Rugby union’s broadcast rights value tumbles in eyes of private equity firms

[Ham105]

EXCLUSIVE Rugby union’s broadcast rights value tumbles in eyes of private equity firms

The money that was hoped to come from private equity to fund grassroots and the women’s game is no longer on the table, JAMIE PANDARAM reports on where to now for the code.

September 21, 2023 - 8:00PM

Rugby Australia’s finances are again under strain, with private equity investment gone and the game trying to raise $90 million to keep going.

This masthead can reveal that RA has decided against private investment after failing to secure the money they’d sought, understood to be between $150-200 million, in exchange for giving up to 20 per cent ownership of the game to investors.

RA will now seek to raise up to $90 million of debt. Several lenders are understood to be willing to lend that money.

Private investors were not convinced that RA will yield a significant increase on their next broadcast deal, from 2026 onwards.

The current agreement, worth around $33 million a year with Nine and Stan Sport, concludes at the end of 2025.

RA chairman Hamish McLennan is adamant that major home events will deliver more than enough to revitalise rugby.

(L-R) Rugby Australia Chairman Hamish McLennan (L) and CEO Phil Waugh are scrambling to find a new source of funding. Picture: Getty Images

“We’ve paused on PE and are executing a debt plan, as we couldn’t provide enough accuracy around the next cycle of broadcast rights,” McLennan told News Corp.

“With a men’s and women’s home World Cup in 2027 and 2029 as the centrepiece of our plans, we didn’t want to undersell ourselves.

“The Matildas showed the incredible interest in home World Cups and rugby will be even bigger.”

RA received a $40 million loan from World Rugby, in anticipation of the revenue they’ll raise from the 2025 British & Irish Lions tour to pay that back.

They have already spent around $25 million of that loan, so will need to refinance with a new lender, while raising an extra $65 million to keep the game going, sources said.

RA had been in talks with up to seven private investment firms including Silver Lake, CVC and Andrew Forrest’s Tattarang, but the money offered was well short of expectations.

McLennan and new chief executive Phil Waugh were among executives to tell the game’s stakeholders via a video call this week that private equity was no longer an option, despite months of negotiations.

With the Lions series coming in 2025, and Australia hosting the men’s Rugby World Cup in 2027 and the women’s in 2029, RA has decided to move forward with the debt raising model and bank all future profits instead of sharing with private firms.

The Wallabies World Cup loss to Fiji did the value of the product no favours. Picture: Getty Images

Network Seven bought the rights to the Matildas in this year’s home World Cup for peanuts, and ratings broke several records.

One source said revenue from the big rugby tournaments could exceed $200 million.

However, it leaves RA cash-strapped in the interim, and the money they’d hoped would flow from private investment into grassroots rugby and the women’s game is now in jeopardy.

Add to that the woeful form of the Wallabies, who are in danger of being bundled out in the pool stage of the World Cup for the first time in history if they lose to Wales on Monday (5AM AEST).

While RA is hoping to create a bidding war between broadcast rights holders Nine and Stan, with others including Foxtel - owned by News Corp, publisher of this website – poor performances by the national team and Super Rugby clubs could drastically reduce the sport’s value.

Broadcast rights expert Colin Smith, who has advised RA is previous deals, said: “If the Wallabies don’t make it out of the first stage of the World Cup, and there is the continued drubbing of the Super Rugby clubs, the attractiveness of rugby is going to decline significantly.”

Rugby Australia needs the Wallabies to progress through the group stages of the World Cup. Picture: Getty Images

Already, moves are afoot for RA to take over the running of the NSW Waratahs and Brumbies, who have been struggling financially for years.

It’s understood there will be a streamlining of operations, leading to job losses.

But RA faces stiff resistance from other Super Rugby clubs, who are happy for centralisation of the high performance rugby and strength-and-conditioning programs, but wary of a commercial takeover.

Waugh announced a centralised model had been agreed to by all clubs last month, but there is no signed agreement in place yet and the sticking point will be the control of the clubs’ money and assets.

The disappearance of private equity funding, and the poor performance of Australia’s teams, has sunk the code to an all-time low.

“This will be a hit for them, but if they can prove a turnaround strategy that Hamish McLennan is espousing, on the pitch – starting to be really competitive in Super Rugby and competitive in Tests in future years, there is a comeback from this,” Smith said.

“But if it continues to go backwards like it did this year, then it’s in a really sorry state.”

https://archive.is/20230921100933/ht...e4c6b3c22c35ee

[Jules]

Well that’s a depressing read! More pressure on those 23 players Sunday.

[GIGS20]

WOW

Andrew Forrest didn't offer enough money for them!

I think that's an indictment on the management, who obviously think they've built much more trust than they have been able to manage.

This could very well be a good thing for the code, with the management under financial pressure and unable to secure a private equity deal the shareholders (State rugby boards) will be starting to see the writing on the wall. They will not be able to run at a massive loss with guaranteed financial bailouts if the union is broke, so they'll use the poor performance on the field and at the bank to get rid of some board members. That's a crapshoot, because it depends who they pick to take on the job.

[SNOB]

RA have been overselling themselves and come to believe their own hype!

[Tazzmania]

A code in crisis, so many red flags in that article.

1) Borrow more at current high rates, when already in significant debt. Borrowing rates will depend on risk associated therefore could include a premuim.

2) Fox expected to be bidder against 9/Stan, really

3) Cannot administer their own finances but want to take over the commercial running of super rugby clubs.

4) Spending money on RL players at a premium when you have to borrow to pay them.

................ trouble on the horizon, back to GRR?

[shasta]

A code in crisis, so many red flags in that article.

Ye; but it is truly the current state of things, sadly.

3) Cannot administer their own finances but want to take over the commercial running of super rugby clubs.

I'm hopeful that WF would now, with the backing of Tatterang, resist this with complete stubbornness. If push comes to shove we'd be (I'd imagine) in the same legal position as the Rabble were during the knifing of 2017 - untouchable.

4) Spending money on RL players at a premium when you have to borrow to pay them.

................ trouble on the horizon, back to GRR?

This is the thing that irks me most of all ATM. No secret I'm also an NRL fan and have always been interested to see how players would go changing codes. But the premise RA/Jones and previously the ARU trot out about "bringing our players back to Rugby" is in most cases, a complete falsehood. Of the players mentioned since McLennan & Jones came along, most have played Rugby only for their last year or two of high school. They generally come from a Mungo background and have either been induced by GPS schools to bolster their first XV or have been placed there by the Rugby League club that has their signature. They mostly play GPS Rugby and Jersey Flegg RL/SG Ball during the same years.

The only current player I can think of who genuinely comes from a Rugby background is Suliasi Vunivalu. His ability at school in Fiji was recognised with a scholarship to a Rugby College in Auckland where he made the Blues development squad but was poached by the Storm at 18yo. He spent 4 seasons there and was a superstar. Even given his Rugby grounding, it has been a struggle to find his way in top tier Rugby, though I think he's getting there. Koirobete is the exception and is a freak at both games. Looking at these facts just points out what a high risk gamble it is to sign them. An extremely high stakes one.

[Ham105]

More from the Panda ...

Wallabies players set to walk, Super Rugby faces uncertainty as national club competition backed

EXCLUSIVE By Jamie Pandaram
Code Sports 8:44PM September 28, 2023

At least four Wallabies players are actively looking to join overseas clubs despite being contracted to Rugby Australia beyond the World Cup, such is the disillusionment within the game.

The revelation comes as insiders fear the code is headed for insolvency, with uncertainty around whether RA can acquire the loans to keep going, while there are calls for a complete overhaul to scrap Super Rugby and establish a national club competition instead.

As RA chairman Hamish McLennan doubled down on his target of acquiring more NRL players to fix the Wallabies woes, and a two-year $1.6 million offer was tabled to Roosters player Angus Crichton, the news only served to anger Australia’s downtrodden playing group.

Four RA contracted Wallabies – on deals up to the end of 2025 – are hitting the overseas market and hope to get early releases.

Could some big names in Australian Rugby walk out? (Photo by Jeff PACHOUD / AFP)

They have lost faith in the future direction of Australian rugby, and want out.

Some also believe the nature of the Wallabies’ campaign in France has devalued them on the player market.

If they get compelling offers, they’ll leverage the offers RA has made to Crichton and fellow Roosters player Joseph-Aukuso Suaalii – who is supposed to be paid a total of $5.35 million over three years from 2025 – to free up that money and allow them to leave early.

Sources said that early discussions suggest Crichton and Suaalii could be the Wallabies centre pairing for the 2025 British & Irish Lions series, with boom rookie Max Jorgensen marked for the fullback role.

The Wallabies have sunk to a historic low of 10th in the world rankings and are set to be bundled out of the World Cup’s pool stages for the first time after losses to Fiji and Wales.

Wallabies coach Eddie Jones, contracted until the end of 2027, has denied taking a job interview with Japan, but there is distrust now between the playing group, Jones and RA’s top brass.

RA has told the players there will be a thorough review once the World Cup has finished, and they’re keen for honest and open feedback.

Rob Valetini consoles Nick Frost after the Wallabies crashed out of the World Cup. (Photo by Hannah Peters/Getty Images)

However, many of these same players were part of a review at the end of last year when they were asked if Dave Rennie should be retained as national coach. They overwhelmingly said yes, but RA decided to sack him and hire Jones, so the players don’t feel their input will influence outcomes.

At the same time, the game’s stakeholders hold genuine fears that rugby will go broke.

Having failed to secure private equity funding, RA will be reliant on securing a loan of up to $90 million to stay afloat. It’s not guaranteed they’ll be given the money.

With the broadcast rights value set to drop after the deal with Nine and Stan Sport expires in 2025, alarm bells are ringing about the future of the game.

Earlier this year, Australia and New Zealand announced that Super Rugby would be guaranteed until 2030, with a new board to oversee the competition and its women’s version, Super W.

But if there is not enough broadcast interest to pay for it, officials may have no choice but to scrap the competition after 2025.

One broadcast expert said a dramatic turnaround of the Wallabies’ performances still won’t be enough to secure the financial future of Australian rugby.

“All this talk about how a winning Wallabies will automatically fix the problems is a furphy,” the expert said.

“High performance does not magically fix a business. The NSW Waratahs won Super Rugby in 2014, the Wallabies made the World Cup final in 2015, and Australian rugby has still gone backwards at a rate of knots.

“The All Blacks won the 2011 and 2015 World Cups, they’ve dominated Super Rugby for the past decade, they’ve secured private investment funding, and they’re still going broke.”

Rugby Australia’s decision to sack Dave Rennie and hire Eddie Jones has left players disillusioned. (Photo by Chris Hyde/Getty Images)

NZR posted a loss of $47 million last year.

In 2013, a research paper was presented to RA categorically stating that Super Rugby expansion was destined to fail. Then chief executive, Bill Pulver, agreed with the paper.

However, RA and SANZAAR still decided to expand Super Rugby to 18 teams in 2016. By 2018 the competition was reduced back to 15 teams, and by 2020 South Africa, Argentina and Japan had all withdrawn from the tournament, leaving Australia and New Zealand.

Super Rugby’s viewership has been dwindling over several years and three of Australia’s clubs, the Waratahs, Brumbies and Melbourne Rebels, are in financial peril.

A radical proposal to scrap Super Rugby and replace it with a 20-team club competition has been presented to RA previously, and still has the backing of investors.

It would involve Sydney’s Shute Shield and Brisbane’s Hospital Cup clubs playing in a two, 10-team divisions with a promotion-relegation system.

Instead of three or four games a weekend involving local teams, there would be 10, increasing broadcast content.

Up to 35 of Australia’s best players would be centrally contracted, and the rest paid by the clubs.

It would see a large departure of mid-level players from Australia but that trend has already begun.

Super Rugby’s future could be under threat. (Photo by Phil Walter/Getty Images)

Sydney and Brisbane clubs have loyal followings, and many supporters have become so frustrated with the mismanagement of the code they’ve stopped supporting Super Rugby clubs, creating a serious disconnect.

That is now stretching to the Wallabies following their disastrous 2023 campaign.

While Australia will host the 2025 Lions series, and 2027 World Cup and the 2029 Women’s World Cup, much of the revenue from these tournaments will need to service RA’s acquired debt.

Should more funds be ploughed into loss-making Super Rugby teams, rugby faces a stark future headed for amateur status.

The RA board and their member states cannot agree on a path forward, nor a financial model that can guarantee survival of the game and their own jobs.

Rugby in Australia has never been in a more precarious position.

https://archive.is/20230928203428/ht...bc0-1695933281

[Ham105]

Just to note, I'm not a fan of this reporter, the story, or his organisation. Nevertheless, it is worth knowing what is being written about the current situation in our game.

[GIGS20]

Just to note, I'm not a fan of this reporter, the story, or his organisation. Nevertheless, it is worth knowing what is being written about the current situation in our game.

Glad you clarified that mate.I assume he's still the nswrugby propaganda unit?

[jargan83]

Doesn't he work for News Ltd? The same News Ltd who have taken every chance available to shit on the game of Rugby Union since it departed Fox Sports?

More Club Rugby will save us bullshit.

[GIGS20]

Doesn't he work for News Ltd? The same News Ltd who have taken every chance available to shit on the game of Rugby Union since it departed Fox Sports?

More Club Rugby will save us bullshit.

It's my understanding that the "more club rugby" crowd are the same mob as the "less Super Rugby" crowd.

THey don't really consider any inherent dichotomy in their views, where on one hand they're saying let's play more rugby and on the other hand they're saying lets play less. Their only concern is the increasing importance and prestige of THEIR club or THEIR competition regardless of any flow on impact to the code collectively.

I struggle to find anybody in rugby that holds the view "a rising tide lifts all boats" (probably didn't state that very well, lots of people are saying that sort of stuff it's just that none of them have any control of anything at all)

Everybody seems to be looking at making the grass on their pissant little patch as green as it can be. If they can't find a way to make their grass greener, they're happy to make everybody else's grass browner so they still have the best house in the street. Nobody appears to give a shit that seemingly every other neighborhood ahs much greener grass than ours, all they do is point at their neighbour and say how much better they are than (the rebels, the hospital cup, the two blues or whoever is their current victim from the exact same space)

[shasta]

As usual, no attribution of his "broadcast expert", quoting from a decade old review of SR blah blah blah. Stopped reading there.

On the lighter side The Horse Guy had (maybe) the last laugh on Eddy. Asked about Laurie Daley's suggestion that, in the event they go insolvent, the NRL should buy out RA and run both games in an effort to stem the tide of kids heading to AFL, PVL said "Tell Laurie that in business you buy assets, not liabilities".

Both funny & not.

[Burgs]

There's facts and there's the way they are presented.
There is such a clear agenda to all these doomsday articles now.
There is zero intent to make Australian Rugby better, it is do whatever is necessary to "save" NSW/Shute Shield.
Totally agree with Gigs re dunghills.
Is first mention I have seen lumping Rebels in with Tahs and Brumbies in financial stress?

[wholetruth]

Is first mention I have seen lumping Rebels in with Tahs and Brumbies in financial stress?

This has been brought up several times recently along with the possibility of taking (merging) the Brumbies to Melbourne under the new centralization plan. The Brumbies have told them where to shove it apparently.
Pandaram has been the RA mouthpiece for years. Remember where he stood on the Force being axed. And being a News Ltd Sydney-based lacky has been writing stories like this ever since Fox lost the rugby.

[Burgs]

Is first mention I have seen lumping Rebels in with Tahs and Brumbies in financial stress?

This has been brought up several times recently along with the possibility of taking (merging) the Brumbies to Melbourne under the new centralization plan. The Brumbies have told them where to shove it apparently.
Pandaram has been the RA mouthpiece for years. Remember where he stood on the Force being axed. And being a News Ltd Sydney-based lacky has been writing stories like this ever since Fox lost the rugby.

Specifically due to financials though?
I've seen the boot/merge conversations, but assumed always around numbers, not financials given historical lifeline support.
That said, it's the Rebels so I don't really lose too much sleep following their details...