The Cumberland Throw

The Spotlight – Rewarding NRL Development Clubs: Introducing Value Added Contracts

Should NRL clubs be rewarded when it comes to retaining players that they have developed?

It’s a topic that’s raised every year, and no matter how often it’s been discussed, the answer has never been found.

Api Koroisau

Penrith is currently the poster child for development clubs. Although not all of their grand final team came through their junior pathways, only Api Koroisau had a significant NRL career before arriving for his second stint at the Panthers.

Over the last two seasons Penrith have lost key players due to salary cap pressure. Is that fair, considering the time and expense they invested in developing said players?

The NRL offers cap dispensation that rewards the long term servants at clubs. That’s fine, but it mostly applies to players heading into the twilight of their career, rather than in their prime.

It’s also been suggested that some sort of allowance be implemented for locally produced products. However, club boundaries are intrinsically unfair. In Sydney, they are rooted in history and extremely dated demographics. As such, boundaries are unfair to clubs who don’t enjoy huge junior leagues as their pathways, and they are unfair on the clubs that do have large nurseries and have to sustain massive budgets in keeping those leagues healthy.

Nominal values have been considered as a way of truly valuing a player’s worth, but those that rate players according to representative honours or NRL experience do little to assist a club looking to retain their players. Basically, they keep upper end prices at their peak.

I’ve been considering another method of attaching a nominal value to a player, and it’s one that would allow the NRL to list salaries and demonstrate the value added by a club.

I’m naming my system the “Value Added Contract” or VAC. Any contract designated as a VAC would attract a nominal salary cap figure distinct from the actual contract money paid to the player.

Bear with me, because this idea is very much at the embryonic stage.

I regard it as rewarding talent identification.

Every club should be a development club. Young players and “value” players are brought into the bottom end of the top 30 every season. If they prove to be absolute gems, the club that discovers them deserves to be rewarded rather than punished.

The VAC only applies to retention contracts. For recruitment contracts a player would be listed at the full value of the deal which attracts them to a particular club.

The Value Added Contract Formula

The value of a player’s first full NRL contract with a specific club (not including development contracts) is called A.

The value of the new deal being offered at the same club is called B.

The VAC salary cap nominal value is the average of A and B.

Therefore, if a player begins their NRL career at a club on a deal worth $200K, and their next upgraded deal is $400K, then their VAC nominal value is $300K.

If the player becomes elite and at some point reaches the $1m contract mark, then the rewards can be justly significant for the developing club. At the $1m mark, the VAC nominal value becomes $600K, a considerable discount on the one million dollars paid to the player.

 

Discussion

The flaw in the “Value Added Contract” lies in the advantage it gives to an ultra successful development club such as the Panthers. In essence it can be seen as working against the salary cap, rather than alongside it.

However, adjustments could be made to the to keep a “fair” marketplace.

Perhaps the best way of introducing the VAC is to limit its application to a specific number of contracts in any given year.

For example, a club could have a maximum of three players on a VAC in a season. The interest could then be which contracts are declared VACs as a club might decide to move them around according to their roster or cap situation.

Furthermore, there are alternatives to using a formula involving averages. The nominal value could be set at a percentage of the increase in the contract.

Setting that at 75% and using the $400K example from above, only $150K of the contract increase of $200K would need to be accounted for in the cap. Therefore, the VAC nominal contract value would $350K. Using the same percentage method for the $1m example, the VAC nominal value would be $800K.

Whether the player is a local product, or someone recruited on an NRL base rate contract, the reward is based on the same principle. If a club adds value to the player’s worth, then they are the ones that should reap the benefit.

An advantage of the VAC is that it rewards astute recruitment. It’s not unusual for a player’s worth to jump markedly following their move to another club. This value added should not be to the detriment of the new club. Likewise the player should not be expected to forego their opportunity to maximise earnings due to a sense of gratitude.

Isaiah Papali’i

Let’s use Parra’s experience with Isaiah Papali’i as an example.

Ice arrived at Parra on a deal reportedly worth $150K, and just two years later he is departing to the Tigers on a contract of around $600K. Under this system the Eels could match that Tigers offer but only have to account for $375k on the cap.

Papali’i would be receiving the same amount from either club and his choice would be based on where he wants to play.

Without question, this would mean that clubs anchored near the bottom of the table might find it harder to recruit their way to success. But, as a counterpoint, it could be argued that a struggling club charting a development course would have better longer term benefits than if they splashed the cash to pay above market price for certain recruits.

How would it benefit a struggling club? Using the example of the Wests Tigers maybe they wouldn’t have lost some of their players, like Tedesco, if they had that VAC advantage in the past. Also, stronger clubs looking to strip talent from mid to lower table clubs would have to pay significantly more.

Under the VAC system, strong clubs who previously claim that elite players are still attracted to them even on lower salaries might be forced to pay market rates to outbid the incumbent club.

Would this system allow strong development clubs to warehouse players?

I believe that it might only occur in a very limited way. Ultimately, players don’t want to run around in NSW Cup or in non-preferred positions.

Would Matt Burton have left Penrith if they were close to matching the Bulldogs offer? Would he have been happy to continue playing at centre rather than in the halves? Only he could answer that, but he has very quickly extended his deal at Canterbury.

Likewise J’Maine Hopgood. Has he departed Penrith due to contract money or the opportunity to play regular first grade football?

If players and clubs are unhappy with the current salary cap rules, then some system for changing it has to be found. Would a system that rewards talent identification and developing players be any more biased than a system which sees many of the same clubs anchored to the bottom half of the table every year, with spending sprees regarded as the only valid path to change it?

Perhaps the Value Added Contract could be a discussion starting point.

Eels forever!

Sixties

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Brett Allen

There is a massive flaw in your idea, and that is the CBA the league has with the players, (which should be between the clubs & the players, but that’s for another day !!!). The CBA guarantees that players are paid a fixed percentage of the games gross, football related revenues, earned both individually as clubs, and collectively as a league. That figure is then divided by the number of clubs to arrive at the Salary Cap figure. Under your idea, which is interesting I’ll concede, the league collectively, and by the league I mean the clubs, will end up… Read more »

BDon

If the VAC’s are restricted to say 3, the overs won’t be bank- breaking. When you say the clubs ‘won’t allow for it’, do you mean they won’t make provision for it?

Brett Allen

The only way the clubs would allow it is if there was a reduction in the salary floor, from 95% of the cap to at least 80% of the cap. Otherwise the clubs are paying the players more than their agreed amount. Even 3 players per team is 51 players league wide which would add potentially another $30m in player salaries league wide.

BDon

Maybe I’m misreading this, in sixties’ suggestion he is talking about say 3 players, within the 30 cap group who are paid 600k but only counted as say $375k in cap, so that’s $225k per player additional cash which the club would have to fund. Similar to your suggestion on free agent retention, the extra cash just comes from consolidated revenue of the club. These methods swing a bit of balance back towards the clubs.

Brett Allen

Yes, but the league has an agreement that guarantees the players 29.5% of all player generated revenue, or based on curent projections about $980m over the length of the CBA (5 years). That equates to $12.25m per club per year must be paid to the players. But that is total benefits, not just base salaries. The clubs are currently paying $9.1m in base salaries annually already. That doesn’t include MPA’s, cars, education, moving allowances, health care, superannuation. That extra $3.15m gets eaten up real quick. You then add maybe another in up to $1.5m per club in extra salary under… Read more »

Matt Sweeney

I think that those supposed smarter minds are making huge mistakes every day through out the corporate world. I like your ideas here, I think they would play out in Peoria.

Brett Allen

You a CAT man Matt ?

Matt Sweeney

There are other sites that will better indulge your child-like mind.

Brett Allen

Huh ???

Matt Sweeney

im sorry Brett i took it another way my mistake

Anonymous

I think Brett is making a South African rugby reference?

Brett Allen

Actually no, he referenced Peoria, it’s the city where Caterpillar, Inc has its HQ. CAT employs about 80% of Peoria residents

Matt Sweeney

Will it play in Peoria? is an American English figure of speech that is traditionally used to ask whether a given product, person, promotional theme, or event will appeal to mainstream United States, or across a broad range of demographic and psychographic groups.

Brett Allen

Ok, now that you mentioned it I think I heard it once on The West Wing

Matt Sweeney

yeah Brett most likely

Brett Allen

Fair enough, what’s really needed is a complete overhaul of the NRL’s entire labour management system. Everything from youth development to a rookie draft w/ a rookie salary scale, to restricted free agency for young players to player trading to a soft cap that allows teams keep the talent they develop to a counterbalancing luxury tax to limit the richer teams ability to use their wealth to dominate.
I won’t hold my breath.

BDon

Tks for info and thoughts, appreciated. Human nature tells me that a complete overhaul would have to include an improvement for players. Maybe the next telecast deal offers opportunity. Your quick summary here gives the bones of a fresh system that people can relate to ( or not).And Tks sixties,good piece…wrestling with clouds.

Matt Sweeney

sixties i have a question do you know how much of our cap is spent
for 2023 in other words can the club afford to buy a high-end player for next year ? thx

Brett Allen

And it just shows the amateur nature of the NRL administration. The Salary Cap shouldn’t be a negotiation, it should be a simple calculation based on forecast revenues, like the rest of the world does it.

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