The Pro14 has become the latest domestic club competition acquired in part by private equity firm CVC, agreeing in principle to sell a 27 percent stake in a similar deal to the one struck with Premiership Rugby.
The flush of private money into the club game will no doubt exacerbate the growing value disparity between the domestic game in the Northern Hemisphere and the domestic game in the Southern Hemisphere.
The player drain on the Southern Hemisphere’s Super Rugby competition is already the youngest it has ever been as nationally-controlled contracting fails to match offers flowing from the North for fringe internationals or even mid-level talent.
In South Africa, the rules have been completely changed in order to keep the Springboks strong in the face of growing European power.
While it is in the South African Rugby Union’s best financial interests to let European and Japanese clubs pay top dollar for Faf de Klerk, Handre Pollard, Willie le Roux, Jesse Kriel and Damian De Allende, it undoubtedly negatively impacts the value of Super Rugby for all nations involved with these players missing.
South Africa’s Super Rugby sides will feel the first impact of the strategic change in 2020. Of the World Cup squad that won in Japan, less than half will play Super Rugby next year with most of the major stars promoting overseas leagues.
International capped players in New Zealand that weren’t in favour but still holding considerable star power are being picked off earlier and earlier.
Seta Tamanivalu, Malakai Fekitoa, Lima Sopoaga, Victor Vito, Charles Piutau, Steven Luatua, Matt Proctor, Charlie Ngatai, George Moala and Julian Savea all are young enough to potentially still be adding pulling power to not just Super Rugby, but also the All Blacks.
Even the highest-profile stars like Brodie Retallick and Beauden Barrett are pushing for New Zealand Rugby-approved sabbaticals that will see them play offshore in 2020, leaving Super Rugby wanting for big names across all the competing countries in 2020.
Even emerging talent at the other end is being picked off, leaving a smaller margin for error in getting selections right. Tasman winger Tima Faingaanuku took a deal with French club Perpignan last year when Super Rugby clubs seemingly weren’t interested. The same has happened again this year for Hawke’s Bay first-five Lincoln McClutchie, now heading to the Japan Top League after his name wasn’t called by a Super Rugby team.
The Japanese Top League has also secured a host of older, high-profile overseas stars and the timing of that competition will leave the Sunwolves Super Rugby franchise bare of any Japanese players. With SANZAAR already confirming their fate post-2020, their last season will be a painful and awful watch full of ring-ins from God knows where.
Rugby Australia’s financial pressures and problems fielding strong Super Rugby teams consistently have already been well-documented.
What happens with the next broadcasting rights cycle will be closely watched as a drop in value will signal that a spiral is already underway in Australia.
A decline in the number one revenue source – broadcasting – will create wage deflation across the code, which will escalate a player exodus at the top end and force Rugby Australia to scrap Giteau’s Law to keep the Wallabies competitive.
If Super Rugby continues to stagnate, the value of the SANZAAR broadcasting rights package will too.
The CVC-led push into rugby up North will surely result in the growth of theirs. If that value gap grows wider, you will see more and more offers that can’t be refused.
The Northern Hemisphere could become even more competitive on the international stage by allowing their domestic leagues to wage a full-scale financial war on the already cash-strapped Southern Hemisphere unions to eliminate their depth and remove top players. The French Rugby Federation’s move to limit foreign players in the Top 14 is actually a helping hand to SANZAAR offering some relief.
The SARU has already wisely bowed to that growing pressure, Rugby Australia half-heartedly with Giteau’s Law, but as long as the NZR insists on not selecting overseas-based players, this remains a risk for them.
With CVC’s investments, how long is it before offers to top All Blacks become three times, four times what the NZR can pay? When those offers get too hard to turn down, then the white flag will have to be raised.
We are undeniably on a trajectory towards that becoming a reality with little to no strategic action to close the growing ‘value gap’ imbalance at the club level.
The biggest power play that SANZAAR could use to turn the tide against the inevitable is to privatise the club game whilst retaining control of the crown jewel and biggest revenue-generating asset, the international game.
Selling off the Super Rugby franchises while keeping a minority stake will allow for wage inflation to improve at a greater clip driven by private investment. Moving to fee-based match compensation like the Rugby Football Union in England for international matches will take out all the risk with long-term contracts that continually go wrong.
When the NZR inked a four-year deal with star winger Julian Savea after the 2015 Rugby World Cup, they did not envisage that his declining form would result in getting benched by the Hurricanes as early as 2016, with Toulon bailing them out of the deal by the end of 2017.
After committing to a four-year deal with his successor Rieko Ioane, NZR are seeing a de ja vu of sorts as Ioane fell out of favour before even making it to the World Cup in Japan despite being on a reported million-dollar salary.
When Rugby Australia topped up a deal for Quade Cooper to return home to the Queensland Reds, they did not envisage they would be paying him to play club rugby at local parks around Brisbane.
By taking control of contracting, a centralised national union holds all the risk that the player will deliver on his contract value and some cannot afford to take the dead money hit anymore.
Transferring the risk to someone who can afford it is not a bad idea, which is what the SARU has done. Even better would be to transfer the risk but have the players still build value for you by playing for a franchise in which you have a minority stake in.
A sale of the Super franchises would need to cede control and the running of Super Rugby, but other terms such as favourable windows to access the players can be made with the hindsight offered by the RFU’s lack of foresight 20 years ago.
The national unions would need to lobby World Rugby for even tighter eligibility rules so that Super Rugby can become an open-border competition across the Asia-Pacific region with minimal risk of national unions poaching each other’s talent.
The competition could then modernise with a proper free agency market that irons out the differences in the playing pools of each country to keep the league as a whole strong at all times.
There would be limited crossover between South African players and franchises in the Asia-Pacific region and vice versa, but across the Tasman you would assume the flows would increase dramatically to aid and strengthen the Australian and potential Japanese franchises.
Only then can Super Rugby develop into the premier club competition in the world, keeping talent on this side of the world and grow in value in its own right.
At the moment it is on a path to becoming a ticking time bomb while remaining an extensive operating cost that national unions cannot afford and continue to lose value on by running it the way they do.
The Season with Hamilton Boys High School 1st XV – Episode 2:
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