The new Premiership season kicks off at Ashton Gate on Friday when promoted Bristol meet Bath. The clubs are run by the two richest men involved in the game, whose combined wealth is more than £2bn, but 21 years on from the tournament’s launch clubs remain mired in debt and the game is still a licence for backers to lose money.
Cumulative losses for 2017-18 are expected to be £35m for the 12 clubs, an average of almost £3m each. Northampton were the first to announce their results last Friday: having posted a profit in the first 16 years of the century, they recorded a deficit for the second year in a row, hitting the league average.
Saints are one of the clubs run on sustainable lines, looking to spend what they earn and beholden to no one, but spiralling wage inflation and two unsuccessful seasons pushed them into the red. “We see a route to profitability but it will take up to four years,” said chief executive, Mark Darbon. “The market is very difficult. It is no coincidence that all clubs are losing money.”
Premiership finances: the full club-by-club breakdown and verdict
The Premiership launched 21 years ago this month. Clubs were then losing an average of £1.5m and before the first season’s end the Monte Carlo-based copper trader Ashley Levett bailed out of Richmond after investing more than £8m, putting the club in administration, after which it dropped to the bottom of the league pyramid. “I do not know anyone with a sound business sense who would do this,” said Levett at the time. “Being an owner of a rugby union club is a complete lottery and I cannot go on throwing money down the drain.”
Rugby union was then in its professional infancy, with teething troubles leading to protracted disputes between clubs, unions and the then International Rugby Board. Club owners were largely motivated by business rather than the sport and many followed Levett out, despairing at ever getting their money back, never mind make a return on it. They had little or no emotional investment in rugby; in contrast benefactors today tend to be fans with bulging wallets who are recognising that the health of the club game demands financial planning, not splurging.
“Rugby is not that young a professional sport now,” says Wasps chief executive, Nick Eastwood, whose club were within a few minutes of being declared bankrupt six years ago. “We are in late adolescence. We should have grown up and learned our lessons. The game can become sustainable but only if we collectively make the correct decisions in the next four years and get costs under control.”
Other than the debts, the club game is virtually unrecognisable from two decades ago. The first round of Premiership matches generated an average crowd of 5,674, with not one attendance nearing five figures. The average for the final round of last season was more than double that, at 11,860, with all six matches attracting 10,000 fans or more. No one rents a football club ground any more and only Sale, who play at a local authority-owned ground in Salford, do not have an asset to exploit commercially. A considerable sum has been spent on improving stadiums, training grounds and facilities, and pitches are no longer mudheaps.
The average crowd at a Premiership match has virtually tripled since the start of professionalism and, if that figure is inflated by matches staged at venues such as Wembley, Twickenham, the London Stadium and St James’ Park, the majority of clubs regularly attract five-figure crowds. Bristol are guaranteed their highest attendance for the visit of Bath, despite the match being played on a Friday night. There will be few spare seats the following day in the five other matches. So why are benefactors still having to dig deep at the end of every season?
The main reason is wage inflation. Four years ago the clubs decided to invest more heavily on the rugby side, raising the salary cap over successive seasons to help compete with clubs in France, who do not have to worry about the upkeep of their grounds because they are municipally owned, and the Irish provinces. The cap this season is £7m, plus dispensation for allowances and two marquee players: Bristol are paying New Zealand full-back Charles Piutau £1m a year and they have also signed former Australia flanker George Smith.
The cap will remain at the same level for three years. It will be reviewed before the 2020-21 season when the television contract for the Premiership comes up for renewal. “Clubs are no better off than they were 20 years ago and that is a real shame,” says Leicester chief executive, Simon Cohen. “Revenues have risen significantly but the percentage that has gone to players has created difficulties and you are less able to invest in other aspects of the game. You want to spend more on infrastructure, the community and matchday experience for fans but wage inflation means you cannot.
“We need to use the cap remaining the same for three seasons to reduce costs. Losing the second marquee player would be a significant help and in future we have to make sure the cap is based on actual revenue rather than projected income, as it has been.”
A fear of some is that Bristol, whose backer Stephen Lansdown is worth £1.7bn, may trigger another wage explosion through their purchasing power. “I sense from the ownership group that the emphasis is changing,” says Gloucester chief executive, Stephen Vaughan. “A few years ago there was a win-at-all-costs mentality but now there is more togetherness. Self‑sustainability is becoming a priority but there can be the odd curve ball and Bristol coming up marks a big change in direction. They can unsettle the market, with marquee players at other clubs wondering why they are not getting paid the same as Piutau. That is not to suggest Bristol do not want to be well run and sustainable but they will be doing their utmost to survive in the Premiership. What club with their finances would not throw everything at it?”
I sometimes ask myself why I do it: where does your business head go when you get involved in rugby?
Lansdown rescued Bristol from bankruptcy in 2012, two years after Bruce Craig used some of the £956m he received from his company’s sale to buy Bath. Bristol have been rebranded as the Bears this season to provide a fresh impetus and, while Lansdown anticipates having to foot Bristol’s losses for the next four or five years, his drive is profitability. “Sustainability has to be the goal because no one can last for ever,” he said. “You owe it to the club, the supporters and staff to put it in a position where it can carry on for as long as it has been going previously and beyond.
“Bristol is not profitable: the club was within a gnat’s whisker of going out of business when I took over and it has to become sustainable because I do not want to wish my life away. Equally, the last thing I want is for Bristol to collapse and that is why I intend to make sure that, at worst, it is breaking even. I sometimes ask myself why I do it: where does your business head go when you get involved in rugby? But I love sport and the city.”
Premiership rugby clubs vow to join forces to tackle losses
The newest owner is Simon Orange, who bought Sale two years ago when the Sharks were unable to get anywhere near the salary cap. This summer they signed the England wing Chris Ashton from Toulon and Orange, who originally envisaged helping the club tick over, is now planning its rise back to the top. “Higher wages are a big reason clubs are losing a lot of money but you cannot blame the players because they put their bodies on the line every week in a tough, short career and are entitled to get what they can get,” he says. “We have to build a sustainable model by growing revenues because I cannot imagine the club game will forever be propped up by wealthy owners.
“I could be wrong: I am a massive Sale fan so could be here for 20 years, like Nigel Wray at Saracens. My company owns the club but unless we make it sustainable quickly, I might have to take it over personally. We have put in a good few million quid so far and will continue to do so for the next two or three years.
“We have made massive improvements and with two or three top quality additions next season, reaching the cap, I do not see any reason why we cannot challenge. The first 20 years of professionalism saw the focus on rugby rather than business, which was totally understandable. It is now on becoming profitable and I am more enthusiastic than ever.”
Wray is the one survivor from the pioneers of the 1990s. His £40m-plus investment has helped Saracens move from tenants to landlords at the Allianz Stadium, where a new stand has been given planning permission, and the club’s work in the community sees the Saracens high school open next month in Collingdale, followed by a primary school in two years. Work off the pitch has fuelled success on it and turnover has trebled since the move to Barnet.
“Every year our debt is written about,” says Saracens’ chief executive, Mitesh Velani. “The club is not in debt and has nothing leveraged on it. It is a loan from our parent company, shareholder investment with no recourse. That will be seen when we release our latest set of accounts in a couple of months. We have a positive net asset value, although we have been loss‑making. We have a great opportunity to become sustainable but we have to control costs and look to the long term.”
Saracens have put their leading players and coaches on long‑term contracts; Gloucester and Northampton have reduced the size of their squads, replacing reserve players on around £60,000 a year with academy graduates; and Worcester, whose financial performance last year was the worst of the 12, with an £8m loss that has hampered the search for new backers, have drawn up a new financial plan.
In the past Premiership clubs have gone to the wall – Bedford, Richmond, London Scottish, Bristol and, most recently, London Welsh – but despite the losses there is no sign of anyone following them soon. “I sometimes pinch myself when I drive into the Ricoh Arena,” says Eastwood, who remembers counting down the seconds in 2012 before Wasps raised the £2m needed to prevent their becoming insolvent. “We were losing £4m a year when we were in Wycombe. Had we not moved to Coventry, there is a significant risk the club would not have survived.”
They are still making a loss but the ground means their turnover is the second highest of any club in Europe. “You have to give owners immense credit: without their substantial investment, the clubs and England would not be where they are today. They hate losing money but they would hate losing their clubs even more. The flat salary cap gives us the opportunity to ensure that does not happen.”