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Rugby World Cup: potential impact on player wages

Posted on 1 November 2019

Managing Associate in the Sports Group Simon Leaf writes for City A.M. – first published here.

When Japan and South Korea hosted football’s World Cup in 2002, it precipitated a significant increase in Asian investment in the sport.

Takeovers of high-profile European clubs followed, as did multi-million pound Asia-only sponsorship deals with star players.

With the first Rugby World Cup to be held in Asia about to conclude, this milestone could 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.

As a result, rugby players are effectively prevented from demanding larger salaries.

This has contributed to high-profile internationals moving to overseas leagues without the same financial restrictions in order to maximise their earnings, even when it has meant giving up their places in the national team as a result.

Football’s financials: fair play?

While top football clubs are subject to Financial Fair Play rules designed to prevent clubs from spending beyond their means, there is no direct cap on what players can earn.

That 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 which effectively limit the players from entering into personal endorsement contracts that conflict with the club’s main commercial partners.

In rugby, these 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 income for them.

Looking to the future

Premiership Rugby’s current TV broadcasting deal with BT Sport is said to be worth between £150m and £200m over five years until 2021.

While the next deal is expected to be significantly higher, with Amazon rumoured to be interested in bidding, it seems unlikely that it will reach anywhere close to the £1.6bn per season collectively paid by Sky, BT, and Amazon for the domestic rights to around 200 Premier League games.

Nevertheless, commercial opportunities in rugby are increasing.

CVC Capital Partners, the private equity firm best known for its successful investment in Formula 1, recently purchased a 27 per cent stake in Premiership Rugby for around £200m.

It 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 were expected to visit Japan for the Rugby World Cup and nearly all the 1.8m tickets were sold in advance.

It is tipped to be the most widely watched, digitally engaging and socially and economically impactful rugby event ever; one study suggests the tournament will generate total revenue of £2.97bn.

As is often the case with global tournaments, the challenge in Japan will be to turn the short-term boost to 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 1.8m new rugby participants in Asia.

Given new investment in 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 narrow the earnings gap to their footballing cousins.

If they don’t, legal challenges to the cap and the rules introduced by national teams on playing abroad appear to be inevitable.

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