There is so much scrutiny around private equity in the game of rugby union in Australia, but the answer is simple.
The Six Nations have it, so too do South Africa and New Zealand. They are seven of the top ten nations in World Rugby. They have financial backing.
It’s not a matter of if but when.
If and when Australia secure the Rugby World Cup rights for both the men’s and women’s Rugby World Cup, how much more is private equity worth to Rugby Australia and the rugby community?
If you believe the articles (pro and con), they have to wait until all is final and then strike.
Rugby Australia was in trouble long before COVID hit. In fact, I’d go so far to say it actually brought on a cost-cutting exercise that needed to happen at Rugby HQ.
Having said that, it has impacted player retention like no other nation.
For those who are unaware, pre COVID-19, Rugby Australia had a corporate overhead of the vicinity of that of the RFU, which was in excess of $20 million per year.
(Photo by Getty Images)
In comparison, those outside of Australia and England were at almost 60 per cent less of corporate overheads. Wow, that’s a difference.
Both the Irish and Welsh rugby unions have grown and the Scottish will have a competitive team for the World Cup as they have had to overcome similar hurdles.
It’s right to wait for the announcement of both Rugby World Cups. This is the injection rugby union in Australia needs, but where do the funds go?
There are four key areas:
1. Professional/elite
2. Grassroots
3. Promotion
4. Administration and management
It’s clear that four is fourth. We all agree.
But where do one to three stand?
If private equity has given a boost to northern hemisphere rugby – which was already huge anyway, and which I assume had a ten to 20 per cent increase on their initial $509 million investment for 14 per cent as published – then it has to be done.
The biggest issue in Australia is the promotion of the sport. It is a product that has key strengths across all codes.
It has an opportunity for all sizes (still), a skill set for all hand-on-ball sports, and has an environment that suits both men and women.
To promote this code, especially at its lowest ebb, is without a doubt a good investment.
There are four football codes in Australia and all of them have a place, but rugby union has a global market that supports all codes when other codes won’t (with the exception of football, of course).
(Photo by Juan Jose Gasparini/Gallo Images/Getty Images)
Between 1991 and 2003, rugby union was battling with the NRL and the AFL. Football was nowhere to be seen in a professional sense on the Australian landscape.
The 2003 World Cup final in Australia had 4.3 million viewers in Australia alone. It was one of the highest TV audiences ever. Cathy Freeman was the highest.
Since then, rugby has gone downhill. There is no sugar coating that part.
We all whinge about the referees, especially with cards. The 20-minute red card needs to be adopted, but won’t be, due to the fact the northern hemisphere want blow-outs. But for God’s sake, tackle lower.
As much as I hate an accidental-contact-to-the-head card, lower your height. It’s basic cause and effect.
But back to the article, these funds must be distributed to the grassroots and there most certainly needs to be greater promotion of the code.
If no-one knows about it, they can’t watch it.
Super Rugby and club rugby have been fantastic this season, but unless you’re a rusted-on fan, you wouldn’t know about it.
(Photo by Graham Denholm/Getty Images)
I’d even go so far as to promote the scrum and not deride it.
It is such a great part of the sport and the power is extraordinary. I would certainly not allow more than one reset, but other than that, let it play and promote the technical side of what is: a great sporting contest.
Obviously the elite, professional part of the equation is important.
As the great David Campese has stated on Thursday, “one thing the Super Rugby teams should realise is that younger kids are looking for idols”.
The faces are becoming more familiar due to some recent successes, but when the World Cups are secured and private equity has come into effect, let’s promote the hell out of it.
RobC
Roar Guru
thanks for your article Riggers. Im unsure how familiar with you with the motivations and practices of global PEs. imo they are not bad actors. But in the case of Aus Rugby, I think its a dangerous partnership for both counterparties
LuckyPhil
Roar Rookie
I reckon PE is the lazy option by the board. Its basically saying they can't really come up with ideas, so get PE involved and let them do it. PE will want their pound of flesh and will demand big changes, so why not do it in RAs terms.
Ken Catchpole's Other Leg
Roar Guru
WL, every piece of gold may be shaped into a shackle. I trust Twiggy as far as I could throw Clive. Others may have reasons to differ. Happy for all politically active industry captains to be proven of good will.
Wallabies_Larkham
Roar Rookie
KCOL..what would be the consequences for RA if they had borrowed from the Twiggy bank..hopefully without interest...
Bourkos
Roar Rookie
Pretty sure Mclennan addressed this. He said they won't consider PE as they are in there "lowest ebb" and will command the worst deal. I think they are biding their time for rugby wc to be confirmed and hopefully a few more super rugby wins
Dionysus
Guest
"Managed properly, private equity will be a major boon for game and should help rugby compete more successfully in the Australian market across all key areas." The key phrase there is "Managed Properly" What worries me about this article is the debate on where PE should be spent - the 4 areas listed in the article. The decision to take PE cash should be born out of a burning need or opportunity not the other way around. Unless we can identify that up front then it will just get wasted.
jeznez
Roar Guru
I’m not a News subscriber either but the précis when searching on Google shows the figures I’m quoting.
Rob9
Roar Guru
Not a News subscriber. ‘We have a lot more than 2-3 guys internationally that would be Wallabies first choice if they were here and the figure is only growing’ Agree to disagree. Enjoy the rugby tonight.
jeznez
Roar Guru
Apparently I've been overstating Banks's salary with him reportedly on under 400K: https://www.theaustralian.com.au/sport/rugby-union/wallabies-enraged-by-3m-offer-for-teenager/news-story/2afdc9574ead3d7b6524f861e5f20925 Makes more sense if the Wallaby average is around 550K (as suggested in the same article). My comment is that we are only paying two or three guys in the 1m plus range. Meanwhile offers in that range are coming for guys still trying to establish themselves in the 23. https://www.smh.com.au/sport/rugby-union/banks-deal-the-tip-of-the-iceberg-for-australian-rugby-20220411-p5acnx.html We have a lot more than 2-3 guys internationally that would be Wallabies first choice if they were here and the figure is only growing.
Rob9
Roar Guru
I’d be interested to see the links to some of the information you’ve introduced here (average salary for Wallabies etc). Just interested and I’ve found very little on bulk in my own quick research. The reality is that by and large we have managed to keep most of our top line talent here. As mentioned previously, there might be 2 or 3 spots in the 23 that you’d look to OS based talent to fill. This should remain the objective and given (at least) the big boys in Europe are done pulling away and we’ve been reasonably successful keeping the overwhelming majority of our best Wallaby 23 in the country to date- I don’t think it’s unrealistic. We’ve just come through the wrecking ball that was covid and a significant period of decline that I believe resulted from a grossly inadequate 2nd tier (Super Rugby)- a layer that’s usually charged with taking the game to the people and capturing hearts and minds. Significant debt is no great suprise, but it doesn’t define the potential. We’ve come through covid, the game has set itself on an exciting new course (that’s more locally focused), there’s a Lions tour in 25’ and a RWC in 27’. The game has a genuine chance to rebuild itself and we need our stars embedded in our news cycle to assist with that rebuild. The game needs to be interesting beyond Bledisloe’s and RWC’s. And the impact of such a minuscule footprint will ensure wins against the AB’s become non-existent and advancing past the pool stage is a real struggle.
james
Guest
IMO PE has one interest - PE. They don't care about anything but getting maximum return for minimum investment and leveraging everything that is not nailed down. It is not some charity that will take the time to let the ARU sort itself out to build a better future. They want returns on day one. PE can work for the bigger unions as they have the cash flow to feed the "vampire" from the cash generated by a much larger pool of supporters paying for tickets and associated merchandise and, the longer season with many more matches. That is not a good comparison for the ARU. I suspect it is better to compare with many of the large retailers who were struggling and turned to PE as a catalyst to enable them to restructure and rebuild. It usually ended in tears especially after the PE paid themselves a handsome stream of dividends and loans.
Micko
Roar Rookie
Rugby union's major problem is that super rugby is a poor format: a weird confused top-down pseudo state/provincial format which doesn't work in Australian footy codes. Sydney is massively underrepresented as the major grassroots heartland, and realistically should have 3-4 franchises. Also, not having a proper pro comp (open recruitment) hurts majorly, as AFL, NRL, A League are generally unpredictable, and have huge turnaround of premiers, minor premiers, grand finalists, and finalists in a decade. Plus the weird development war angle with NZ doesn't really work. NZ's national sport against a small niche sport: 7th or 8th biggest male team sport (and heavily geographically confined!), means the franchises aren't really going to be equal, and RA can't really afford to have 3-5 pro franchises in all of Australia for the sport where their competition have triple, and are STILL expanding! It's a farcical setup all round!
jeznez
Roar Guru
We've got 2 maybe 3 guys up at that pointy end. The average Wallaby (which includes the salaries of Hooper etc. for calculation) earns 500-550K. Banks is exactly in that bracket (arguable that he should maybe be on lower as a 20 cap Wallaby) but his reported contract had him bang on the average. Reality is that we cannot afford to keep our 'average' Wallabies. We lost Samu Kerevi who was on 600K for about 800K back in 2019, the salaries for top performers has only gone up. I think needing to select more from offshore, letting guys go and earn what they are worth and not going as deep into debt as we have trying to keep them here is the correct call. I thought earlier you were saying we need to make these big payments and keep these guys here. "Our stars move from our local scene and they’re as good as lost for promotional purposes." We have about 70m in loans and interest to pay back by 2027 - we can't afford to have more of these guys playing at home.
Riggers
Roar Rookie
Thanks mate
The World in Union
Roar Rookie
Absolutely agree Rob, rugby is currently sitting at very roughly 10% of the level/value of soccer. I reckon rugby could double it's value over the next 2 decades which is great from a rugby perspective and should provide a good return to private equity. Not sure there's much upside after that though. Still way off the level of soccer but should be further ahead of rugby league so it will be interesting to see if a league star chooses to cap their potential earnings at say $1.5M in Australia or open themselves up to the international rugby market where potential earnings may be well above this. No doubt this is an emotional question that could be an article in its own right :happy:
Rob9
Roar Guru
Michael Hooper’s pre-covid RA/Tahs contract was $1.2m (I think it’s back there now). Vunivalu was brought over from the Storm on close to a mil. Are these salaries not competitive in the international market? Israel Folau was reported to be the highest paid player in world rugby… while plying for the Tahs. While it’d be great to see more Australian talent on our own shores, I don’t believe our best 15 (or even 23) would be missing much if it were picked exclusively from local talent.
Jacko
Roar Rookie
Yes Im unsure when the first PE investment in rugby came along but I would hope that soon we start getting some genuine data to show its worth. I certainly get the lump sum stuff but the returns on investment is the real stuff.
Jacko
Roar Rookie
Im hearing talk in the background Muzzo. WAY in the background lol.
Tim J
Roar Rookie
You are doing a great job creating good conversations about key topics, the feedback is very positive. I always enjoy your honest and balanced articles, and looking at the responses not just on this article but also others that you have written other Roarers appreciate your ability also. :thumbup:
jeznez
Roar Guru
But what is the proposal? RA to have their own platform? Get off Stan? What other sporting unions or competitions are thriving under the model? We often hear we need the likes of Silver Lake to bring expertise to bear in this space, but as I said above - the only example I've seen from them took UFC back to a traditional broadcaster agreement (and trimmed costs). Wasn't anything radical to grow the sport.