The Blog

Rugby: Shifting Sands in The European Rugby Meltdown

Alternate proposals to fill the void left by an absent European Cup have considerably more failings than any imperfections they were dreamt up to fix. Remember that the two main reasons for the current European shambles are a dissatisfaction with the lack of meritocracy, and a skewed distribution of remuneration.

Despite modest progress towards resolving the Heineken European Cup impasse, its future remains in limbo as the epicentre of discontent has relocated from London to Cardiff, where insurrection rages, as the four Welsh regions pursue autonomy from the WRU, allegedly in the name of survival.

As the RFU have assumed the balancing act of astute conciliators, Premiership Rugby have kept quiet, probably using this opportunity to reflect and ultimately reframe their previously staunch position. The passing of time doesn't just heal wounds, it handily assists folks to forget, giving camouflage to about-turns without losing credibility. Indeed Premiership Rugby will likely come in from the cold, but only when they can rationalise it as a victory rather than a retreat. So as the frenzied (re)positioning goes on, my prediction remains, that rugby's European Cup will endure, and here is why.

Alternate proposals to fill the void left by an absent European Cup have considerably more failings than any imperfections they were dreamt up to fix. Remember that the two main reasons for the current European shambles are a dissatisfaction with the lack of meritocracy, and a skewed distribution of remuneration.

The current front running and flawed idea is that the four Welsh regions might abandon their Irish, Scottish & Italian partners in the Pro12, joining an expanded Premiership. The idea shares a lot in common with infants trying fit cubes into cylinders, by failing to spot some obvious incompatibilities,

For the Welsh, the potential higher rewards (thanks to BT Sport) sound great, but the risk of demotion is totally unpalatable. The possibility of being stranded in the second tier Championship would leave them up the creek without a paddle, despite any parachute payments. Hence if survival is the aim, they would insist on immunity from relegation, guaranteeing their funding annually.

Wonderful for the Welsh as this might be, just imagine the furore if an English club finishing third last was doomed to relegation in place of two lower Welsh sides. Perhaps this might lead Premiership Rugby to try and ring-fence the top tier entirely, removing the threat of relegation which has been mooted many times before. Ironically, it was the Welsh based in London (London Welsh) who had to pursue a legal route in 2012 just to claim the place they had earned in the premiership.

Given the evidence of recent history, it suggests that there exists little special sentiment towards those of a Welsh disposition, and meritocratic values are just a smokescreen to kleptocratic interests. As ever, it's money that talks. The regions would do well to beware of who is playing who, if they weren't too busy brawling.

Despite being around since 2003, the four regions remain mired by poor judgement, management and more, as PriceWaterHouseCoopers specifically noted in April 2012 that poor financial handling was a contributing factor to their woeful predicament.

Thus far, the Welsh regions have cumulatively turned down approximately £6m annually, and also rejected an extra £1m in savings by allowing the WRU to centrally contract top players. The outsourcing of expenses (i.e. receiving subsidies) is about as good as business gets for the recipient, yet still the regions resist.

The statistician and scholar, Nassim Nicholas Taleb reckons,

"you are rich if and only if money you refuse tastes better than money you accept"

which was his eloquent way of defining 'contentment'. However I fear the regions may have taken this literally to conclude they will actually become rich by refusing money. The reality is £7m is a lot to sacrifice for a precarious sort of independence.

Nonetheless the regions project that this arrangement would certainly lead to ruin, yet like all extrapolations, their case is built on weak foundations called assumptions. Calling it uncertain would be an understatement.

"Driving a car blindfolded with directions from a passenger who is looking out the back window"

is how the Professor of Finance Werner DeBondt humorously describes financial forecasting.

Interesting as it is to consider why the regions are pursuing the construction of a house of cards to be situated on sand, it's difficult not to conclude that they should be focusing their energy closer to home and building modestly on safer ground. Along with this, it must be examined how they walked themselves into such a dark place.

The gaping hole in their funding widened 160% from £2m in 2008 to £5.2m in 2011, in what appears to be a serious lack of communication between those raising money, and those spending it. Ambition of course explains a lot of this over-investment and that impulse is commendable, but at some point in time, a business needs to become sustainable and adjust to the market. Most start-ups can do this within around five years, the regions are over a decade old, with seemingly little progress.

How is it exactly that the regions would allow their wage-bills and expenses to rise so dramatically when they had little hope to pay them? The reality is that the professional rugby market for ambitious players is rigid with demand constant, and with an abundant supply of talent, most of which never gets seen. As such, despite what sports agents would have you believe, it is implausible that an entire squad would pack up and leave. The market is not big enough. Wage inflation can be managed responsibly without catastrophic effects, as the clubs have more power than they realise or care to exercise. Of course some players would leave, but so what? It's far better to live within your means and have a future rather than to blow up by gambling the family jewels.

In the last few days the WRU have announced that Wales Captain Sam Warburton has signed a contract directly with them. It's likely that this is the first step towards an agreement that will see the Welsh united once again, and continuing in the Pro12, leaving the English clubs isolated. It's true that compromise is key to achieving meaningful results, otherwise you risk ending up as a lone spectator. After a certain point, roles are reversed, as it's the smart person who accepts, and the idiot who insists.