Australian Rugby / RA

[Braveheart81]

I understand companies recouping their investments - but surely there is more to this, why make a $200M investment, pull out some divvies, yet still be at a $175M loss on that investment but have it tied up with a business that is falling down?

How are they losing £175m? They still own the investment in the league.

£27.5m over 2 years on a £200m investment suggests a yield of almost 7%. CVC would likely be pretty happy with that.

CVC taking a dividend of £27m on their 27% share suggests that the other owners (the clubs) have taken a dividend of around £73m pounds between them over the same period.
A £29m debt seems serviceable if that is the case.
Doesn’t line up nicely for a sensationalist tweet though.

The "dividend" for the clubs though is a large chunk of their revenue that they need to run a professional rugby club.

These aren't profits being distributed out to them after all the bills have been paid. This is the income to pay the bills.

It's clear that a lot of Premiership clubs have been spending well beyond their means and this has been catastrophic for them. Some of them are competing with private owners with deep pockets and when they're still community owned clubs they can't do that.

 

[Adam84]

I understand companies recouping their investments - but surely there is more to this, why make a $200M investment, pull out some divvies, yet still be at a $175M loss on that investment but have it tied up with a business that is falling down?

CVC still retain a 27% stake of the PR, CVC will receive 27% of all future commercial income from the league in perpetuity. They haven’t made a £175million loss.They’ll easily recoup their investment in 10 years at this rate.

What’s concerning for the PR is they received £200million from PE for 27% share; PR distributed £175 equally to the clubs(£13.5million each) and retained £25million at the organisation level to manage the league.

But through COVID many clubs have lost all that money, and then some, and apparently so has the league itself. What’s worse is they now only receive 75% of the commercial income they previously did with CVC pocketing the rest.

Cash is king for these PE ‘partners’ like Silver Lakes and CVC, they’re paying these figures for an annual cash flow

 

[PhilClinton]

But through COVID many clubs have lost all that money, and then some, and apparently so has the league itself. What’s worse is they now only receive 75% of the commercial income they previously did with CVC pocketing the rest.

Cash is king for these private equity ‘partners’ like Silver Lakes and CVC, they’re paying these figures for an annual cash flow

These PE guys don't throw 200M at something unless they know they'll soundly recoup their investment, as you say, at this rate it could be done within 10 years, but is the competition even that profitable?

Isn't the point of the original article to say now that the PE deal is in the place, PR has no money and is in trouble?

Surely there is more to this because CVC would have done their due diligence before the investment and in order to recoup their cash, they need a profitable rugby competition. The annual cash flow only occurs if the competition is running. But if the competition is bankrupt and the teams are all fucked, what am I missing? Has it just been a major misfire from CVC in terms of the investment? COVID etc I guess...

 

[Derpus]

CVC still retain a 27% stake of the PR, CVC will receive 27% of all future commercial income from the league in perpetuity. They haven’t made a £175million loss.They’ll easily recoup their investment in 10 years at this rate.

What’s concerning for the PR is they received £200million from private equity for 27% share; PR distributed £175 equally to the clubs(£13.5million each) and retained £25million at the organisation level to manage the league.

But through COVID many clubs have lost all that money, and then some, and apparently so has the league itself. What’s worse is they now only receive 75% of the commercial income they previously did with CVC pocketing the rest.

Cash is king for these private equity ‘partners’ like Silver Lakes and CVC, they’re paying these figures for an annual cash flow

Dont know shit about business but it never made sense to me to forgoe future earnings for a lump sum unless the plan is to invest that lump sum in something else that generates a return (i.e. Not inflated player wages).

Its like taking out a pay day loan to pay the electricity bill. Next bill is only going to be harder.

 

[Adam84]

These private equity guys don't throw 200M at something unless they know they'll soundly recoup their investment, as you say, at this rate it could be done within 10 years, but is the competition even that profitable?

Isn't the point of the original article to say now that the private equity deal is in the place, PR has no money and is in trouble?

Surely there is more to this because CVC would have done their due diligence before the investment and in order to recoup their cash, they need a profitable rugby competition. The annual cash flow only occurs if the competition is running. But if the competition is bankrupt and the teams are all fucked, what am I missing? Has it just been a major misfire from CVC in terms of the investment? COVID etc I guess...

By the nature of these deals, PE ‘dividends’ aren’t a portion of profits, it’s a portion of commercial revenue. It doesn’t need to be profitable for them to pull their money out.

PRL clubs need to cut their spending clearly, but as long as commercial revenue through broadcast deals and sponsorship remain, CVC are still getting their return.

 

[Adam84]

Dont know shit about business but it never made sense to me to forgoe future earnings for a lump sum unless the plan is to invest that lump some in something else that generates a return (i.e. Not inflated player wages).

It’s like taking out a pay day loan to pay the electricity bill. Next bill is only going to be harder.

yeah exactly.. distributing the one off cash injections to poorly managed clubs without a solid plan for growth was a ridiculous decision.

Any PE injection needs to be invested wholly in a growth plan/fund which has benchmarks that significantly exceed the level of future revenue you are forgoing.

 

[PhilClinton]

By the nature of these deals, private equity ‘dividends’ aren’t a portion of profits, it’s a portion of commercial revenue. It doesn’t need to be profitable for them to pull their money out.

PRL clubs need to cut their spending clearly, but as long as commercial revenue through broadcast deals and sponsorship remain, CVC are still getting their return.

Thank you for clarifying

 

[The_Brown_Hornet]

All this turmoil in the English clubs probably helps us retain players. There is a long overdue reckoning on player salaries that should work out in our favour. I don't begrudge the players one bit getting every dollar they can, but I suspect the pool of clubs with deep pockets is diminishing.

 

[Derpus]

All this turmoil in the English clubs probably helps us retain players. There is a long overdue reckoning on player salaries that should work out in our favour. I don't begrudge the players one bit getting every dollar they can, but I suspect the pool of clubs with deep pockets is diminishing.

I think it just shifts more players to France and Japan, honestly.

 

[dru]

I think it just shifts more players to France and Japan, honestly.

It’s still a reduction in comps paying big money which helps our non competitiveness back in Aus.

Definitely something RA should be watching in terms of Private Equity.

 

[Adam84]

I’m quite glad a PE deal has gone south for a fellow rugby tournament before RA engage their own, it vanquishes this notion that PE is the holy grail of commercial growth and should hopefully generate a slightly more cautious approach.

 

[Doritos Day]

I think it just shifts more players to France and Japan, honestly.

Does it? There aren't an infinite number of spots. Japan are tightening the screws on foreign capped players, and the clubs are increasingly aware of getting fleeced on these 1-2yr sabbatical deals.

France maybe, but you're certainly earning your money over there. Look at Beale's comments when he returned; you're being put through the meat grinder from a physical perspective.

 

[PhilClinton]

Sheesh the new cricket Australia broadcast deal really shows the gap between rugby and some other sports in Australia. I know cricket is a unique beast in terms of its monopoly on the Australian sports summer and the multiple formats and competitions which are included.

I believe the current RA deal with Nine was worth $100M over 3 years.

Cricket Australia about to sign a 7 year deal worth around $1.4B - so that’s nearly double the total value of the RA deal, per year.

Interestingly channel 7 were also able to recoup $5M recently from their current cricket deal due to the significant drop in viewership of the big bash product. They were chasing $70M so $5M is obviously a fair bit less, but it’s an interesting precedent for broadcast arrangements. I think a lot of us aren’t overly optimistic about the ongoing viability of Super Rugby Pacific format and its engagement. I wonder if something similar could ever be on the cards.

 

[WorkingClassRugger]

Sheesh the new cricket Australia broadcast deal really shows the gap between rugby and some other sports in Australia. I know cricket is a unique beast in terms of its monopoly on the Australian sports summer and the multiple formats and competitions which are included.

I believe the current Rugby Australia deal with Nine was worth $100M over 3 years.

Cricket Australia about to sign a 7 year deal worth around $1.4B - so that’s nearly double the total value of the Rugby Australia deal, per year.

Interestingly channel 7 were also able to recoup $5M recently from their current cricket deal due to the significant drop in viewership of the big bash product. They were chasing $70M so $5M is obviously a fair bit less, but it’s an interesting precedent for broadcast arrangements. I think a lot of us aren’t overly optimistic about the ongoing viability of Super Rugby Pacific format and its engagement. I wonder if something similar could ever be on the cards.

Which is why given we're staying with SRP (Super Rugby Pacific) we need to go with more not less and certainly not the same amount of content as we are offering at present. As maligned as the BBL has become for it's overreach in terms of games there is still value in the ability to prove 56+ games of domestic product which is something that as it stands we cannot.

 

[Dan54]

Which is why given we're staying with SRP (Super Rugby Pacific) (Super Rugby Pacific) we need to go with more not less and certainly not the same amount of content as we are offering at present. As maligned as the BBL has become for it's overreach in terms of games there is still value in the ability to prove 56+ games of domestic product which is something that as it stands we cannot.

True unfortunately WCR, it's content as we all know not always the standard of content (maybe wrong word, but it's Jan 2nd and I got brain in neutral ) If TV/Streaming services can get a few more subscribers it all they interested in really.

 

[WorkingClassRugger]

True unfortunately WCR, it's content as we all know not always the standard of content (maybe wrong word, but it's Jan 2nd and I got brain in neutral ) If TV/Streaming services can get a few more subscribers it all they interested in really.

It's not unfortunate. It's recognising a commercial reality. Refusing to recognise and adapt to this has seen the likes of the NRL grow it's ability to remunerate it's talent far in excess of ours. And it's something many fans fail to comprehend as well. I watched far more NRL in 2022 than I had in a very, very long time. Something that stood out to me was how thin the talent actually was. The Top 10 teams were pretty competitive but the bottom 6 most certainly were not. And yet, outside of the promotion and marketing side of the equation the ability to not only have accessible content but available content has served the NRL very well despite this very clear disparity.

SRP (Super Rugby Pacific) in my opinion with the right schedule. One that involves both a 22 round home and away schedule plus a cross-border competition with the JRLO could actually provide not only content but with greater financial returns increase it's ability to not only retain but recoup talent keeping the standard of a good quality.

My schedule would involve SRP (Super Rugby Pacific) running for 22 rounds with the let's call in the Asia-Pacific Champions Cup running within this season with the Top 8 from both competing split into 4x4 pools. So the regular season would run for 25 weeks. Tests would move to mid week and run alongside the season much like the NRL.

 

[PhilClinton]

Whilst I really like the idea of a ‘champions comp’ - I’m worried that the engagement won’t be there to warrant it.

It’s yet to be proven that rugby can return to its glory with an Aus/NZ Comp. So what’s the enticement for them to watch something involving teams from another competition.

 

[WorkingClassRugger]

Whilst I really like the idea of a ‘champions comp’ - I’m worried that the engagement won’t be there to warrant it.

It’s yet to be proven that rugby can return to its glory with an Aus/NZ Comp. So what’s the enticement for them to watch something involving teams from another competition.

There is that risk. To be honest a great deal of the thinking has more to do with revenue. It wouldn't necessarily need to be part of it but a full season should be a non-negotiable. Again with Tests moved to mid-week fixtures.

 

[Adam84]

Interestingly channel 7 were also able to recoup $5M recently from their current cricket deal due to the significant drop in viewership of the big bash product. They were chasing $70M so $5M is obviously a fair bit less, but it’s an interesting precedent for broadcast arrangements. I think a lot of us aren’t overly optimistic about the ongoing viability of Super Rugby Pacific format and its engagement. I wonder if something similar could ever be on the cards.

The legal grounds for recouping the money was more because a breach in contract in relation to how CA managed the draw and player availability during covid, Chanel 7 argued the drop in viewership was a byproduct of those decisions by CA. Obviously CA didn’t have much room to work with, but Seven did pay for something that CA arguably weren’t delivering.

It’s a tumultuous relationship despite the money exchanged, Nine/Stan & RA seem to have a much better relationship then Seven & CA do.

 

[Dan54]

My schedule would involve SRP (Super Rugby Pacific) (Super Rugby Pacific) running for 22 rounds with the let's call in the Asia-Pacific Champions Cup running within this season with the Top 8 from both competing split into 4x4 pools. So the regular season would run for 25 weeks. Tests would move to mid week and run alongside the season much like the NRL.

I like the way you thinking, but have the test series running alongside it isn't going to work, rugby is too complicated to not have a decent build up etc for tests etc. And super with test players removed from a good part?