Rugby World Cup: The business of the game

9News Nigeria

Sep 23

Sponsorship, video games, and tickets - what brings the most revenue to rugby and how good an investment is the sport?

As rugby fans celebrate the thrills and highlights of the past few world cup matches, the tournament's organisers can rub their hands with glee: the economic boon and revenue the event has given to host France is sizeable.

A previously released report from Ernst & Young's claimed that the tournament in Japan in 2019 saw the highest ever economic impact in Rugby World Cup history, and increased the GDP by $2.93 billion (€2.75 billion).

The profitable sport mega event is attracting even more tourists to France, meaning hotels, airlines, museums, and more cleaning up.

The 2023 tournament – the tenth edition – is expected to attract more than half a million visitors to the country, and bring approximately $1 billion (€940 million) into its economy.

Meanwhile, the organisation Rugby World Cup Ltd is expected to rake in a hefty revenue, in the vicinity of $500 million.

Football's a very different ball game

It's by comparing rugby to other commercial sports that you can clearly see the impact it has. The obvious one is football.

The Rugby World Cup is considered to be a top 20 sport mega event, while the Football World Cup is in the top three, and so predictably brings in a gargantuan sum.

"So it's believed that for World Rugby, the organisers of this particular competition, may generate around $500 million from the competition," said Simon Chadwick Professor of Sport and Geopolitical Economy at Skema Business School in Paris.

"In comparison with FIFA, the 2022 World Cup in Qatar brought somewhere in the region of about $7.5 billion to the organisers," he added.

Where is the money coming from?

While the financial value of football may eclipse that of rugby on the world stage, the funds that flow through old rugger are not to be sniffed at.

There are three major drivers that put the balance sheet of the Rugby World Cup into the positive every four years, following three preparatory years of huge expense and investment.

The majority of the revenue comes from broadcasting rights, followed closely by sponsorships and then income from ticketing and merchandise.

Broadcasting rights include everything from showing live games to edited highlights, news reports and social media clips.

The big question is, how many pairs of eyes can the Rugby World Cup attract across the globe?

The amount dictates how many sponsorship deals can be struck and how much the organiser can charge for broadcasting fees.

"In broadcasting terms, we're talking about hundreds of millions of people," Chadwick said. "But if we were to compare that to global sports like, for example, the Olympic Games or the Football World Cup, we're talking about billions.

"And once a sport is able to offer to commercial partners, to sponsors, to broadcasters, to investors, billions of eyeballs, it suddenly becomes very attractive," he said.

For this reason, becoming an Olympic sport can be an extremely lucrative commercial lifeline for a game such as rugby.

Rugby union, the version of the sport played at the Rugby World Cup, only turned professional in 1995. While it has appeared at the Olympic Games before – specifically in the early 1900s – it's sevens, the aptly-named version of the game played with seven players, that since became an official Olympic event in 2016.

Similarly, sponsorship deals are struck based on the same logic: the more people are watching, the more attractive a sponsorship is for big brands who want to show off their wares and services to as many people as possible.

This year's edition includes sponsors such as Emirates, Mastercard and French railway company SNCF.

"We're looking at some fairly sizeable sponsorship revenues, perhaps upwards of $100 million US dollars from sponsoring the Rugby World Cup," Chadwick said.

Investing in the young to invest in the sport

Rugby as an investment may seem to be in its infancy but it has clear potential, according to Professor Chadwick.

"Rugby is still in the process of transformation," he said "It is becoming increasingly popular in territories such as the United States, and we're even beginning to see teams and competitions staged in places like China."

"Moving forwards in the next 10 to 20 years, the financial and commercial attractiveness of rugby will change considerably," he added.

Some European private equity firms are dabbling in the sport already, but most come from across the Atlantic.

"The US market for sport is still the biggest in the world, one-third of global economic activity in sports has its origins in the US," said Chadwick. "So the fact that the US is now beginning to take interest in rugby and does see a potential commercial return, I think is significant."

In the case of sports like rugby, an investment may take decades to yield though, as it's based on long-term engagement.

"Sustainable engagement is very often built during childhood. This is absolutely crucial for the long term health of a sport," said Chadwick. "Evidence demonstrates that for many of us, particularly in Europe, that first sport, the first team, the first player, the first game that you ever saw sticks. Up until when you're 90 years old, that is still your team."

The result is that this engagement drives fans to follow their team and buy the merchandise for decades.

However, with the huge popularity of video game series such as Fifa, the foundation of long-term engagement is changing.

Electronic Arts, that develops and publishes sports video games, earned $7.4 billion last year, the equivalent of €6.75 billion, with FIFA 23 yielding record sales figures.

"The new generation of consumers, kids who are now six or seven years old, are increasingly getting their first engagements with the sport, a player, or a club, via a console game," the professor said.

Chadwick predicts that the question of how popular or successful a certain player or team is in a game, as opposed to real life, will determine the relationship of the next generation to the sport.

Therefore, investing in video games is likely to be an evermore lucrative investment for the world of rugby.

Giraffonomics: How a psychic giraffe can contribute to rugby's economy

Believe it or not, the same can also be said of the importance of the natural world for rugby investments.

Joining a long list of supposedly psychic creatures that can predict sports results, a French giraffe, Obano, correctly predicted the outcome of France's first match of the Rugby World Cup this year. And while it may just be a colourful, light-hearted moment to some, it can actually contribute to increasing the number of rugby fans worldwide.

Gambling is still legal in Europe and is an important part of life for many on the continent. While regulations exist, gambling sponsors bring money into sport.

And a clairvoyant giraffe entering the news can help give it a push.

"It serves as a way of getting new audiences to engage with the competition now, and some of those people will stay," says Chadwick. "They'll become rugby fans for life because of what's going to happen over the next month. And so this whole thing of animals predicting scores might seem funny, but there will be some people who genuinely are engaged by it and they will remain rugby fans."

Rugby has been steadily growing in popularity across the world for decades.

According to the Rugby World Cup, almost 9 million people play the game regularly in more than 130 countries. In short, as the sport grows further, investors' interest has the potential to do so too.

But we can't predict the future… unlike a certain giraffe, apparently.

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