Mark Evans
IT HAS taken some time but the CVC deal for a minority stake in the commercial rights of the Six Nations (including women’s, U20 and autumn International matches) has now been concluded. Following on from the stakes acquired in the English Premiership and Pro14, it puts the private equity firm in a powerful position to influence the future of the sport.
It’s not just a rugby thing. Sport in general is very ‘hot’ at the moment, with numerous funds and groups seeking out opportunities, driven for the most part by technological change and the chance to connect with fans globally through digitally-based platforms. This trend pre-dated Covid, but the financial pressure faced by all clubs and unions since the spring of 2020 has accelerated the process.
When you are strapped for cash you tend to grab at any source of short-term revenue. Which is something of a worry, because selling off a chunk of your revenue-generating assets is something you don’t do lightly. A slice of your future revenues are gone for perpetuity. You hope that the cake will get bigger since you are no longer getting all of it.
The argument put forward is that private equity groups bring more than money. They bring expertise, knowledge and contacts that will grow the sport and its competitions more quickly.
There are no guarantees – there is always risk – but assuming this argument holds true then you need to consider the second point at issue.
What do the clubs and unions do with the windfall? In this case £365m over five years. Ideally, the money would be invested in areas that would enhance future revenues. This is investment in the truest sense. For example, the digital offerings of rugby are a long way behind certain other sports. You could invest in this capability and look to create an in-house streaming platform.
Alternatively, you could put more resources into participation, which in the long run drives your audience. It could be used to set up an investment fund to meet the huge costs that the looming concussion crisis will generate. It may simply be needed to repair the damage done to the various balance sheets over the past year or so.
However, there is a danger it will simply finance higher salaries of players, coaches and administrators or be squandered on ambitious vanity projects. That would not be investment. Let’s hope it is avoided but all stakeholders will demand their share and some will need to be resisted.
It’s not difficult to see what the first move will be. Unlike English club rugby, which is already almost entirely on subscription TV and recently failed to increase its broadcast value, many Internationals are currently shown free to air. There is undoubtedly an increase in revenue to be created by putting more content behind a paywall. Probably not all of it, at least in the short term, because there is real value in the large ratings generated on BBC and ITV.
However, that route could have been taken without CVC, so it’s probably the holy grail of a structured global season where the unions see the most upside. There is no doubt that the current situation is holding the game back. Too much switching between international, European and domestic competitions. Too much overlap between tournaments. Too many games. Too many different broadcasters, not enough exclusivity. The narrative is hard to follow for all but rusted-on fans, of which there are few.
With an element of common ownership between various competitions in the northern hemisphere (with the notable exception of France – the biggest rugby market of all), it is hoped realignment will be secured and significant value will be unlocked. If that happens, all parties will benefit – but the execution won’t be simple and it’s not inevitable.