Rugby union’s existential crisis

On September 23, the storied rugby union team Wasps sealed their first win in this year’s Gallagher Premiership, fending off a second-half fightback by Bath. It would be their last victory in the league, perhaps forever.

The Coventry-based club was placed into administration on October 17, and immediately made 167 employees redundant, from the England players in their first team, to coaches and players.

Wasps were founded in 1867 and achieved European glory twice. But history wasn’t enough to pay the bills. The club collapsed when it was unable to repay debts to creditors including the UK tax department and retail bondholders, after Covid-19 ate into revenues.

Wasps are not the only victim among the 13 teams that made up the Premiership. Worcester Warriors were suspended from the league earlier in October after they failed to show the authorities proof of insurance cover, funds to meet monthly payroll and a “credible plan” to take the club forward.

Jason Whittingham and Colin Goldring, the former owners, were fined and banned from serving as company directors for 12 months because they did not file financial accounts for the year to the end of February 2021. Rumours persist that other teams might yet join them in administration.

The collapse of the two clubs hints at something rotten in the financial state of English club rugby. Even before Covid wiped out ticket sales and hospitality revenues, rugby union’s top clubs were mired by fragile finances.

In a review published in May 2020, the late British lawmaker Lord Myners found that even as collective revenues rose to more than £200mn in 2018 on the back of a new broadcast deal with BT, losses mounted to £40mn. All but one club in the top flight booked losses in both 2017 and 2018.

By choice or necessity, rich owners were forced to act as benefactors, picking up the bill as losses — and debts — mounted. “There are people who make the assumption that rich people will continue to fund clubs because they’re rich,” says one sports banker. “Those people are idiots.”

The future of the Premiership — and its clubs — is vital to the wider game, from fans and the grassroots, to players and to the club European Cup and the Six Nations contest of national teams.

Interested parties go beyond sport: CVC Capital Partners, which paid £200mn for a 27 per cent stake in the Premiership in 2018 as part of a wider investment in rugby union that also includes the Six Nations, is betting that the league can grow its audience and strike more lucrative commercial deals.

UK taxpayers are also on the hook after the government stepped in as a lender of last resort during the height of Covid-19 as clubs added debt to their balance sheets. Julian Knight, a Conservative member of parliament and chair of the digital, culture, media and sport select committee, has warned that the travails of Wasps and Worcester raise “serious concerns about the future of the sport and its financial viability”.

Club owners, senior executives, investors, the league and authorities see an opportunity for a “reset” that can put the sport’s finances back on track. “We’ve had 25 years of pro rugby now and the model is bust really,” says the owner of one club. “This is a moment to reset the dial.”

Doing so could unleash the commercial power of a league in rude health in terms of the competitive quality of the matches and viewership numbers.

Other national leagues, for example in France, have proved that despite the financial hit of the pandemic, there are viable economic models for the game. In Australia, aggressive cost-cutting helped clubs overcome the shock of the pandemic. “All clubs realised the importance of living within their means,” says David Bond, a professor at UTS Business School who sits on the board of Sydney Rugby Union.

Yet looming beyond the health of the UK rugby’s clubs is a separate, more existential crisis over the health of its players that could have even wider repercussions for the sport. Hundreds of former players are suing global rugby authorities for alleged negligence in protecting them from life-altering head injuries. The twin crises add up to a transformative moment for the game.

The seeds of disaster

Rugby is a punishing game played by two teams of 15 players. The rules are complex but can be boiled down to a war for territory that is won by moving the ball up the pitch to score a try. The sport started to codify its rules in the 19th century — the Rugby Football Union was founded in 1871 — but only turned professional in 1995.

The Premiership’s first season as a professional league followed in 1997-98, and teams struggled with losses from the start. To control those costs, and ensure a level financial playing field for clubs, the league introduced a salary cap for players in 1999. Rather than limit individual salaries, it put a ceiling on the overall collective wages for senior players.

But as England began to breed superstars such as Jonny Wilkinson, whose last-minute drop goal won the World Cup in 2003, the clubs needed to pay superstar-sized salaries.

“An arms race started for players with money the game couldn’t afford,” says Tim Crow, a sports marketer who has negotiated sponsorships with the Six Nations, British & Irish Lions and the Premiership. “It hasn’t changed.”

As the Myners review would later report, the game became prone to financial ups and downs. Periods of relative stability typically led to excess, mostly as clubs pushed salary budgets to the limits in pursuit of domestic and European titles.

Club owners becoming accustomed to annual losses were delighted, then, when CVC took a 27 per cent stake in the Premiership in 2018, giving the game a £200mn windfall for growth.

Then the pandemic struck. Instead of using the roughly £15mn they each received from CVC to invest in infrastructure, clubs were forced to use the cash to survive. CVC was flexible and made funds available to support clubs, according to people close to the firm and the sport, while the Premiership slashed its salary cap to £5mn from £6.4mn previously.

The crisis now engulfing English rugby was worsened by the pandemic, say experts, but not caused by it. “Rugby union has been storing these problems up for some time, the warning signs were there,” says Dan Plumley, sports finance expert at Sheffield Hallam University. “Covid has accelerated the problems that were already there.”

A better system

Fundamental reforms are now on the table. Proposals include giving greater oversight of club finances to the Premiership, which already monitors salary cap compliance, and cutting the league down to 10 teams.

Advocates say a 10-team league would concentrate revenues — and top players — among fewer clubs, strengthening their finances. Senior executives in the sport speak of a “less is more” approach that would also help the Premiership avoid clashes with international matches by reducing the number of games each club plays by six a season. One owner says the league should consider continuing its moratorium on relegation to protect clubs as they fight to rebuild after the damage from Covid.

“What we need to do is create a system and a model where investors in clubs feel the confidence to take a long-term view on the asset growth of the club and the sport,” says Simon Massie-Taylor, chief executive of Premiership Rugby. “We need to improve some of the governance structures that we have and improve decision making.”

Some club owners want a rethink of their relationship with the RFU, the national governing league. At present its primary responsibility is running the national team, but it also invests in development of the grassroots game in partnership with the clubs, and sets the rule book for the professional game in England.

Some say the Premiership should be given more responsibility for overseeing the competition and its clubs. “The [RFU is] our biggest competitor for sponsors and players,” says one club owner. “[Yet] they’re governing us and regulating us. It makes no sense.”

Clubs especially lament that internationals take precedence over domestic games, and that their teams suffer when their star players are away on England duty.

“The reality is that the RFU stage international games,” says Tony Rowe, chairman and chief executive of Exeter Chiefs. “That’s to obviously give them the funds to support community rugby in England but also to pay to borrow our assets, which are the players . . . and I don’t think they pay enough. They take the cream of English rugby.”

The RFU says that “deconflicting and thereby reducing the overlap between the international and club calendar is a huge priority”. The governing body also said it should take the lead on checks of new owners of clubs, in consultation with the Premiership.

Both league and governing body are discussing how to ramp up financial oversight of clubs, pointing to how the French top-tier league is run.

Clubs in France’s Top 14 have to satisfy a range of criteria to obtain a licence before the season to compete. RFU chief executive Bill Sweeney says the process involves a “complete review” of club financial projections and business plans by an independent body.

“They have to keep in the bank 15 per cent of their cost projections in cash deposits [and] if an owner is guaranteeing to bankroll any financial shortcomings it’s not just satisfactory to have a letter from the owner, they have to have a bank guarantee,” says Sweeney.

“We need something like that in place,” he adds, saying it will be discussed with the Premiership and the government.

Clubs may also need to take a hard look at whether salaries in the league are sustainable. Bond, the Australian academic, says the Premiership may need to consider whether the ceiling on player pay is set at the right level. “I don’t know how it has been feasible to have that salary cap considering what their revenue is.”

But revenue growth is also important to the clubs and CVC, which is optimistic about the future of the Premiership’s media rights. Cutting the number of games played is not expected to be an issue because not all are screened live by pay-TV partner BT Sport. The addition of free-to-air games on ITV has widened the league’s reach.

Despite the financial plight of Wasps and Worcester, CVC is optimistic about the league’s chances when its media rights next come up for sale. Relative to its 12mn fan base in the UK, rugby union underperforms on broadcast and commercial income, according to Nielsen Sport.

CVC is betting the Premiership can increase the value of its £40mn-a-season UK broadcast deal (France’s Top 14, by comparison, secured a deal with Canal+ in 2021 worth €113mn a year). The league has also launched its own streaming platform to go to fans directly. Growing the value of media rights would also help to attract richer investors to Premiership clubs.

At heart, however, a 10-team league could be part of the solution to a far bigger threat to the future of the game: player welfare.

Serious health questions

The precise link between contact sport and brain damage later in life remains a hotly debated topic within the scientific community.

Rugby has faced questions on the issue for years, especially since the game went professional, resulting in bigger, stronger players and a steep increase in the amount of time spent training.

The subject is increasingly gaining attention as more ex-players are diagnosed with serious neurological impairments, such as chronic traumatic encephalopathy, and motor neuron disease.

Their plight has also been highlighted by recent TV documentaries, such the BBC’s Head On: Rugby, Dementia and Me, which tells the story of former England World Cup winner Steve Thompson, who was diagnosed with early onset dementia at the age of 42.

This month, a study released by researchers at the University of Glasgow showed that international rugby players had a “higher risk of a neurodegenerative disease diagnosis” than the general population, ranging from a doubling of risk for dementia, and a more than 10-fold increased risk of developing MND.

Some of those affected are taking action. A group of more than 200 former players — including Thompson — have initiated legal proceedings against World Rugby, the RFU and Welsh Rugby Union, alleging that the sport’s governing bodies had been negligent in “failing to take reasonable action in order to protect players from permanent injury caused by repetitive concussive and sub-concussive blows”.

Richard Boardman, the lawyer leading the action, says that brain injuries among former players had now become “an epidemic and an existential crisis” at all levels of the game.

“Based on studies out there, and what we and our experts have seen to date, we believe that up to one in two [professional players] will end up with some kind of neurological impairment. Even gladiators in Rome wouldn’t sign up to that.”

The RFU calls the welfare of players its “number one priority”, and says its guidelines are continuously updated in line with scientific advice. “As understanding of concussion in sport evolves then our protocols and laws have evolved, and will continue to do so.”

The legal action has echoes of the landmark US case filed by thousands of former American football players against the NFL, which resulted in a $1bn settlement.

As the scientific research showing potential dangers from playing rugby has been growing, participation in the sport has been in decline.

A survey by Sport England showed that the number of people participating in rugby union in 2019 was 228,400, a 12 per cent drop from three years earlier. The figure for last year had plunged to 133,600, partly due to the impact of Covid.

A separate survey by the Drake Foundation, a non-profit that funds research into head injuries in sport, found that more than half of parents were concerned about the long-term impact playing rugby might have on their child’s brain health.

Progressive Rugby, a non-profit group whose members include doctors and former players, has been lobbying for changes to help reduce the risk of long-term damage to the brain. Those include reduced contact training, longer time on the sidelines for those who have suffered a blow to the head, extended breaks for players returning from international duty, and stiffer punishments for clubs that fail to comply.

“If we want to protect this game for future generations, then we’ve got to make changes,” the group says.

Yet anyone involved with rugby knows that change is a constant in this sport, from an ever-shifting rule book to the many teams who have fallen from the top tiers to obscurity. Clubs owners say the fate of two teams shouldn’t be mistaken for a death knell for the sport.

“Please, we’re upbeat. It’s tough. Business is tough. Attendances are slightly down but we’re not all looking over our shoulders for the liquidators,” says Rowe. “No matter what business you’re in, it’s pretty tough, and it’s been made worse by that bad Russian man. We just need our supporters to turn up.”

In some ways it reflects the game itself. “You slowly lose a bit of momentum and that happens in a game of rugby,” said Wasps player Tom Willis, describing how they had let Bath back into that September 23 game before securing victory. “Teams find their way back into it.”

Additional reporting by Nic Fildes in Sydney