The sale of a minority interest to former Formula 1 owners CVC Capital Partners (CVC) for a reported £200m, and the first multiple club relegation battle in recent years, means the divisive issue of ring-fencing English rugby’s Gallagher Premiership is back in vogue.
New contributor to Last Word on Rugby Steve Dunham, adds his voice to the conversation that will support the ongoing success of the English Rugby Premiership organization.
Premiership Rugby Limited (PRL) has been seeking financial sustainability since its creation in 1997. With that achievement continuing to elude it, PRL has been debating ring-fencing ever since.
PRL clubs are expected to show cumulative losses in 2017/18 of around £35m, as reported by The Guardian. PRL have reported an 80% growth in commercial income over the past ten years. However, costs have continued to outstrip this increase, largely due to pressures of wage inflation.
Announcing the CVC deal in December 2018, PRL’s Chief Executive Officer (CEO) Mark McCafferty stated “it was the perfect time for us to identify the right partner to help accelerate our next phase of growth”. PRL Chairman Ian Ritchie added;
“Proceeds will be reinvested to drive continued growth in the sport, for the benefit of the fans, Clubs and players”.
‘Growth’ is the key word. PRL clearly see ring-fencing as a major factor to deliver growth in value owners desperately crave as they look to take their product to the ‘next level’.
PRL clubs have announced their intention to speak with the Rugby Football Union (RFU) to advance the idea of ring-fencing.
Whether PRL seek ring-fencing to be a permanent feature remains to be seen. It could, as Bristol Bears owner Steve Lansdown suggested, be ‘for a defined period’ such as three years.
‘Closing’ the league will secure future
Operating a closed league system should enable PRL Clubs to undertake investment strategies needed to secure a firm financial base. From this they would seek to maximise the impact of the CVC partnership.
Additionally, the eight year Professional Game Agreement signed with the RFU back in 2016 expects revenue of more than £200m. It provides a one-time opportunity which the game cannot afford to waste. But, with heightened passion on both side, the current resurrection of the debate has seen no toning down of views.
An open league structure is something British sport has always embraced. It enables sporting competition to protect the dreams and ambitions for lower ranked teams of reaching the top.
Exeter Chiefs are held up as the vanguard of the current system. Their rise through the Devon leagues, promotion to the Premiership and winning the Aviva Premiership final is considered a decisive argument.
Current Championship clubs, including Ealing Trailfinders, Cornish Pirates, Coventry and Yorkshire Carnegie, all have similar ambitions of reaching the top.
But the example of London Welsh, who after relegation from the Premiership in 2015, went into liquidation in 2016 and are now currently playing in the regional London leagues, is a clear reminder of the precarious nature that sporting success can bring. However, pursuing the exclusion of Championship Clubs through will result in legal action being taken. This is their strength of feeling on the issue.
RFU Reluctance to change the ‘status quo’
While PRL’s position is clear, any movement toward ring-fencing would have to be sanctioned by the RFU. The Professional Game Board, the RFU Board and RFU Council would all have to agree.
The RFU have agreed to formally discuss any PRL proposal once presented. But, interim CEO Nigel Melville called the idea “wishful thinking”. It is therefore unlikely to be one which would happen in the immediate future.
Any expectation of RFU approval is likely to be extremely difficult to achieve in the current climate with the current strength of feeling outside of PRL.
What might the future hold?
So where does that leave PRL in its search for “long-term financial sustainability for professional rugby in England”?
PRL have already announced it will separate the sporting and commercial parts of the business going forward. The expected appointment of UKTV’s Darren Childs as CEO of the commercial arm is a clear indication of where CVC are looking at taking PRL.
Experience tells us CVC will not wait to deliver changes to fully exploit commercial opportunities they believe rugby union offers. The next PRL board meeting on 9th April should provide further details.
Clearly from a financial viewpoint, a closed league system, whether permanent or for a defined period, has to be the way forward if professional rugby union in England is to achieve its massive commercial potential.
By persuading the sporting side to move forward in partnership with the RFU, the England team and the game as a whole should benefit as a whole.
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