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 Heineken 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 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 has an option to extend the agreement for another five years with a deadline to exercise of 31st December 2013. If the Regions don’t extend it, then the PA expires with the WRU saying the Regions will effectively cease to exist in the eyes of the WRU.

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.

The WRU has made it abundantly clear that there is 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 won’t the Regions just sign the deal that is on offer?

The Regions cannot sign a legally binding PA as the WRU are at this moment 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) some 18 months ago that they were withdrawing from the competition. At this moment in time 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.

This is despite proposals 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 has 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 are unable to fully confirm the number of teams competing in the PRO12 between 14/15 and 18/19, the revenue from and distribution from the league in that period. There is currently no sponsor for the PRO12 in 2014/15 (next season) and the TV deals are not confirmed.

It is impossible for the Regions to commit to a rolling five-year plan when we don’t even know what will happen in six months time when the current PA expires. This is despite the WRU knowing of the uncertainty around European competition for almost two years, and the PRO12 for approaching one year.

The Regions have been put in a position where their entire business platform in just six months time is completely unknown, with a combined revenue risk of £16m, yet they are being pressurised by the WRU to sign a five-year extension to the PA immediately.

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

We’ve tried. 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.

If everybody is back around the table, what are the latest public rows about?

In a nutshell, 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.”

But the WRU gives the regions more than £16m a year in funding between them. Isn’t that enough to allow them to operate?

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 is 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 the business decision of spending money on players that they haven’t got or for 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.

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. As outlined above, the regional organisations cannot sign a Participation Agreement when what they will compete in is still unknown.

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 globalization 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.

What happens if the Regions refuse to sign the PA?

Union executives have publicly threatened to “disband the regions” if the PA isn’t signed by 31st December 2013.

That is 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.

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 simply want to achieve a level playing field in terms of TV revenue.

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.

Add in that 8 or our 11 league games currently involve a flight for our away supporters and away support in our league is minimal as a result.

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.

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 cannot drive our own TV revenues for the games we play.

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 recognize 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.

A number of developments in recent months would appear to have offered some very clear ways in which new income streams could potentially be introduced into the game.

With the PA deadline for extension looming on the 31st of December along with the Heineken Cup agreement also ending and the English and French clubs serving notice to quit, there appeared to be a very real opportunity for change, a change that would benefit all.

PRL in England were able to bring 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. However, these proposals were blocked by the respective national 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.

Without debate or discussion they were thus 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.

How can this be justified? How can the WRU say that they are acting in the best interests of Welsh rugby whilst agreeing a deal on our behalf which not only reduces the income of the Regions, it sees our French, Scottish and Italian rivals all receive considerably more.

Despite a series of high-level meetings and the commissioning of an experienced independent mediator the European competition structure and revenue distribution still remains UNCLEAR.

RRW and the Regions are trying to find a solution to the current crisis. We are fighting to protect our game, fighting 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 are fighting 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.

As two parties we are dead-locked and in this case, it is not just about a commercial contract negotiation, this will have a profound effect upon local economics and employment and the national sport of the country, and regrettably has the potential to damage the credibility of Wales as a leader of and high performer in World rugby.

This needs to be urgently addressed.