HomeGovernanceRugby UnionUSA

Major League Rugby takes slow and steady approach in attempt to crack US market

(Credit: Rugby United New York)

  • Start-up domestic professional league growing from seven teams in 2018 to 12 for 2020
  • Strategic partnerships with USA Rugby and AEG Rugby aim to expand commercial efforts
  • New York team owner Kennedy admits series of mistakes as team loses $1.4m in first season

Ahead of an expected bid by the United States to host the 2027 or 2031 Rugby World Cup – and a desire by global governing body World Rugby to tap into the North American market – Major League Rugby is seeking a sustainable approach to ensure it has its own long-term staying power and can play a role in helping to secure the major tournament.

MLR is specifically looking to avoid the mistakes made by its short-lived predecessor Professional Rugby Organization (Pro Rugby). The inaugural domestic professional rugby union competition in the US began play in April 2016 but ceased operations just nine months later amid reported financial problems and a series of clashes between owner Doug Schoninger and national governing body USA Rugby.

After being established in 2017, MLR officially kicked off in April 2018 with seven teams – Austin Elite, Glendale Raptors (Denver), Houston SaberCats, New Orleans Gold, San Diego Legion, Seattle Seawolves and Utah Warriors (Salt Lake City) – which competed in regular-season matches before a four-team playoff.

Two more teams were added for the 2019 season – Rugby United New York and Toronto Arrows – and the league will expand to 12 teams in 2020 with the addition of New England Free Jacks (Boston), Old Glory DC (Washington DC) and Rugby ATL (Atlanta). To help with travel costs and to help build local rivalries, MLR is switching to two six-team conferences next season.

A Dallas team is scheduled to join in 2021 while there are talks with a prospective ownership group in Los Angeles. The goal to reach 16 teams in the medium term.

In a similar structure to Major League Soccer, MLR is a single-entity league, with no promotion or relegation. Expansion fees have reportedly increased from approximately $500,000 initially to $4m now.

Attendances have been sluggish and have varied according to the local market. Crowds averaged around 2,000 per match in 2019, but a capacity attendance of 6,000 for the MLR championship game between hosts San Diego Legion and Seattle Seawolves in June offers the league optimism for the future.

In multi-year partnerships, MLR has signed a 13-game linear broadcast deal with CBS Sports Network and an 18-game digital deal with ESPN’s direct-to-consumer platform ESPN+. CBS is reportedly not paying a rights fee for the deal that puts select games on cable channel CBS Sports Network. However, it  gave the league significant national exposure when the main CBS broadcast network aired this year’s championship game, gaining an audience of around 510,000.

On a regional level, AT&T Sports Networks has the linear rights to a 17-game package for six MLR teams, including Austin, Houston, New Orleans, Seattle, Glendale and Utah. Meanwhile, a partnership with subscription streaming service RugbyPass in the 2019 season gave the league access to an international audience via delayed full replays of selected games, highlights, player interviews and other features.

MLR – whose headquarters are based in Salt Lake City, Utah – has just three league-wide commercial partnerships: Ram Rugby (official ball partner), XBlades (official apparel partner), and a sponsorship deal with British-based luxury apparel brand Barbour, its lone non-endemic partner.

With teams having an annual salary cap of $450,000 – compared to $9.06m (£7m) in England’s Gallagher Premiership – interest from international stars has been understandably quiet thus far. But Rugby United New York (RUNY) pulled off a significant coup by signing France centre Mathieu Bastareaud for the 2020 season, where he will join another big name, former England fullback Ben Foden.

Elsewhere, former European player of the year Steffon Armitage has signed with San Diego for next season.

MLR has attracted some interest from international investors, too. The Scottish Rugby Union has a 30-per-cent stake in Old Glory DC, while RUNY secured a minority investment from Pierre Arnald, the former director general of French Top 14 club Stade Français.

Building a strong foundation

Despite the slow but steady progress made under commissioner Dean Howes – the former chief executive of MLS team Real Salt Lake – there have been reported murmurings of discontent in his leadership among some team owners, who want more rapid and expansive growth that more closely resembles the strong overseas fan interest in rugby.

MLR team owners all have seats on the Board of Governors, which oversees the planning, expansion and other activities for the league. But Howes is sticking by his long-term approach and has reasserted the league’s need to remain “organized and disciplined” in its commercial aims.

“We just finished our third year [in existence] and second year playing, and I think between our media deals and everything else we’re just on a better foundation than we were three years ago,” Howes tells SportBusiness. “Our owners are new owners so they have to learn how to be owners of a professional sports team. We still have a long way to go on just tightening up how all of this works administratively and contractually.

“The real foundation is how are you set up as a single entity, who are the new partners that you are bringing in and what are they bringing to the table, how are you doing in terms of managing player contracts and things like that. We’re getting there but it is a heavy lift that takes time.”

According to Howes, the league has “a long way to go” in regards to bringing in new sponsors. But he says he is in multiple conversations with potential commercial partners for 2020. “I’m hoping that that’s where we make a very significant step forward,” he says.

(Major League Rugby)

Howes admits that MLR is not making any money from its broadcast deals with CBS, ESPN and AT&T Sports Networks, as the league is paying for its own production costs. But he says the investment is worthwhile due to the need to expand the reach of rugby union in the US and convert more fans into the sport.

“We’re at the very start of this [process] and it takes a little while before you start making enough money with sponsor partners to offset those costs,” says Howes.

Howes has welcomed the arrival of international players to the league, such as Bastareaud. But he warns that expensive stars will not be enough to help MLR grow in the long term.

“Right now you have to go slow [on signing big-name international players]. You can’t just start a league and all of a sudden and hire all the biggest names,” he says. “You want some stars and we need people who can help put people on the seats and help TV ratings but that is something that we have to move very deliberately on.”

Strategic partnerships with USA Rugby, AEG Rugby

Howes has specific long-term goals he wants to achieve, namely: growing the available domestic player pool; expanding to 16 teams; increasing average attendances to at least 5,000 a game; and improving the value of media and sponsorship deals.

“If we really want to be financially viable for the long term, we have to fill our stadiums,” Howes says. “But everything has to match up with rugby right now. We can’t compare ourselves to soccer or [American] football or basketball. We have to compare ourselves to rugby. We have to stay organized and disciplined.”

To help MLR reach its aims, the league has forged a strategic partnership with USA Rugby. In April 2019, the two parties formalized a relationship centered around growing the sport in the US. The agreement, which establishes a framework for long-term collaboration, includes initiatives such as player welfare and safety, the release of US men’s national team players for international duty, and shared marketing initiatives.

The deal also calls for the creation of a professional advisory board that will include representatives of each organization and one from World Rugby.

“It’s everything from helping with our players, and sending our players to the national team, sharing some activities where we think we can bundle those activities and get more bang for our buck,” Howes says.

(Major League Rugby)

USA Rugby also believes this relationship will be mutually beneficial.

“It opens up a lot of opportunities for us to have commercial conversations and explore opportunities together,” Mark Griffin, USA Rugby’s commercial director, tells us. “The obvious ones in the commercial landscape are the fact that combined we can offer a lot more to a national-level partner. Lots of these big brands, in the retail space at least, want some local activation so for us to partner with MLR where they are building up fanbases in some core markets would appeal to a retail brand.

“It makes it more appealing for USA Rugby and MLR to have a conversation with a brand because we can provide a high level of national visibility and a more robust level of activation so that combination is a great fit,” Griffin says.

The league has also created a commercial arm Rugby United Marketing, which is essentially a copy in structure (and name) of Soccer United Marketing, the for-profit company run by Major League Soccer and the United States Soccer Federation.

RUM is a separate legal entity to MLR, with team owners as its board members and controlling voice. Its aim is to negotiate future commercial deals and potentially sell equity in the league to outside investors.

MLR is also working with AEG Rugby – a subsidiary of sports and entertainment conglomerate AEG – to help grow in the content and facility space. AEG Rugby is also in early discussions to play a major role in the growth of RUM going forward.

New York team lost $1.4m in first season

At the club level, RUNY’s majority owner James Kennedy, also the chief executive of New York-based construction company Murphy Kennedy Group, offers a number of revealing insights into the realities of running an MLR team.

Kennedy, who is from the Republic of Ireland, was first approached by the now defunct Pro Rugby to establish a team in the New York area. But he decided to align with MLR instead as he believed the league “was a lot more aware of what it would take to succeed…that it was a long-term play”.

RUNY played its first season at MCU Park in Coney Island, also the home of New York Mets-affiliated Minor League Baseball team Brooklyn Cyclones. But Kennedy is searching for a new venue for next season after struggling with attendances at the Brooklyn venue.

In addition, the team made a loss of $1.4m in its first season, having recouped just $1.6m of a total operating budget of $3m.

“Overall it isn’t that bad and we did spend some bad money as well,” Kennedy tells SportBusiness. “In my heart it’s three years [to break even] but with my head it’s five years.”

On the team’s financial struggles, Kennedy concedes he made a number of mistakes as a new owner in professional sports. “We selected the wrong venue. I think everybody would agree with that. But at the same time, it was the only actual venue available in the city. Maybe I wrongly thought it was important to be actually in the city in the first year,” Kennedy admits.

“We also made mistakes on where we spent some of the money on marketing. We spent wisely on a [New York City] subway campaign but we didn’t spend wisely on the social media spend,” he says.

 

Kennedy adds that the team did not engage aggressively enough with expat communities, who come from countries with a strong rugby union background such as England, Australia, New Zealand and France. High-school and middle-school visits, which proved popular with children, were also started “way too late” he adds.

RUNY’s ticket sales were “very bad” for the majority of games, Kennedy admits. The team was aiming for 2,000 fans a game at MCU Park, but achieved 1,500-1,600 for its better-sold games. One match, played on the day of atrocious weather, generated a crowd of just 400 people, with no walk-up sales. “That was downside of having the stadium on the beach as when the weather is bad, it’s really bad,” Kennedy says.

While the stadium’s location in the southern tip of Brooklyn was to blame in part for poor attendances, Kennedy says the team made a “massive mistake” by not engaging in ticket sales until Christmas 2018, just a month before its inaugural game.

“It was incompetence on my part,” he says. “We’re engaging in ticket sales [for 2020] now. We go to [local rugby] tournaments – and there are so many tournaments across the tri-state area – and we go to them all to make a presence and talk to the players, fans, the parents…And we have an initiative in which a percentage of ticket sales will fund their programs, which has been successful.”

Going forward, Kennedy is targeting venues in New Jersey and upstate New York for next season, which could include playing at multiple stadiums in the tri-state area. “We have some options in the city and some towns near Westchester about a full-time stadium but that is clearly long term,” he says.

Despite the financial losses, next season the team’s budget will rise to $4.5m. “$1m of that will go to facilities and player welfare and some better player housing,” he says. “We’re already spending the most in the league, but a lot of that is reflected in doing the cost of business in New York.

“We need to expand the player pool as it’s very attritional in rugby, for injuries and exhaustion. Another thing I didn’t account for was the effect that travel has, not just on the players but also on the staff. There was mental fatigue with about six weeks to go [of the regular season] and we started to give the players time off but it also affected the staff. We know now that we need to hire more coaches and a team manager and it is such a hard lift with all the travelling. There will be more local rivals next year and way easier travel.”

Bastareaud signing ‘a statement of intent’

For all the teething troubles, Kennedy has seen reason for optimism. Merchandise revenue has been healthy, he says.

“Weirdly, we sell a lot of merchandise in Berlin [as well], but I think that it is the fascination to Berliners of New York,” Kennedy says. “I am trying to find merchandisers, designers that will push the boundaries on merchandise and try and have some fun with it and get away from typical sports and rugby apparel and move into new areas, driven by the New York brand.”

(Rugby United New York)

Kennedy is also engaged in talks to play an official MLR game overseas. “We’re in conversations with three possible countries/territories and I really hope it happens. We’re working very hard on it,” he says. “Conversations are going on, they are very active with sponsors and possible venues and teams. I would ideally play two games, one in one country and another in another country, to engage fans.”

RUNY has a number of corporate sponsors, including Motion PT Group, Bawnmore Irish Beef Jerky, Hospital for Special Surgery and Elastoplast. “The sponsors are all upscaling next season, which is fantastic, and we’re going to announce soon some blue-chip [company] sponsors,” Kennedy says.

The team has struggled to gain a meaningful media presence in the crowded New York sporting landscape – despite local broadcast deals with SportsNet New York (SNY), NBC Sports Washington and NBC Sports Philadelphia+. But Bastareaud is likely to help the cause.

“It’s a statement of intent [that he joined the club], it draws attention to MLR, it attracts other players and there’s been massive reach-out since Bastro [signed],” Kennedy says.

Moving forward, Kennedy is entertaining interest from potential investors as he wants to spend more time with his children and other businesses. But he wants to make sure he does not sell the club – either in part or in whole – to investors who are “naive and misunderstand the American market”.

“While the money that they would bring in would be fantastic and would help with facilities and stuff, the potential damage to the brand would really upset me and that is the legacy part [I want to ensure],” he says.

Most recent

The world’s most isolated major city has broken down geographical barriers to punch above its weight consistently in the sports events sector. Bradley Rial finds out how.

Thai FA president Somyot Poompanmoung is striving to make Thailand the leading football nation in Southeast Asia Former police chief is pushing the organisation toward greater commercial sophistication

Parasport hasn’t always been able to garner the sponsorship it needs, despite the best efforts of its international and regional organisers. Total’s sponsorship of BWF’s Para-Badminton World Championships is a good case-study of how a win-win solution can be found.

The Chinese State Council’s September revision of the country’s sports strategy includes changes that will be critical to note for domestic and overseas sports industry players. Sports industry academic Daniel Zhang analysed the new plan for SportBusiness.