What would the takeover of the Rugby Premiership mean for clubs?

PRL is owned by 13 member clubs: the 12 sides in the Premiership and London Irish. The deal is regarded as the biggest change in club rugby since it went professional 23 years ago, and comparisons have been made to the formation of football’s Premier League in 1992.

The pros – improved financial future for clubs

At present, Premiership rugby is not a profitable business – collectively the clubs lose about £30 million a year. And there have been warnings from the RFU that the financial situation may get even bleaker with revenues from the RFU forecast to decline. The Professional Game Agreement (PGA), an 8-year agreement signed between the PRL and RFU in 2016, underpins the England team's access to Premiership players in return for payment. While this amount was fixed at £112 million for the first four years, from 2020 to 2024 the amount received by clubs is linked to financial performance at the RFU. And it’s the financial performance of the RFU which is the cause for concern as it seeks to reduce costs to offset falling profits. Therefore hard to see clubs rejecting a deal which would allow them to pay off debts and provide opportunities for investment in facilities.

CVC reportedly sees huge scope for commercialisation, especially in terms of the sales of TV rights, which would boost income in the future. In the past, increases in revenue have typically been invested into player wages, as has been the case in Premier League football. However, the presence of a salary cap, which isn’t expected to dramatically increase, in the Rugby Premiership instils a degree of financial discipline, which is essential if clubs are to become profitable businesses.

The cons – relationship with the RFU and the future after CVC

As the PRL is owned by the clubs, not the RFU, the RFU has no right of veto to ownership of the league. And the presence of a new controlling stakeholder could destabilise what has historically been a fractious relationship between the Premiership and its governing body.

The main cause of friction between the clubs and the RFU is access to players, as the RFU requires players to be released for international commitments; both matches and training camps. Unlike football, Premiership rugby continues uninterrupted through international windows, and so clubs lose their big-name international players. This causes a conflict as the RFU request players availability, whilst the clubs want their international stars to be playing as much domestic rugby as much as possible in order to attract bigger crowds and increase the chances of success on the field. It should be expected that if it is investing significantly, and the aim of its investment is to make a profitable return, CVC will want to drive a harder bargain with the RFU over the cost of player release for international windows. This would be a win-win for the clubs, achieving either more money from the RFU or better player availability.

As it did with Formula 1, CVC will be looking to make a profit on its investment. It will therefore likely be seeking to significantly increase the value of the Premiership and then sell it. While the initial investment windfall and the increased value are hugely positive for the clubs, the horizon post-sale is uncertain in terms of both ownership of the league and long-term financial security.

What can clubs do themselves?

During the negotiations, and in the early stages post-agreement, it is important that clubs make sure they get their houses in order. They should make sure that they have suitable corporate and governance structures, as well as processes in place to enable them to run sustainably and remain financially viable for the foreseeable future. A key part of this is having detailed financial plans, which adequately cater for different scenarios. Having robust financial plans allows clubs to react to change and enables them to generate strong financial performance by responding to the level of success on the field of play. 

How can we help

Moore Stephens offers a wide range of services to sports clubs assisting them to maximise their income, increase efficiency, manage risks and secure a sustainable future.

If you require any advice on the matters noted above, please contact David Rogers.

Leave a comment

 Security code