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The shove is on!!

By JP
March 8 2020

The shove is on to get rugby over the gain line


When Saracens run out in rugby’s second tier next season, the north-west London club’s squad of international stars must be careful not to stumble on a tree root. At Dillingham Park, Bedfordshire, home to Ampthill RUFC, the only way to reach the pitch from the spartan clubhouse is to pick a muddy path through a silver birch wood.

Many more indignities await Saracens following their relegation by Premiership Rugby for persistent breaches of the top flight’s player salary cap. The scandal means one of club rugby’s richest teams will clash with relative paupers such as Ampthill at the same time as the sport itself is tackling its own troubled relationship with money.

“We’re really on day one of this journey,” says Darren Childs, chief executive of Premiership Rugby and the man under pressure to deliver nothing short of a financial revolution in English club rugby on behalf of team owners and their new business partners, the $82bn (£63bn) private equity giant CVC. “We lost about four months and everything got held up while we sorted out the salary cap issues,” he adds.

Saracens are resigned to a season of exile and Childs – a previously casual rugby fan – has received a crash course in the laws and lore of the sport. Now his real task of converting club rugby into a slick commercial machine is beginning.

 

The former chief executive of UKTV, the broadcaster of the comedy channel Dave, was deliberately chosen by CVC as a rugby outsider, capable of building a future for the sport without too much regard to its past.

 

Childs took up his post in June and has surrounded himself with former colleagues from UKTV. The new team are already preparing to move the headquarters of Premiership Rugby away from Twickenham, English rugby’s traditional south-west London stronghold, and into Covent Garden in the heart of the capital, closer to the brands they hope to attract as partners and a short walk from CVC’s offices on the Strand.

“Rugby only went professional in 1995 and we’re a bit behind the curve,” says Childs.

“But we’re in a business where the interest in the product we create is just growing. The fan base is increasing. There are 300m active rugby fans around the world and the great thing about technology is that it allows us to start to connect with them.”

For many of the rugby men who have traditionally run the game with pride in its arcane structures and amateur spirit, the coming campaign of breakneck professionalisation is likely to be dizzying.

“CVC are no doubt going to meet some resistance,” says Simon Gillham, the British chairman of the French club Brive. “But in the end money talks and that is what they are offering to the club owners and the competitions. CVC are incredibly ambitious for the sport.”

For Premiership Rugby, CVC’s ambitions will mean heavy investment in almost all aspects of the sport. The private equity firm has won the confidence of club owners, who sold it a 27pc stake in their competition for £200m, partly through basing its business plan entirely on new equity funding. However, there are no plans to deploy the debt trickery often used by buy-out firms to quickly boost returns, partly because returns from rugby are so low there is little to borrow against.

CVC-backed rugby bosses are in line for the multi-million-pound paydays that are standard in private equity if they hit stretching targets in as soon as three years.

In meetings with club leaders, Nick Clarry, one of the CVC partners leading the firm’s rugby push has highlighted just how little the sport makes compared with American football. Excluding television rights, he tells them, the Premiership final makes a return of about $3m each year. Meanwhile the Superbowl throws off in the region of $350m. Clarry accepts that England is not America and the Premiership is not NFL, but argues that a ratio of nearly 120 times demonstrates that rugby has plenty of room to grow.

The comparisons with American football run deeper as Childs attempts to deliver on CVC’s ambitions. The Premiership is already working on a streaming app for fans outside the UK, modelled on Game Pass, which allows British NFL fans to watch live matches for £14.99 per year.

 “The old broadcasting model was that you had to have big scale in markets to sell your product,” says Childs. “But now we can write a piece of code in Twickenham that can deliver coverage to someone in Tonga and tap into those superfans.”

On home turf there is no prospect of Premiership Rugby going direct to consumers in this way, but as it prepares for an auction of broadcasting rights later this year, Childs is attempting to improve coverage with more uniform camera angles and better on-screen graphics that can help newcomers to the sport more easily understand the action.

He has the power to make such changes. Although CVC only own 27pc of Premiership Rugby, with the majority still controlled by the clubs, a complex shareholder agreement ensures it has day-to-day control.

The money it has injected into the clubs cannot be paid out in dividends by owners – CVC feared triggering a spike in yacht purchases by owners – and is intended for investment in stadiums, facilities and academies. Although CVC had no direct influence, the punishment delivered to Saracens is also a signal that rugby must not squander its new riches inflating player salaries. As the sport changes, more money will arrive from other sources, Clarry has assured impatient elements.

The Premiership is wrestling with the idea of abandoning relegation and promotion – known as “ring-fencing” – effectively turning teams into NFL-style franchises. The move would reduce investment risk for team owners, but risks creating “dead rubber” matches unappealing to fans and broadcasters.

Meanwhile the likes of Ealing Trailfinders, currently in the second tier and generously funded by the travel entrepreneur Mike Gooley, would have their dreams of top flight rugby dashed. Finances already cause tensions between the Premiership and the second tier, says Ben Ward, director of rugby at Trailfinders.

“Something should be done to stop ring-fencing but also something should be done about the fairness of the competition and to help develop sides in this country. The Premiership this year is not exciting with relegation already decided.”

Gillham of Brive agrees. “For me, the threat of relegation is really important for the game. You see it on people’s faces at Brive every week. We have been involved in relegation battles but I wouldn’t give them up for the world.” The ring-fencing debate has rumbled in rugby for a decade and is unlikely to be concluded quickly even under CVC’s influence.

The forthcoming sale of television rights later this year is a more pressing question. The domestic rights are currently held by BT Sport, which pays about £40m per year and averages between 150,000 and 200,000 viewers for each match. BT is understood to be keen to renew its contract.

The broadcaster has proposed a deal in which it would pay nothing to show one game a week live, and aim to “upsell” fans to a package with complete coverage, splitting the proceeds with clubs.

There are few signs of the idea being taken up, although the NFL is considering a similar arrangement to get a better foothold in British living rooms. BT sources suspect that their role in rugby may be under threat as CVC’s plans advance.

Premiership Rugby is only one part of a global investment being led from London. CVC followed up in November with a £120m deal for a stake in Pro14, the top flight competition for Irish, Italian, Scottish, South African and Welsh sides. The Six Nations competition will be the next domino to fall, with the private equity firm due to pay the national rugby authorities £300m for a one-seventh stake. Talks are also under way with New Zealand and South African club rugby.

It may be more difficult for CVC to take control of France’s Top 14 competition, which has already enjoyed a major infusion of cash and is paid about £100m a season from the broadcaster Canal+. Owning a rugby club became de rigueur for continental billionaires such as Mohed Altrad of Montpellier and the cement industry and Hans-Peter Wild, owner of Stade Français and heir to the Capri-Sun drinks fortune. Top 14 is also structured as an association, with no company in which CVC could invest.

Clarry is nevertheless keen to involve French teams in his plans through the Champions Cup, the European club competition.

Each of CVC’s investments in rugby must pay their own way, but the firm is gradually gaining more control over the global game, potentially allowing it to coordinate the sale of broadcasting rights to maximise their value. Clarry has spoken in meetings of a dream scenario for CVC in which the Premiership acts as a “volume” product of weekly matches through winter to be sold alongside the “value” product of the Six Nations in spring and autumn internationals.

Sky is understood to be developing ideas along the same lines for a rugby channel, where it could package up a sport senior executives have previously viewed as a “total mess” and sell it to pay-TV customers. Some at BT suspect close ties between CVC and Sky – who have previously worked together on Formula 1 and been joint investors in Sky Bet – makes such an outcome likely.

Others are less sure. “I think there’s the question about whether CVC can effectively coordinate across all their fragmented interests,” says one experienced rights executive. “They don’t really have control. They might have commercial control but what kind of veto rights do the teams have? And there is clearly a lot of debate about what is the right approach of free-to-air versus pay-TV.”

One senior broadcasting executive thinks the challenge is more fundamental. “I’m just not sure the sport is popular enough,” he says. “You can change the tournaments, make kits nicer, end relegation and promotion. Is that going to double the audience? I don’t think so.”

Clarry and company must also contend with different national structures.

While Premiership players are contracted to clubs and “loaned” to England, giving CVC influence over the RFU, the Welsh RFU secures its players on central contracts 

The Six Nations rights are already on the block, delaying CVC’s investment. Its vision of the future is sharpening a process that the Clarry believes has been poorly run in the past, however.

For the first time the BBC and ITV have been prevented from bidding together, a move designed to force the broadcasters to pay up to keep the competition free-to-air.

The process has drawn fire from Julian Knight MP, the new Conservative chairman of the culture select committee, who last week warned “it’s of huge concern to see there’s a bidding war that could take the Six Nations behind a paywall” as he demanded more transparency.

Jonathan Thompson, the chief executive of Digital UK, the terrestrial broadcaster joint venture that oversees the Freeview platform, says millions are at risk of being cut off from rugby.

“What free-to-air television is uniquely able to do is unite the nations in a moment of intensity and common effort,” says Thompson.

“If the Six Nations were to go behind a paywall, viewing figures show that around 10m people who currently tune in in of every corner of the UK would risk being deprived of the chance to join in.”

 

CVC is determined to exploit all the rugby rights over which it has some say to the fullest, however.

Clarry and the other partners in the investment have put up millions of their own money in a bet that with some bulking up, rugby’s financial underperformance can be tackled.

 

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The shove is on!!
Discussion started by Comeonyouwarriors.co.uk , 08/03/2020 17:29
Comeonyouwarriors.co.uk
08/03/2020 17:29
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Faithful_City
08/03/2020 17:32
A long read but very interesting and informative.

As has been mentioned above how do they choose the bottom club in the Prem and the Top club in the championship?

Results and numbers averaged over the 5 seasons or the team that wins or loses their respective league in the last season?

JP

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