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Volume 22 No. 23

In Depth

The Seattle Seawolves, MLR’s inaugural season champs, led the league in attendance last year.
Photo: ap images

The sport of rugby reached a milestone on Jan. 26: The opening of a second season for a professional league in the United States.

Major League Rugby has preached sustainable slow growth from the start, weary of becoming another high-dollar rugby expansion bust. But with its footing a bit more sure than last year, league executives and owners are accelerating the plan in 2019. 

Most notably, MLR has expansion teams in Toronto and New York, bringing the league to the Eastern time zone and two of the continent’s four largest markets. (Last year, Houston was the only top-10 market in the league, and no team was east of New Orleans.) 

The league increased the per-team salary cap from $350,000 to $450,000 for this year. Also, the schedule is doubling from eight games per team to 16. 

“We feel like we can move a little faster than maybe some other leagues did historically, because we’ve gotten to learn from them and we’ve made it a focus to have facilities and the works, and have media deals in place,” said Commissioner Dean Howes, former CEO of Real Salt Lake of Major League Soccer.

Make no mistake, the startup is still in a precarious position. Profitability is still far off, there are no nonendemic league-level sponsorships and some clubs need better facilities and better attendance. It must make progress on those fronts while also executing against the higher operational demands of the much longer season. 

MLR is focused on old-fashioned local event marketing, at a time when much of the sports industry’s top minds and capital are focused on modern subjects like digital distribution and international growth.

Signs of Progress

 

What to watch for in MLR’s second season:

 

A successful and on-time opening of the Houston SaberCats’ new rugby-specific Aveva Stadium in March, replacing their current rental of the minor league baseball park Constellation Field.

 

Early traction in expansion cities Toronto and New York.

 

More leaguewide sponsorship deals.

 

Improved TV and streaming numbers, especially for the championship game on CBS broadcast.

 

Continued development of the player pool. Demand for MLR club ownership currently outstrips the supply of pro-level players.

“[Howes] has said nothing else matters more than putting butts in seats,” said James Kennedy, the principal owner of expansion club Rugby United New York, which rents MCU Park, home to the Brooklyn Cyclones, where he hopes to average at least 3,000 per game. “It matters for how it looks on TV, it affects recruitment and affects sponsors.”

MLR spent much of its offseason trying to upgrade production values for its weekly national games on CBS Sports Network. Every club except Austin has a local distribution deal, and ESPN+ has leaguewide digital rights. CBS broadcast will air the championship June 15.

“Everything that helps us convert people, to get the teams more involved and more relevant in our communities [is a priority],” Howes said. “That makes us become more relevant to our media partners, and then we can continue to build the fan base.” 

Local linear coverage will play a major role in marketing. Rugby United New York announced a deal with SportsNet New York in January, and the Seattle Seawolves, the inaugural season champions, will again air local games on Root Sports Northwest.

“I’m really pushing viewership on Root,” said Shane Skinner, principal owner of the Seawolves. “Part of the deal is that we can run ads, not ads just during our games but ads during Mariners games.” 

The Houston SaberCats will move into the new 3,500-seat Aveva Stadium in March.
Photo: getty images

Another deal in Seattle, with A-B InBev-owned Elysian Brewery, also aims to ingrain the Seawolves into the local pro sports pantheon. The brewery will develop a Seawolves-branded beer, just as it does with the NFL Seahawks.

“Sports is very much a local product, and to be strong, it has to be something that literally influences the behavior of fans and athletes alike,” Howes said.

The league is hoping to average 4,000 per game for 2019. Last season’s average attendance was about 3,000 per game. 

The Seawolves led the league in attendance last year, and have sold 2,600 season tickets at the 3,100-capacity Starfire Stadium, up from 1,700 last year, Skinner said in an interview prior to the season opener. Also, they sold a jersey sponsorship to Virginia Mason Health System and other top-line deals with BECU credit union and Washington Federal bank. 

But not every team is as solid as the reigning champs in Seattle, or has as much upside as New York, where there are 398 local rugby clubs and a robust community of Irish and British expats. Some rugby insiders suggest some clubs will struggle to stay afloat on their own.

Howes promises that every club will survive 2019. 

“There is no league, even the strongest, that doesn’t have a gap between the top and the bottom on the financial strength of a particular owner,” he said. “It’s very evident in baseball and other top places. But we are in good shape for 2019.” 

The league is a single entity, and 13 shareholders share the risk. (Clubs in Atlanta, Boston, Dallas and Washington, D.C., have joined the league with plans to begin competing in 2020.)

“Our strongest member is highly incentivized to make sure the other members that may not have that strength get the right partners and are able to be successful,” Howes said.  

Many rugby enthusiasts continue to hope for their sport to lure an exceptionally wealthy investor who could bankroll extended losses, like Phil Anschutz or Lamar Hunt did for Major League Soccer — someone like former Indiana University rugby player Mark Cuban, for instance. But Howes said the league does not believe it needs additional capital partners. 

MLR owners and investors want to make money, but the entire sport is rooting for its success, said Paul Santinelli, a USA Rugby board member. Right now, the USA national team is on the upswing, but its development is limited because potential stars have so few places to play at a level above amateur clubs.

“I think it is incredibly important that the professional game grows over the next three years,” Santinelli said. “It is the ability to slot in players above club rugby and below the high-performance national team that we need to succeed.”

After narrowly avoiding financial collapse in 2018, USA Rugby is working to stabilize itself with the help of its global authority, World Rugby.

“The organization had the flu, we now just have a bit of a cold and we’re working through it,” said Paul Santinelli, a longtime club rugby enthusiast and general partner of North Bridge Venture Partners who joined the board during the crisis.

The national governing body for rugby, one of the fastest-growing team sports in the U.S. according to the Sports Fitness & Industry Association, says it’s close to having a full board of directors again. It could make interim CEO Ross Young its official top executive within two months, giving it a fully populated front office for the first time in a year. 

The financial picture is still cloudy, however, after what has been a tumultuous couple of years. In spring of 2018, it became evident that Rugby International Marketing, a for-profit commercial arm set up in 2014 by USA Rugby and outside investors such as CSM Sport & Entertainment, was facing bankruptcy. It lost $6.3 million in 2016 and 2017, largely due to the high costs of its streaming site, The Rugby Channel, and a poorly performing events business.

Because RIM also owned the rights to the Rugby World Cup Sevens tournament last July in San Francisco, the streaming site’s woes threatened the event itself. The RIM losses were so severe it damaged USA Rugby too, even though the external partners provided the capital. 

By far the largest rugby contest ever held on American soil, the Sevens tournament had its own problems — for instance, the original bid underestimated the cost of housing players in the expensive Bay Area market.

USA Rugby board of directors

 

In spring 2018, four members of the USA Rugby board resigned in a matter of weeks, including Chairman Will Chang, as the nonprofit’s for-profit marketing arm faced financial collapse. The board has lacked full representation since then. In January, the USA Rugby Congress granted four members full board status after a period of transitional status. If the newest transitional member, Mike McKenna, is approved for full status in early March, the board will be complete again for the first time in a year.

 

Chair: Barbara O’Brien

Vice Chair: Paul Santinelli

Julie Lau

Jim Brown

Mike McKenna*

Jeremiah Johnson, USA Rugby Congress rep

Agustín Pichot, World Rugby rep

Phaidra Knight, athlete

Todd Clever, athlete

 

* Pending approval

Eager to avoid a catastrophe in America, which has long been considered a sleeping giant for the sport, World Rugby stepped in. The international federation loaned USA Rugby the cash to operate the World Cup and backstop losses. World Rugby then installed its vice chairman, retired Argentinian star Agustín Pichot, on the board.

“I think a lot of people thought, ‘Oh, my God, World Rugby is infiltrating USA Rugby,’ but the fact is, World Rugby is an investor in our sport, here to help us run our game, and with that they would like representation,” Santinelli said. Pichot will leave the board when the loan is serviced.

RIM sold the Rugby Channel to FloSports in May for an undisclosed price, and Rugby International Marketing has been restructured as USA Rugby Partners, a wholly owned subsidiary. 

There is still more to be done before USA Rugby is on firm financial footing. Before the unwinding of RIM and the World Rugby bailout, USA Rugby posted a $4.4 million loss on $14 million in revenue in 2017, and its budget in 2018 began to count on royalties from RIM that won’t come. Also, a breach-of-contract lawsuit is pending from Doug Schoninger, the entrepreneur behind the defunct PRO Rugby league. He says he spent $6 million of his own money to launch the league, but that it failed after USA Rugby violated an exclusive sanctioning agreement. 

However, the nonprofit has made numerous structural changes to its national office based on a report in the wake of the RIM collapse from consulting firm SRi, which executives believe put the organization on the right path.

In August, former U.S. Soccer CFO Eric Gleason joined USA Rugby in the same role. Santinelli said interim CEO Young has pleased the transitional board and will likely be made permanent CEO once the board spots are settled.

During the turmoil, four board members resigned or were forced out, including former Chairman Will Chang. CEO Dan Payne left and was replaced by Young.

All this corporate and financial drama has played out as the national rugby teams have had some of their best results (see related story). Rugby fans in the U.S. and globally are accustomed to executive-level drama, and winning solves a lot of problems. “They were on the cliff of complete and utter financial disaster,” said Pat Clifton, an associate editor at Tarrytown, N.Y.-based website Rugby Today. “People have forgotten all about that because they’re winning now.” 

World Rugby divides its member nations into three tiers, and though there are no firm definitions of what makes one country Tier 1 and another Tier 2 or Tier 3 — and no specific way to move up or down — the sport’s governing body knows what decades of results suggest: The United States is not in Tier 1. To go from Tier 2 to the sport’s upper echelon, where longtime powers like England, New Zealand and South Africa reside, is a generational task, but Team USA is starting to build a case that it can do just that.

Heading into the fourth stop out of 10 in the 2019 HSBC World Rugby Sevens Series the first weekend of February, the Americans were in an unprecedented position — tied for first place in the overall standings, with Fiji. They got there with three consecutive second-place finishes, one more top-three finish than the U.S. had ever won in an entire annual series.

The USA Men’s Eagles’ fifteens team (in white) defeated sixth-ranked Scotland last June in Houston, the squad’s biggest win since the 1924 Olympic Games.
Photo: norma salinas

While the outcome of the Feb. 2-3 tournament in Sydney was not known before press time, the Eagles will almost certainly be among the top contenders heading into the only American stop on the tour, March 1-3 in Las Vegas.

Meanwhile, the Eagles’ fifteens squad is on a hot streak seven months before sport’s biggest stage, the quadrennial Rugby World Cup, begins in Japan. In 2018, the Americans beat No. 6-ranked Scotland, 30-29, in front of a home crowd in Houston, its first win over a Tier 1 country since beating France in the 1924 Olympics. USA Rugby called it the team’s biggest win since those ’24 Games, and the team followed that up with a win over Tier 2 Samoa a few months later.

This past weekend, the U.S. fifteens squad started its title defense in the Americas Rugby Championship, a six-nation tournament it has won each of the last two years. 

This fall’s World Cup in Japan will be a tall test. Unlike in many of the one-off games, all 20 teams will field their best rosters. USA Rugby knows that a championship would completely change the trajectory of the sport in the U.S., but that’s not considered a realistic goal. The U.S. has never advanced out of pool play and hasn’t won a game in World Cup fifteens play since 2011.

The Americans are in pool play with Argentina, England, France and Tongo, and must finish in the top two to advance to the quarterfinals.

“Performing well in your pool is a good performance indicator,” said board member Paul Santinelli. “I would love to say our goal is to win the World Cup. I would say it’s a big goal.”

New Zealand Rugby Union and its star Sonny Bill Williams are a popular and growing presence on social media.

English rugby player James Haskell sits atop rugby’s social media rankings, according to data from MVPindex measured from Jan. 18, 2018-Jan. 17, 2019. MVPindex is a social media valuation that offers real-time analytics on more than 90,000 athletes, entertainers, teams, leagues and brands across Twitter, Facebook, Instagram, Google+ and YouTube. Its rugby data is based on more than 1,300 players, teams and leagues.

Turnkey Intelligence recently completed a research study that evaluated consumer perceptions and attitudes toward leading sports and leagues in key countries. As interest and investment in rugby continue to grow in the U.S., we offer three takeaways from a comparative snapshot of U.K.’s top two team sports, soccer and rugby, that may highlight opportunities for successfully promoting rugby on this side of the Atlantic.

International competitions are more popular than the top domestic league. The variety of international rugby events that could rally general sports fans in the U.S. to get behind the national team offer an opportunity to elevate the sport, not unlike what U.S. Soccer’s participation in the FIFA World Cup has done for soccer.

A colleague in London referred to rugby as a hooligan’s game played by gentlemen, while describing soccer as a gentleman’s game played by hooligans. This notion appears to extend to the stands, as fans of rugby feel more appreciated than soccer fans and rugby matches offer a safer and much more family-friendly environment than soccer matches. Given rugby’s well-educated and affluent supporters, this could be a key distinction for positioning the sport versus other team sports in the U.S. that allow plenty of physical contact.

Rugby fans are loyal to sponsors of the sport. The propensity of U.K. rugby fans to support sponsors of Premiership Rugby and the Rugby World Cup with their wallet is on par with the support of soccer fans for sponsors of the Premier League and the FIFA World Cup. If promoters of rugby in the U.S. can demonstrate to brands that the small but passionate group of rugby fans in the U.S. is ready to give back to marketing partners of the sport, similar to what MLS and U.S. Soccer have done, the appeal of rugby as a marketing platform will continue to grow. 

Nikolay Panchev is senior vice president at Turnkey Intelligence.