Blues man says Wales needs just two regions to pull in finances
THE Cardiff Blues have fallen further into the red with board member Martyn Ryan warning that the professional game in Wales is now at crisis point and should look to create two super regions with the financial clout to be competitive.
In a frank assessment of the challenges facing the game in Wales, against bigger TV and other commercial deals in England, France and Ireland, which can draw on bigger crowds due to the wider geographical spread of its regions, Mr Ryan said that taking a “purely commercial and non emotional” perspective they should be based on the biggest population centres in Wales – namely Cardiff and Swansea, but taking an east and west Wales approach to capture even more people.
He said that the existing four regions, alongside an academy/ development side in North Wales, should still exist to foster player development.
But he said the current funding model had to change to put more player squad, coaching team and financial resources behind two regions in a bid to close the gap with rivals in the other home unions and France.
A WRU blueprint to effectively centrally contract all players under a new joint venture company with the regions was rejected earlier this year.
However, discussions between the regions and the WRU – as the Newport Gwent Dragons could soon come under the control of the union – are continuing.
It comes as the Blues, who are hoping to secure a 150-year lease from landlord Cardiff Athletic Club to redevelop their BT Sport Arms Park home – with two possible options in a new stadium and an indoor arena – have posted pre-tax losses of £1.49m for the last financial year to the end of June 2016.
While the previous year was a 13-month period, on a like-like for basis, losses widened from £657,950 to £1.49m. Revenues were down £800,000 from £9,2m to £8.4m.
The worsening financial position was a result of a £300,000 fall in ticket and retail income. Also in the previous year it received £500,000 from the WRU for entering into the Rugby Services Agreement (RSA) with the regions.
The regions are now into the third year of the RSA with the WRU, which will have to see them repaying a £3.6m loan (around £900,000 each) over the next three years to the union. It will only be interest bearing if the regions miss capital repayments.
Mr Ryan, a former partner and chief executive at Genesis Investment Management, said: “Arguably this 12 month period [year to end of June] is a good reflection as to where we are under the agreement.
“If you say we are losing short of a million pounds on operations which is cash flow, and have got things likes the RSA loan now reversing, it is not a happy situation.
“Commercial activity is fine and is probably as good as it can be and probably better than the other regions. But the seat of the problem is the expenditure you have to make on the team to stay competitive.
“We are spending around £5m just on the squad and Gloucester for example, who we recently played in Europe, are spending £7.5m and that’s 10 internationals [budgetary difference]. So the quality is good [Blues’ squad] but the depth is not there.
“Gloucester also have a relationship with Hartpury College which they are effectively running as a development side, which next year will be playing in the English Premiership. It is just the whole environment with like-for-like spending millions of pounds apart [between the professional game in Wales and England].
“I think we are at a point where those tough decisions need to be made with fundamental change.
“And in my view I think the game in Wales can only really support two very competitive professional sides.”
Mr Ryan along with fellow directors in Peter Thomas, as chairman, and Paul Bailey, have invested millions in loans into the club that are not drawing down interest. The Blues total net liabilities for the year stood at more than £14m.
When asked which regions should receive more funding and where they should based he said: “If it was purely a commercial and non emotional decision you would put them in the two biggest population centres, so east and west Wales would be the obvious
thing. It is not purely money, but environment and coaching as well, but to build a quality environment you can only really afford to support two sides.
“But you need five professional entities for the development of players. So you would require another three. So it would be four regional and RGC (Rygbi Gogledd Cymru).
“If you look at Ireland they have much bigger gates. Leinster think they have a chimney point reach of 2.5 million people, which is the whole of South Wales, where we have four regions.
“They are getting 20,000 people. So there is gates in Ireland, and in England and France it is TV revenues. For our Pro 12 TV revenues it is £14m a year.
“The reason why it is £14m is because of the number of eyes and the grading. In Wales it is a working class game and in England it is a middle class game. So in England there are more eyes and commercial opportunities.”
Mr Ryan said that the two regions in Scotland also have significantly more in playing squad budgets than the Welsh regions, with Glasgow, for example, having several million pounds more than the Blues.
The current TV deal for the Guinness Pro 12 with Sky and the BBC expires at the end of next season.
On a new deal Mr Ryan said: “I think it will go up, but not significantly.”
If two new super regions are established in Wales, Mr Ryan said things could change.
He said: “Yes there is no reason if things grow you can’t go back. If you look at NFL there were only 22 franchises 20 years ago and now there are 32.”
He said that for a new sustainable regional funding and business model to emerge it would need the WRU to play a key “midwifery role”, while there was potential to bring in new private sector investment, particularly if the regions were competitive in Europe.