Next in Tech | Ep. 216: Rugby Season and Media Rights

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Eric Hanselman: Welcome to Next in Tech, an S&P Global Market Intelligence podcast where the world of emerging tech lives. I'm your host, Eric Hanselman, Chief Analyst for Industry and Company Data at S&P Global Market Intelligence. And today, we're going to be talking about all things Rugby. And to discuss that with me is returning guest, Richard Berndes. Richard, welcome back to the podcast. 
 

Richard Berndes: Hi, Eric. It's nice to be with you again. 
 

Eric Hanselman: It's great to have you back. We've explored other sports, looked at football from both sides, the American and the rest of the world. But we're in between parts of the rugby season right now. And I wanted to dig into that. We really hadn't touched on what is Rugby and what's it all about. So, I guess before we get too far along, can you give our listeners a little background? 
 

Richard Berndes: Yes, sure. Rugby started in Warwickshire in England in 1823 is the rumored start date. It actually started at Rugby private school. -- we call them public schools here in the U.K., but they're actually private fee-paying schools. And a gentleman called William Web Ellis, who was playing soccer at the time, was frustrated by the game, picked up the ball and ran with it, and therefore, Rugby was born. So that's the story. And actually, the World Cup is actually named the William Web Ellis Trophy. The rules were first put together in 1845 and the Rugby football Union started in 1871. And that was the first international play in 1871 between England and Scotland. So that's sort of where we are. It was very much an amateur sport because it was played by sort of the elite schools. And then probably the first big change was around 1895 when the game spread across England and Scotland and a lot more working-class people were playing it. And because they had to work rather than be these gentleman players, they had to take time off work to play the game. So, they became professional and that caused an issue with the original rules. So, Rugby League was born. So, there's 2 types of rugby. There's Rugby Union and Rugby League. Rugby Union is probably the most famous of the codes, but has 15 players, Rugby League has 13. And there's various other slight differences, but they're essentially the same game, but that was the big change. There's Rugby Union and Rugby League and Rugby Union is the one that most people know. 
 

Eric Hanselman: But so, the -- there was a split to a professional version of the game, but interesting to see that what was the amateur version is what principally persists today. 
 

Richard Berndes: Yes, yes. I mean it's obviously -- it only turned professional very recently. It was still very much an A game up until the early 1990s. So, it's only become sort of fully professional sort of the last sort of like 30 years or so. 
 

Eric Hanselman: Oh wow. So, this is a relatively recent thing, especially when you compare that with something like soccer/football. 
 

Richard Berndes: Yes. I mean sort of since then; I think the first women's international was played in 1881. And since then, it's moved around what, I suppose, what used to be the British Empire, so Australia, New Zealand, South Africa, Canada, but it was played in Germany in 1850. And quite interestingly, it was paid around 1840 at Harvard Dale in Princeton. -- where I think a lot of other players might have been involved in the English school system. So, it was played in those elite schools in America around 1840 apparently. So Well, interesting times. 
 

Eric Hanselman: It has been something that, at least in the U.S., I think, was something that came out of a collegiate environment, but of course, has now got professional leagues in the U.S. as well. 
 

Richard Berndes: Yes. 
 

Eric Hanselman: So, we are just out of, I guess, what is probably one of the more significant competitions, 6 nations. And I guess that's really part of this wider swath of all of the various rugby associations that are around the globe. 
 

Richard Berndes: I'd say I mean, rugby, every country will have its own sort of league system and cup games. But outside that, I think probably there's a few big competitions in the 6 nations is one of them. Probably the biggest one for the club, the Rugby club size is the European Rugby Champions Cup and essentially the best teams from all the European leagues competing in that. And actually, the French sites have been dominating in very recent years. They won the last 4 titles because a lot of French rugby clubs now have a lot of money going behind them, and they sort of -- they've got very high salary cap. So, you're seeing a lot of players like George North and Farrell. A lot of the top English players are now playing in France, which is quite unusual. So that's sort of the biggest club thing. But as you say, -- outside that, the 6 nations is the European -- the 6 competing top European nations, and that's paid for roughly February to April. And the women's version of that actually started in 1996. But for the Southern Hemisphere side, which is Australia, New Zealand, South Africa, they have the Rugby championships, and that includes Argentina, Australia, New Zealand and South Africa. So, they're the big tournaments. And obviously, there's a Rugby World Cup that's paid every 4 years. So, they're the big competitions. And interesting, the last Rugby World Cup in 2023 in France, I think, had 1.3 billion viewing hours of viewing to that tournament and 85% of that came from free-to-air television. 
 

Eric Hanselman: Wow, that's quite an audience. 
 

Richard Berndes: Yes, it's very good. I mean, in terms of revenue as well, the most recent data available is for the 2019 Rugby World Cup. Gateway it's taking over GBP 250 million in revenue. And in broadcasting, it's taken up roughly GBP 150 million in broadcasting revenue. But obviously, running parallel with this is you've got the women's game is growing rapidly. Obviously, the 6 nations now has the same coverage as the men's game. They have the same sponsors. So, it's growing really, really nicely. And the main sponsors are Gun Guinness Beer. So, what you're seeing now is the women's game growing in parallel with the men's game. 
 

Eric Hanselman: Interesting. Well, it sounds like especially given that it's just professionalized relatively recently, that's pretty significant growth in terms of how that happens to have evolved just over what is a relatively short period of time. 
 

Richard Berndes: Just coming back to the 6 nations, it's -- within Europe, it's like one of the big events, the 6 nations just for everyone, it's England, Scotland, Wales, Ireland and now Ireland plays as one country. France was the original 5 nations, and that started in 1910. In 2000, Italy joined the competition, who is now called the 6 nations. And it's very much a sort of a national pride event and it's very much of a culture event. And all the teams are very symbolized their nations. -- like the French is very much a flare attacking side. The Irish sort of have a lot of tenacity and spirit and Scotland has seen a very resilient, strong side who sort of go up against the edges. But what you tend to find with the 6 nations is you'll find a team that dominates for 4 or 5 years. as they have the thing recently, it's been island. So -- but they all do sort of very, very well. They're mostly all on sort of terrestrial -- sorry, free-to-air TV. But yes, no, it's a big event and within Europe and it does dominate the sporting headlines around that time. 
 

Eric Hanselman: Well, I mean, so much of broadcasting outside of North America winds up being -- having requirements for free-to-air broadcast just in terms of sporting events and where they fit. It seems like that's certainly the base piece of a lot of the way that the media -- the media approach winds up delivering some of the capabilities there. Is that something where you're starting to see media valuations improve as part of that? And what's -- it seems like this is one of these challenges always. It's free-to-air versus a lot of the pay opportunities. Clearly, I think in the U.S. pay opportunities are tending to dominate delivery of sport, but that's not the case in other parts of the planet. 
 

Richard Berndes: Yes. I think it's balancing that with all these sort of situations because obviously, pay TV have got very, very deep pockets. And obviously, streamers coming on board with things like that have got very deep pockets and that can pay these high-ticket prices for sports that generates all the revenue. But for a lot of emerging sports, it's balancing that free-to-air and pay dynamic. So, it's bringing the revenue in, also building -- having the exposure of that sport to as many eyeballs as possible. And obviously, with that exposure, the sponsorship values becomes more and more important because it's very rare to find that exposure of a sport that can get like 50%, 60% share of the audience. So, in the -- here in sort of in Europe, it's a lot of the Rugby Six Nations is free-to-air. And I think in the U.S., it's shown on NBC. But there have been some changes around that because in the '90s in the Six Nations, England actually contracted out of the deal and all just the England games were shown behind the paywall on Sky. So there has been that sort of dynamic of moving between pay. And I think the new deals coming through, there is rumors that it might not stay free-to-air, and there's been a lot of debate, and the government has been involved here in Europe in terms of should it -- because a lot of sports in Europe are what they call listed events. So, they have to be shown on free-to-air TV like the Olympics and things like that. So, there is that, but then it becomes a tipping point of like the sports body is saying, well, we need the revenue. We have to go with the pay TV people. And obviously, in parallel, the women's game is sort of running a similar sort of thing. So, it's -- but yes, on some of these big events, it's not as big as, say, football or soccer, but some of the big rugby things do get close to some of those bigger viewing figures. 
 

Eric Hanselman: Well and is it one of these situations that -- I mean, we've talked about this in previous episodes about having a dedicated fan base and about the value of that fan base. It seems like Rugby is one of those sports where there is a very passionate fan base. 
 

Richard Berndes: Yes, definitely. And I think what goes with that and which is probably quite unique with Rugby, it has a very, very upmarket commercial profile. So, it's in terms of the audience that is sold to, it's very much an ABC1 AB profile because of its background. It's seen sort of an upmarket sport as very much. So, in terms of the brands that sort of sponsor and associate with Rugby, they're sort of at the high rests. I mean, England is sponsored by O2, Telecoms Australia is by Qatar Airways, France by Renault and Society General. So, what you see is a lot of these sort of higher prestige brands are associated with Rugby. And in a previous life, when I worked with one of the TV companies, one of those TV companies were charging 50% premiums on some of these big rugby events. So that sort of gives you some idea of the value that Rugby presents as an opportunity. because of that purity of that commercial upmarket audience? 
 

Eric Hanselman: Well, we were discussing earlier. What's the phrase? Rugby is a Hooligan's game? 
 

Richard Berndes: Play -- yes, Hooligan's game played by gentleman. 
 

Eric Hanselman: As opposed to soccer, which is a gentleman's game play. game played by Hooligans... 
 

Eric Hanselman: And I guess the gentle people of the upmarket crowd are that much more valuable to advertisers. 
 

Richard Berndes: Yes. I mean it's -- if you ever look at the advertising around a Rugby Stadium, it's very much prestige brands like Land Rover and sort of equity companies and things like that. So, it's -- yes, it's seen very much as a sort of -- it has that cache and that sort of upmarket profile that's a value to audience. And obviously, with these big high-profile games, it's a large-scale pure audience, which is very valuable. 
 

Eric Hanselman: And the game itself, I guess, gets seen as very pure. It's not something like American football in which you've got all sorts of padding and heavy-duty helmets and all sorts of things. It most rugby players have got this relatively thin scrum cap. I mean this is where we're talking about a sport that's really being played just basically physical body to body. 
 

Richard Berndes: Yes. No, it's -- I mean, there are a lot of -- I think, a lot of similarities between rugby and American football in terms of you have these big guys or ladies bashing into each other and then you have the sort of the guys running from the back. But yes, it's -- I mean, in terms of there are some big hits going on there. But yes, it's -- for me, it is a hugely context book. And there are -- there is some tech being developed to help sort of like protect players as well. 
 

Eric Hanselman: Much the same as in other industries. Although I assume that it's also in that same business where player tracking and all of the player condition management just simply takes that next step to also look at impact injuries, head injuries, all those other things that tech is actually taking a very large role in. 
 

Richard Berndes: Yes. I mean, tech is it's the driving forces to sort of preserve and protect context books like NFL and Rugby. I mean like companies like Capgemini are involved in it as well, which has developed what's called a momentum tracker, which provides coaches an analyst with data and stats on players' performance and opponents and sort of tactical awareness so they can help refine how the players play and how they can train and affect the say. And one of the other things that rugby players do where is a mouth guard. It's like just on their top sets of tea. PreEvent Biometrics has developed a connected mouth guard, which basically measures the intensity of the tackles going in on players to help sort of protect them and sort of develop that around it. I mean -- and even going back before that, in 2015, England had a wear the Rose campaign, which is an immersive 360-degree sport tech developed by Optus R Technology, which allows fans to actually be amongst the England players in a training session and be in the sum -- so that was an amazing bit of development. And Hawco also developed what's called the spot system, which is used by touchline judge called the Pitchide video review. And that helps to check for sort of like concussions and things like that. So, it sort of helps sort of basically, if you see a player has been here and it's down, they can actually -- they can pick up sort of like the level of the intensity of the injury to the player. So, it can help sort of solve concussion issues as well. So, there's a lot of tech that's gone into Rugby because of the nature of the game, which is just probably very similar to how it is with the NFL. 
 

Eric Hanselman: Yes, except without all the heavy-duty padding and armoring that your average NFL player has. Yes. It was interesting. We're just the other side of the NFL draft, and it was always surprising to me to see the level of glitz that goes on, but it was that interesting contrast of sort of the equipped gladiator sort of versus the rugby player who's sort of out there all on their own. 
 

Richard Berndes: Yes. it's an interesting scenario. I mean -- and of interest as well is actually the interest from private equity into Rugby. And what we've seen is a specialty company called CVC Capital has developed a significant stake into the rugby world. In 2018, they bought a 27% stake in the English Premier rugby system. And in 2021, they spent over $500 million buying a 14% share of the 6 nations. Now they don't -- the way they're operating, they're not trying to affect the game as such. in terms of how it's played and rules and things like that. I think what CVC Capital is trying to do is leverage the media rights to develop different sort of events. And what we're sort of seeing is CVC probably trying to bring together the Northern Hemisphere fees as in the 6 nations and the Southern Hemisphere teams to sort of create new sporting events and rugby events to create media value. And as we've already touched on the value of those media rights are going up and up and up. I just think CVC see a lot of commercial value. And they did this very successfully with Formula One before this. 
 

Eric Hanselman: So, CVC specifically was also in F1? 
 

Richard Berndes: Yes, they were in Formula 1. And also, I think Silver Lake Capital are involved in New Zealand Rugby. So, you can see a lot of these sort of big private equity companies. They obviously -- again, it comes back to what we're saying about that. that purity of the demographic, probably the lower value of rugby, but also the growth of Rugby and I just see opportunity. 
 

Eric Hanselman: Well, this is -- if you take a look at where investment potential is, you look at all of the various investments that got made in soccer and regular football in the world, that's now gotten pretty pricey. So, it sounds like maybe Rugby is that next big growth potential sport. And I guess they figured that they could get in close enough to the ground floor and look at the opportunity there. 
 

Richard Berndes: It's definitely a growing sport, and you can just see the way you've seen growth in the U.S. and also especially in Japan, it's a massive -- what was a cold sport and it's becoming more and more important because the Japanese have done very well in Rugby World Cup. So, you can just see it growing these pockets of growth. And it does have this sort of prestige image of where it comes from. And I just think it gives it so much commercial appeal that's going to be a value to investors and advertisers. 
 

Eric Hanselman: Well, and where there's value, there are going to be people who are going to try to capture some of that. You talk about growth. You mentioned the growth of the women's game. And I guess the women's Rugby World Cup is coming up. 
 

Richard Berndes: Yes, that's taking place in England. I mean, again, it's growing. I think there's the RFU, which is the body that governs Rugby reports there now 2.7 million players playing -- women playing rugby globally, and it makes up nearly 25% of all players registered with the RFU. It is a growing momentum. And also, I think what is interesting, as I touched on earlier, is you're seeing the same brands associate themselves with the women's game as you see with the men's. They're not different. I mean, Guinness is the standout. You're also seeing Capgemini. It is all these sort of prestige brands because they see the similar sort of thing. And in the way they're presented as well in terms of the marketing, it's very much the same marketing logos for women's rugby and men's rugby in terms of the 6 nations. So, it's seeing very many hands in hand. But as I said, the World Cup is in England this year, and it's part of the RFU strategic plan to help grow the sport. And now I think 1/3 of all members of the Rugby World Council are women, which is a very interesting development because that probably is not moving in any other sport. 1/3 of the governing body are women. And I think the World Cup Managing Director, Sarah Mass, she wants to create this is a generational moment for women's rugby. In terms of brands, it's got free-to- exposure, which as we've touched on, I think will really help and the commercial partners, as I mentioned, we've got Capgemini, Mitsubishi and Asha are some of the commercial partners involved in it. So, it's -- yes, for me, it's part of this whole growth in women's sport and Rugby, I think, it's a great opportunity. You can only see it getting more and more interest with women, young girls playing the sport. 
 

Eric Hanselman: Well, and impressive to see that, that integration between the men's and the women's games is -- again, I guess maybe that was because of the early stage of -- there was an awareness when they were building the environment when that growth was happening that there was that level of participation really across the men's and women's games. As you said, very different in other areas of sport. 
 

Richard Berndes: Yes. And you see it at all levels. You see it at the highest international level, but you also see it at grassroots level. Some of the rugby clubs near me, there's as many -- I see as many young girls playing rugby as you see some boys and sometimes, they play in the same teams, which is great. 
 

Eric Hanselman: Well, which again broadens the appeal if, in fact, this is something that works across that whole universe, all the better. Interesting. You mentioned there's a new tournament that's going to be kicking up this year, Rugby Nations. 
 

Richard Berndes: Yes, the World Rugby Nations Championship, which starts in 2026. It's a new -- it's going to happen every 2 years. And what it's going to be trying to do is going to try -- it's -- as we touched on it, it's bringing together all the teams for the Northern Hemisphere and the Southern Hemisphere in sort of an international event. So, it's bringing together the 6 nations and the Sun Heater championships into one event. So, there's going to be 2 divisions of 12. The top division will have the main European nations and the Southern Hemisphere nations. But you'd also I think having Fiji in Japan in there who are very strong teams. And then there'll be a second division of some of the emerging teams like Spain are very strong, probably the U.S. will be in there as well, Canada. And it's got a lot of sort of investment from sort of TV companies and media companies. There's going to be no relegation or promotion until 2023. And the games are going to be paid during the July and November international breaks with the grand finale. -- after that. So, I think it's -- you could sort of see it as a rival to the World Cup or certainly a complementary thing to the World Cup because it's every 2 years. But it's bringing together those big teams that traditionally dominate the game, but it's also giving that opportunity and that exposure for some of the emerging nations to be part of a big, which is only going to attract more and more people to the sport. So yes, it will be interesting to see how it develops, bringing together all the nations every 2 years on top of the World Cup, which is every 4 years. 
 

Eric Hanselman: Wow. Well, and it all gets back to the ability to generate more events, more opportunities for media coverage and the revenue that, that generates -- interesting to see it's every 2 years, again, doubling the sort of the World Cup cadence there. But again, more opportunities for teams to play, more exposure and more media opportunities. 
 

Richard Berndes: Definitely, definitely. And again, as we touched on, I just think the commercial appeal of Rugby in terms of the brands it attracts, it just -- there is the potential for big revenue growth there, I think. 
 

Eric Hanselman: We'll have to see how that pans out. Well, this has been great Richard. Thanks for being back and I appreciate all the perspectives. 
 

Richard Berndes: It's been great to talk to you, Eric, and I hope our audience enjoys the sorts around Rugby. 
 

Eric Hanselman: And we got a lot of games coming up that they can watch. That is, it for this episode of Next in Tech  thanks to our audience for staying with us. And thanks to our production team including Sophie Carr, Feranmi Adeoshun, and Kyra Smith, and Adam Kovalsky on the marketing and events teams. I hope you'll join us for next episode because there is always something Next in Tech.