The Big Interview – Gloucester Rugby

Gloucester Rugby CEO Stephen Vaughan speaks to sportindustry.biz after announcing a fourth successive annual profit, and discusses the future of rugby sevens and the increased wage cap.

After your recent financial results, can you count that as good year for you?

I’d say it’s been a bitter sweet year, we’ve obviously had a good time of it from a club/business point of view, we have been managing communications well and introduced new revenue streams.

On the pitch it hasn’t been so memorable. We have produced a record profit, even though our core revenues haven’t grown. It’s with a tinge of sadness as we would like to be saying we have had a record year and finished in the top 6 or top 4, but unfortunately we finished 9^th. Arguably this makes it even more of a success off the pitch as we have been able to do this when we have had a difficult year on the pitch.

How have you bucked the trend in sport over recent years financially?

I can only talk from our perspective, last year our core revenues didn’t grow – season tickets, match tickets – this was fundamentally down to results on the pitch. We tasked ourselves with other areas to grow profits across the business, we were around growing new revenue streams. Despite a tough season on the pitch we introduced 11 new sponsors and commercial partners to the club and pushed conferencing, while hospitality revenue was the highest it’s been since the stand was built in 2007. Add on few more innovative few initiatives, cashless payment system, new interest free direct debit option – this helps us and supporters.

We have also introduced a number of new partners to the club such as Ricoh, SportLobster and more quality sponsors on top of the quality suppliers as well.

We have tried to remain as competitive as possible off the pitch from our core business around exhibitions and hospitality for instance, and we have been driving new streams, keeping costs as a focus. We had something called Project Nighthawk where we looked at efficiency and energy spend as a group of people – that led to changes such as LED lights, and we hit it from different angles to grow our profit in a year when we didn’t have a growth in core revenues.

This is important going forward. We aren’t in the Champion’s Cup, so the commercial reality is that means reduced gates and interest from partners. It is important team performance doesn’t dictate how the business is run. It is a massive part of it, but you need to be ensuring that your business can stand on its own two feet.

You can’t run a business relying on on-pitch performance but it is crucial for a club like Gloucester to compete at the top end of the table and that’s why we have invested so heavily in High quality coaches and players so we can compete at the top end going forward. If we get that bit right, our off-field plans become much easier to execute.

You had success in the sevens, how do you see that having an impact on the club and secondly are you guys a bit ahead of the game on this front, could it be getting bigger?

Yes, I think so. Sevens is cricket’s Twenty20 equivalent. Whether we like it or not, there’s a new generation of people coming to watch sport and they are in need of instant gratification, they like music and tries and fun and partying. Sevens ticks these boxes, it is easy to understand, no collapsed scrums, no time out of the game, it’s quick and fun, it’s a summer game – it works at a time the winter game does not.

I think Sevens is here to stay and will only get bigger, the World 7’s happen now at Twickenham once a year and it will grow, especially with the sport debuting at the Olympics soon. It’s less aggressive and physical, so it will attract a different playing audience as well.

It works well for us as a club – we put on a good show, we have hosted the opening events and had record attendances for the last two years, and our supporters love it. It’s a great night out, great family vibe and commercially, having a full house is wonderful. The prices are set accordingly (£5 for kids £10 for adults), you can’t even take your family to the cinema for that!

How will the new wage structure impact you and the wider team? Just because it is has been increased will/should clubs max it out?

It’s an interesting debate. In Aviva Premiership Rugby we all have a vote, we all have a say in issues. Now there are clubs run differently to us for sure – some have large benefactors and are willing to accept large losses to their business in the search for success on the pitch and then, I presume, build a sustainable model going forward.

There are then clubs like ourselves and Northampton and Exeter who are self-sustainable, run to a model where we will invest as much as we can in players and infrastructure but we will not do it at the cost of losing money and not running as a self-sustainable business. Of course there are clubs that potentially can’t afford full salary cap, so they need to be careful not to lose touch going forward or invest heavily in a strong academy set up.

It does fundamentally make a difference to all of us, it’s the biggest outgoing by a mile, putting up salary cap by half a million and putting an extra marquee player in, it’s an interesting debate. No one is saying you HAVE to do that, you don’t have to but if you can find a way to without threatening the self-sustainability or key objectives of the club then you will do what you can to achieve it.

You aren’t in sport to coast though; you are in it to win. The truth of the matter is, you will strive to do whatever you can to pay full cap and get the extra marquee player in, but clubs will do it in different ways. We will give David Humphries absolutely all we can to commit to the whole salary cap and get the marquee signings in, but to do that I have to ensure that our distribution or our income or cost management is such I can give him that but ensure I don’t put the business in jeopardy.  

From a European aspect, you have kicked off to a good start in Challenge Cup – how have you found the new format?

Good start, good wins, both here and on the road, the format from a commercial perspective is fair. Financial distributions are fair. Independent governance is equitable and it is giving the development teams in countries with no opportunity before an option to partake. It means the clubs that were possibly accused of resting players in other countries and saving them for big games, have to approach things slightly differently – it’s fairer.

But from a commercial point of view being in Challenge Cup is not where we want to be.  

It was one of most public and ongoing negotiations in recent years – was the uncertainty ever unsettling?

We went through a number of scenarios very publically, so we tried to remain tight lipped and stay behind the Premier Rugby message. We are pleased with the outcome of it and hope in future years going on from it we are in the Champions Cup – and eventually get up against the cream of European Rugby.