A model for stronger and more sustainable rugby

First I’d like to congratulate Raelene Castle – she’s on the right path towards building rugby from the bottom up in Australia.

The testament to her success is the results of the under-18 and under-20 rugby squad’s performance. A great start.

As an Australian I have this sinking feeling every time I see the best men’s rugby talent heading overseas to make their rugby fortunes. I feel rugby in Australia is being weakened every time this happens given we have such a small playing pool compared to other nations like England, New Zealand South Africa and just about everyone else.

It is a fact Australian rugby will never have as much money as overseas clubs and competitions and will continue to have our national talent picked off by cashed-up offshore scouts. This is currently a downwards spiral for Australian rugby.

One must look at ways of turning a negative into a positive, so I’m going to offer up some suggestions.

(Cameron Spencer/Getty Images)

Australia needs to expand its men’s professional rugby playing pool. A structure that will have many hundreds of contracted players, an expending talent pool that is eventually self-funding, with the cost of player payments to Rugby Australia being eliminated. The sweet spot for contracted players is 750 and rising to 1000 over time.

Australia needs more money for rugby. As part of these ideas I have included a model where RA can increase its annual income by being compensated when contracted rugby players take up more lucrative overseas contracts.

The following rounded figures detail select parts of Rugby Australia’s finances, as published in its 2018–19 annual report.

Income
Total income: $118 million

Expenses
Player payments: $16.8 million
Super Rugby teams: $5.8 million
Super Rugby funding: $25 million
Wallabies team costs: $10 million
Total expenses: $57.6 million

I have not included the profit line as RA runs almost at zero profit, although in the year just gone they made a profit to offset earlier losses.

The Super Rugby and Wallabies expense of $57.6 million per annum is currently a necessary drain on rugby in Australia. This is due to the current top-down, top-heavy model and will eventually result in the decline of Australian men’s professional rugby.

I would like to see a new model introduced to distribute $50 million of the RA income differently.

(AAP Image/Craig Golding)

Phase out $1 million-plus single-player contract payments
No more individual player payments to keep a player participating in Australian Super Rugby and the Wallabies. This is a model that is going to destroy men’s rugby in Australia.

I think Australia should stay in SANSAAR for the money but no longer pay any single player any more than $150,000 per annum. If a Super Rugby club wants to pay a single player more than that, it is up to that club to find the money. No more subsidies of $25 million to Super Rugby clubs. Those clubs can draw on as many of the pool of RA-contracted players as they like who are being paid up to $150,000 per annum. Australian Super Rugby franchises can manage their own incomes and make their own arrangements. All the players are already paid for and if they want to pay extra, that is a matter for the franchise.

With regard to the Wallabies, who will receive match day payments, the selection pool will include players playing both domestically and internationally. The shrinking Super Rugby model will no longer be the sole feeder to Australia’s national team.

A single multimillion-dollar contract comes at the opportunity cost of not signing possibly multiple – 20 to 25 – young men’s rugby players on $40,000 to $50,000 a year.

The new model is Australian rugby needs many contracted rugby players as it can afford and to add value to that pool of players. It is strength in numbers.

(Daniel Pockett/Getty Images)

Standard ten-year $1 million men’s contracts
RA has had a policy of signing players to only short one and two-year contracts. This is a mistake and a mismatch when a ten-year plan is required.

RA have started to sign young players on four-year contracts, and that’s a great start, but I think the governing body should make the standard contracts term ten years and $1 million in total. The starting annual payments for young selected players with exceptional talent would start at say $40,000 to $50,000 per annum and step up to $150,000 per annum as the player develops.

These centralised ten-year $1 million contracts should be phased in and offered to 16, 17, 18, 19 and 20-year-old rugby players who have been selected by RA. These young players and their families would easily take up the opportunity of a $1 million contract over ten years just to play rugby. This would provide them tenure and would also attract the best rugby talent at a young age from all over the region.

A main reason for ten years contracts is to tie the players to men’s rugby in Australia so long-term planning can be established with a standard ten-year view.

3. Player contracts – the fine print
I think any player signing a ten year contract with a face value of $1 million should be able to walk away at any time without penalty or any other obligation if they get injured or no longer wish to play a professional sport like rugby. In addition a player has no obligation to RA at the expiry date of the ten-year contract if they choose to stay and play professional rugby in Australia.

Furthermore any player who gets seriously injured while playing and can’t complete the contract should continue to receive the rugby payments until the end of their contract.

The other obligation of RA is to invest in talented young rugby players, providing them with an income to concentrate on becoming a professional rugby player at a very young age. Rugby Australia would provide professional coaching, mentoring, diet and training supervision, skills training and all things that one would expect from a sports school or academy, together with competitions for those boys and men to provide a clear pathway as a professional rugby player.

The goal is to turn this raw talent into a more refined product so that each of the contracted players becomes a desirable rugby product and will be noticed.

Rugby Australia’s goal is to unearth as much talent as possible, which is done by creating this much bigger pool of professional players. One would expect to see a lift in standards in the under-18s and under-20s and in club rugby throughout the country. One would expect this to have a positive impact on the more senior levels over time.

In return for all the above player benefits to the ten-year, $1 million contracts there would be a requirement whereby the contracted players would have to pay back the funds invested in them plus pay any unexpired term of the contract by RA should they wish to leave Australian rugby to take up a more lucrative offer elsewhere.

The reason for the repayment of this obligation is that these funds are a loan to assist the player to make themselves a better rugby player.
Of course these contractual obligations become an asset of RA.

RA would also allow the player to amortise this obligation within their new more lucrative rugby contract over, say, a five-year period at a value of $200,000 per annum, a relatively minor amount within the high-paying, low-taxing contracts being offered elsewhere.

The player and his manager will now be required to negotiate this obligation as part of their new offer to leave Australian rugby.

(David Ramos – World Rugby/World Rugby via Getty Images)

A scalable model
The intention of this new model is to create a large conveyor belt of, say, 750 contracted professional rugby players in Australia at any one time, with the number scaling over time to 1000 players.

Australia can now place itself in the position of not being concerned and feeling it is being disadvantaged when its rugby talent is enticed by overseas rugby talent scouts. RA knows it is going to be compensated for developing that talent, and by the player leaving they create room for another signing, allowing for the talent pool to become deeper.

One could argue that Australia wants to encourage the players to take up more lucrative offers. A possible key performance indicator for RA is that it wants a large portion – say 100 – of the possible contracted players to want to be released from their contracts every year, principally those who are not injured wanting to continue their rugby career elsewhere. This will improve their skills and experience and deepen the pool of players who could possibly be available for selection to play for the Wallabies.

I think Australia should also be seeking as a sweet spot to have up to 600 players participating in overseas rugby clubs and competitions and eligible to play for the Wallabies. This number will eventually flood the overseas competitions and probably cause them to change their eligibility rules for overseas players in some countries when they realise their feeders to their national teams is being compromised. That would be a great outcome as it is pushing back on their policy of the unfettered raiding of Australian rugby.

One might predict it could compel more Australian players to stay at home and create the need for more Australia professional team competitions. One might also predict that under-18s, under-20s and club rugby will become rugby competitions full of professional rugby players.

In the interim every time a player quits his Rugby Australia contract he creates room for new young players to be signed under the new ten-year, $1 million contracts.

That is an increase in asset and income for RA by the player signing and the playing leaving respectively.

This structure over time has the potential to earn RA an additional $50 million to $100 million per annum from players taking up more lucrative overseas opportunities.

Multiply that over ten years and the numbers will empower rugby in Australia.

The contracts, a new asset class, will have a positive effect on Rugby Australia’s accounts, adding hundreds of millions of dollars to the balance sheet. This is probably the most compelling feature of the proposed ten-year $1 million contracts.

My guess is this new contract model would be self-funding within three to five years or even earlier. This model builds on itself, and the more money and players that circulate through it compounds on income, making it easily scalable.

Other changes
I think Australia should also seek amendment to World Rugby’s regulation 8 players international eligibility to international representation at under-18 and under-20 level.

As stated above, the Wallabies selectors should immediately be unrestricted to select any player who qualifies under regulation 8. The long-term result is Australia should no longer have any difficulty in find depth in any position for the Wallabies.

I also think Australia should still participate in the shrinking Super Rugby competition just for the money. The long-term view should be for the creation of a new time zone friendly Asia Pacific competition – including Fiji, Samoa and Tonga – funded by Asian TV networks, further developing the concept by mining billionaire Andrew Forrest with the full backing of all of Australian rugby.

In the long term this competition will outperform Super Rugby in terms of strength of competition, audience size and income produced for Australian rugby.

Conclusion
It’s time for Australian rugby to change its view on how it goes about its business. Rugby became professional almost 25 years ago, but it’s still being run as though it’s an amateur sport rather than having players bound by mutually beneficial commercial contracts.

It’s time for RA to leverage rugby’s explosion of international popularity, which is big enough to dwarf the domestic rugby league and AFL competitions.

The opportunity and the money is there for the taking – it just requires thinking outside the circle, some vision and some fresh thinking.