer? The salary cap covers the whole squad, not individual players. This means that a halo player could earn many times his co-players’ wages.

Management
The future of the game will potentially be unlocked when clubs make the switch from reliance upon rich owners to instead run the club like a business. As with any business, it needs proper planning, good cashflow and good management. The clubs also need to ensure that they are looking after their players, and not just in terms of remuneration.

This leads us to the other elephant in the room for rugby, and that is the safety of its players. It is widely reported that hundreds of ex-players are already taking legal action against numerous rugby authorities for what they see as a failing to protect the welfare of players. Many players are suffering from life changing brain injuries caused by years of hard tackles, and feel that they weren’t advised of the potential risks.

The negative repercussions of this are plentiful. Not only will more and more players suffer issues with their health if this aspect of the game isn’t taken more seriously, but the legal costs could have a further detrimental blow to the games’ finances.

In our blog just last month, we offered advice to business owners to spend more time working on their business than within it. That step back to evaluate the best way forward could not be more important. It seems that rugby should be heeding that advice themselves. If the game doesn’t make changes soon, it could be inevitable that there will be more failures, meaning a well loved sport that was born not far away from the BLB Advisory head office, could face disastrous consequences.

Every business is likely to hit problems at some point. It’s how you react to it that matters. Let’s hope that rugby is ready to react positively.