Judgement Day offered points and plaudits for the Cardiff Blues and the Scarlets. WRU Finals Day underlined the progress made by RGC. But Geraint Powell says other results – the financial ones – point to a Welsh rugby structure that no longer adds up.  

 

Spring is always a difficult season for the non-Test tier of professional rugby in Wales, the time of year when the hybrid regions/”super” clubs are compelled by UK company law to publicly file/disclose their financial performances for the preceding rugby season.

The spectacular quarter-final flops of the Ospreys and the Cardiff Blues in the play-offs of only the second tier of European competition once again compounding the sense of a business model in a perpetual state of crisis.  Not even any offsetting feel good factor from “Team Wales” this March/April, because of the failure to close out wins over England and (after Gallic scrum/medical shenanigans) France sent it plummeting to 5th place in the Six Nations.  A few Welsh Lions places probably went down with it, unless Warren Gatland is prepared to risk the wrath of the London and Dublin rugby media.

Judgement Day weekend, a saviour for the regional game last season, was unrelentingly grim for the regions this season.  A perfect storm.  The Pro12 is moving inexorably towards a Leinster v Munster final.  The Ospreys form and season is in complete meltdown, not just losing to Treviso, their underpowered pack bullied off the park 17-35 by the Blues in a manner they themselves used to bully the Blues through the likes of Richard Hibbard, Ian Evans, Adam Jones and (the injury absent and talismanic) Alun Wyn Jones.  Now, along with the Scarlets, battling against Ulster to be the away team semi-final sacrificial lambs at the RDS and Thomond Park.

The Scarlets themselves struggling in a tepid match to beat 21-16 a Newport Gwent Dragons team forgiven for having other more pressing things on their minds.  Such as their livelihoods, in case 25%+1 of club shareholders take leave of their senses and vote for group insolvency on 9 May and the end of Newport RFC altogether.  In that post-Newport RFC scenario, will the WRU seek to acquire Rodney Parade and the Dragons off the receiver?  Or to acquire the Dragons and relocate them elsewhere in Gwent?

There was certainly no wider regional comfort for the Cardiff Blues, despite their good win.  Gareth Anscombe showing his old Kiwi form for the Chiefs region in Super Rugby and for the Auckland province in the ITM Cup, but also reminding us of his being Welsh rugby’s only real strategic project player (albeit with a Welsh mother) on a dual central contract and the large number of players who have gone into exile.

And then that secondary school academy of Pontypridd RFC rugby, from Neil Jenkins to Paul John to Michael Owen, providing the stardust – Bryn Celynnog.  The timeless Jenkins old (Gethin) and the rising Jenkins new (Ellis), both alumni and both starring.  Both redirected to Cardiff heritage, either with the demise of the unaffordable fifth region in 2004 or under “the pathway”.  Cardiff born and bred players for the Blues, almost completely absent.  A win, but with (needlessly created) mercenaries from the valleys and from further afield.  No eastern Glamorgan representative region this.

Not much comfort even for the union, Alex Cuthbert back at his region.  Away from “Team Wales”, and now finding his feet again.  Used correctly, going hunting for the ball off inside shoulders.  Nicely rebuilding his shattered confidence far away from the brutal Test arena, as so many have been clamouring for since early 2015.

If the Judgement Day crowd was 8,000 down from last year, the Cup Finals Day crowd on the Sunday was significantly up this year at over 9,000.  A former IRB World player of the year, old “twinkle toes” Shane Williams himself, on the left wing for Amman Utd RFC as they beat Caerphilly RFC (soon to host the Dragons v Blues region match) 43-31 in the entertaining WRU Bowl final.  Penallta RFC, the perennial bridesmaids, playing poorer this year but finally and deservedly laying their hands on the WRU Plate with a 16-16 draw.  Few outside of Ystylafera RFC begrudging them that try count title.

And a WRU Cup final truly to pour fire on the regional failure.  Pontypridd RFC v RGC, of all the finalists there could possibly have been.  One team that primarily highlights the failure of regionalism in one region, the other that highlights the failure of the wider 2003 regional business model.  The required North/South/East/West perverted into West (West)/West (East)/Cardiff RFC/”mish mash” at Newport RFC.  Only in Wales .

A 15-11 win for RGC, but Ponty defying pre-match fears of a drubbing with such a crippling list of absent players (including 5 back row players, not just the high profile Ceri Sweeney and Dafydd Lockyer as their 10/12 axis) to push RGC all the way.  Kieron Assiratti on the bench, one of a number of regional academy players who should never have been forcibly re-allocated to Cardiff RFC this season.  Ponty playing with pride, passion, and dogged determination, characteristics not always universally seen in the tier above them.  But playing against another good 10/12 axis, that was present for RGC, in Jacob Botica and Tiaan Loots.

And of course, Rygbi Gogledd Cymru.  Or Rhanbarth Gogledd Cymru, as S4C have now more accurately started to sometimes refer to them.

Only the most seriously myopic still believing that an entire North Wales region playing against 15 South Wales clubs in a Saturday afternoon club competition, a slot during their home games that places it in direct commercial competition with all the other North Wales rugby clubs, is the logical structural, player development and commercial conclusion for the North Wales rugby region project headquartered at Colwyn Bay.

The Welsh U20s evening matches at Colwyn Way are commercially screaming otherwise, in the direction of Martyn Phillips and also in the direction of Martin Anayi at the Pro12.

If we have a 4 professional regions model, or even a 3 regions model, one has to be in North Wales.  Not one either side of the River Loughor, competing for many of the same retail and particularly corporate customers.

That is basic consumer demand, whatever the player development.  A regional model of 2 teams in the West region, 15 miles of countryside apart, and 0 team for the North region is not a model that will ever be financially sustainable and especially when the sleeping, or rather heavily snoring, giants of the South and of the East finally wake up and finally get their regional acts together.

The commercial reason why the Pacific Islands of Samoa, Fiji and Tonga are not drowning in Super Rugby franchises.  The reason they do not have one Super Rugby franchise between them.  Player development, yes.  Commercial viability, no.

Oh, indeed, Spring is very much the time of year when harsh business reality catches up with the regions and the dogmatic ideological illusion of a nominal independence, the spin doctors sent into overdrive with the messages for the Welsh rugby media.

The current 2016-17 season is expected by seasoned observers to be financially bad, even if it is the last season of a WRU loan inflow to the regions before the repayments reverse from 2017-18.  Plenty thought this would be the case, even in 2014.  Few, other than me, were expecting the financial results to be quite so dire for 2015-16 (only the second season of the new Rugby Services Agreement).  The Ospreys are alone in not yet filing their financial accounts, but it has been unrelentingly grim elsewhere.

A profit of £177,094 in 2014-15 was converted by the Newport RFC/Newport Gwent Dragons consolidated group into a £754,840 loss in 2015-16.  If only there could be a constant, not a one-off, annual WRU payment/gift of £500,000 and an annual NATO conference in Newport.  Sadly that was the relatively good financial news.  The Scarlets slid to a £1,502,290 loss and the Blues plummeted to a £1,490,026 loss, as they each tried with varying degrees of success to have competitive rugby teams at Pro12 level.

Two regions at a £1.5 million structural deficit, before the loan drawdown inflow is reversed and the loan repayment outflow begins.

All the regions have to repay their £325,000 (2014) loans to the union this 1 September, followed by another £325,000 (2015) on 1 September 2018 and the final £250,000 (2016) on 1 September 2019, yet none seem to have the internal wherewithal to do so.  Nobody seems to have the slightest idea how the Scarlets will ever be able to repay £2.6 million to the UK taxpayer in 2023. Least of all the Scarlets themselves.

And to cap it all, the generous 3-year BT Sport sponsorship of the regions from 2014, what some of my Irish friends mischievously call the “Judas Iscariot 30 pieces of silver” sponsorship, will come to an end this summer.  If it is renewed at all by BT Sport, it will no doubt be on lesser terms.  ERC are no more, the arrival of the EPCR successor signalling the kicking of any British + Irish league into the very long grass.

In an era where rugby’s European Champions Cup has only found two (one of which was the inherited Heineken from ERC) of the required five title sponsors in three years, and the WRU Cups and the WRU national leagues have no title sponsor at all, it is very much a rugby sponsor’s commercial market.  The BT Sport new entrant “money pit” has disguised the harsher wider commercial reality.

Newport RFC will either sell the Newport Gwent Dragons and Rodney Parade to the union or the group will collapse into insolvency to repay the various external/internal secured and other unsecured creditors, not because of their relative financial losses (half of those of the Blues and Scarlets) or the level of their historic debt but, because they have lost the ability to find alternative funders for new losses following the imminent professional game retirement of Martyn Hazell and Tony Brown.

Regional debt secured against club assets, to be written off if the region itself is preserved.  The Bisley Stand built for the continuance of the professional game, more a will bequest by Tony Brown and Martyn Hazell made early during their lifetimes rather than £4.4 million thrown away generally on rugby.  No clean break in Newport in 2003 between the professional region of Gwent and the semi-professional club of Newport RFC.  Cash-flow is their crisis, and it will kill them next month but for a union bailout and full union takeover on 1 July.

Oh to currently be Saracens, where £48 million of debt at over three times annual turnover is nothing to the major funders of that plaything such as Nigel Wray and South African billionaire Johann Rupert.  Better still for World Rugby to belatedly introduce Financial Fair Play rules globally to improve the health of the sport, to “cap” non-Test player wages as a percentage of underlying business turnover (similar to even UEFA in football have done in recent years).  No more of directors effectively paying player wages from their personal wealth, with safeguards against funding directors using their other companies to achieve the same end through “generous” above market value sponsorship deals and hires of corporate boxes etc.

The financial performances in Wales may be declining, but at least the ability to bury bad news is improving.  The Scarlets accounts filing buried in the media coverage at the end of the Six Nations.  The Blues would no doubt have done something similar, but for the need to publicly increase the pressure on the Cardiff Athletic Club to agree a long-lease with redevelopment rights and the need for the organisation to issue yet another funding SOS through the media.  You reap what you sow.  How many thousands of season ticket holders have the Blues got north of Tongwynlais and Talbot Green?

The recently published dismal accounts were addressed in an interview by WalesOnline business editor Sion Barry of Blues funding director Martyn Ryan (link), an apt category of interviewee given that another £250,000 shares have been issued by and another £1.5 million “loaned” to the business by funding directors during the course of the year.  The latest suggested “answer” is apparently a model of two “super” regions, based in Cardiff and Swansea.

Past history would tell us, rather than East and West, one of these “super” regions would just end-up as a Cardiff RFC heritage “super super” club, the governance at the Arms Park already so poor and so archaic that the region and the historic club have never been separated into separate corporate entities, complete with residual club heritage name and colours obligations for the post-2004 eastern Glamorgan region.

Diolch, ond dim diolch.  Thanks, but no thanks.

The businessmen amateurs playing at professional rugby administrators at the Blues have repeatedly demonstrated their complete inability to successfully operate along rugby region lines.  The support levels north of any line drawn across eastern Glamorgan between Talbot Green and Tongwynlais are simply unacceptable. They have alienated a rugby hotbed, and these are the inevitable financial consequences.  Leinster haven’t alienated nearly everybody outside of sections within Dublin, with the inevitable commercial benefit.  Broadcasters and commercial sponsors notice the difference between Leinster engagement and eastern Glamorgan apathy and hostility.

It’s not just their own money that they are wasting with this “super” club ideological dogma, for broadcaster, commercial sponsor and union member club money is also committed to this failing enterprise.  Strategically they never seem to look beyond the next sponsorship deal, and tactically they never seem to progress beyond the next overseas vanity player signing.  The Blues are simply where the rugby talent of the Rhondda, Cynon, Dare, Taff, Ely, Taff Bargoed and other valleys are compulsorily sent under “the pathway” to fail to reach their professional rugby potential.

However you wish to look at it, across the board, we are currently living within both a failed and an archaic business model.  Little surprise that union Chairman Gareth Davies and Chief Executive Martyn Phillips were in New Zealand last summer analysing their more mature and more successful regional rugby business model.  To closely witness and study the interface between the union centre, the union devolved and the devolved private investors (link).  Alignment, hooked up strategic thinking and planning and, of course, Super Rugby dominance underpinning phenomenal All Blacks dominance.

The post-1995 business model for non-Test professional rugby in Wales has ultimately never remotely come to terms with the three fundamental pillars of the rugby landscape; a low overall fan base relative to other more populous countries, a high number of rugby fans relative to the overall population, and the historical diversity/tribalism of communities in relation to rugby affinities when seeking to resource concentrate into a handful of teams.  You might easily add a fourth pillar, socio-economic factors requiring more fans in total to attend to offset lower ticket prices achievable in Wales.

Until we have a structural business model that recognises and accepts these pillars and is built to accommodate them, our professional rugby game will simply continue to hopelessly flounder as it has done since 1995.  We tried an unsuited professional club meritocracy without resource concentration.  It was a fiasco until 2003.  We have tried an unsuited non-meritocratic “super” club perverted model of unrepresentative regionalism with resource concentration.  It has also been a fiasco, since 2003.

There has simply been no natural structural alignment anywhere since 2003.  Not between the union centre and the regions devolved, not between the union directors/executives and the region private investors, not between the “Team Wales” coaching staff and the regional coaching staff, not between the regions and their feeder semi-pro clubs, not between the coastal cities and the valleys, not between South Wales and North Wales. Not anywhere.  There is just a disjointed mess, copied by no other rugby nation on this planet and for very good reasons.

“You can’t buck the market”, as Margaret Thatcher once put it, whilst her Welsh adherents have been dreaming of an independent “free market” Welsh “super” club paradise.  Market forces have repeatedly said “no”.  With no broadcaster “money pit” and with increased union investment required, we self-evidently have the wrong business model to achieve the urgently required higher investment and budgets.

Provincial or regional rugby was the requirement, impartial club-neutral and community-neutral representative rugby above the semi-professional historic club tribalism.  Yes an only team for some fans and especially for some millennials but also another team, between club and/or semi-pro club and country, for many others.  Not to just get the % per head of population above Ireland, where rugby is in most parts a minority sport, but right up to where it needs to be, and nearer to where it once was, if we are to make our business model viable and sustainably so.

The requisite template for a successful business model with rugby as a national strategic project was there from day one in August 1995, a product actually attractive to controlled private investment, to balance risk management, identities, affinities, geography, commercial centres, population spread, broadcaster requirements, commercial sponsor requirements, central/devolved roles and accountability.

North/South/East/West provinces or regions for all stakeholders, a completely new impartial tier above the so-called “1st class” clubs of the historic non-professional club game.  Freeing that club tier to preserve all the old club tribalism, a feeder aid to pro rugby rather than a commercial competitor.  And these provinces or regions would be complete with their own pathway “A” teams, and feeding directly into a Welsh “A” team.

All this underpinned by universal central professional player contracting out of central competition platform income and WRU central investment, with regulated localised private investment, entrenched by devolved provincial or regional rugby boards.  Thus enabling a higher calibre streamlined smaller union main board to proactively focus upon the strategic issues, including every emerging external risk and/or threat, delegating the provincial or regional boards and their club elected representatives to do most of the local spadework nearer the community level.

The elected club representatives elected directly to a provincial or regional board, and possibly the same elected representatives going directly to a limited role union council at the national level acting as the ultimate constitutional custodian of the member clubs.  But not elected directly to the main board.  The provincial or regional boards and the council should nominate their members to the main board, based on aptitude for that specific role from amongst their elected selves or through appointing/nominating suitably qualified external candidates.

It is simple, streamlined, efficient and logical, and all very much in too great a quantity for chaotic Welsh rugby to readily adopt.

So we will spend the next few seasons in a state of transition, interrupted by ever growing crises.  The North will remain “the elephant in the room”, as the RGC project will seek to increasingly dominate the old 1^st class South Walian clubs at semi-pro level.  The union will restructure the East, not least to show they can run a province or region better than amateur businessmen lumbered with partisan club governance and emotion.

The South will probably find itself permanently entering union hands, whether or not the Arms Park redevelopment “white elephant” is given the green light.  And we will have to see how the duplication in the West plays out, or rather at how we will arrive at the commercial crisis point and how the union resolves it without alienating one or both fan bases each side of the river.

And then, in 2020, with the ending of the (obsolete upon 2014 drafting) Rugby Services Agreement, the union must be in a position to put in place a radically new and modern business model that will compete with the union provinces over the sea to the west and with the BT Sport-fuelled club independents across Offa’s Dyke to the east.

One that recognises the need for the non-Test tier of the professional game to engage with the disillusioned heartlands of Welsh rugby, to entice broadcasters and to provide commercial sponsors with something worth aligning their precious business brands with.  That will bring risk prudent added value private investor consortiums into a business model that meets “Team Wales” universal central player contracting requirements, just as in New Zealand, to protect the Test rugby “financial engine”.

If you look closely enough, the broad restructuring hints about the future are everywhere.  We have an interesting three years ahead, as the old order will give way to the new order.