Private equity support premier rugby “turned a big corner” after the financial crisis caused the collapse of three clubs, according to the CEO.
English Rugby Union’s top professional league, Premiership began the 2022-23 season with 13 clubs, but ended at 10 as the wasps, Worcester Warriors and London Irish all fell into bankruptcy. Newcastle Falcons were saved from a similar fate with a pending acquisition by Austrian energy drink brand Red Bull.
Last year’s report by accounting firm Leonard Curtis warned that seven of the remaining clubs have “business in balance sheets” and are completely dependent on funds from the owner, leaving behind high debt and lasting losses.
However, Simon Massy Taylor, CEO of Premiership Rugby, which runs the league, said the game is a “another trajectory” thanks to an increase in audiences, change in governance, increased commercial revenue, increased broadcaster TNT sports, and a long-term partnership with the national government’s rugby and football coalition.
“We’re just in a very different place right now. We did a lot of work to keep things steady,” he told the Financial Times. “That’s not to say there are no challenges in the future, but I think we’ve turned a big corner.”
Simon Massie-Taylor: ‘Now, a big project is to ensure there is a growth accelerated story, and to ensure this is a product for future investors © Dan Mullan/Getty Images
Massie-Taylor, who was appointed chief executive in 2021, said the game has made “missing” advances in that issue, with the next set of club accounts showing debt and financial contributions from owners.
“It’s a bit like the economy. There’s no easy fix here,” he said.
Private equity firm CVC, the former owner of Formula 1, paid £200 million for a 27% stake in rugby prime minister in 2018 as part of a wider play in the sport with professional rugby unions.
There are also interests in the Six Nations Rugby, the annual Northern Hemisphere International Series, featuring clubs from Ireland, Italy, Scotland, South Africa and Wales, and the United Rugby Championship.
However, when Covid-19 hits and live sports were put on hold, the premiership team survived using funds injected by CVCs instead of investing in infrastructure and growth. Their debt grew even after the UK’s culture, media and sports sectors lended around £124 million to premier teams during the pandemic.
As part of its recovery plan, Premiership Rugby and TNT Sports are targeting Premier League football fans by screening games immediately after a football match. They also introduced initiatives such as equipment, mainly Derby Gold Games, to boost viewership ratings.
Almost 82,000 spectators saw Bath defeat the Leicester Tigers in the Premiership Finals at Allianz Stadium in Twickenham last weekend. The game has sold out for the second year in a row. TNT Sports and ITV1 had an average viewer of 973,000. This is a record of the equipment for the competition.
Rob Wilson, a professor at the university campus of the soccer business, which offers a sports-focused degree, said the owners appear to be trained by spending and have managed to raise interest from local fans and sponsors.
Wilson, who co-authored the Leonard Curtis report, said:
While the appetite for live rugby remains strong and the financial situation remains stable, Massy Taylor said there is still a need to overhaul the sport’s structure and ownership model.
Premiership Rugby taps investment banks Raine Group and Deloitte to come up with recommendations to run a review of the game and attract global investors at the club and potentially league level.
The move to rebuild the UK’s professional rugby union comes as it faces challenges from the proposed new international club competition (called the R360), led by former England captain Mike Tindall.
The R360, which is set to start next year, aims to become a franchise-based competition, invites the best players on bumper contracts to play games at venues around the world and play games on free aerial platforms.
However, Massie-Taylor dismissed the project as a “distraction,” but Andrew Georguou, who oversees TNT sports in the UK and Ireland, recently described it as “commercially unsustainable” and “delusional.”
As part of the recovery plan, Premiership Rugby is targeting soccer fans by screening games after soccer games ©MI News/Nurphoto
“A big project during the current premiere is to ensure that there is an accelerated growth story and that this is the product that is as investable as possible for future investors,” said Massy Taylor.
Professional rugby, he added, was relying too much on a handful of wealthy British owners to fund the club. “It needs to change in terms of it changing and appealing to the global market.”
The most likely result is the premiership, renamed Gallagher Prem, moving to a franchise model similar to the US sports and the short British cricket competition The Hundrement. The auction of a team franchise for 100 people, which raised over £500 million earlier this year, provides great info on decision-making within rugby.
The franchise model eliminates the financial risks associated with promotion and relegation, but the team has not moved between the premiership and championship since 2022. The winner of this year’s second tier competition, Ealing Trailfinder, was not promoted because it did not meet minimum standards such as stadium size.
