Regional Rugby Wales (RRW) is the body that represents the four professional regional rugby teams in Wales – Cardiff Blues, Newport Gwent Dragons, Ospreys and Scarlets – who all compete at the top tier of the club/provincial game in Europe; currently the RaboDirect PRO12, the LV Cup and the new European Rugby Champions Cup and European Challenge Cup.

The four Regions have a collective turnover approaching £30m per annum, with a direct economic contribution to Wales in excess of £50m per annum. They provide employment for almost 1,000 people in a combination of full-time, part-time and casual roles, including over 600 professional and semi-professional rugby players and more than 50 highly skilled coaching, conditioning and medical staff.

RRW presents the views and opinions of its member regions to governing bodies and tournament administrators, ensuring the views and concerns of the Regions are heard at the highest level, with a view to assisting the four achieve long-term sustainability on and of the field.

What’s your current position, having not signed an extension to the Participation Agreement on 31st December followed by the receipt of a new ‘service’ agreement from the WRU on 6th January?

The Regions continue to actively discuss each element of the detailed operational document proposed by the WRU. Now that both European Competition and the PRO12 league have been confirmed, all our efforts will now be concentrated on work with the WRU to ensure that we can reach an agreement that truly works in the interests of both parties to ensure a sustainable and competitive Professional game in Wales at both regional and international level.

The Regions welcome the new European platforms announced in March 2014 following their public support for the implementation of the Rugby Champions Cup in October 2013 – some five months previously. The new European platforms together with other competitions will provide an additional £12m in committed revenues to Welsh Rugby – the biggest increase of funding into the Welsh game in five years.

RRW and the Regions, through no choice of their own, had been forced to consider every alternative to secure a sustainable future for regional rugby in Wales; and have worked tirelessly to be able to plan their futures positively based on new options in the absence of any concrete proposals on income and distribution for Europe or the PRO12 league for many long months.

 

With no other choice, the Welsh Regions took the bold step to safeguard their future in the absence of any alternatives and worked hard to negotiate the biggest increase in funding for Welsh Rugby of the last five years – simply asking the WRU as the governing body to support them in this.

The Welsh Regions welcomed the announcement from European Professional Club Rugby (EPCR) confirming the commitment made by nine stakeholders into new European competitions for next season and beyond.

Naturally the Regions are both pleased and relieved that the European competition platform that we believed from the outset was the strongest and right direction for Welsh Rugby has finally been secured.

It was clear to the Regions in October of last year that the Rugby Champions Cup was the best way forward for Professional Rugby in Wales; and we fully supported the need for new European competitions which brought a number of significant advantages in terms of balancing governance, qualification and distribution of finances.

The new agreement will ultimately result in three strong European club rugby competitions with the principle of equal distribution by participating clubs and a real opportunity to drive revenues in our clubs from a strong broadcast platform

What is the cause of the current dispute between RRW and the Welsh Rugby Union (WRU)?

RRW and the four regions are concerned about the state of the game below international level and genuinely fear that unless immediate action is taken, then irreparable long-term damage will be caused, with a very real risk that top level professional regional rugby in Wales will disappear.

An independent report from PriceWaterhouseCoopers (PWC), jointly commissioned in 2012 by the WRU, confirmed that there was a funding shortfall in the regional game in Wales, and clearly stated that

“…the logical solution appears to be a closer and more collaborative approach between the Regions and the WRU to address the funding gap”

With this in mind, throughout 2012 and 2013, RRW has been lobbying the WRU for change, seeking a way forward for Welsh rugby in partnership that would not only address the significant funding gap but also address some of the external issues directly affecting their business activity, most urgently, the player drain which is seeing a growing number of Welsh players leaving to play in England and France where they can earn a much higher salary than in Wales.

The current Participation Agreement (PA), the legally binding contract between RRW and the WRU expires at the end of the current season. The PA governs the relationships between the Regions and the WRU and includes rules for the following: authority of WRU to act and roles of the Regions; international players’ release from clubs; regional funding support from WRU; WRU to have responsibility for all TV and competition negotiations on behalf of the Regions and distribution of those monies to the Regions; the proportion of Welsh qualified players in Regions’ squads.

RRW had an option to extend the agreement for another five years with a deadline to exercise of 31st December 2013. The current PA is not a 10-year agreement with a break clause as alluded to by the WRU in the media recently; It has always been a five-year agreement, as referenced by the WRU at the time it was signed, and to belatedly claim otherwise is disingenuous at best, deliberately misleading at worst.

The WRU’s position regarding the PA ahead of the 31st December deadline had been quite clear for some time: if the Regions didn’t extend it, then the PA would expire. The WRU publicly stated on numerous occasions that the Regions would effectively cease to exist in the eyes of the WRU and the idea of setting up ‘new teams’ to meet WRU commitments was suggested via media channels.

Over the previous 18 months, the WRU’s position had been one of intransigence. Despite RRW’s repeated requests to review the terms of the PA, the WRU refused to negotiate.  It was made abundantly clear to RRW that there would be no additional funding attached to the new PA, meaning that the regional organisations would be tied into a new five-year commitment that would see central funding in 2019 at the same level in real terms as it was 10 years earlier. This is notwithstanding the substantial and fundamental changes that have occurred in that period, most notably in the upward pressures on player salaries as demonstrated through the player drain from Wales.

We would ask the question if Warren Gatland the national coach has extended his contract on the same terms as he had in 2008?

Why was the PA offer unacceptable to RRW on 31st December 2013?

Prior to the announcement on the European competitions at the end of March 2014, the Regions could not sign a legally binding PA as the WRU were unable to tell us what we will be participating in or the distribution of revenue for a new look European competition or PRO12 league.

The English and French clubs formally notified ERC (the governing body of the Heineken Cup) more than 18 months ago that they were withdrawing from the competition. There are no firm proposals in place for its replacement, only a skeleton framework for a an inferior replacement competition with similar funding to previous years when TV revenues have increased massively for pro sport and rugby in particular.

Proposals were being put forward for an alternative competition with increased revenue for all participants, one that had the support of RRW and all the other independent clubs but had effectively been blocked by the WRU and the other host Unions – interestingly other than the RFU who were apparently supportive of the position taken by their member clubs as it would mean them losing control of the club/provincial/regional game. Is it right to block privately owned businesses from controlling their own destinies?

In addition to being unable to confirm the structure of their European competition, the WRU were unable to fully confirm the number of teams competing in the PRO12 between 14/15 and 18/19 as there was uncertainty around the ongoing participation of the two Italian clubs, the revenue from and distribution from the league in that period. There is currently still no sponsor confirmed for the PRO12 in 2014/15 (next season).

It is impossible for the Regions to commit to a rolling five-year plan when we did even know what would happen when the current PA expires at the end of the current season. This was despite the WRU knowing of the uncertainty around European competition for almost two years, and the PRO12 for one year.

Finally it has been resolved but at what cost?  What lessons must be learnt as we look forward?

The Regions had been put in a position where their entire business platform beyond the current season were completely unknown, with a combined revenue risk of £16m and no way to plan the next season.

The WRU were trying pressurising the four Regional Organisations into signing a five year-agreement immediately even when the Regions are unable to confirm any form of robust business plan and financial forecast beyond May. Committing to such an Agreement with no guarantees in place would have left the Regions in danger of insolvency and if they had signed the PA at that time it would have been for the wrong competition framework – as ERC (now replaced with EPCR) was at that time still being backed by the WRU as the future organisers of the European tournament.

The uncertainty left the four businesses in a position where:

  • Season ticket and match day ticket revenues could not be confirmed, with a clear detrimental impact on income streams
  • Commercial contracts could not be confirmed within contractual deadlines, again to the detriment of income streams
  • Playing kit and merchandise design and orders could not be confirmed within contractual deadlines, further impacting potential income streams

This has had a significant impact and knock-on effect on the four regional businesses – time and revenues that cannot be clawed back or changed now.

The WRU, quite rightly, do not and could not run their business in such circumstances and neither can the Regions.

So, why don’t RRW and the WRU just get around a table and talk?

We’ve tried. Repeatedly – for over two years. One of the key recommendations of the PWC report was the establishment of a new body that would enable the two organisations to “..address the issues collaboratively.”

Thus, the PRGB was proposed to be formed with Regional and Union representation along with an independent Chairman who was appointed with the full agreement of RRW and the WRU, Sir Justice Wyn Williams, and whom it was intended should have the power of a casting vote. Hailed by the WRU at the time as “a landmark moment in the history of Welsh rugby”, the formation of the PRGB was seen as an effective way for all parties to work together in partnership to “ensure effective decision making.”

However when it came to formulate the constitution of the same, the entire process became bogged down in legal dispute as RRW were accused of “interpreting the MOU in a manner unacceptable to the WRU”.

RRW in response to the WRU accusation asked for an Independent Review of the “interpretation” of the MoU and formally confirmed it would abide by any findings. An Independent Review was flatly refused. Why?

Eventually, the PRGB was reconvened with the Chairman losing his casting vote, despite RRW publicly stating that they were happy for him to retain those powers, even if it meant they could lose important arguments. This was effectively a return to the status quo with the WRU thereby refusing to be bound by independent and objective decision-making unless they specifically agree – a position it had been expressly agreed needed to change for the betterment of the relationship.

RRW is fighting for its Regions to have the right to control their own destiny. In an ever-changing landscape, it is crucial that, as independent, privately owned businesses, they are able to negotiate for themselves what competitions they play in and what revenue they can generate. On any objective level, it is difficult to comprehend why this should be controversial.

The PWC report outlined that a preferable solution would be to seek a restructured season and additional revenue streams. It said: “The Regions have recognised that the financial position in FY11 was unsustainable and have taken actions to improve the management and performance of the Regions; they have implemented cost cutting strategies and the new management teams appear to be putting a strong emphasis on improving commercial and marketing activities.”

Is this row simply about who controls the game in Wales?

RRW has no desire to ‘control’ rugby in Wales, only for the four Regional Organisations to control their own destinies, in terms of competitions we compete in and our ability to raise revenues.

The International Rugby Board (IRB) has issued a statement outlining its view that ‘..it will not support any cross border competitions that are not approved by the Unions..’.

Our stated position had clearly been to work with the WRU, and to play in competitions approved by the WRU. At no time have we talked about a ‘breakaway’, or about wanting control of the wider game.

RRW understands that the recent situation has threatened not just the professional end of the game, but the effects are being felt right the way from the junior sections of community clubs through to the international game.

Junior playing structures are disparate, participating numbers are falling. The league structure is in disarray with confusion surrounding the purpose of the Premiership and scheduling issue impacting on clubs throughout the pyramid. Clubs at all levels are facing increasing demands and costs and at the same time reduced revenue, including from the WRU.

The time would appear right for all parties to come together to resolve the governance issues which are clearly impacting on Welsh game from top to bottom, in order to create a sustainable, successful rugby pyramid, based on solid foundations, rather than a quick-fix solution aiming solely to get the national team through to the next Rugby World Cup, that ignores the wider, longer term issues that are rightly concerning everybody who cares about the game in Wales.

The WRU gives the regions a combined sum of more than £16m a year in funding between them. Isn’t that enough to allow them to operate? Why are you biting the hand that feeds you?

Firstly, £10m of that money is revenue earned directly by the regions through the competitions they play in and for television rights, which the WRU insists is paid through their accounts, and then is immediately fed through to the Regions. While this makes good reading in the WRU accounts, and allows them to claim an investment of £16m in the regional game, that statement has been at best misleading.

The remaining £6m is a mixture of core grants and funding for development platforms, with a sum of just £1.2m paid between the four Regions for player release to the national squad.

The Regions are completely committed to providing players for the national team, which is evidenced by the fact that the Welsh national coaches benefit from having greater access to players outside of the recognised international window than almost any others in the Northern hemisphere.

However, it can’t be that the Regions have to bear all that cost themselves, particularly at a time when the amazing success of the Welsh national team in recent years has led to a dramatic increase in the market value of our top players.

The market value of an International player can double, treble or even more in a three-year period. As soon as a player is selected to play for Wales, their visibility in the global “shop window” increases dramatically, as does the amount that clubs outside Wales with far greater revenues from TV deals are prepared to pay.

At the current funding levels, and when you factor in both the time that these players are unavailable to the Regions and the cost of employing replacements for when they are away, employing leading Welsh internationals is becoming increasingly uneconomical.

The WRU have called on the Regions to run their businesses more professionally, yet have criticised them when it comes to making a business decision of spending money on players that they haven’t got, or letting Welsh internationals leave.

The English model agreed between the RFU and Premier Rugby Limited (PRL) provides genuine compensation and rewards those clubs who work with the RFU to develop homegrown talent, at a significantly higher level than in Wales. Whilst the RFU compensate for U20 call-up, there is no payment in Wales for U20 players who are also called up in the Six Nations window. Last season the four regions collectively lost 29 senior players, 26 U20’s and six to the 7’s in the Six Nations window. This can make managing a squad extremely difficult, not to mention expensive, considering replacements need to be paid. This figure can also grow once injury replacement call-ups are taken into account.

Premiership Rugby Ltd (PRL), which represents the English clubs, negotiate their own television and media deals and with RFU payments and TV can afford to contract high-level squad players that play during the international window – as can Irish and Scottish teams who are owned by Unions and pay ALL player and coaching costs.

Equally, the regions have made significant levels of investment into infrastructure and support services to further excellence in Welsh rugby.  Money is not placed back in the owners’ pockets. Investment in modern new stadia and massive improvements in facilities for players and supporters at all four regions has been highly visible since regionalisation. More depth of resource has been built into backroom resources at the Regions including physio, coaching and analysis – to enable our teams to compete in the professional era with the clubs with bigger staffing budgets.

The WRU have offered to centrally contract the international players. Why not just do that instead?

The PWC report categorically stated that: “Centrally contracting the National Squad will not address the fundamental structural funding gap…”

Despite the idea being dismissed by the report they themselves helped to commission, the WRU have ignored that expert opinion to continue peddling a line in the media about central contracts.

Central contracts in themselves will not solve the problem of the player drain. The proposals made by the WRU to RRW on August 12th 2013 would have simply seen a limited number of central contracts funded by the removal of existing payments to the Regions; there was no further detail and no indication of where the additional revenue needed would come from. It was the financial version of rearranging the deckchairs on the Titanic whilst she sank.

For many months through the proper channels of the PRGB, the Regions have attempted to discuss a number of pragmatic options for different contract models with the WRU; as part of a wider structural solution that focuses on delivering sustainable and competitive professional rugby at all levels over the next ten years.

These proposals had at their core the objective of retaining our Welsh International players and ensuring they trained and played their weekly rugby in Wales.

The proposals also confirmed that the Regions would only play a centrally contracted player on collective agreement between all four Regions – as part of a complete structural solution for the future of the game in Wales.

This agreement between the Four Regions was to ensure that any national contract agreement was part of a clear and proper strategy and agreed framework to achieve long-term solutions for player retention in Wales; and guard against any quick fix, ad-hoc action.

The introduction of one individual national contract in January 2014, left the Regions bemused and they would question the strategy behind the bizarre action by the WRU given that a final agreement on the future of Welsh Rugby has yet to be reached.

The Regions were concerned about the impact of this action, the confusion it creates within Welsh Rugby at this time and how it may unsettle the balance of strong and close-knit team environments at the Regions.

What about the additional £1m that the WRU have promised to help keep the out of contract Welsh internationals in Wales?

It came as a shock that the £1m was first mentioned in the media by the WRU – as it was something we were entirely unaware of.

While welcoming the suggestion, we cannot agree to something where the goalposts are constantly shifting and where the terms attached are completely unfavourable and unrealistic.

The number of restrictive terms being attached to any funding mean that each Region would have to commit to a long-term financial outgoing far in excess of any short-term monies received, rendering the proposed assistance more of a hindrance than a benefit.

It has also transpired that a key condition of the £1m is that all four Regions sign the new PA..

RRW would also ask what would the WRU’s longer-term strategy be in terms of contracting players? Signing up six players in one year would not address the issues moving forward. What about the players who are out contract in 2015? Or 2016? As highlighted above, central contracts in themselves are not the solution. We would be interested to hear the WRU’s long-term solution to this issue, and not just a proposed solution that potentially sees just six key players contracted by the Union until the 2015 Rugby World Cup commences.

Wales have been successful in recent seasons with a growing number of players moving to France and England. Warren Gatland says he’s happy for them to go, so why does it matter that they stay in Wales?

Warren Gatland has gone on record many, many times, saying that the key to a successful national team is time together to prepare for matches.  He also confirmed his backing, with safeguards in place, for ‘Gatlands Law’ i.e. players stay in Wales to play for Wales.

The Welsh national set-up currently enjoys far greater access to their players outside of the recognised international window than many other coaching teams in international rugby thanks to the collaborative approach of the Regions.

Two Grand Slams and a Six Nations Championship, a Rugby World Cup semi-final, a first-ever U20s Junior World Championship final and a Sevens World Cup win have all been achieved over the last five years. It is players contracted to the Regions who have delivered this unprecedented success, and the access to players within Wales has been a huge contributory factor.

It is indisputable that when players move away from Wales to play, the coaches lose that access, and they receive less time to prepare for matches under Warren Gatland. Who will pay big money to watch an under par Wales team or a side missing all its senior players in an out of window fixture as English and French clubs won’t release them?

At regional level and below, the impact could be even more devastating. Shorn of key, experienced players, the Regions will be come uncompetitive, and with no big names to watch, attendances, sponsorship and commercial revenue will fall.

Young children want to see their heroes in action for their local team. If the Regions are without their international players, all playing outside of Wales, who will inspire them and spark a lifelong passion for the game? If there are no senior international players at the Regions, who will the next generation of players learn from, just as the current youngsters learn from the likes of Rhys Priestland, Alun Wyn Jones or Sam Warburton?

The ongoing player drain could bring about the end of professional rugby in Wales, unless something is done to stop it NOW. As a sport we are already facing increased pressure from the globalisation of football and the success of Welsh clubs in the Premiership. We all need to pull together to be able to compete for young talent and be able to capture youngsters’ imagination in Wales.

So the Regions failed to sign the PA by 31st December – What next?

Union executives publicly threatened to “disband the regions” if the PA wasn’t signed by 31st December 2013, a startling threat from representatives of a Governing Body, who are there to run and promote the game in Wales and say they are acting in the ‘best interests of Welsh rugby’.

The four Regional Organisations have a collective turnover approaching £30m per annum, with a direct economic contribution to Wales in excess of £50 per annum. They provide employment for approaching 1,000 people in a combination of full-time, part-time and casual roles, including over 600 professional and semi-professional rugby players and more than 50 highly skilled coaching, conditioning and medical staff.

Benefactor support to Welsh rugby through the regions comes to over £40m over the last 10 years, a support that no other rugby country has enjoyed.  This is together with the support of Welsh business sponsors amounting to a similar sum and every single supporter/season ticket holder who have spent thousands of pounds individually supporting their regions. Without their commitment, the professional game in Wales would not have been sustainable.

However, as they seek to change that and make these businesses sustainable, their efforts are being thwarted at every turn by those who, according to PWC, should be working with them towards their mutual goal.

Having spent all of 2013 telling the Regions that there could be no negotiating regards the new PA, within 48 hours of the deadline the WRU issued a statement confirming that the Regions would shortly be presented with a new agreement which is “..in the best interests of all of rugby in Wales, from the grass roots to the international level.”  

Within days, the new “Rugby Services Agreement” had been received and RRW together with the WRU are still discussing the contents of the proposed agreement.

This is a primary focus for the Regions currently.

RRW believe that the following questions are particularly pertinent:

  • Why did the WRU spend the previous 18 months telling RRW that they could not amend or negotiate on the terms of the PA, and then just days after the deadline do exactly that, albeit on their terms?
  • If the new agreement offered is “..in the best interests of all of rugby in Wales, from the grass roots to the international level.” does that mean that he previous agreement wasn’t?

 

How positive a step is the new “Rugby Services Agreement” sent to you by the WRU on Monday 6th January?

The Regions welcome the fact that an updated proposal has been put forward by the WRU and as we have been throughout discussions with the WRU over the past two years either as part of the PWC report or then the PRGB, we are entirely prepared to engage positively in discussing all elements constructively.  We are currently considering the contents of the document in detail; we are in active discussion with the WRU and that includes requesting wider details, clarity and confirmation on a number of points raised in the proposals.  

So what are the biggest challenges facing RRW and the Regions ?

TV revenues and distribution: There is no professional sport where attendance, commercial and merchandise activity are NOT dwarfed by TV revenues. TV revenues that have shown massive increases over the last five years as more competitors enter the market.  The Regions will continue to battle hard to achieve a level playing field in terms of TV revenue.

The next big reality is sheer numbers: The population of South Wales is 1.9m with four Regions and two Premiership Football Teams playing every week. One Region only has 380,000 people over a massive geographic spread.  We work hard to achieve our crowds and in light of our demographics we are achieving more than many counterparts in the league.

Many of the clubs we play from the Irish Provinces and Scottish Clubs to English clubs including London-based teams have higher population densities available to them as customers. Employment and disposable income in Wales are a challenge but we are doing our utmost to meet those challenges.

Add in that fixtures against eight of our 11 league opponents currently involve a flight our away supporters and away support in our league is minimal as a result.

French and English teams negotiate their own TV rights. Currently, our TV rights are negotiated by the Union. That is not a true “professionalisation” – it is a hybrid with Union Control. We need to drive and have a say on our own TV revenues for the games we play.

Added to the economic and rugby issues is the threat posed by Premiership football and the growth in popularity of the game in Wales. Circa of 1.7million people will attend Premiership football matches in Wales this season, compared to around 800,000 watching Professional Rugby. Both Cardiff City and Swansea City will turnover in the region of £100m this season, dwarfing the WRU turnover and combined figures of the Regional Organisations. The two football clubs will be investing at least £4m into the grassroots community game in Wales, encouraging football development at the expense of rugby.

It is essential that all parties involved in rugby in Wales work together, collaboratively, to address the issues facing the game in Wales at all levels, economically and socially, to create a long term, sustainable future for Welsh rugby.

So, what is the magic solution proposed by RRW?

There is no magic solution.

As we have said all along our view, endorsed by the PWC report, is that a collaborative approach between the Regions and the WRU is the way forward.

As the PWC report clearly stated, everybody in Welsh rugby needs to generate additional income, Regions and WRU alike, and there is a genuine need to work collectively in order to do so. The WRU however have to be realistic and recognise that the Regions are independent businesses. They cannot operate in this competitive market with one hand tied behind their back and tied to the WRU apron strings. In their domestic markets, they have to have greater freedom to operate to stand and fall by their own efforts.

The very real opportunity for change, a change that would benefit all was boldy backed by the Welsh Regions. PRL in England brought to the table proposals for a new, club run competition, the Rugby Champions Cup, that would see increased revenues for all parties including substantially increased television income.

The proposals were backed by the Regions to strengthen the game in all Six Nations countries, with increased but equitable revenue streams.

Furthermore, the original RCC proposals, included a new third tier European competition, would provide opportunities for the growth of the game across the whole continent. Developing rugby nations including the likes of Portugal, Spain, Russia, Romania and Georgia, plus others, would benefit from a competition not currently afforded to them.

This has now finally been achieved with the agreement from nine stakeholders to ensure the continuation and development of European club rugby competitions. A truly meritocratic tournament, with appropriate division of finances, underpinned by a long-term agreement and strong governance.

It is important to recall that these proposals were blocked for many by the respective Six Nations Unions, who then unilaterally attempted to sign up all clubs/provinces/Regions to compete in a watered down European competition minus English clubs, with reduced income for participants, that shuts the door in the face of the second tier rugby nations across Europe.

Without debate or discussion the WRU were proposing to commit Welsh Professional Rugby to fall even further behind France, England, Ireland, Scotland and even Italy as a consequence of TV revenue distribution and International Player release.

RRW and the Regions had to be bold to find a solution to the crisis and continue to fight to protect our game – for the right to control our own destiny as businesses and to identify a structure that is attractive to players, broadcasters, supporters and commercial partners.

We will maintain a strong focus on continuing to bring new revenues into the game in Wales, something which will benefit everyone involved in rugby from the community game through to the national team and would enable us to ensure a vibrant Welsh game for everybody to enjoy, for many years to come.