John Nicholson returns to Planet Rugby to discuss the impending windfall for Premiership clubs and why they shouldn’t follow football’s lead.
Rugby Union is about to get a big cash injection from CVC to the tune of £200 million in return for a 30% share in the game. Well, that’s all fine and dandy because lord knows, the clubs really need the cash. But remember who we’re talking about getting this windfall. Our top flight rugby clubs have proven to be run by people who can’t necessarily find their own backsides with both hands. Only Exeter made a profit last year.
Given that only that one club have been financially competent enough to make money, we would be right to be cynical about the other clubs’ ability to spend the new money with any degree of responsibility. We would be right to worry that there will be only one way they can think of to spend all this lovely new cash and that is on increased wages for themselves and for players.
As I documented three months ago, many clubs whazz the vast majority of their income on player wages, wiping out profits and ending up in crippling debt. Few businesses can survive when they pay staff more money than the business can support but all too many rugby clubs try to pull off this impossibility. The simple laws of profit and loss seem to have had no traction on these people’s thinking and that has led to the virtual bankruptcy of the game as one club after another languish in the red with no realistic hope of getting into the black.
When the new cash lands in their lap, the odds must be on them simply cranking up pay scales to try and attract better players, seemingly oblivious that an arms race of wage inflation benefits no club. When everyone pays more money, you get no advantage from paying higher wages in the same way if your house value doubles, you are no richer if you have to buy a house that has also doubled in price. I only got an A Level grade E in economics but even I can work that one out.
So it is very important that the clubs invest in the game with an eye for the long term. Again, this is hardly the sort of stuff of economic giants but, if you invest in the game more broadly and by doing so grow its popularity and thus the income that can be generated, you will be ensuring your financial solidity for years to come and not forever teeter on the edge of bankruptcy whilst supporters sit in crumbling stands and stadia with poor facilities.
Many clubs need investment in their infrastructure, in pitches, in coaching and training facilities, that’s where the money should be going.
Just paying players thousands more per year will not get more of us through the turnstiles but developing better facilities, leading to better, more competitive rugby played in more comfortable or enjoyable surroundings absolutely would.
Do not, under any circumstances, look towards Association Football for a role model because there is a very good argument to be made that the rampant wage inflation in that sport has ruined the top levels of the game for many fans, who find the wages paid to be morally repugnant. Clubs have gained no advantage over each other and, despite being some of the richest on earth, they still find it difficult to compete with other European clubs who have far less income. Rugby’s lesson here is don’t be like football. The salary cap needs to remain in place and not just keep on rising and rising and, just as importantly, the uncapped marquee player wages must not spiral out of control either.
Long term planning isn’t something humans do very well. Our monkey brains are too hard-wired to the here and now, too focussed on what we’re doing today and far less, or not at all, at what we’ll have to do in a year or three’s time. But rugby needs some long term financial planning desperately. Given the recent club history, it’s easy to imagine all this new investment just being frittered away and not being used to secure the future of the game. After all, that is what the game has done with its existing income. CVC must be aware of this too and you’d hope there might be some stipulations attached to their investment to ensure the future viability of the sport.