This is the latest in what is unexpectedly becoming a series of slightly mad ideas about rugby league governance and reducing inequality among NRL clubs.
In a former life, I spent several years working in the field of federal financial relations. In essence, begging the federal government for money.
An important part of Australia’s federation is the distribution of GST revenue between our eight states and territories, known by wonks as horizontal fiscal equalisation.
It’s most recently been in the news through Western Australia’s successful effort to reduce the amount of money generated by hard-working sand gropers that’s sent east.
Anybody who tells you they understand how the system works is probably lying. I like to think Marvin, Douglas Adams’ famously paranoid android, is hooked-up to a computer bank in the Commonwealth Grants Commission figuring it all out with a mere fraction of his mental faculties.
Here’s a very rough overview. The more populous and prosperous jurisdictions have a portion of the GST revenue they generate transferred to less populous and prosperous jurisdictions to roughly equalise the quality of services provided across the board.
It works this way because of the multiplying effect of bigger economies and because there are unavoidable structural factors, population dispersion and remoteness most notably.
Queensland is a case in point. The distance between Brisbane and Boigu, the northernmost inhabited island in the Torres Strait, is about 500 kilometres farther than the distance between Brisbane and Hobart.
The value of a dollar in Brisbane is not the same at Boigu.
Critics of the system argue it rewards inefficiency and inertia. This argument is not entirely without merit. But an often-ignored aspect of the system is that there are incentives for governments to remove inefficiencies. When a problem appears intractable, the federal government will provide targeted support to resolve it.
Rugby league has no remote outposts, though some clubs do appear to reside on the edge of reality. It does have plenty of inefficiency, inertia and structural problems.
While every club has the same salary cap – $9.9 million in 2021 – it’s clear a dollar is not of the same value to all of them.
(Photo by Chris Hyde/Getty Images)
Canterbury and Wests have just signed players from top-six clubs on big money. They’ve seemingly done well, but a lot more needs to be done in both cases.
Melbourne and Easts have both lost multiple representative players.
Melbourne’s signed Canterbury’s unwanted fullback, Brisbane’s underperforming winger and a rugby sevens player.
Easts have signed Paul Momirovski and a couple of bench players.
There’s a good chance clubs like Canterbury or Wests will pay big money for Nick Meaney and Renouf Atoni a couple of years from now in a bid to usurp Melbourne and Easts.
I’m not about to propose robbing Melbourne to pay the Wests Tigers. Neither deserves that. Nor will I suggest that we should divert more money from the grassroots to pay NRL players.
But I’m worried the disparities that have emerged between NRL clubs despite the salary cap are in danger of becoming permanent fixtures.
A limited internal draft might help. The much-hyped concept of ‘culture’ is important, but it’s an organic thing. You can’t force a random group of people into getting along. Good coaching is a must. But you don’t know who’s going to make a good coach until they are one.
Struggling clubs are going to have to work it out themselves, which is not to say they can’t be nudged in the right direction.
Which brings us back to incentives and targeted support.
Many NRL clubs are obviously not run well, not penalised for inefficiency or inertia and, beyond results on the field, not incentivised to run better.
Some of them are two clubs attempting to run as one. Some are riven with factional warfare that makes major political parties look harmonious. Some were well run but have lapsed into complacency.
There could be better standards. There could be incentives and nudges. It can be targeted support without being one size fits all.
This is the problem definition. Part 2 will look at what could be done. It’s about the composition of boards and the quality of decision-making, reporting, evaluation and recruitment practices.
It’s not as boring as it sounds, I promise.
Redcap
Roar Guru
Hi mushi, Wow, you've written half a thesis before I've even finished the future article in question. I won't be proposing an intervention - as I alluded to in the article above it would be a conflict of interest. I agree that it's operational, it's also strategic. I'm not sure I understand the point you're making in paragraph three.
Redcap
Roar Guru
No issue with any of this, mushi. TBH, I know next to nothing about the NBA or NFL, but doesn't the NBA have a salary cap and a draft. The A-League is a little bit skewed because there's been so much instability; clubs failing, others being admitted, but there's a pretty decent spread of champions since its inception. The methodology that underpinned that Sydney FC thing was laughable from a company claiming to trade on insight. I'm not planning to go anywhere near the cap - I'll be looking at other revenue sources and maybe a bit of gaming the system...
Redcap
Roar Guru
Hi mushi, As you say, it was a rhetorical device I used to frame an issue. I also said I'm not proposing to rob Melbourne to pay the Wests Tigers. The area where it's relevant is in terms of incentives and nudges. Governments do this all the time in cases of market failure in the hope of avoiding the need to intervene directly. The NRL could do a little more to encourage clubs to innovate and address the competitive gaps that seem to be opening up. That's what the next piece is going to be about.
mushi
Roar Guru
The solution you’re looking for here seems a structural one. But the competitive differences of the various entities are not structural. It’s operational, they’ve just got poor management at clubs. They invest in players with really terrible risk reward analysis. You had the money ball article – the issue there was it wasn’t a sustainable competitive advantage. The inertia and ineffectiveness arguments are critical here but I question why you dismiss that the on field success, the entire reason for the professional clubs, is not enough of an advantage when seemingly the yard stick by which you’re measuring success is on field. It’s circular. Why intervene at all if they aren’t motivated by winning – I think you’ll find they’re all motivated just some are ineffective. Given ultimate selection is often the fans, the fans of that club have the power to change it. I am even more uneasy at the solution being flexible, seemingly that would then have the NRL – an entity which took 20 years to figure out how the cap penalties and makes sudden changes mid season, to be empowered to intervene in the governance of clubs to ensure better on field results. Given on field results are a zero sum game that means they’d be deliberately intervening to the detriment of other clubs. That’s just a massive conflict of interest and generally it’s seen as a handbrake to return on assets to have government dictate the strategy of induvial businesses. Also the governance mechanics would be interesting as the NRL clubs can effectively remove the ARLC chair and he would effectively be able to remove the club boards…
mushi
Roar Guru
Now the NRL does have a role to play in ensuring it remains a broad competition and not a concentrated one. Like market regulator given it's a closed oligopoly. Is the competition currently concentrated? Compare the distribution of success for the NRL era (I’ve used premierships and GF appearances) to other sports 24 premiership data points for a 16 team comp isn’t a lot and yet you’ve got the type of distribution I’d expect of 4 zeros and then three outliers with more than 2 (one of which had a structural advantage which the NRL has since admitted through a change in cap penalties) I’d think a game where the inputs don’t fundamentally change from year to year to have would have a far more skewed distribution than that (think about how many lebron teams have played NBA finals in that era, or the patriots in a 32 team comp...) . Heck when they had that “Sydney FC article” the biggest take away should be that the NRL doesn’t have the issue we're so desperate to solve when compared to the broader sports landscape. This is why I doubt you’ll see the NRL successfully defend the draft as it is incredibly easy for the player/s to produce data that shows that the competition is more even than many other successful competitions around the world. And definitely more broadly competitive than during its broader history. The cap, when properly enforced, does enough to broad based competition to act like quality regulation in encouraging broad competition and new entrants to “success”.
mushi
Roar Guru
But the difference being that the funding model you’re using to frame the discussion is servicing a social good. Government spending should aim to remedy structural inequality in these social goods, it’s the reason centralised spending exists. There shouldn’t be open competition for resources in this setting. This is where it is ill fitting to professional sport. It’s a competitive industry not layer of government. Competition in this industry isn’t a beneficial by-product for consumers it is the entire reason it exists. It’s even called a “competition”. The fundamental purpose of the two concepts are diametrically opposed.
Redcap
Roar Guru
Excellent question, mushi. My take is that equalisation in the context of federal finances or rugby league is something that can never be achieved - it's a constant effort to ensure inequality doesn't get out of control. It can never be attained. People who live in rural and remote areas do not enjoy the same opportunities or service quality as I do in a major city - we're just bringing them up to an acceptable standard, a standard where cities were at previously. In rugby league, when a club achieves some measure of parity with rivals, one will find something to tip the balance - star players, coaching and tactical innovation, new investment from outside, whatever. Equalisation is probably not the best word. The way it's used is a little fairytale politicians and officials tell themselves. I've never been to Boigu. I have been to some other islands in the straits, and I've made a few trips to PNG. The Local Council offices and the private houses in the straits are nicer, but not by much.
mushi
Roar Guru
A philosophical question... If we want to eradicate inequality then we clearly are aiming for equality. Then what is the point of the game. If each side is perfectly matched it will simply be luck or (some fans would argue it's the case now) refereeing decision that decide who wins games.
Redcap
Roar Guru
Hi Andy, As it happens, transparency is a word that appears in the next piece.
andyfnq
Roar Rookie
We can't allow us be satisfied with a funding model that depends on licenced clubs and poker machines. Surely there must be a better and more transparent way to run NRL clubs.
andyfnq
Roar Rookie
Looking forward to part 2. And I do realise there are no perfect solutions!
Albo
Roar Rookie
Had me worried there for a minute , Cam ! $850 k for Coates , is a figure I could never see coming from the Storm brainstrust?
Otsuble
Roar Rookie
Yep but apparently I wouldn’t know. Being on an organising committee and being intimately involved in the project counts for nothing apparently!
Don
Roar Rookie
I’d prefer to be a little kinder to the clubs and less so to the PVL fiefdom AKA the NRL. Those rule changes should not have happened during a live season. And then we had crackdowns on any high contact because…you know….kiddies won’t play, mums are scared, legal minefield and liability, player welfare… pretty well anything V’landys could spruik and get regurgitated by his media acolytes like Kent and Co. Forget that the actual notion was correct and necessary. It was the ham fisted way it was enacted and then managed. And low and behold, after a month and some push back, we see a relaxation in the enforcement.
Albo
Roar Rookie
Are we allowed into Perth / WA yet ? Apart from being 2 x time zones away from the rest us, and the significant costs associated with that for all NRL Clubs, they have shut out the eastern states for the past two years . There's the big problem for your "no brainer" solution.
Adam
Roar Guru
Oh if I was Darren I'd be keeping the job until they wheeled me out too
Nat
Roar Guru
He qualifies under the "stay with us for unders" program. Benefits include huge salary, flashy title, public profile and absolutely no decision making required.
Cam
Roar Rookie
Sorry I wasn't clear, that was a $1m two year deal. $500k per annum offered by the Broncs, $425k per year from the Storm.
Adam
Roar Guru
Been to a few AFL games in both Launceston and Hobart and can confirm that I wanted to tear my eyes out
Adam
Roar Guru
He's not lying. The game at North Hobart oval was not well ticketed, patrons were not scanned while going in and tickets didn't need to be purchased for kids. The numbers they provided were estimates only....