Matt Williams: The economic earthquake for European rugby is coming

The economic earthquake this pandemic has created will deeply change rugby.

The first tremor of the looming financial crisis in rugby was felt last week when USA rugby’s governing body filed for bankruptcy. Coronavirus accelerated a major financial problem into a crash.

Then Rugby Australia announced a Aus$9.4 million (€5 million) loss. Ninety-five per cent of Rugby Australia's and the Waratahs lowly paid, hard working staff were laid off.

If there are no more Super Rugby and Wallaby games played in 2020, RA projects a staggering loss of Aus$120 million (€67 million).

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The chief executive of New Zealand Rugby Mark Robinson said the organisation faces revenue losses in excess of NZ$100 million (€55 million) and cut all wages across the organisation by 40 per cent.

That was the second major tremor.

The “big one”, the earthquake for European rugby has not hit yet . . . but it’s coming.

The real revolution of rugby turning professional in 1995 was financial. Over a few days, the game’s business model changed unrecognisably. Many of the drastic changes in those tumultuous days were deeply flawed.

The most damaging was that when professionalism was declared, the English and French Rugby unions did not take central control of their clubs.

That decision 25 years ago laid the foundation for the coming crisis.

Short-term planning

The private ownership system installed in rugby’s European financial heart requires lots of matches to generate more revenue.

The clubs fight against relegation to remain in the Top 14 or the Premiership to gain the TV money. To do this they have created an ever escalating arms race of buying players.

Short-term planning and a lack of leadership has created a players market with inflated wages and costs.

An example of the extent to which this market has spiralled out of control can be seen in the fact that there are more than 420 New Zealand players on professional contracts outside of New Zealand.

This economic lunacy ensures that most clubs in Europe have a business model of paying out more money than its income streams can generate.

Ironically, in a gladiatorial sport, it was a microscopic virus that delivered the day of reckoning. The money kept going out but suddenly nothing was coming in.

Like the subprime mortgage markets of the global financial crisis, club rugby’s business model cannot withstand the type of serious economic shock we are now in.

The tectonic plates of rugby’s world have shifted and the destructive shock waves have hit the French ProD2 and English Championship clubs who have already cut wages, staff and players.

Sadly, as the Waratahs have proved, Super Rugby players in Australia and New Zealand will be the next to fall.

As the economic crisis deepens, the majority of top-level clubs in Wales, France and England will face financial ruin.

For the moment the French clubs are getting staggering government wage subsidies of up to 70 per cent. This situation obviously cannot last.

Harsh reality

The Irish provinces will experience deep financial stress but they are in much better shape than the rest of Europe to survive.

The harsh reality is that the majority of European clubs are not viable businesses.

The days of believing that the pay TV tooth fairy will donate astronomical amounts of money to rugby are disappearing like toilet paper off the supermarket shelves, as fear rips into consumer confidence and subscriptions are abandoned.

David Hill, the former head of both the Australian Broadcasting Corporation and the Australian Soccer Federation, believes that Foxtel in Australia, whose parent company is Sky, is in "a terminal decline."

Reports in this week’s media have put Sky’s losses in the UK due to the coronavirus, at above £700 million and some as high as £1 billion.

All professional sports are watching those figures with grave concern.

Coronavirus has forced each of us to face the possibility of sudden death. To stay alive, common sense tells us to place the advice of medical science at the top of our decision-making processes.

Be it medicine, climate change or athletic development, science must drive our actions.

Charles Darwin, one of history's greatest scientists, wrote that the species who survive unexpected events of great change are "able to adapt to and adjust best to the changing environment in which it finds itself."

New environment

Coronavirus has changed the world, so to survive rugby needs a paradigm shift to adapt to the new economic environment.

The men’s 15-a-side international game will remain the only level of rugby that is financially profitable.

So the new environment requires more international games and a drastic reduction in the number of economically unsustainable club games and competitions. The needs of the English and French clubs must be placed second to the money the international game can generate.

World rugby must strategically plan a new global calendar that features an expanded international playing programme to generate desperately needed income.

Competitions and clubs that cannot survive on fewer games will cease to exist or drop to lower divisions.

Economics will force clubs to place a greater emphasis on developing local talent, which is cheaper than buying and relocating overseas players. Toulouse and Leinster are proof this system can lead to on field excellence. Forcing clubs to focus on developing local talent is good for the game.

This new reality will also force the number of professional players across the globe and their remuneration to significantly decrease.

It is a little known fact that Che Guevara, the legendary Argentinian revolutionary, was a rugby writer and a scrumhalf for the San Isidro Club in Buenos Aires. The same club as the great Puma scrumhalf and current vice-chairman of World Rugby, Agustín Pichot.

A few years ago Pichot brought forward a bold new vision for the global rugby calendar that was discarded because it threatened the political powers of the old paradigm.

I hope “Gus” can channel the courage of his club mate Che Guevara and once again provide the leadership to create a new, financially sustainable annual global calendar, that breaks that old paradigm of north and south and creates a world professional playing season.

The first era of professional rugby is a dead man walking. It may stagger on for few more months but it is condemned to failure by the fatal flaws of the rugby revolution and will be killed by the harsh economics of the coronavirus crisis.

It remains unclear if there is to be a successful second professional era. If it does emerge, it will require leadership, planning and cooperation at levels far superior to what we experienced in the now gone, first epoch of professional rugby.