After almost going bankrupt in 2018, USA Rugby has revealed it now expects significant financial losses in 2019.
This, the national governing body said in a press release, is due to over-expenditure in its high performance program leading up to and during the 2019 Rugby World Cup, legal fees in two ongoing lawsuits and revenue shortfalls. USA Rugby is now refinancing lines of credit to work towards ensuring financial obligations through the end of 2019 and into the first quarter of 2020.
The USA Rugby board said it was “frustrated” by this “financial backstep” and is looking to “establish proper controls to assure that this will not occur again”. Nonetheless, cashflow challenges await in 2020.
“Corrective measures have been made, including staffing changes and cost reductions of projected activities and projects scheduled this year. In terms of bridging the financial gap in 2019, we are working with partners to accelerate certain 2020 income streams, refinance current lines of credit, and ultimately meet existing financial obligations of USA Rugby,” the board said in a statement.
“We as a board are of course discouraged to be facing another year of financial challenges. Nevertheless, we have confidence in the plan moving forward and appreciate the patience and support of the rugby community.”
Financial troubles at USA Rugby are nothing new. The collapse of for-profit subsidiary Rugby International Marketing (RIM) and the Rugby Channel, a subscription-based online streaming service which offered exclusive live and on-demand coverage of top-tier domestic and international rugby matches, almost bankrupted the league in 2018.
A lack of subscribers (there was a peak of 11,000) and capital to fund the Rugby Channel – coupled with the emergence of new, much broader streaming services such as ESPN+ – put the service in deep financial trouble and led to $4.2m losses for RIM by the end of 2017. Eventually a deal was struck in May 2018 for US-based subscription streaming service FloSports to acquire the Rugby Channel and place all its content on its FloRugby vertical.
RIM’s money troubles were also exacerbated by its ill-fated attempt to stage a Test match in June 2018 between Wales and South Africa at RFK Stadium in Washington, DC. Held outside the traditional international window, the game was in trouble from the outset with cash guarantees to both teams reportedly reduced from $1m to $750,000 before it even began.
An attendance of 27,000 was needed for RIM to break even financially. But due to a number of leading players missing and poor marketing, just 21,357 fans showed up, leading to further financial losses.
These mounting problems led to the resignation of four members of the USA Rugby board, including chairman Will Chang and chief executive Dan Payne, in the spring of 2018.
Meanwhile, World Rugby was forced to loan USA Rugby a reported multi-million dollar sum to ensure the 2018 Rugby World Cup Sevens tournament in San Francisco, which RIM also organized, would be a success. Despite the 100,000-person attendance and high ratings on NBC Sports, it proved another money-losing venture, in large part due to the cost of housing all the players in the expensive Bay Area market.
In February 2019, RIM was put out of its misery and essentially shut down. It was reintegrated into USA Rugby, under the name USA Rugby Partners, as the union began the process of completely restructuring its commercial efforts.