• Home
  • Latest
  • Rugby World Cup 2019: rugby must try to convert its Asian opportunity to narrow the earnings gap with football

Rugby World Cup 2019: rugby must try to convert its Asian opportunity to narrow the earnings gap with football

Posted on 20 September 2019

Rugby World Cup 2019: rugby must try to convert its Asian opportunity to narrow the earnings gap with football

The Rugby World Cup 2019 kicks off on Friday 20 September in Tokyo, the first time in the sport's history it has been held in Asia.  Many will recall when Japan and South Korea played host to the FIFA World Cup in 2002, which arguably contributed to a significant increase in investment in football – as evidenced by Asian investors acquiring a number of high-profile European clubs and multi-million pound Asia-only sponsorship deals with football's biggest stars. Will the Rugby World Cup create a similar bounce in the fortunes of rugby players?

Time to cap the cap?

Premiership Rugby and football's Premier League approach financial compensation for the players they regulate in very different ways. This has undoubtedly contributed to professional footballers earning many multiples more than their rugby playing cousins at every level of the game. 

Since the late 1990s, Premiership Rugby has imposed a salary cap on its participating clubs. These regulations were introduced with the aim of ensuring the financial viability of all clubs and the league, as well as to ensure an even playing field. The salary cap covers the combined salaries of all players and, while there is no restriction upon an individual's salary, each Premiership club, aside from exceptions relating to the number of 'Home Grown Players', 'International Players' and injuries, as well as the ability to nominate two players to sit outside of the cap, may not spend more than £7 million a year on its wage bill.  

As a result, players are effectively prevented from demanding larger salaries. This has contributed to several high profile international players moving abroad to play in other leagues without the same financial restrictions in order to maximise their earnings.  This has often come at the expense of these players giving up their places in the international team as there are strict rules preventing such players from being selected.

Football's Financials: Fair Play?

While there is no direct cap on what football players can earn, top clubs are subject to Financial Fair Play (FFP) rules imposed by UEFA and the Premier League. FPP rules are designed to prevent clubs from spending beyond their means. Under the Premier League FFP rules, for example, a club may not make a loss of more than £105 million over 3 seasons.

Like rugby, there are a number of areas under both the Premier League and UEFA regimes where spending does not count towards the calculations, such as investment in youth development, training facilities and infrastructure.

The lack of stringent controls on salaries has unsurprisingly allowed clubs to pay ever-increasing sums of money to their players (and agents). Many clubs have tried to justify this by entering into special image rights arrangements with their players and their image rights companies, which effectively limit the players from entering into personal endorsement contracts that conflict with the club's main commercial partners. In rugby, these formal image rights arrangements are also starting to gain popularity – albeit, with the salary cap, it is much harder for a club to get star players to curtail outside sponsorship work given this external income is an important source of revenue for players.

Looking to the future

The current TV broadcasting deal for Premiership Rugby with BT Sport is rumoured to be around £150 to £200 million for a five year contract ending in 2021. While the next deal is expected to be significantly higher, with Amazon reportedly to be interested in bidding, it seems unlikely that it will reach anywhere close to the heights of the amounts paid by Sky, BT, and Amazon for the domestic rights to collectively show around 200 Premier League games per season. To put these figures into context, barely a month into the new football season, Sky and BT have already paid more to screen live Premier League football than Premiership Rugby will receive for the entire season under its current deal. 

Nevertheless, commercial opportunities in rugby are increasing. CVC Capital Partners, the private equity firm best known for its successful investment in Formula 1, has recently purchased a 27% stake in Premiership Rugby Limited for around £200 million. The CVC investment is likely to lead to each club receiving a £13 million windfall. Additionally, CVC is also in the process of buying a share in the commercial arm of the Six Nations and the Pro14 league.

Opportunities in the East?

More than 500,000 foreign fans are expected to arrive in Japan and nearly all of the 1.8 million tickets have been sold. World Rugby has claimed that an estimated 40 million people in Japan itself will watch the opening game. It is anticipated to be the most widely-watched, digitally-engaging and socially and economically impactful rugby event ever; an economic impact study suggests the tournament will generate a total revenue of £2.97 billion. 

As is often the case with tournaments on a global stage, the challenge in Japan will be to turn the short-term boost of the sport into long-term growth, popularity and further commercial opportunities. Perhaps this has already begun, following World Rugby's launch of its Impact Beyond legacy programme which has reached 1.8 million new rugby participants in Asia.

Given the additional amounts going into the game and this World Cup opportunity, it is surely only a matter of time before rugby players use their growing power to apply greater pressure on the authorities to loosen the purse strings so they can start narrowing the earnings gap to their footballer cousins. If they don't, legal challenges to the cap and the rules introduced by national teams on playing abroad appear to be inevitable.

How can we help you?

How can we help you?

Subscribe: I'd like to keep in touch

If your enquiry is urgent please call +44 20 3321 7000

I'm a client

Please enter your first name
Please enter your last name
Please enter your enquiry
Please enter a value

I'm looking for advice

Please enter your first name
Please enter your last name
Please enter your enquiry
Please select a department
Please select a contact method

Something else

Please enter your first name
Please enter your last name
Please enter your enquiry
Please select your contact method of choice