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C.B. Schmelter photo

2018 marks the third full year of business for Rugby International Marketing, the for-profit subsidiary of USA Rugby. RIM was concocted in 2015 by USA Rugby’s board of directors to, “jumpstart the commercial activities of USA Rugby and exploit the market opportunity through an infusion of third-party capital and strategic investor partners in an entrepreneurial environment,” explained USA Rugby and RIM board member Chad Keck.

While about $7 million in outside investment got RIM off the ground, USA Rugby’s contribution was its three major revenue streams – events, licensing and sponsorship. They were signed over to RIM via a 15-year licensing agreement. The first four years would see USA Rugby paid an average annual licensing fee of about $1.3 million.

The outside investment came from four entities - $2 million from the Rugby Football Union, English rugby’s governing body, $2 million from Chime Sports Marketing, $2 million from the Harlequins RFC (half to RIM and half directly to The Rugby Channel) and about $1 million from five individuals and families. After those investments, USA Rugby owns 75-percent of RIM and 92-percent of The Rugby Channel.

I was able to sit down with RIM CEO David Sternberg, who had the interim tag removed from his job title in February of last year, and Keck at USA Rugby’s National Development Summit in Denver, and over the course of the next several days will publish a series of stories on the status of RIM’s major revenue streams – sponsorship, events and The Rugby Channel. The first installment was on sponsorship.

For the most part, we’re talking about international rugby games – home Eagles test matches, “The Rugby Weekend” in 2016 featuring Ireland’s historic win over the All Blacks in Chicago, etc. This is the bulk of the event business for RIM, though the USA Rugby subsidiary has also taken control of some national championships, like D1A.

Without RIM, it’s hard to imagine the D1A semifinals and final being broadcast on CBS Sports Network, along with every other playoff match being streamed live on The Rugby Channel. An additional hidden benefit is the cost savings for the union. Not only does RIM pay an annual seven-figure licensing fee to USA Rugby, it has helped relieve costs for the cash-strapped union by absorbing a few different responsibilities and events that traditionally haven’t been money makers.

“Over the last two years we’ve progressively taken more and more expense away. So we took away last year the cost of staging the college NCS championships, collectively about $110,000,” said Sternberg.

“We took away a part of the communications staff. We took away the cost of the medical symposium in Las Vegas, which we’re now going to operate with some partners in the health care space. Things like that are also being moved across in a way that doesn’t immediately pay a dividend for RIM but provides a meaningful relief for USA Rugby.”

For probably as long as USA Rugby has charged dues, people have asked what they get in return for paying them. The answer includes a multitude of things, but traditionally and principally, you get national teams to root for, liability insurance for your coaches, players and club, and some kind of national championship to strive for.

There is no high school national championship anymore – USA Rugby did away with those years ago, and now private organizations run separate tournaments for the boys and girls. USA Rugby has started subsidizing salaries for the directors of state rugby organizations, though, so where there was value lost, there was also value added, even if USA Rugby didn’t intend it that way.

There are also no interterritorial tournaments or all-star championships anymore, much to the chagrin of many. But USA Rugby still stages national championships for its club divisions and most of its college divisions. On the women’s side, there is the privately-run NIRA for NCAA programs. On the men’s side, there are the Penn Mutual Collegiate Rugby Championship, operated by United World Sports, and multiple NSCRO championships. Even though it doesn’t run the small college championships, USA Rugby writes a check to NSCRO every year.

The international event business has become a weird one. The Eagles games are a must-do. RIM needs to run those at a profit, picking and choosing the moments to put them in a big stadium and when to go smaller for the less attractive opponents. Like before RIM, this has been hit-and-miss.

But recently, the prospect of marquee matches between teams outside of the United States has become a reality. Ireland versus New Zealand was best-case – it sold out, American fans were treated to a world-class, historic event, and some money was probably banked. But more than that, the game caught the eye of a major sponsor, as well as hopefully some casual sports fans.

“If you go back to 2014 when New Zealand came over to play the U.S., that was really the trigger for a much bigger relationship between USA Rugby and AIG,” said Sternberg. “It then went up another level when we had Ireland playing New Zealand in 2016. That’s another benefit of bringing some of these unions over and partnering with them.”

Now South Africa and Wales are reportedly set to play in D.C. ahead of Wales’ tour of Argentina. Other matches have been rumored to be held in America, which often means there was work going on behind the scenes to try and make them reality, like the British & Irish Lions visiting last year or a Bledisloe Cup game coming to America. There was the famed failure of the NRFL’s staging of a match between the Saracens and Crusaders, the recently failed attempt by AEG to bring a preseason Super Rugby match to Los Angeles, and the failed tour by the Golden Lions.

Everyone wants a piece of the American market, the entire sporting world’s envy. Foreigners, especially, are drunk in love with the possibilities, and there’s a bit of a race to get involved, evidenced by the Aviva Premiership’s recent dealings Stateside and rumors of Super Rugby and the Pro 14 expanding to these shores.

The United States isn’t the only new frontier. Japan and New Zealand recently struck a deal for a Bledisloe Cup match to be played in Japan this year. But these apparent windfalls don’t always mean a payday for the host nation. The All Blacks were reportedly guaranteed $1 million when they came and played the Eagles in 2014. Wales and South Africa are reportedly guaranteed $700,000 each for their game. That doesn’t necessarily leave much meat on the bone for RIM or anyone else involved in staging a match.

“The deals have to make sense, but they do serve a purpose beyond the financials, although the financials are very important, exposing the game to a wider audience, creating more awareness of the sport, and having the game brought to more communities around the country in our core markets. Those are the yardsticks for evaluating those kinds of third-party promotional opportunities,” Sternberg said.

Ultimately, the sanctioning function is under USA Rugby’s umbrella as the national governing body. But RIM has a vested interest in making sure that if bags of cash are being made from rugby games in America, it gets its share, and the American market isn’t plundered by outsiders.

“In a way, yes. Sanctioning resides with USA Rugby, so ultimately, the sanction is the vehicle to determine who gets to play and who doesn’t get to play,” said Keck. “That really provides a fair amount of leverage and control with USA Rugby. USA Rugby collaborates with RIM in terms of financial opportunities and the businesses we’re trying to pursue, but it is a collaboration.”

“A lot of the things we’re doing is because they have strategic relevance to us, and not because they’re overly attractive in their near-term financial returns. We’ve got to do things that make sense financially, but because we have this outside capital, we’re able to do things to grow the game, to invest in the game, without having to be overly concerned about the near-term financials.”

The biggest event in RIM’s young portfolio is largely the reason for its existence – the upcoming Rugby World Cup Sevens. While Keck says RIM was created principally to bolster USA Rugby’s financial situation, he concedes it’s fair to say a large chunk of the motivation to start RIM was to host the 7s World Cup, which was seen by USA Rugby brass as a stepping stone toward hosting the big shebang – a 15s World Cup.

The 7s World Cup has never been financially lucrative for World Rugby or the host union. The 2013 event in Moscow was a disaster. Big stadiums, tiny attendance. So there was never any guarantee it would make money, or break even, in America. There still isn’t, making hosting a risk. USA Rugby, which has a history of operating at a loss on its own day-to-day business, couldn’t afford to risk losing. Enter RIM and it’s $7 million in outside investment.

“With the capital we got we were a competitive bidder for the 7s World Cup. In the absence of that, we couldn’t responsibly have bid, because we had no way to stand behind the bid,” said Keck. “But with the capital RIM had on its balance sheet, the capital we raised, we were a credible bidder and we got it and we’re using that capital to put on the best tournament we can put on.”

Early projections were that the event could lose seven figures. Now, Sternberg says it could yield a meaningful profit (other sources indicate up to $1 million) if every single ticket is sold and the current sponsorship sales target is exceeded. But, making money off this particular event isn’t the point. Never has been. The point has been to use a big, fancy, worldwide spectacle to draw mainstream attention to the sport, and to make a good impression on World Rugby for a future RWC 15s bid.

RIM has also arranged for money to be left behind for fan and community activation. One of the biggest hurdles RIM faces is creating fans. Rugby is a participation sport, and if RIM is to make money selling tickets and subscriptions, it needs fans, not hobbyists, to buy them. Sternberg refers to this transition as turning doers into viewers.

“That really is in many ways the biggest sort of rationale for doing the World Cup 7s, not because of the sponsorships, although that’s been helpful,” said Sternberg. “And it’s not because of the TV coverage in and of itself, but it’s the TV coverage and the 40,000 tickets across those three days that will be consumed by casual fans, not just hardcore rugby fans or players, but people who maybe saw a little bit during the Olympics or have gone to Vegas and just want to see what it’s all about.”

The difficulty with that kind of investment plan is it’s very difficult to gauge its effectiveness. You can’t tally the click-throughs, impressions or impact of sending something into the ether and hoping people pay attention to it. If there’s no tangible return from the 2014 All Blacks blowout financially, all we have to point to as evidence for its a success is the anecdotal story of it helping land AIG as a sponsor.

Logically, one could argue having an NFL stadium sell out for a rugby match went a way toward two professional leagues launching in the following years, NBC hoarding World Cup, Six Nations and Premiership rights, etc. But those are just educated correlations.

However, if the 7s World Cup doesn’t bankrupt RIM, we got some good mainstream exposure out of it, everyone has a good time, and years down the line USA Rugby is awarded the 2027 World Cup, what criticism could anyone levy on the event or RIM itself?

Getting the RWC 2027 won’t be easy. It’s not a given RIM and USA Rugby will go after it, or if they do, that they’ll have the capital to land it. The bidding process for 2023 was publicly bloody and very expensive.

“We’re certainly interested. We’ve got to get through 2018, and I think if we get through 2018 the way we hope to and expect to, we’ll have the confidence and World Rugby will have the confidence in considering what’s next for the USA in terms of hosting,” said Keck.

“It’s going to be pretty competitive, because we saw how competitive 2023 was. So it’s not a foregone conclusion that even if we bid we would get it, and it’s unclear yet quite how we’ll have the capital to back up the bid, because World Rugby is pretty rigid in terms of having adequate capital to host a tournament.”

“That’s just a handicap we have in the U.S. where there is no such thing as a government guarantee for a sports event,” added Sternberg. “If you look at the bidding for 2023, each of the three finalists countries had significant public sector resource put against it, and that’s just not something that would ever happen here.”