By DAVID HAYWARD
IN last year’s season of HBO’s Silicon Valley, the show parodied business model jargon through Pied Piper CEO Jack Barker creating his own model, the Conjoined Triangles of Success, to help their business thrive in the high stakes world of venture capitalism.
This model can easily be applied to the current NRL negotiations with players and clubs given there are three dimensions to its ineptitude. Included in the Conjoined Triangles of Success model (or failure in the NRL’s case) are engineering and manufacturing (players and clubs), growth and sales (NRL), and compromise (salary cap and club grants).
The ongoing saga of salary cap and club grant negotiations in NRL circles is one of the most uninspiring aspects of the game in 2017. To add insult to injury, it has reached the point that all parties are bringing political tactics in their respective attempts to win the court of public opinion, even though sports fans use sport as a tool to get away from the depressing and uninspiring world of politics.
The three dimensions to the NRL’s Conjoined Triangles of Failure for club and player negotiations are bleedingly obvious to all except themselves it would appear. One, there is no discussion of club expansion by the players. Two, players are requesting a revenue share model based on NRL revenue, when in most cases their employers (clubs) are operating on multi-million dollar losses every year. And three, the NRL is on the verge of agreeing to one of the worst acts of social welfare in Australian political and/or sporting history.
In the last round of AFL salary cap negotiations, the AFL and players successfully used expansion from 16 to 18 teams as a tool for initiating sustainable wage growth for players. This served the players well through the creation of around 70 more jobs (12.5 per cent increase), enhancing job security in the cut-throat world of professional sport and forming more job prospects within the game post-playing. This also served the AFL very well in terms of expanding to new markets to facilitate long term revenue growth from TV deals and sponsors, which in turn will also enable players to negotiate salary cap increases in the future as they have recently done.
There has been no serious discussion at all by the NRL or players through this process of club expansion, rather just expansion from within by expanding club rosters from 25 to 30 players (additional 80 player contracts to mostly be used for reserve grade playing time). It is completely narrow-minded and self-serving by all parties (if it isn’t self-serving it is plain incompetent) to ignore club expansion. And most importantly, it ensures the game will not grow over the next five years at least with the added risk it could go backwards.
It would be great to know the NRL, players’ and clubs’ thoughts on how the NBA’s salary cap grew from $10m to $100m over the past 30 years, because their current actions are effectively a statement for no growth. The NBA went from 23 teams in 1988 to 30 teams in 2005. The great benefit of this approach not only did it increase local TV and sponsorship revenue, it improved the league’s global reach. This expansion created 84 more roster spots which has been filled with international players from Europe, Asia and Australia and forms greater engagement with the people from these nations. Sure the NRL salary cap will never reach the heights of the NBA but it would be great to at least aim for $15-20m over the next two decades instead of increasing the chances of it decreasing back to $7m.
Many within NRL club management claim there isn’t enough playing talent for 16 teams, let alone 18, which has put a handbrake on expansion. While this view has the stench of self-interest by protecting club revenue, it is shortsighted and an insult to the current players. There is a demand for fans to watch 18 teams as evidenced by the strong TV ratings for the Pacific Nations Test matches in May. Through expansion, it opens opportunities to develop talent from PNG, Pacific nations, Europe and North America. The later might also come in handy given they are hosting the 2025 World Cup and there are hundreds of athletes in their early 20s with college football experience that have skills transferable to rugby league who could successfully switch codes if they are not drafted into the NFL. The NRL could create a generation of non-drafted college footballers that have a professional sporting career outside of college that would translate to the rugby league equivalent of Patty Mills, Matthew Dellavedova and Joe Ingles signing $50m NBA contracts.
The players staking a claim of NRL revenue as the basis for player wages seems fair given it is what a lot of sporting leagues do with salary caps. However, it would be even more fair if the revenue included losses of their clubs. The players claiming 29 per cent share of the NRL’s estimated $550m revenue for next year results in a salary cap of around $10m per club. The fact the clubs, who are responsible for paying players, are reportedly operating at a combined loss of $50m per annum, it remains a significant retardant on the sport’s ability to grow. For example, by including club losses in the revenue calculation the salary cap would be at around a more sustainable $9m per club and open up more opportunities for the game to invest in growth and force clubs to live within their means.
Finally, the NRL offer of subsidising clubs with annual grants amassing to the salary cap plus 30 per cent represents a reprehensible act of social welfare and all parties are at fault; it would make the most powerful economic socialists in history so proud. The NRL should never have offered it, and the clubs should never have accepted it.
The fact clubs survive financially over the next five years with their annual $13m handout is by no means a mark of the club’s and the system’s financial success, it completely hides the fact there are major fiscal problems within the NRL, much like how the economic situation played out in Greece. These grants are setting the sport up for failure while ensuring the “success” of the current 16 clubs for the medium to long term future.
Imagine if the clubs worked in the interests of growing the game and “took a cut” only accepting a $10m per annum handout from the NRL? The NRL would have an extra $48m per annum to invest in setting up new teams in Perth, Queensland or Wellington. But that perhaps isn’t in the clubs interest, especially if they are blind to business growth strategy and fear change. With the glass half full, in five years there would be more revenue from TV and sponsorship that would enable grants and salary gaps to increase.
One can only hope sanity prevails and the NRL, players and clubs adopt a growth mindset in finalising the salary cap and club grants for 2018. This of course is highly unlikely given the historical and cultural mindset of Australian rugby league decision makers are often addicted to instant gratification and embracing Conjoined Triangle of Failure model. If that is the case, the NRL is destined to become the Greece of professional sporting world over the next decade and future rugby league players and fans can thank the 2017 crop of NRL administrators, clubs and players for it.
