Football clubs in the Championship can learn valuable lessons from the Rugby Football League - including how to innovate, cut costs and build close relationships with corporate partners - in the wake of the economic downturn, according to the Rugby League chief executive Nigel Wood.
As Championship Clubs come to terms with UEFA Financial Fair Play principles that were discussed at the Football League’s annual meeting in Cyprus this summer they may want to consider the licencing system used in Rugby League to provide more detailed scrutiny than relegation and promotions.
RFL chief executive Wood explained the RFL's controversial licencing system in the wake of the recent withdrawal of Crusaders from rugby league's premier competition Super League.
Commenting on the RFL's financial performance, which saw the organisation record a pre-tax profit for the ninth consecutive year in 2010, Mr Wood said: "We had a strong year in 2010. But we're not complacent to the challenges that the sport faces as wider economic conditions remain challenging."
Mr Wood said one of the most pleasing aspects of the RFL's financial performance had been the income coming centrally into the sport, which has increased from £18.6m in 2001 to £48.2m in 2010.
He said the increase had been generated from a number of avenues, mainly broadcast revenues, revenues from central and local government, increased numbers of spectators watching matches despite reduced disposable income, and what he described as "commercial exploitation" - forging and maintaining partnerships with corporate sponsors.
Derby chief executive Tom Glick, a member of Football League board explains the dilemma facing Championship clubs:
"We have re-stated how important it is for all of us to sort out our businesses into an entity that is sustainable. We have now put an action plan into place. We know we are going to have 46 great games. We know this is a great competition. The problem is that at the end of it almost everyone has lost money."
"If you look at all great businesses, one thing they have in common is continuity of leadership."
So how do we fix it?
"The system that operates in League Two is based on a percentage of turnover. What is being proposed for the Championship is less prescriptive. It will operate on a balanced budget basis. That therefore gives you discretion on how much you, for instance, spend on player wages."
"You can theoretically, spend 90 per cent of your turnover on player wages, as long as you balance out what you do. It doesn’t give you much to play with – another ten per cent – but you can work like that if you want to.It allows us all to get to the same place and spend an ‘appropriate’ amount on player wages."
"We are looking at putting a set of rules in place where clubs are incentivised to operate on their own and not to run up massive operating losses. Massive operating losses cannot be sustained."
Being considered are transfer embargos, financial penalties and also a more wider brief as Glick explains:
"The National Basketball Association has what’s called a ‘luxury tax’ where if clubs do spend outside their revenue, the rest of their competitors say: ‘Okay, if you are going to do that, we are going to tax you.’
The discussion is sure to continue but unless Championship clubs balance their books more will face the Administrator. Wouldn't a licencing system that included financial benchmarks be simpler?