Rethinking rugby league as it emerges from COVID-19

Sporting rethink

Rugby league began in 1895, as the 'Northern Union' when clubs in the North of England broke away from the Rugby Football Union (“RFU”) in a sporting rethink. The clubs wanted to compensate their working-class players for time away from work for rugby tours and injuries. The RFU refused, saying “if men couldn't afford to play, then they shouldn't play at all.” In the decade that followed, rugby league made changes setting itself apart from rugby union.

The changes were sufficiently popular with players and spectators to arouse the interest of rugby players in Australia and New Zealand – the roots of the huge popularity of the National Rugby League (“NRL”), especially in New South Wales and Queensland. The increased gate money allowed the rugby league clubs to pay benefits to the players the crowds had come to watch and support.

Notwithstanding early and continued innovations, rugby league’s hold on the imagination of fans in the UK has faced stiff competition from other sports and changing social habits in recent years. The confirmation of open professionalism in rugby union since 1995 has presented one challenge, although as for all sports it is the juggernaut of football’s Premier League and football more generally which presents the greatest competition. Unfortunately, in addition, the heartland of the sport in the North of England has also suffered an economic decline since the sport’s creation in 1895. This has exacerbated these competitive challenges by reducing the revenue available to the sport.

However, for the game that was formed due to a desire by the community to look after the players who played the game, this community remains its great strength. Manchester Metropolitan University (“MMU”) published a rugby league Dividend Report in 2019 that estimated the sport’s social impact on players and volunteers was more than £185m along with an annual economic impact of English clubs and central events of more than £141m.

BDO Rethink

Whilst rugby league is arguably the original sporting rethink, during the COVID-19 crisis BDO developed the Rethink global framework. This aims to support businesses’ response to the pandemic, encapsulating how to:

React to a crisis ensuring that measures are taken to secure business survival in the short term
Build Resilience throughout the prevailing business environment, safeguarding vital elements of a company where necessary
How to look forward to Realise the future benefits of sensible business decisions taken calmly and pragmatically.

React - The basis for survival

The unprecedented circumstances of a global pandemic had devastating consequences on professional sport in the UK, with an enforced halting of competitions and then when play was able to be resumed it re-commenced with no and then reduced spectators for a significant period. This is before you consider all of the additional challenges that had to be dealt with on a continued basis to enable players to compete, in similarity with all other businesses and organisations.

The scale of the financial challenge is evidenced by the impact on the two English clubs with the highest turnover pre-pandemic, the Leeds Rhinos and St. Helens. In the financial year to 31 October 2020 (“FY20”) performance was negatively affected in comparison with FY19 as follows:

£'m	Leeds Rhinos FY 19	Leeds Rhinos FY 20	St. Helens FY 19	St. Helens FY 20
Turnover	11.5	8.8	8.6	5.9
Profit / loss after tax	0.4	- 1.4	- 0.3	-0.7

Professional rugby league was severely affected by the pandemic - for example by the cancellation of an Ashes Test series against Australia in the autumn of 2020 which had been due to start at the Tottenham Hotspur Stadium and would have delivered crucial revenues. However, the benefit that rugby league provides to its local communities, the communities that originally led to its establishment, was the basis for its survival.

The quick reaction of the sport’s governing body, the Rugby Football League (“RFL”), in accessing HM Government support and being able to demonstrate the value of rugby league to society, as set out in the MMU report, led to rugby league being the first professional sport to access loan funding from the Department for Digital, Culture, Media & Sport (“DCMS”) during 2020. The RFL, in conjunction with DCMS and Sport England, established a Loans Committee and a process to distribute loan sums according to need across the professional game. The process that was created was subsequently rolled out to other sports, highlighting the speed at which rugby league reacted to the crisis.

On 1 May 2020, the RFL secured a £16m emergency loan from the Government. The funding was made available to UK-based Super League, Championship and League 1 clubs, the RFL and Super League Europe.

The RFL also worked closely with Sport England to deliver survival funding to the grassroots game, largely spread across the same areas of the North as the professional clubs.

Resilience - adapting business models and utilising support

In March 2021, the RFL secured a further £16.7m in loans to support professional clubs through the pandemic. In total, rugby league accessed a facility worth £32.7m of loan support for its professional clubs. In conjunction with other measures taken by the clubs and the RFL, including accessing the Coronavirus Job Retention Scheme (“CJRS”), this ensured the survival of the professional clubs and consequently the professional game in England.

This funding will have helped prevent insolvencies within the sport which has, unfortunately, been a reality at clubs such as Bradford Bulls and Widnes Vikings in the not-too-distant past.

A significant sponsorship deal was also struck with The National Lottery with a specific focus on Women’s and Girls’ rugby league, which allowed the resumption of competitions such as the Women’s Challenge Cup and Women’s Super League in 2021, as well as England internationals against Wales and France.

Rugby league also benefited from the strength of its relationships with broadcast partners (Sky Sports and the BBC), and commercial partners such as Betfred, Cazoo, Dacia and Ronseal.

There was an additional challenge - even crisis - in the summer of 2021, as Australia and New Zealand withdrew from the rugby league World Cup that England had been due to host later in the year. This presented particular issues for the sport’s relationship with the Government, which had been so supportive of the three World Cups to run simultaneously - Men’s, Women’s and Wheelchair - based largely in the north of England. Again, the strength of that relationship has ensured continued support for a tournament that will now be played in the autumn of 2022.

Notwithstanding the myriad of responses to the COVID-19 pandemic by the sport, including on-pitch measures to protect players, the quick action to secure additional funding has safeguarded the vital infrastructure of the professional game and consequently, there is a sport that can be taken forward.

Realise - what next?

Getting through the crisis of the pandemic is just the first stage for a game that, against the backdrop of football, struggles for media recognition and sufficient commercial revenues. In similarity with many businesses, professional rugby league in the UK is at a crossroads following the pandemic as it competes for exposure and the revenue it needs to ensure its long-term success and viability to allow it to continue to contribute to society.

This challenge of "what next?" aligns with the challenges of many businesses that face the twin headwinds of the pandemic and current macroeconomic conditions. Rugby league has decided, in a fashion that won’t be a surprise to its spectators, to tackle this issue head-on.

For several months, senior figures from the RFL and Super League Europe have been working on a twin-track plan – with one group aiming to secure a realignment of the sport’s governance, and another considering a new strategic plan for the next decade, which is likely to involve a restructuring of competitions and crucially the involvement of an external strategic partner.

The conversations have resulted in a positive strategic direction for the sport, a streamlined governance structure to ensure efficiency and a lack of duplication of costs and function and the creation of a new commercial vehicle which will exist with the sole function of growing revenue into the sport.

This focused commercial function will be responsible for the maximisation of all broadcast, sponsorship and event asset values thus increasing the return to all parts of the game. A large part of the discussions held has also been to discuss confirm and agree the allocation of resource delivered by this commercial operation in order to create certainty going forwards.

It is intended that the structures will be implemented in time for the start of the 2023 season, when it is hoped that a long-term strategic relationship with a major global sports partner will also be in place to maximise the impact of the updated governance structure and to guide, assist and enhance the maximisation of relevance, reach and revenue over the coming years.

Conclusion

Rugby league has reacted well to the pandemic and has been proactive in its actions and also strategic considerations for the future. This brings a lot of optimism to the sport, particularly considering a background of financial distress in the sport which had previously caused insolvencies of significant clubs.

However, rugby league still has a way to go to carve out its future and financial stability of its participating clubs. The pressure/competition from other sports for spectators and commercial revenue remains high and the future strategy for rugby league is not yet implemented.

There are different variables that will influence the outcome for the sport which mirror threats and opportunities across the wider sporting sector. These include:

Digital platforms, experience and utilisation of increased data
Economic challenges faced by broadcast and commercial partners
Commercialisation of women’s participation
Changed habits of supporters affecting attendances
Debt overhang
Institutional and private equity investment

Against this backdrop it is difficult to predict the outcome for rugby league but given its history, the passion it engenders and its wider societal impact we strongly hope that the actions set out above enable the sport to thrive after COVID-19.

BDO is a market leading advisor to businesses including sporting institutions and have extensive experience assisting organisations overcome financial stress and distress. We recognise that challenges faced by businesses, particularly against the backdrop of COVID-19 are complex and nuanced. We believe we are the right people to help you make informed decisions based on context, analysis and commerciality.

If you would like to speak to an advisor regarding our services or the Rethink framework and its application to your business please get in touch with Raoul Lempriere or Lee Causer who will be happy to help.