The cost of Professional Rugby

This week saw the publication of the Annual Accounts of ‘Scarlets Regional Ltd’, the company that owns and runs the Scarlets. The clue is in the title. The headline figures for the business was that its turnover (i.e. income) was £8,976,506 but it still spent £987,615 more than it earned.

That’s right, the cost of running the Scarlets was £9,961,121.

Before we go any further, it’s worth noting that is the total cost for the entire operation from running the Academy to running the Stadium. The business employs 237 staff and has a wage bill of £6.4m per year. Or, more accurately, £6,420,957.

For a simple comparison purpose here, Exeter’s turnover was £13,222,843 and their wage bill was £6,868,046 whilst employing 184 people.

There are some in Wales who believe that we should have relegation from the PrO’12, with the top Welsh Premiership team being promoted in turn. Those figures above should kill that idea stone dead as no business could move from part time rugby players in May, to running a wage bill of £6.4m by September.

Furthermore, included in the income of £8.9m for the Scarlets was what its stadium generates throughout the year, with the necessary events, exhibitions and dinners etc. There are also 15 Executive boxes that are used for both rugby and non rugby events. To continue the notion that promotion / relegation is impossible, no facility in Wales outside of Pro Rugby Wales’ four teams could generate that kind of non-matchday income (excluding the Principality Stadium, of course).

There are others in Wales who believe that the WRU pay for ‘the Regions’. So, to look into that idea, we must see what the WRU spends on the four Pro Teams. The 2014 RSA sees a payment of £1.7m (in round figures) to each of the four teams plus £150,000 towards the costs of running the respective Academies.

Therefore, from the £8.976m of income for the Scarlets, £1.7m of that came from the WRU. Another major source of income comes from the competitions in which the Scarlets play – the PrO’12 and the EPRC. Some believe this competition money also belongs to the WRU as they can choose who receives it (as they choose the competition entrants). This belief, however, is a fallacy as Pro Rugby Wales are equal shareholders in EPRC. They OWN part of that competition. As for the money generated by the PrO’12, this is also owed to its entrants. As Roger Lewis found last year, it is not possible to appease those who pay (the broadcasters) unless the best teams from each country are entered. The broadcasters pay to broadcast PRW teams.

This competition income equates to, judging by the last WRU Annual Report, £8.1m. Therefore, it’s pretty safe to assume that the Scarlets saw £2m of that.

So we can see that the money earned from the competitions, the money paid by the WRU for services rendered under the aptly named Rugby Services Agreement, totals £3.7m of income. This means that we are still £5.206m shy of the income figure in the Scarlets accounts.

This is, therefore, money they have generated themselves through ticket sales (their Accounts show there are 4,000 Season Ticket holders for the team), sponsorships and non match day income.

Could any team outside of PRW in Wales generate this kind of turnover? Some believe that a team should be based in Colwyn Bay so let’s say that it replaced the Scarlets. It would need to generate £6m of its own income in order to match the expenses of the Scarlets (the major expense being the wage bill, of course). Could it do that? Parc Eirias doesn’t seem large enough to generate much non-matchday income. It’s capacity is 6,080 which is 500 BELOW the average achieved by the Scarlets, so it couldn’t generate the same match day income either.

We must also consider that the Scarlets spent more than they earned, which means that somebody has to cover those losses, somebody has to underwrite the risk that income won’t meet the guaranteed expenditure of wages etc. At the Scarlets, they have six benefactors underwriting the team and two associated companies also injecting cash. For a team in Colwyn Bay, we are yet to see if one individual (let alone six) is interested in carrying the can.

Some will argue that the WRU should underwrite professional rugby but it couldn’t handle even half of the combined losses of the four teams over any kind of period. The Barclays covenants are the likely reason why the income from the competitions passes through the WRU accounts, even though it is owed to the participants. Furthermore, the WRU could not underwrite one pro team but not the others as that would skew the market and be an abuse of market position, leading to large solicitors bills no doubt. It simply isn’t possible for the WRU to act in the way that some wish.

Of course, some say that a team should be in Pontypridd rather than Colwyn Bay, but the same figures and income generation applies at both venues. Neither has the corporate facilities for match day and non match day income, neither has the required capacity for spectators, neither is suitable.

Whilst Pontypridd claimed a crowd of 4500 when they played Merthyr, which was a fantastic effort by all in that weather – regardless of how close to 4500 were actually there – the cost was £10 to stand up and kids were free. The terrace tickets for the Scarlets v Cardiff Blues game were £18. The stand tickets ranged from £25 to £33 and upwards for that game, significantly more than the £15 to sit at Sardis Road. Plus, of course, there are significantly more bums n £25 seats at Parc Y Scarlets than there were on £15 seats at Sardis Road.

So, in a simple nutshell, there you have it. Nowhere else in Wales is there a capacity to host professional rugby. Nowhere else in Wales is there the ability to offer the necessary underwriting for a professional team. We have the four teams that we can have until the day that somebody steps forward with an enormous pile of cash to move rugby away from the four venues we have. And that pile of cash would have to look something like £27m for a stadium similar to Parc Y Scarlets and at least £1m a year for 5 years to run the venture.

In other words, its cloud cuckoo land stuff. We have the only four teams that we can have, owned in the best way for each of the four, branded in the best way for each of the four. And if none of the four are for you, so be it. Find your rugby elsewhere as there is lots of it about.

8 thoughts on “The cost of Professional Rugby

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  1. To be honest Phil, the future for Welsh domestic rugby looks bleak as long as the teams remain in the Pro12. Might sound harsh, but what is needed is another ‘rebel season’ with Cardiff and Ospreys breaking ranks and doing everything possible to join the Aviva Premiership when they go to 14. Harsh on the Dragons and Scarlets perhaps, but if it comes to having two strong sides in Wales rather than four weaker ones then tough decisions have to be made.

    The big question that is always asked is what can Welsh teams offer the English league, well in the case of Cardiff and Ospreys, quite a bit actually. For one, a traditional and strong city based rivalry between the two sides meaning real fixtures of interest between the two. Secondly, a close geographical location to nearly half the teams in the league along with the established cross border rivalry with teams that brings. Thirdly, the Principality Stadium and the opportunity to hold a massive double header there every season, featuring Cardiff and Ospreys against two out of Bristol, Bath and Gloucester. Fourthly, increased interest in the league in Wales, one of the few countries (albeit a small one) in the world where rugby is keenly followed. The current talk in rugby is about expansion, well why not start with the nearest neighbours?

    Whenever this subject is brought up, it is often met with derision from detractors saying that the RFU wouldn’t allow it. As we see with the English Premier League, however, those running competition have a very different agenda to those running the FA and the same could apply to those running the Aviva Premiership. As long as the two Welsh teams only received the same funding from the WRU that the English receive from the RFU and the Welsh teams agreed to the same European qualification rules, then I can’t see an issue, especially as an Anglo Welsh competition already exists.

    As I said before, leaving the Scarlets and the Dragons in the lurch would be harsh, but there should be no sleep lost over ditching the Irish (only taking an interest in the Pro12 now the European silverware has dried up and the Union can’t afford further investment, the Scots (been happily coasting along with two sides to the detriment of the league) and the Italians (who shouldn’t be in it anyway). Accepting four Welsh teams would surely be too many for the English to consider, but two might be feasible. Maybe alternate arrangements could be made for the Scarlets and the Dragons, but that shouldn’t worry Cardiff and Ospreys, as they should already be making the strong case why they and not the likes of Yorkshire should be considered when the Aviva Premiership adds two teams.

  2. Unless they were considering two divisions or conferences Phil, I just think four Welsh teams would be a step too far for the English. I think it is far more likely that they will look to mirror the 14 team structure of the French league and that is w

  3. Unless they were considering two divisions or conferences Phil, I just think four Welsh teams would be too much. I think it is far more likely that they will look to mirror the 14 team structure of the French league and that is where the door might open. When the music stops and two chairs are available, it would be up to Cardiff and Ospreys to make a better case for inclusion than the likes of Yorkshire Carnegie and potentially the likes of Newcastle. For the reasons I listed in my first post, I think it would be a strong case (I accept I might be biased) that would grab the attention of the money men who run the league and potentially those at BT Sport.

    A move into the English league would also see the long overdue dropping of the regional charade and Cardiff and Ospreys would be structured in the same way as their English counterparts with academies and ‘A’ teams. With Cardiff and Ospreys being allowed to stand on their own two feet, there could be a real move (again long overdue) towards getting the structure of the game right in Wales.

  4. My other question would be if the door to the Aviva remains closed, would the possibility of us going alone be an option? The Pro12 is well on the way to killing domestic rugby in Wales and I wonder if rumours of potential investment at London Welsh are true, it might be an option to consider.

    There is a lot of talk around about the need to reduce the number of games players are playing, so let’s step into the realm of supposition. Let’s say the rumours about London Welsh are true and they are an option to add to the current four current four to get to five. We could then maybe add a team like the Unicorns cricket team (maybe in North Wales) and get to six. That would mean 10 league games a season, along with a minimum of eight European games and the Anglo Welsh tournament. Would that be enough?

    As always the big question would come down to money. Could we secure a healthy TV deal to show the games? If I am right, the current Sky TV deal for the PRO12 is worth £30m, with BBC Wales paying secondary rights of about £3m. If a deal could be agreed with BT to show the Welsh games and the Anglo Welsh cup, would it be anywhere near that? 1 Friday night game on BBC, one 3pm Saturday kick off not on TV and one 5.30pm Saturday kick off on BT wouldn’t be too bad. The WRU would have to invest in the sides and the presence of two extra teams would mean the rules on NWQ players would have to be relaxed a little.

    Might be a bit fanciful and there are a lot of permutations involved (particularly with London Welsh), but after my first choice of Cardiff and Ospreys being in the Aviva, I would honestly prefer this option to being aboard the sinking Pro12 ship.

  5. If no where else in Wales has the ability to host a team then one needs to be created.

    Personally I believe Colwyn Bay could be viable. Plus Wrexham.

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