Fans are allowing themselves to get excited about a resumption of play after Rugby Australia and Fox Sports announced they had reached an agreement on a “revised” broadcast deal to show the new Super Rugby competition, involving the four franchises plus the Western Force, starting on 3 July.
But the financial future of the game remains uncertain and in the apparent absence of a lucrative deal, private equity has emerged as the last great hope for rugby to remain a major sport in Australia.
Significantly, the value of the interim broadcast deal has not been officially released, although it will eventually leak out. It is almost certain it is not anywhere near the $57m a year RA had been receiving under the previous agreement.
There is speculation Fox Sports initially wanted RA to pay for the broadcast of the domestic Super Rugby competition themselves, but then relented and offered a much reduced deal, which RA had no choice but to accept.
It is understood RA has assured the Super Rugby clubs they will be economically viable for the rest of this year, but what about next year and the year after that?
Whatever deal has been done to enable the game to survive 2020 and the financial impact of the coronavirus pandemic, it is only the entrée before the main course, which is the next broadcast deal from 2021 to 2025.
Fox Sports may offer RA a long-term but very low deal, emphasising the new harsh reality that the days of sports over-reliance on blockbuster TV deals are over.
Fox Sports indicated some time ago they would focus primarily on the two major football competitions in Australia – the AFL and the NRL – and that seems to be the way it is unfolding.
Relations between Fox Sports and RA became strained when former RA chief executive Raelene Castle took broadcast rights to the open market earlier in the year.
It is understood there is no longer any ill feeling between the parties, but the money that has sustained professional rugby in Australia for the last 25 years is just no longer there, with Fox Sports struggling financially themselves.
In this scary scenario, RA will desperately need to secure private equity to make up the shortfall and maintain rugby’s place as a major sport in Australia.
Unlike overseas sport, Australian sport in general and rugby in particular does not have a particularly long and deep involvement with private equity or private ownership.
Several years ago RA, which has always closely guarded its control of the game, opened the Super Rugby franchises to private equity investment, but there were few, or no, takers.
When the Melbourne Rebels were established in 2011 they were meant to create a new model of private ownership of Super Rugby franchises, but the team’s two owners, firstly Harold Mitchell and then Andrew Cox did not last long.
The financial problems at the Rebels contributed largely to RA’s economic woes and led indirectly to the axing of the Force in 2017 when RA could no longer be the lender of last resort when teams got into trouble.
Ironically, the only Australian team with significant private backing is the Force, who are supported by mining magnate Andrew “Twiggy” Forrest.
It is believed Raelene Castle was about to meet with major private equity investor CVC, which has significant investments in European rugby, just before the coronavirus pandemic hit. That was the end of that exercise.
Now, American private equity giant Kohlberg Kravis Roberts (KKR) is reportedly in preliminary discussions with RA “in collaboration” with the Rebels about making an investment in the game worth hundreds of millions of dollars.
KKR are certainly a major player in the private equity field and would have the funds to invest in Australian rugby, assuming they were genuinely interested.
It is unlikely KKR, or anyone else, would be interested in buying an individual Super Rugby club, which would be seen as a potentially bad bet, but rather buy the commercial rights to a competition such as CVC’s investment in the Six Nations and other European competitions.
Whatever deal RA – or even Sanzaar – can strike with private equity, it needs to be done in a hurry, but it may already be too late.
RA’s deal with RUPA for players to take, on average, a 60% pay cut because of the coronavirus pandemic ends at the end of September. RA is currently in discussions with RUPA to amend this deal, which is expected to result in a 10% pay increase, following the signing of the interim broadcast deal and the resumption of play.
But players will demand a lot more than that come the end of September. If RA cannot convince Australia’s leading players it will be able to generate sufficient income to restore something close to their previous multi-million dollar salaries, it risks a mass exodus overseas.
Without an injection of significant capital from private equity, Australian rugby will revert to relying on dwindling broadcast monies and sponsorship for revenue to keep the best players at home. The next three months is not just about a resumption of play for Australia’s Super Rugby teams, but ensuring rugby remains a major sport in this country.