FanNation - The Republic of Sport

A financially stricken NRL would first and for mostly need to ensure that it maintained transparency in all of it actions. Players are not likely to take a salary cut without reason. Product Control ensures that the firm follows the proper regulatory and financial procedures with regard to business transactions; this may include product price and placement revision. The NRL could first establish reachable targets and then look at strategies such as re-aligning the salary cap to a level where it could be profitable, re-distribution of League income to its teams and revising the league standards for entry into the competition much as they did when South???s were booted from the league in 2000.

Product control is based on the sporting authority controlling placing limits on teams/clubs at one time and players on team lists. Labour market control consists of player mobility through for example player drafts and salary caps. Product control changes would include number of players in player roster for example A-League must have 3 under 20???s players in squad, a similar thing like this via NRL should be used to increase youth development.

Strategies the NRL can use in terms of labour market control is to increase the salary cap due a agreeable amount due to the departure of top players position due to the salary cap e.g. Petero Civonenciva; benefits and bonuses should change such as more benefits for younger players in terms of training to help their lives in future; sponsorship levels of players should be excluded in the salary cap and finally successful players should be recognised by salary cap concession for those involved to let them stay in NRL/club. (Buti, 1990)

With the NRL suffering from a lack of financial funding, David Gallop must assess the salary cap???s current faults and establish why it has not been a productive source of income for the NRL. He must strategise to make the cap efficient and productive for both the players as well as the teams. He must apply certain aspects of the universal rule and act the same in each situation with every the club. This will lead to an equitable financial gain for both parties.

With reference to product and labour market control, the CEO should ensure that all financial procedures are being undertaken at both a morally and ethically acceptable standard (Healey, 2005). If these procedures are out of date no longer profitable, then they should be reestablished and redefined to fit in with the current flow of the market. These procedures have occurred and been implemented in the Hyundai A-league with their salary cap increasing from $1.6 million to $1.8 million in the third season to allow for increased squad sizes.

One of the key issues within the NRL is the imbalance of funding between clubs, as highlighted by Buti (1999 p137), reflecting the need for review of the salary cap. The current strategy does not effectively manage the ???product control??? across the respective clubs, as clubs with higher degrees of funding are more than likely to be able to produce better results than those with considerably less reflecting a Marxist ideology. Strategies to reduce this should be more transparent in order to more effectively manage ???labour market controls??? may include a change in policy which more evenly distributes the earnings of the clubs, while perhaps designing financial outcome of the player/sponsor to disperse club contribution to the NRL as opposed to the club, in which they would be able to better distribute funding.

The NRL is solely responsible for the 16 teams in the NRL. Therefore government funding, sponsorship within the game and leagues clubs grants get split between the NRL, ARL, NSWRL, QRL and CRL meaning less money at the top level. If the NRL were to successfully merge the different governing bodies within the game it would be able to gain better ???product control??? of the funds that get poured into the game. Meaning the salary cap could actually rise in the coming years. The NRL should be transparent regarding its financial issues, and the increased funding from being the sole governing body, would mean they could share the increased funds evenly among the NRL clubs showing better ???labour market controls,??? allowing the NRL to be in a better financial position. It is also important that the NRL adhere to the ASC principles of corporate governance (Healy, 2005) so that all other parties around the NRL see that they are acting in a way beneficial to the game, clubs and sponsors.

The Salary Cap is a major issue debated countless times over the course its existence. Some argues the salary cap doesn???t have a dominating effect as evident in other sports such as the English Premier League. The financial fluctuating avenues of the NRL are in a struggle to keep their ???best players??? in Australia due to the salary caps and hence leaving the NRL and heading overseas. The key point to rise is to find the point of equilibrium between the product and labour market control, even if it results in raising the salary cap. As Buti (1999) suggested, a strategy that could help retain our players is to NOT include funds from sponsorships. Also a more lenient leeway must be given to the sponsorship servicing allowance and the long servicing player or veterans allowance. This way, we can allow our top players to hold sponsorship fees benefits without going over the salary cap and therefore retain them in the NRL.

It is important for any institution struggling finacially to reconsider and re-align its goals and targets. It would be wise for the NRL to reconsider what and how it controls its product. This may include, repositioning its product, or even changing the rules, to suit the changes in the market and realign with the fans. In order to continue labour amrket control it may be necessary for NRL to look at systems currently in place-the salary cap. It may be wise for the NRL to change this system, to allow for the more less struggling clubs to support the less well off clubs. The inlcusion of a draft system similar to that of teh AFL may also allow the NRL to keep a cap on labour amrket contol whilst at the same time loosing teh salary cap to allow clubs tp refinance and re-establish strategic alliances with corporate sponsors. Thirdly in line with Butti (1999) teh NRL may need to redistrubute its finances to support the less well off clubs within the institution, to regain some of the competitions validity.

Dabscheck suggests ???for clubs to be equal in terms of financial strength, the market mechanism would evenly distribute playing talent between teams and this would increase spectator interest, gate receipts and group profits??? which was one of the reasons why the salary cap was introduced which has not neccessarily been successful. By adopting a reverse salary cap system where higher financial limits are allocated to less successful clubs in order for them to attract higher performing athletes could provide sporting equality and potentially improve revenue streams for the NRL. This structure may work but it has now become difficult to determine the less successful or poorer clubs with many improving revenue by secondary measures, sponsorship, merchandise, and league club revenues.
Another strategy to improve product control could be enforcing uniform ticket prices for all ???regular??? and final games, control on the number of constituent clubs and some form of revenue sharing. (Buti, 1999)

Currently people are centred on the salary cap, and believe it is the only factor contributing to the poor financial situation of the NRL. The way the NRL???s product control is currently set up is a positive, as it spreads out the playing talent and ensures that the talent pool is big enough for the 16 clubs. In relation to labour control I would encourage the introduction of the draft policy, because at the moment players have restricted mobility through transfer systems. This therefore limits what a player could earn at the top level because, ???the salary cap system, as it operates in Australian sport, is a collective limit, but there are no direct restrictions on the amount a club may pay any one player??? (Buti 1999). An example of such unlimited spending by a club is evident when Andrew Johns was accounting for one third of Newcastle???s overall salary cap.

In order for the NRL to be brought from the red, into the black, David Gallop needs to assess the strategies that have been implemented. The key issues within the NRL is the disproportion of funding between clubs (Buti 1999), therefore David Gallop needs to review the salary cap.
For clubs to be equal in terms of financial strength, this would evenly distribute playing talent between teams, thus creating an equal and fierce competition between the teams, therefore increasing spectator interest, gate receipts and group profits. But NRL has not seen the benefits of the salary cap which is currently being put into practice.
To effectively manage the product control, and labour market control, the NRL would first and for mostly need to ensure that it maintained transparency in all of it actions. Players are not likely to take a salary cut without reason. Another way is to ensure that players don???t leave the code, to go to ARU or England, to do this, they need to find ways to benefit the player. This could be achieved by not including sponsorship funds the players receive into the salary cap, also, a lenient margin must be given to the sponsorship servicing allowance and the long servicing player or veterans allowance. (Buti 1999) By doing this we allow our top players to earn more, without going over the salary cap limit, therefore leaving more funding for the clubs to put toward other players to encourage them to stay with the club.

It is evident that the NRL is under pressure due to the lack of consistent funding between the 16 teams in the league. Therefore, it is critical that David Gallop analyses the existing salary cap and implements appropriate managerial strategies in order to formulate the league, so that it is highly regulated and cooperative (Buti 1999, p.143). A couple of strategies that Gallop could implement are though ???labor market controls??? and ???product controls???. Some strategies include, implementing uniform ticket prices for all games like NBL, and then distributing the revenue evenly to the 16 NRL teams (Buti 1999, p.144). Another strategy could be though the elimination of athlete sponsorship contracts from the salary cap (Buti 1999, p.144), which can allow for more income for athletes who receive limited remuneration because of the salary cap (Buti 1999, p.149). These are just a few recommendations that can assist in bringing the NRL from red to black in its financial status.

With the amount of money in sport theses days, in particular professional sport, it is hard to fathom that the NRL needs a financial consultant to get themselves back into the black. Two things the NRL could look at to reduce expenditure would be product control and labour market control.
Product control is maintained through the controlling sports authority placing limits on the number of clubs or teams in the league at any one time and players on team lists (Buti, 1999. pg 130). In the past the ARL has expanded to 20 teams, but this expansion caused the folding of teams. One way product control could be maintained via expansion would be the relocation of a team, rather then creating a new one.
Labour market controls include restricting player mobility through transfer systems, zoning rules, draft schemes and the salary cap (Buit, 1999. pg 130). 2 of these that are or could be enforced in the NRL are a draft (much like the AFL), and the Salary Cap which is enforced currently. Both a salary cap and draft would ensure talent is spread evenly amongst clubs, which would then create a level playing field amongst teams. This would help solve financial difficulties as crowds would increase to see an even competition.

As Buti (1999) states "Product control is often maintained through the controlling sports authority placing limits on the numbers of clubs or teams in the league at any one time and players on team lists." Therefore the best option for the NRL would be to decrease the number of players in the top squad from 25 as it currently is and reduce their payments towards clubs as a percentage of the reduction. I would not advise the NRL at cutting back the number of teams as there was numerous problems mainly the south sydney situation the last time they cut teams and the potential cost could move the league into further debt.

Labour Market Controls as Buti (1999) states "include restricting player mobility through transfer systems, zoning rules, and draft schemes". Buti also states another control as being a salary cap. For the NRL i would suggest implementing a 'restricted' and 'unrestricted' free agent transfer system similiar to the NBA, which will clubs with 'restricted' free agents to match any offer made to their players and allowing to manage their salary cap as they wish.

Buti (1999) states that many professional sports leagues are highly regulated and cooperative organisation???s with rules and restrictive product and labour market controls which the constituent clubs and players must comply with. Product control affects players and the labour market severely limits the freedom and economic restraints in the sport. The salary cap places limits on the player???s ability to maximize the economic value of his athletic capacity as well as restricting clubs in a professional league. The main reason for a salary cap is for the even distribution of ???sporting equality maintenance??? amongst sporting teams, however this is not really evident as not all players receive the same salary and there remuneration may be significantly affected. There needs to be greater transparency in the NRL and even so the salary cap may need to be determined between clubs as some are not financially viable to afford particular players and the greater proportion of TV rights, broadcasting and merchandise sales are to be taken into consideration.

Product control involves the dictation of number of teams or clubs in a competition as well as the number of players on team lists (Buti, 1999). Product control strategies to aid the NRL include uniform ticketing similar to the NBL and adjustments to the size of team lists, therefore making more funds available while staying under salary cap.

In terms of Labour market controls, which according to Buti (1999) include the restriction of player mobility through transfer systems, zoning rules, draft schemes and the salary cap. The NRL currently utilises a salary cap strategy, this in combination with a drafting scheme may help bring the NRL from the red to the black, however this strategy has the potential to open up a pandoras box in terms of restraint of trade arguments. Free and competitive economic conditions as discussed by Healey (2005) with relation to restraint of trade will be severely affected.

While product controls affect players by restricting the number of players on the team lists, labour market controls severly limit the economic freedom and otherwise of the player (Buti, 1999). The Salary Cap was introduced with the objective of "ensuring an even competition" (Buti, 1999), however as a financial consultant i believe that the salary cap only ensures limited finance available to the NRL. By introducing a revenue pooling scheme..."if clubs were equal in terms of financial strength, the market mechanism would evenly distribute playing talent between teams and this would increase spectator interest, gate receipts and group profits" (Dabscheck) therefore creating a potential increase in revenue to the NRL and its players.

It is important for the NRL to bring in the right managerial strategies to turn from the red into the black. The NRL could move away from being equitable for all clubs, as most fans are loyal supporters or bandwagon supporters anyway. Uniformed ticket sales could be a way to increase revenue but may not work with all clubs, as supporter numbers differ for each club. One tactic that won???t work for the NRL is limiting the number of clubs in the competition. This could cause serious legal ramifications, similar to what happened with South Sydney in 2000, so they would need to make an appropriate salary cap, which isn???t to high that the lower clubs cant achieve the signings of the top players and not to low to limit players payments.

Bringing the NRL back to black from red in financial terms revolves around the games fans and the revenue they put into the game. They are the only variable that can go up or down and therefore it is essential that the NRL attract and retain fans. The primary objective of labour market control or the "salary cap" in the NRL is to spread the playing talent, making the game more equal and more attractive to the fans..ie revenue. Product control is maintained through the controlling sports authority (NRL) placing limits on number or teams and players in teams( Buti 1999, pp 130). Therefore one managerial strategy that could be implemented is to limit the number of representative players in any one team similar to what is done in the Penrith Junior Rugby League. This is a means of evening the spread of talent which would keep fans happy and revenue flowing in.

In order to bring the NRL "from the red to the black" i would advise David Gallop to review the current salary cap and to consider changing the "collective limit" (Buti, 1999) to limitations concerning the amount clubs can pay for individual players. In particular, representative players.
This would encourage the even share of talent among all teams and would create a more competitive competition.
Another idea I might suggest to David Gallop would be to implement a draft policy that would ensure each team has the ability to recruit young and talented players.
These suggestions would hopefully result in greater ticket sales and and less contreversy among the NRL community.

I would recommend that the NRL continue using the salary cap however I would suggest changing the type of salary cap system that is currently used. Currently, each NRL club has the same salary cap limit. I agree with Buti???s (1999) suggestion of implementing different salary cap limits for different clubs depending on the financial position of the club ??? the worst performing clubs would have higher limits than the more successful clubs. In order for this to occur, the NRL would need to financially subsidise the less successful and poorer clubs through such things as giving them a greater proportion of revenue obtained from TV rights, merchandise, sponsorships, and play-off gate receipts so that these clubs can afford the higher limit (Buti, 1999, pp146-147). This could lead to equal financial strength, talent distribution and spectator interest across the league which in turn, leads to profitable outcomes.