The Yankee dabble in Prem Rugby is Dandy, but I don’t get it
It is great to see that an American investor is set to take over Exeter Chiefs; it marks a new point of interest for Prem Rugby after Red Bull and Sir James Dyson from this side of the pond invested in Newcastle and Bath respectively.
And we must not underestimate the power of US involvement because it signals a step change in how one of the most active sports investor markets sees European rugby.
But I can’t say I get it.
First and foremost is the lack of profit rugby provides. Even the most successful Prem Rugby club made a loss in its most recent results, and the idea of coming into a sport like rugby – where stadiums aren’t always full – and turn a profit in the short-term is for the birds.
Critics would argue that profits in the Premier League and Championship are equally sparse, while investments in The Hundred will take years to recoup. But each of those leagues has a potential audience – when you factor in Indian interest in cricket – of more than 1bn, making brand value as useful to investors as the details of any profit and loss account.
Prem Rugby doesn’t have that luxury
Then you look at the loss of cash from the outset; CVC Capital Partners acquired a 27 per cent stake in Prem Rugby’s parent company in 2018. That’s a significant chunk of league-wide revenues heading out of the door before any wannabe owner gets a sniff.
And then there’s the structure. The buy-in, buy-off franchise structure in North America will be the dream scenario here in England – where new franchises pay way above market value for a piece of the pie while sellers get inflated sums when they choose to cash out – but the numbers are tiny.
The general rule of thumb in the third and fourth tiers of English football is that a club is worth roughly 1.5x revenue. Can rugby really claim the same, even in the top tier? The only financial deal we have to go off is Dyson’s investment in Bath – and that included debt for equity arrangements. We’re in the dark.
The competition
What is certain, however, is that any investment into Prem Rugby should be welcomed. Besides the Six Nations – and no matter what many want to believe about the French Top 14 – there is no competition better than the English top flight at the moment.
The contests are of a ding-dong nature with points galore, the domestic and international players are attractive to watch, and the final is always a great showpiece day. Throw in a reasonable desire to have 10 big games across each season, including the final and potential neutral semi-finals, and there’s a lot going for the league.
I just can’t fathom why, financially, the institutional capital and tech bros in the US fancy buying the Tony Rowes of this world out of their clubs.
Former England Sevens captain Ollie Phillips is the founder of Optimist Performance. Follow Ollie @OlliePhillips11