The Great Farming Scandal

On a recent road-trip we stopped off in one of the towns that I had once called home earlier in my life. 

As is usual when one visits old haunts, we explored the town and the spaces that had been an intimate part of my life so very long ago. My fellow travellers, family, had all come into my life some 15 or more years after I had left this particular town, and I fear I bored them to tears with my stories, pointing out the places of my youth.

Forty seven years had passed since I had left there. 

I had been back. Of course I had been back, but I had never lived there again, and the town has changed.

Forever.

As I dragged my reluctant family up and down the familiar old streets there was an incredible sadness, a sense of desolation, as I looked at the changes time had brought to my old home town. Buildings, modern once, now showing the ravages of time. The family owned stores and local shops, the cafes, the restaurants and bars had changed, or vanished, often replaced by the garish yet soulless logos of national and international brands. 

The faceless supermarket that has replaced the corner grocers owned by that gentle Chinese lady, with her husband sitting in the tiny cluttered office, answering the phone and writing out orders on slips of paper. 

The tea-room, once the purveyor of the best milkshakes in the world, now a nail parlour. 

The Copacabana Restaurant, known for fiery peri-peri dishes, and the best soft-serve ice-cream in the known universe – the building is still there, and the Copa’s premises too, but now it houses a second-hand furniture store. 

The corner café where we used to fetch the Sunday papers, before 13h00 mind you, they closed at 13h00 on a Sunday. Gone now, replaced by an estate agent’s office.

And so it went throughout my old home town.

Perhaps the change that hit me the most was the disappearance of the family owned bakery that used to be very close to the centre of town. Just one street back from the main road. Those wonderful early morning smells of freshly baked bread coming out of their ovens used to drift over the town on days when the wind was just right!

I knew the owners well, they were friends of our family, and we visited. 

This bakery supplied the whole of our town with breads, pies, cookies, and baked delicacies. They supplied many of the smaller villages and communities in the surrounding countryside too.  They were a regional institution.

I also knew the story of the closing of their bakery.

After three generations of bakers had produced some of the finest, whitest, sweetest breads, the crustiest sourdoughs, delectable pies, and delicious cakes, the family were approached by one of the big national brands – one of those factory-baking brands that churn out cotton-wool textured flavourless loaves of pre-sliced stuff masquerading as bread, and shipped to the supermarkets and food stores of the country in brightly coloured plastic bags with natty little clips to seal the bag after you had taken out a portion or two of clinically pure carbohydrate.

The national brand had “made the family an offer they could not refuse”and bought the bakery.

It was a sad day when the family bakery closed. 

Sad for those that knew the family and treasured the old ways and traditions. The local newspaper took a different view, suggesting that the old needed to make way for the new, and that progress was inevitable, promising renewal and everything better. They told that the national brand would be bringing in new, modern, equipment and new ovens. There would be new buildings, and a bigger factory, with bread being baked for the whole of our provincial region. There would be new jobs, and new contracts for suppliers…….

And none of that ever happened.

Those that kept an eye on proceedings told of the days when the vans pulled up and the new owners stripped out the equipment – the mixing machines and the proofing ovens, the baking ovens and the thousands of bread-pans, the cooling racks, the glass-topped counters from the little shop, the work tables. Everything was loaded into those vans, and then they drove away. 

And they never came back.

The bakery buildings were boarded up and stood silent for a decade or so, and then they were auctioned off, bulldozed, and replaced by a faceless office block and parking garage.

Many years later I bumped into one of the bakery family members, we shared a couple of coffees and chatted about the old days. I asked about the bakery. My friend told me that the national brand had made all kinds of promises, but had never intended to carry out any of them. They were intent only on shutting down the opposition, and then stripping out all the assets and equipment, removing them from town and selling them elsewhere, so that nobody could ever try and restart a big bakery in the old home town.

It was a cold, calculated, commercial decision, with profit and market domination at the core of the decision.

So, what on earth has this story got to do with rugby?

There are all kinds of signs of a similar activity happening in the word of rugby.

Across the globe, more particularly in South Africa, iconic sporting arenas suddenly find themselves with new names – Ellis Park becomes Emirates Airlines Park, having been Coca-Cola Park for a while, we have had a couple of ABSA stadiums, and more than one Sahara Parks, one or two Telkom Stadiums. It is not just South Africa, Aussie has them too, and New Zealand, Westpac, Suncorp and BankWest, and DHL Stadiums, corporate names with little of rugby’s soul or tradition about them.

Rugby needs those corporate sponsors in order to survive and prosper in the modern professional era, but the sponsorship comes at a cost – a cost to the treasured traditions of the game.

However, the selling of “naming rights” to a stadium is just the tiniest tip of a truly massive iceberg that has quietly floated into the world of rugby, and iceberg that has the potential to change the face of rugby forever.

Some even suggest that this iceberg could do to rugby what a distant iceberg cousin did to a ship called the Titanic!

Let me explain:

Some of rugby’s biggest assets have been sold to a “national brand” and they have commenced a different kind of asset stripping as an integral part of the new order.

In one of the biggest off-field developments in the history of rugby, a private equity company called CVC Capital Partners, has  acquired a financial stake in the two big club competitions in the UK and Ireland – the English Premiership and the Pro 14.

CVC bought a 27 per cent shareholding in Premiership Rugby for £230 million (roughly R4,4 Billion, or Aus$420 million), and then then went on to buy a similar stake in Pro 14 for £120 million. 

In March 2019, CVC went the whole hog and offered £500m for a similar share in the Six Nations tournament, the jewel in the northern hemisphere rugby crown.

Those are eye-wateringly large amounts of money to wave around in front of rugby’s administrators, especially at a time when rugby finds itself a little short of some of that folding stuff. 

Back in April I wrote of the precarious financial position of rugby in the northern hemisphere. Especially so in England, where the Premiership clubs lost nearly £50m between them in the last financial year with only one club, Exeter, recording a profit. (The English RFU itself, is running at a loss, as is the French RFU.)

At the time the deal offered by CVC would be for £200 million.The Premiership and Pro 14 deals promised the English clubs some relief, each would receive something of the order of £13m per club. 

The clubs were mostly eager, but some resisted, prompting CVC to up the offer to £230 million. Just enough to swing the deal.

Although the buy-in only affects the governance of the commercial arm of the game, red flags and some alarm bells have been raised by CVC’s record in Formula One racing. 

Back in 2016 Bob Fernley, the (then) deputy team principal of Force India, described the activities of CVC: 

“All their actions have been taken to extract as much money from the sport as possible and put as little in as possible.” 

CVC owned a majority shareholding in F1 for ten years between 2006 and 2017, and earned an estimated 350 per cent return on their initial £1.4 billion investment in motorsport. That is a good return in anyone’s money!

Their involvement resulted in some significant changes to F1 as a spectator sport. 

During the period that CVC were involved, the sport moved from free-to-air to pay TV, and the worldwide audience fell by 137 million as a result. 

The financial spoils from TV broadcasting rights and the new annual auctions for the staging of Grands Prix were unequally divided between the teams on the grid, and a huge chasm appeared between the bigger and smaller outfits. 

CVC’s £230m investment in the English Premiership will be divided among Premiership Rugby’s 13 constituent clubs, a windfall payment of approximately £18m per club. 

If the experience of F1 is any guide, short-term gain may mean considerable suffering in the longer term. 

The devil is in the detail. 

CVC will be paid 27 per cent of the income of every single club, for every year that the deal lasts. 

This is not good news for clubs which are all (except for the Exeter Chiefs) in various stages of financial extremis. 

The short-term benefits of an £18m cash boost was, ostensibly, intended for use in the development of club infrastructure, but it has rapidly become evident that the clubs have gone on a player purchasing spree unlike anything seen before in the rugby world. 

Much like Toulon Rugby club in France under Mourad Boudjellal, the Premiership clubs are looking to buy success rather than to build for the future.

Much of the money is being spent on overseas signings as the Premiership clubs fight tooth and nail to become one of the “haves” rather than the “have-nots”. 

The sudden wealth of the Premiership clubs has startled the French into action too, they have realised that their own seemingly limitless supply of Southern Hemisphereans is in danger of some really competitive bidding, and they too have looked to recruit more of the southerners. Their benevolent billionaire benefactors have thrown yet more of their money at the clubs. (Much as in England, the clubs run at a financial loss, although alleviated somewhat by the fact that their stadiums are usually municipally owned and they have no maintenance costs.)

An immediate knock-on effect of the frenzy of recruiting from England and France has been a reaction from the wealthy corporate-owned Japanese clubs. They have joined the fray, looking for their fair share of the spoils. Once again, the clubs do not have to run at a profit, they are a tax write-off for the Japanese corporate owners.

It is these developments which poses a bigger threat than ever before to professional rugby in South Africa, Australia and New Zealand. 

The recruiters from the north have descended on the southern hemisphere like a swarm of locusts on a recently sprouted corn field.

All across the south the reports are flooding in of players heading north, some before, and some after the World Cup at the end of the year.

Already, a plethora of Wallabies have taken the financial bait and signed on for next season – Nick Phipps, Curtis Rona, Sekope Kepu and Adam Coleman are all off to newly-promoted London Irish, while Christian Lealiifano, David Pocock, Rory Arnold, Sam Carter, Scott Higginbotham, Samu Kerevi, Henry Speight, Duncan Paia’aua and Sefa Naivalu are all headed to either France, Ireland or Japan. 

At the most recent count, 22 Australian Super Rugby players are leaving the country.

They join players like Scott Fardy, Tatafu Polota-Nau, Will Skelton, Greg Holmes, Ben Mowan, Dave Dennis, Sean McMahon, Joe Tomane, Digby Ioane, James O’Connor, James Horwill, Berrick Barnes, Rob Horne,Mike Alaalatoa, Liam Gill, Nic Stirzaker, Wycliff Palu, and Nic White who have already gone north.

(You could pick a pretty decent Wallaby team out of that bunch.)

The Jaguares are losing 4 players, Santiago Garcia Botta to Harlequins, Tomas Lavanini to Leicester Tigers, Pablo Matera to Stader Français, Martin Landajo to Harlequins.

New Zealand is also losing a bunch of top players to Europe, and Japan. Twenty eight at the last count, and the number is sure to rise. 

The All Blacks will have to find a new captain in 2020, Kieran Read is on his way to Toyota Verblitz although there is already a bidding war erupting as it has been reported France’s Racing 92 are prepared to pay him NZ$2 million per season.

The South African departures lounge features 9 players from the Bulls, 3 from the Lions, 4 Sharks, and 3 Stormers. Of that contingent of 20, 11 have played for the Springboks, and 9 are likely to feature at the 2019 Rugby World Cup.

As at today, the counts stands at 22 Australians, 28 New Zealanders, 4 South Americans, and 19 South Africans who have all confirmed their departure from their countries, and from Super Rugby.

Seventy three Super Rugby players are leaving the competition at the end of 2019.

They are joining the seventy four that left their country and club in 2018.

Add that to the 112 that left at the end of 2017 and exactly 100 that left to go north in 2016!

Three hundred and fifty nine Super Rugby players have left Argentina, Australia, New Zealand, and South Africa in just 4 years! 

359 players is nearly 16 full match-day squads!

That is a massive exodus of talent which hugely undermines the already dwindling value of Super Rugby. 

Dare I say it, it is an unsustainable exodus of talent?

Super Rugby, the keystone of Southern Hemispherean rugby, has become something of a dying competition.

Buoyed by their early success, when Super Rugby exploded across the globe, with rugby of the highest quality and excitement played by 10, and then 12 teams of hugely talented players, the administrators have done their level best to expand their empire, and to stretch their tentacles into hemispheres previously untouched, growing from an initial 10 teams to a massive 18, at which point the Super Rugby universe started to implode, forcing the power-hungry administrators to allow their monster to shrink back to 15, and down to 14 in 2021, if all goes to plan. 

The previous unrestricted growth resulted in a dilution of the talent pool, especially in Australia and South Africa, together with the introduction of additional teams of mediocre quality and value. 

The Super became less-than-Super.

The megalomaniac tendencies of the administrators had to be contained – market realities kicked in as the fans stayed away from the mediocrity on offer. Logic eventually found a crack in the administrative skull, some light seeped in and they started to recognise that unrestrained growth was not the way to go.

The reduction in the number of Super Rugby teams to 15 was an imperative, and even more should go. The Sunwolves are on their way at the end of 2020, and there may be some short-term benefits for the quality of Super Rugby as it drops the controversial conference system and returns to a round-robin format. It is all good, but this is not likely to be enough! 

These changes may already be too late!

Along with the unsustainable growth of Super Rugby, the rugby-playing talent pool of the Southern Hemisphere has been devastated by the raiders from the north.

The ongoing drain of rugby talent heading north is likely to have a devastating effect on rugby across the whole of the Southern Hemisphere. The professional franchises are denuded of their best talent, those players that provide the team with the spark and sparkle that is needed to attract spectators and fans, those same players that lift the performance of their team members, and drive a team to ever-higher levels. Those players from whom the youngsters in the squad learn their trade. The mentors and guides that are essential in any team culture.

These are also players that the school boys and junior players hero-worship and adore, and want to emulate on the sports-field. 

Their departure leaves a huge hole in the entire DNA structure of rugby in their home countries.

Rugby, as a sport, a pastime, a passion, and an interest is suffering as a result.

Which brings me to the title of this piece:

The Great Farming Scandal.

Has the Southern Hemisphere become nothing more than a huge talent farm for northern rugby clubs?

What are those northern rugby clubs putting back into the talent pool of the south?

Are they simply asset-stripping, as did that national bakery when they took over our local bakers?

Are they looking to take as much as they can without giving anything in return? As CVC did to Formula One racing?

Sometime, somewhere, somehow, the talent farm that is the south is going to run out of resources.

A farmer who keeps planting a crop, only to see it devastated by a plague of locusts year after year, after year, is going to stop planting that crop – he is going to look for a different way to use his land, probably switching to livestock that are of little interest to those locusts.

And, if the locusts have nothing left to gorge themselves on, they too will begin to die off.

But the locusts may well outlive the farmer, he may be long gone before they have devastated the entire farming community from which they draw their sustenance.

What can be done?

First and foremost, Rugby as a whole needs to recognise the problem. Those from the southern countries might well have recognised it already, but the northern countries, and those northern clubs, now flush with an injection of corporate money, need to recognise the damage they are doing to their own lifeline of both local and international recruits.

Once the problem has been recognised, we can do something about it.

I do believe that there needs to be a dual approach to the problem.

A Transfer Market

First and foremost, rugby should look at the example set by other professional sports and recognise that a system that includes a formal Transfer Market is a necessity for survival. 

At the current time rugby union has no established transfer market or system that compensates a club, union, or training establishment if one of their players or coaches is snaffled by someone else.

Rugby clubs, traditionally, have recruited and strengthened their teams almost exclusively through their own academy and junior team pathways, together with the contracting of players whose previous deals have ended at their former clubs. 

This system is a carry-over from the amateur days.

There are examples of unions or clubs paying compensation for a player or coach to be released early from their current contract, but they are rare occurrences. The Sharks paid an undisclosed amount in compensation to the Brumbies when John Smit recruited Jake White to Durban. John Mitchell leaving the Bulls to join in England coaching squad is another such example where compensation was paid. 

The practice is also finding feet in England, where we recently saw Leicester Tigers and Gloucester engaged in transfer negotiations of sorts, with Ed Slater and Jonny May moving between the two clubs while still under contract.Saracens also paid compensation to Bristol Bears in 2011 to get Mako

Vunipola out of his senior academy contract the Bears.

One of the major contributory factors to the lack of a rugby transfer market is the practice of negotiating short-term contracts with players. 

One-year, two-year and even three-year deals are commonplace in rugby, with very few longer term deals of the four-year, five or even six-year variety very much the excerption.

Malcolm Marx has recently signed a “long term” deal with the Lions, until the end of 2021, with a sabbatical after the 2019 World Cup to go and play in Japan until June 2020. Whilst the Lions hail this as a “long term” deal, it is nothing of the sort, it is a two year deal that includes a six-month “sabbatical” away from his employers!

Michael Hooper has a six-year deal with Rugby Australia, while Israel Folau has just had his four-year contract terminated. Those are longer term deals.

They are, however, the exceptions that prove the rule.

The concept of a four-year deal being the standard, and five- or even six-year deals being common practice, might be wholly understood and accepted in football, but this is an alien concept in rugby.

The shorter-term nature of professional rugby contracts makes it much easier for players to be recruited away from their initial clubs. The recruiter usually knows the time-line and is often happy to wait for a player to approach the end of their current deal and then jump in to lure them away in the final year of that contract.

For the smaller unions and clubs, the have-nots of the sport, this represents a significant and very real problem. They regularly invest serious time and resources in developing and nurturing a player, only to have the player poached away with no compensation for their investment.

Of course, this is not just a cross-hemispherean issue, it happens between smaller provincial unions and the bigger ones, it happens between lower league clubs and the senior leaguers too!

The wealthier unions and larger clubs can offer players higher wages, fringe benefits and more realistic shots at glory and trophies. Pounds Sterling and Euros are more desirable currencies than South African Rands, or New Zealand Dollars. Hence we cannot begrudge the players their willingness to move for those factors, loyalty does not buy bacon. 

Playing for a 3rddivision club will not expose a player to the national selectors.

Player movement cannot be stopped, but it can and should be regulated with a focus on a fair deal for the unions and clubs that have spent their time and resources developing a player and the assistance they have given him in order to become that “marketable product” that gets offered that big contract.

Some school fees are due!

Of course, the unions and clubs with a bigger bank account, a wealthier benefactor, and more resources at their disposal – the “haves” of the rugby world – will certainly wield more financial firepower in any rugby transfer market, if it were to exist, but at least such a market would compensate teams and unions for losing players where they currently receive nothing.

That money, the transfer fee, could then be re-invested into the union’s own playing squad or into the union’s academy, generally redistributing wealth within the professional arm of the sport. wealth which currently predominately resides in Europe. 

Some of that money would then flow back to the Southern Hemisphere! 

Of course, some might suggest that the wealthier clubs might attempt to “hoard” players in order to keep them away from the opposition – this happens in football as professional clubs send their talent scouts out to find school level players and sign them to a professional academy contract at the ages of 15 or 16. They believe that the cost of doing so is offset by the potential transfer fees they could earn later in that youngster’s career.

Rugby is a niche sport compared to football, there are far fewer players, and it is very doubtful that such practices could find fertile ground in rugby.

In rugby, many national unions have rules that prevent players from being “poached” prior to the age of 18 while the lower revenues – and some regulated salary caps – would probably prevent teams from stockpiling players at a young age, if they still want to put out a competitive senior squad.

The bottom line, from my perspective, is that rugby needs an established, recognised, and regulated transfer market. 

This will prevent the wealthy French and English clubs, as well as those with corporate backing in Japan, from preying on the smaller or less financially well-to-do clubs in their own countries as well as across the globe in countries where unions and clubs frequently go unrewarded for their efforts in developing playing talent.

Rugby’s ability to generate revenue is severely limited in comparison to football or a number of the major global sports, so a transfer market would be another way of bringing an extra stream of income to the less well-endowed markets, money that can be redistributed across the global game. 

Fiji, Samoa, Tonga could be major benefactors, with very positive benefits for rugby in those countries.

The knock-on effect of the wealthy unions and clubs paying for the coaches and players they recruit from the smaller unions and clubs would be funds that allow those smaller unions and clubs some reinvestment in the game itself. There would be a real financial incentive for having a productive academy that develops and produces high quality players. Not only would that reinvestment pay off on the home pitches, but it would also be rewarding on the bank balance.

This is like the farmer finding an alternative method of farming, and avoiding the deprivations caused by the swarms of locusts!

I have no doubt that many of rugby’s traditionalists would be in total opposition to the suggestion of the establishment of a formal transfer market. I simply challenge them to come up with a better solution to the problem of the haves taking from the have-nots and the probable demise of rugby in the southern hemisphere.

Flexible & Innovative Contracting

The second part of the approach to preventing the damage caused by the raiding recruiters, that swarm of northern locusts, has to be a new approach to contracting in the southern hemisphere.

The south simply has to find a new and better way to retain primacy of contract with their top players – central contracting perhaps, or whether it is via paid sabbaticals as New Zealand have done with Brodie Retallick and Sam Whitelock, and South Africa have done with Malcolm Marx, or a player sharing or exchange scheme between paired clubs in the two hemispheres. 

(As an example: The Sharks in South Africa could come to some sort of an arrangement with Sale Sharks, or the Lions with Gloucester…..)

Every country in the Southern Hemisphere is feeling the pinch. 

Their premier rugby competition, Super Rugby, has been horribly mismanaged by administrators who have lost sight of the primary function of any competition – to produce quality players that can go on to represent their countries at the highest level. They have seen it as some kind of empire-building vehicle instead of a premier rugby competition.

Whilst the Super Rugby competition was being flogged to death by administrators, the players were being lured away from the competition, further denigrating the quality of the competition as a spectacle and a sellable product.

The southern countries, Argentina, Australia, New Zealand, and South Africa have to find a way of retaining their core players, and if this requires a change in contractual mind-set, so be it.  

If they don’t, the game of rugby will surely wither, and then die as a professional entity. 

Do Not Make The Same Mistake

Most importantly, the south must learn a lesson from the north.

Rugby must solve its financial problems from within the game itself.

The appearance of that private equity firm, CVC, in northern hemisphere rugby is not likely to be much of a long term solution at all.

In the short term, the 13 Premiership owning clubs may benefit from an immediate financial windfall, and they might make more money off broadcasting and sponsorship deals than their forebears, for a while. At the end of it all, CVC are the only ones guaranteed to make a takeaway profit. 

In the longer term, the Premiership will have to pay the piper. And it is a huge price that they will pay. More than one-quarter of their revenues, year in and year out. 

They have sold their bakery to the big international brand, can they survive the experience?

In the meantime, the professional tier of the game in the southern hemisphere will be further devalued by the increasing talent drain to England, France and Japan, funded by their respective financial speculators, benefactors, and corporations. 

Is the Southern Hemisphere just a talent farm for the north?

How long can that last?

New Zealand may have the more productive farm at the moment, and might survive the continual raids of the locusts, albeit as a much weaker All Blacks on the international stage. Will rugby retain its place in that country and society, or is it doomed in the longer term?

That South African farm is still producing plenty of quality products, but none of it seems destined for local consumption. The locusts are taking most of the best of the crop. The African farm seems to be in serious trouble, unless they find another way of farming.  How long can it survive?

The Aussie farm already seems to be changing to another avenue – be it AFL, tennis, or gardening. I am not sure that they can be revived.

Rugby has not found the transition to the professional era easy. Money talks, but it does not always make sense when it opens its mouth. The corporate deals might well be the death knell of rugby as we knew and loved it.

2 COMMENTS

  1. Hi Bill,

    Another great article, thanks for the read! As I dived deeper in it, some comments and questions arose.

    1. There is no such thing as “too good to refuse” . Anything can be refused, the bakery could still be there along with it’s fourth (fifth?) generation.

    2. Ashamed to admit this as a rugby fan but…there are no transfers in rugby? LOL, I don’t know which term describes it better, suicidal or plain stupid. Wait, it is suicidal AND stupid!

    But, wouldn’t such a move trigger the immediate rising of salary cap’s quota? Or even the disappearance of salary caps all together?

    3. If SA rugby would have a similar eligibility rule as the AB’s, how would this impact SA rugby players and the team as a whole?

    4. How are the presences in southern hemisphere’s test sides being remunerated? Along with the honour of playing for your country, could it be (is it?) also a great deal financially? Could it outstrip playing a year in France?

    Thanks,
    Andrei

    Ps: looking forward for an in-depth article about Argentinian rugby. 🙂