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Are third-party player payments only for the rich clubs?

23rd October, 2014
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Sonny Bill Williams and the Roosters logo (Image: NZ Warriors)
Roar Guru
23rd October, 2014
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1740 Reads

The word ‘unlimited’ is attached to the NRL third party agreements (TPAs), and unless your club is located near big corporates who find rugby league players marketable then you are offside before kick off in salary negotiations.

The NRL’s major financial partner is Channel Nine and they have taken advantage of a major loophole in the salary cap rules.

In 2006, the NRL introduced an allowance for players who can enter into TPAs with club sponsors; they called it marquee player agreements (MPAs). This season, the top 25 players were allowed to earn up to a maximum $600,000 in MPAs.

Most clubs can handle MPAs on top of the 2015 $6.55 million salary cap. But there are also TPAs with ‘unlimited’ dollars attached.

The broadcasters have been suffering with substandard performances in recent years from the high-profile Brisbane Broncos. It is crucial for the ratings that the Broncos are successful and that they make the playoffs. 10s of millions go down the drain in lost advertising revenue if the Broncos are not major contenders, which makes justifying TPAs easy.

Something had to be done and it was no coincidence that champion coach Wayne Bennett is back as head coach and it is also no surprise that the player list is bulging and boasts at least seven players capable of playing fullback in first grade side.

But that’s not enough – exciting prop James Gavet has just been signed on a two-year deal after he secured a release from the Wests Tigers.

How can this be?

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The NRL have designed a TPA strategy that allows big clubs in a big city to have a huge edge over other clubs. The Broncos and the Roosters are only two clubs who have been able to exploit this.

This is how it can be done.

A champion, say Sonny Bill Williams as an example (these figures are for argument’s sake), is signed for 500k when his real value is $1 million. He is paid the remainder by a third party, agreeing to an exclusive interview or two. He may even have to co-host the Footy Show.

A club sponsor or official cannot enter into a TPA with a player, but with so many sub-companies and affiliates associated with Channel Nine and Foxtel, it would not be difficult to find a sponsorship conduit. Channel Nine Queensland is a sponsor of the Broncos and because of their immense following they are granted most Friday night games.

The parent company of the Brisbane Broncos is Nationwide News Pty Ltd, a subsidiary of News Limited, which as of June 30 2007 owns 68.87 per cent of Broncos shares. News also owns 50 per cent of Foxtel shares. It was the News Corp boss Lachlan Murdoch who phoned Wayne Bennett in July to convince him to come back to the Broncos. His return was officially announced the following day.

When Channel Nine and Foxtel fork out over $1 billion in exclusive TV rights, they clearly want the high-rating NRL teams playing in prime time, but importantly they have to be winners and they have demonstrated that they are prepared to be proactive to underwrite their investment in the form of TPAs.

They want the best players and the best coaches who attract the biggest TV audience.

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This is what the NRL say: “All third party agreements must be registered and approved beforehand. This is to ensure that they do not become a way for clubs or players to use sponsors or third parties to undermine the salary cap and also for the game to ensure the protection of club and game intellectual property. There are provisions for club sponsors to enter into agreements with elite players under the Marquee Player Agreement allowance.”

They say that this is their plan to ensure that the salary cap is “not undermined”, but that is exactly what is being done.

The clubs that are in the ideal position to exploit these naive rules are the big clubs in the big NRL cities: the Roosters, Souths, Parramatta, the Bulldogs and Brisbane.

If you are wondering why the Parramatta Eels have not been more successful in recent years it is not because they have not tried to exploit the cap, but because of a divisive board, poor recruitment and coaching.

The clubs who are at are clear disadvantage are the New Zealand Warriors, who are in a rugby union-centric country, and the Melbourne Storm, who could never attract big corporate fees for their high-profile players in an AFL city. The Cowboys, although in a NRL heartland in Townsville, do not have the number of corporates of a major capital city.

The marquee payments and the TPAs needs to be re-worked so that they represent a level playing field for each club. The ability to attract corporate sponsors is crucial in this process and each club needs to be rated on their demographic and geographic capabilities and the likelihood of aligning with a TPA.

Compensation should be available to the clubs who are disadvantaged if the NRL are serious. There is overwhelming testimony that many clubs are giving away a $1m head start in the race to win the premiership.

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The NRL have said income that a player earns from parties not related to his club is generally not included in the salary cap, however, the details of the agreement must be advised to the club by the player.

Third-party agreements are payments made by companies directly to players. There is no restriction on the amount a player can earn through TPAs where he is being paid for his own intellectual property, without the need to employ club logos or names and where the company involved is neither a club sponsor nor are they acting on behalf of a club to secure the player’s services.

The NRL say: “an example of this is a player promoting a brand or product, for example, Billy Slater and Australian Bananas”. The only problem is that Bananas do not grow in Melbourne.

Many players have TPAs that are outside the salary cap. Individual players registered third party agreements in 2013 was in excess of $10 million.

I wonder what percentage of that $10 million was negotiated directly with the players without a hand pass from the club? The answer would be somewhere between zero and not much, which underlines the naivety of the TPAs and its authors.

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