I was reading an article at the weekend which highlighted South Africa as the only International Rugby Union making any profit. This is quite a scary scenario considering this is only 30 years since the sport turned professional.
The French Rugby Union hosted 2 world cups in close succession being 2007 and 2019 and the only reason that can happen is back room deals with pay for votes when member counties vote on the host country. The last world cup did not pan out as expected as the French lost a reported $29 million compared to the profit of $33 million in 2007.
The 2019 World Cup reportedly generated $5 billion in economic output so the host country does benefit from all the extra taxes earned, but that does not exactly represent profits for the host rugby union. World Rugby pocketed more than $400 million which is not all theirs and a portion is distributed to all the rugby unions across the world. They are the caretakers of the sport and have to make sure everyone is fed so they can continue generating more income for the pot.
Why any rugby union would be sticking up their hand to host a Rugby World Cup is crazy unless they have a deal with the government that covers their losses. SA at one stage was sticking their hand up for every sporting event which included the Olympics. These events are not cheap and cost more than $15 million each time just to cover the initial bidding costs and that is if you have the infrastructure in place like stadiums which would mean for more money if they needed to be built.
Every professional sport lost money due to the Covid lockdowns and the answer is not to give future earnings away but to generate a pot that is sustainable foe the future. If a rugby union needs $100 million to cover any losses then they need to generate that income and not sell off their assets or brand.
The difference between SA Rugby and the rest is they rejected a deal last year which would have sold off 20% of their brand. The proposed deal would have seen a once off payment of $75 million which would have entitled the investment group to earn 20% of all future profits.
Cash strapped countries like New Zealand, France and England have already done this type or a similar deal a few years ago and now their revenues they generate are all being diluted. The money they earned from the investment has already been used up and in order to maintain the levels where they once were they have to grow their profitability by 24%. This is not moving their financials forward and is a figure that literally sees them standing still.
The unions that make up the SA Rugby Union all voted against the deal as common sense tells you this is a really dumb move. The US investment firm is now trying to change the deal by having a local investor join the deal which in around about way is telling us they are sounding out corrupt government officials to try and make it happen. This should still be blocked as there is no future in giving away future profits.
SA used to be part of Super Rugby which included Australia and New Zealand which many believed had run it's course and become stale. In the last few years they have been playing in the European competitions and this has generated new interest and why the profits have risen whilst Australia and New Zealand are still struggling.
Next year shall see the first "old style" tour when New Zealand tour South Africa with a 3 test match series and 4 mid week games including a game in London. This is where the money is going to be generated as this is going to see sold out venues for every match. This tour is also an independent deal between the two countries so they are the ones pocketing the extra sponsorships and tv deals. This is how the sport survived before it turned professional and this is how it will survive in the future. New Zealand and South Africa will share the profits and this tour will make them both profitable for 2026.