7s, at last on the verge of the Olympics, may hold limited commercial potential for USARFU.
Becoming a 'medal sport' is expected to create new revenue opportunities for the abbreviated game, but the union has already sold key rights to the club and territorial championships to a private investor, including title sponsorship, TV and online broadcast rights, and rights to a new collegiate 7s championship. The winter 2008 pact with Bill Tatham also encompasses right of first refusal to exclusive sponsorship of the 7s Eagles, according to a draft of the agreement.
Boulder could thus find itself saddled with the operating costs of running national title competitions and developing an Olympic team, but its upside will be tied to the value of a pact struck before the sport's game-changing admittance to the Summer Olympics. In as much as the International Rugby Board has made admittance one of its foremost objectives, the board's decision could well prove short-sighted.
In an email, a USARFU official described the pact as 'a sponsorship agreement of two events at which [Tatham] wants to promote his company'. But the March 2008 press release also highlights the 'to be announced' college 7s tournament as well as 'title and presenting sponsorship to the above [3] events, and ... becom[ing] an official sponsor of USA Rugby across the board.'
The pact is worth $900,000 over 4 years, according to the draft agreement. 'Not only do these exclusive broadcast and sanctioning agreements provide unheard of protections for our business launch, but it also gives us added credibility in the world of rugby union,' Tatham said in the press release.
USARFU previously sold Tatham exclusive rights to a 7s pro league in 2005, in the midst of a severe cash crunch. The 2008 move was more an attempt to increase revenue, an executive said at the time.
The 2008 deal can be compared to the 'covered call' investment strategy, in which you own a certain stock and sell the right for someone to 'call it away' from you at a defined (typically higher) price, in return for a premium that you keep whether or not the call is exercised. It's a good move if the stock (or product) is not likely to rise much in value, as is normally seen to be the case with American rugby. But if the stock goes up significantly, your gains are limited and most of the upside is pocketed by the buyer of the call.
Olympic 7s has been one of the IRB's priorities for at least half a decade: Since 7s' failure to win admission in 2006, Dublin has lobbied all the more diligently and, apparently, effectively. In August, 7s was recommended for inclusion by a key steering committee, and Friday the International Olympic Committee could formally approve it as a medal sport in the 2016 games, newly awarded to Rio de Janeiro, Brazil.
The contents of the 2008 pact came up at last month's Congress meeting. The board failed to specify the business terms but said it would provide follow-up information, which it has not yet done.
Becoming a 'medal sport' is expected to create new revenue opportunities for the abbreviated game, but the union has already sold key rights to the club and territorial championships to a private investor, including title sponsorship, TV and online broadcast rights, and rights to a new collegiate 7s championship. The winter 2008 pact with Bill Tatham also encompasses right of first refusal to exclusive sponsorship of the 7s Eagles, according to a draft of the agreement.
Boulder could thus find itself saddled with the operating costs of running national title competitions and developing an Olympic team, but its upside will be tied to the value of a pact struck before the sport's game-changing admittance to the Summer Olympics. In as much as the International Rugby Board has made admittance one of its foremost objectives, the board's decision could well prove short-sighted.
In an email, a USARFU official described the pact as 'a sponsorship agreement of two events at which [Tatham] wants to promote his company'. But the March 2008 press release also highlights the 'to be announced' college 7s tournament as well as 'title and presenting sponsorship to the above [3] events, and ... becom[ing] an official sponsor of USA Rugby across the board.'
The pact is worth $900,000 over 4 years, according to the draft agreement. 'Not only do these exclusive broadcast and sanctioning agreements provide unheard of protections for our business launch, but it also gives us added credibility in the world of rugby union,' Tatham said in the press release.
USARFU previously sold Tatham exclusive rights to a 7s pro league in 2005, in the midst of a severe cash crunch. The 2008 move was more an attempt to increase revenue, an executive said at the time.
The 2008 deal can be compared to the 'covered call' investment strategy, in which you own a certain stock and sell the right for someone to 'call it away' from you at a defined (typically higher) price, in return for a premium that you keep whether or not the call is exercised. It's a good move if the stock (or product) is not likely to rise much in value, as is normally seen to be the case with American rugby. But if the stock goes up significantly, your gains are limited and most of the upside is pocketed by the buyer of the call.
Olympic 7s has been one of the IRB's priorities for at least half a decade: Since 7s' failure to win admission in 2006, Dublin has lobbied all the more diligently and, apparently, effectively. In August, 7s was recommended for inclusion by a key steering committee, and Friday the International Olympic Committee could formally approve it as a medal sport in the 2016 games, newly awarded to Rio de Janeiro, Brazil.
The contents of the 2008 pact came up at last month's Congress meeting. The board failed to specify the business terms but said it would provide follow-up information, which it has not yet done.
Finally! I didn't think this was ever going to be written about. Even after the administration lied to Congress on the subject.
Kurt, sounds like they still didn't come clean to your questions.
So how's that track record looking now? Worst ever national team performance, money losing balance sheets, high priced payroll, and they lie to us if it suits them.
Add the Tatham mess to the Kooga lawsuit and we should be glad this administration doesn't accomplish many sponsorships.
Posted by: fire-melville.com | 05 October 2009 at 14:53
Moronville and Robtards bumble another opportunity for rugby in the USA.
Posted by: Down Syndrome Diary | 05 October 2009 at 15:04
Being inept commercially and lying to cover your ass are two different situations. People get fired for both and arguably prosecuted for the latter.
Similar lies were told about the Kooga lawsuit. Exposure was only $50k, they said. Wait until Congress finds out about this one.
Posted by: oh my | 05 October 2009 at 15:30
If I understand it, USA Rugby sold these rights in '05, with no obligation that Tatham actually develop a league in a timely manner in order to retain the rights. Please tell me this is not the case as it would essentially be a option with no expiration clause for lack of execution. Classic.
Can someone with the proper knowledge provide an opinion as to the enforceability of this rights sale with regard to restraint of trade/antitrust laws? I doubt a court would prevent another entity from starting a 7s league, though it may lack USA Rugby's sanction, for what that is worth today.
Lastly, is the USA Sevens Cup Championship Series an infringement of this rights sales, given the prize money involved? Details, please.
Posted by: Steve Laake | 05 October 2009 at 21:53
The first big check the United States Olympic Committee to insure a proper pursuit of a rugby gold medal maybe cashed by Tatham. What a bunch of losers that have been running rugby in the USA.
Posted by: Show me the money! | 05 October 2009 at 22:49
This matter needs to be fully explained by USA Rugby and then assessed as the the extent of the damage done to 7's and rugby in America.
Can Congress please get off your rear ends and get Roberts and Melville to provide us some real information. No usual spin required please.
Posted by: No Spin Zone | 06 October 2009 at 06:34
Confirmation on the 4 year term is also key, as bad as it is, imagine if it were a 10 year deal an spanned the 2016 games ... Should the 2012 games have 7s as a demonstration sport, that contract expiring in 2012 could allow USAR to regain control just when the spoort gets the actual playing in the olympics exposure,a s opposed to just teh hype of being added.
It sure would be nice to have the real details of this dealso we all could know how bad it really is.
Posted by: rags | 06 October 2009 at 07:52
Steve,
You are partly incorrect. The original agreement between Tatham and USAR was executed in 1995, this agreement was for pro-7s. It sold to Tatham the rights to be the exclusive operator of professional seven-a-side rugby. USAR could offer no other sanction to any other operator with respect to pro-7s, and further would have some obligation to protect what they sold to Tatham.
Doug Arnot was in charge when these rights were sold to Tatham. Today I don't think anybody sees this agreement as a problem. Pro-7's aren't a serious Olympic issue. Certainly complicated as the definition of what's professional comes into play, but not a serious issue yet.
Here's the problem!
In 2008 Nigel Melville and the current Board of Director, EXPANDED this agreement to included all other USAR sanctioned sevens events to include the US national club and all-star championships, as well as, other not-yet created sevens events, like the US college sevens national championship. Only what USAR had already previously sold, (IRB-USA-Sevens) was excluded from the expanded agreement.
This was an unbelievably dumb move. USAR was paid peanuts for the expansion they sold. USAR's only motivation for the short-sighted fire sale was the need for more and more money to feed high priced salaries and poor planning and management of the union.
As Kurt points out, if rugby is admitted into the Olympic Games and US rugby is therefore required by the USOC to created a push around sevens, these events will be owned in whole or part by Bill Tatham. Control the TV, sponsorship and venues and you control the new Olympic sport in America.
This expanded agreement speaks to the facts of incompetent leadership and the simple statement that desperate people do desperate things.
Like, lie to their Congressional constituents in the Annual General Meeting.
Posted by: house on fire | 06 October 2009 at 08:55
Youch, that hurts, bend me over and put seven digits up my runway. We didn't even get a reach around.
Posted by: Bent | 06 October 2009 at 09:59
Congress deserves no better. They apparently didn't have the guts for a follow up question. There's only a couple members of Congress with any loyalty towards the membership. Most are too dumb or frightened to open their mouth.
When this all comes out there will be nowhere for any of these fu*kheads to hide.
Melville and this Board are liars and cheats. The Congress is just mentally over matched.
You and me...we're fu*ked!
Posted by: what did you expect? | 06 October 2009 at 11:20
I'll tell you what I expected, a hell of a lot better than this!
Tell me why we are funding this organization with our dues money again? Oh yea, its that near worthless liability insurance, which can be purchased over the telephone.
What TU will have the nerve to offer a vote of no confidence first? I get it would be only ceremonial, but what a start.
We can rule out the TU's with dubious connections to the USARFU-Board, PacCoast, West, Midwest. But MARFU, the South, even SoCal are all possibilities.
What does this blog think the IRB knows about this Tatham deal and the lawsuits? They have propped up this administration, you'd think they would be concerned.
The IRB is focused on international results, so they must understand how poorly USAR has performed in this area. They have to understand how wasted the grant income has been to performance.
They must feel like the US is a hopeless cause.
Posted by: tick tock | 06 October 2009 at 12:05
i am not getting my hopes up with regards the olympic decision. The IOC is run by a bunch of eurocentric individuals who care less about rugby.In a way it is a good thing, USA rugby would not have any idea what to do with that gift.
Posted by: rugby fan | 06 October 2009 at 12:49
on record as "loving rugby" a lot more before Kevin Roberts told us it was his goal to make us love rugby.
Posted by: love marks | 06 October 2009 at 13:01
Why doesn't anyone sign their real names. Who's afraid!
Posted by: Tom Schmidt | 06 October 2009 at 13:37
Kooga Lawsuit
Here is the docket sheet
http://news.justia.com/cases/featured/massachusetts/madce/3:2009cv30051/121264/
and here is Ruggers, Inc. (doing business as Kooga North America's) complaint.
http://docs.justia.com/cases/federal/district-courts/massachusetts/madce/3:2009cv30051/121264/1/
Posted by: Kyle Wittenbraker | 06 October 2009 at 13:46
Tom why don't you Congress types talk tough to these crooks running USAR and cease the blog tough guy talk?
Posted by: anon by right and purpose | 06 October 2009 at 14:49
The Ruggers/Kooga lawsuit will cost USAR seven figures.
Hey Congress, how about that lie the Board told when they said $50k would cover everything?
This is our administration at work. Get sued screwing your sponsor before cutting them loose. Jump in bed with a company headed for BK, bitching all the way, how they're not doing enough for you.
After they file for BK, end up with no sponsor. Nice!
CEO at $275,000 per year, Nice!
Posted by: marketing 101 | 06 October 2009 at 14:58
I don't think Tom Schmidt is who you think Tom Schmidt is...
Tom Schmitt is the congress member from the Midwest. I doubt he would ever misspell it.
Posted by: the Dread Pirate Roberts | 06 October 2009 at 15:36
Well what have you got to say DPR? You're a Congress member who blogs anon support of the Board. What do you have to say about lies, cover ups and the performance in general of the highest paid employee in USAR's history and our Board of business types.
Posted by: role call | 06 October 2009 at 15:53
house on fire,
Thanks for the added info. Does anyone have detailed information about this contract, particularly if there is a time frame associated with the rights purchase? At some point his rights expire, or does he own the 7s properties indefinitely?
Posted by: Steve Laake (my real name) | 06 October 2009 at 20:23
You ruggers are all doomed! F&$K Rugby - Play Lacrosse! Or play Rugby League. We are pairing up with them and they have their S#!T together.
Posted by: LAX | 06 October 2009 at 22:10
If it was/is only a four year deal, I'm not seeing a huge downside.
USAR got some money, and even when 7's rugby gets added as an olympic sport. It's still 7 long years (& two RWC's) until the Rio Games.
It's not like 7's will suddenly become the next google/yahoo/etc. by next Monday.
Posted by: Bobby Roberts | 06 October 2009 at 23:03
I am anxiously awaiting Roberts and Melville's professional heads on sticks. Add Latham's and you can call it my birthday !
OFF ! OFF! OFF ! just like they chant it in the Shed at Gloucester Melville.
Posted by: Cherry and Whites | 07 October 2009 at 06:05
if that guy above is referring to the rugby league "partnership" with lax that ARN "reported" on then that is just too funny. I looked into it and the league teams are getting in on a promotion that the Philly lax team holds which is usually intended for... high school and youth lacrosse teams.
They give you a bunch of tickets at cost or whatever. basically really low. and you sell them to your parents and family for retail and you all go and they let you play on the turf before the game. Wooooo! and then they let you have a pizza party to continue your 15 year-old birthday celebration.
Posted by: league's groundbreaking partnership with lax | 07 October 2009 at 07:28
haha.David Niu really knows how to spin it.
Posted by: rugby fan | 07 October 2009 at 07:56
Steve,
First, don't listen to Bobby Roberts, he only comes on here to defend this shameless administration.
The agreement isn't into perpetuity of course, but Tatham has lawyers better than USAr's. He wasn't going to spend a pile of dough creating something only to have USAr step in and say thanks, we own it now.
The agreement has, "rights of first refusal", language which might as well make this agreement perpetual. If USAr wants to own these rights again, they've need to buy them back from Tatham or others at fair market value. Good luck.
Another tidbit, USAr hasn't received payment from Tatham in quite awhile. He is working them like a top, by not going into default on the agreement, while buying time to see the success of the Olympic vote. Just another small fact the administration "forgot" to inform Congress about.
Once the vote comes in he pays up and owns all sanctioned sevens for a song, or walks, having purchased an inexpensive option.
USAr...its good work if you can get it!
Posted by: more info | 07 October 2009 at 09:19
David Niu does more in one year for rugby league in the USA then the entire staff at USA Rugby get done in a decade. I'm switching to league.
Posted by: Sidestep | 07 October 2009 at 13:05
League?
it's only really played in Australia.
Really. That's it. One country.
Look at the numbers.
LAX teaming up with League?
It's what the world needs, another sport for short, slow caucasian men who could not play another sport.
Posted by: that's not my name | 07 October 2009 at 14:40
It appears that too much is being said about what is in, or not in, the contract expansion with Mr. Tatham. Because it is a contract, there is no way that the general public is ever going to find out exactly what is written in the contract. However, before everyone goes crazy, let us use the most extreme example - ie, Tatham and Co. have been sold the men's championships and the all-star championships. If this is the case, then Tatham and Co. is responsible for running the championships. They are responsible for all of the costs. This relieves USARFU of its financial responsibility. If the contract is for a set period of time, then Tatham and Co. have to pay for the events, and then USARFU can come in and take them over (after Tatham and Co. has done the heavy lifting to get them on TV etc.) Where is the down side to this? If anyone has been to a sevens championship, you would know that these events are not money makers. The clubs who have hosted the events are breaking even and maybe making some profit. But they are not bringing in thousands and thousands of dollars. The only way that will occur is when the clubs (and the organization) is receiving a cut from the television broadcasting rights. This really seems to be a nonissue.
Posted by: Norris Elliott | 07 October 2009 at 16:10
Norris, think before you type, we are trying to create a blog of thoughtful responses. Your follow up reply suggestion you are a complete tool of the administration.
Here's some information to help you not make a complete fool of yourself in your next attempt to speak for the administration.
1) We all understand the the current sanctioned sevens events are low profile, non-commercial type event. We are only engaged in this conversation because we sit on the verge of full Olympic Status, which will fully change the game of sevens from a commercial and broadcast standpoint.
2) Mr Tatham's well lawyered contract will protect him from spending investment capital building something for the benefit of others. See the "rights of first refusal" comment above. (different poster)
3) Its true that USAR will no longer be responsible for the event cost for ALL USAR SANCTIONED SEVENS EVENTS, but this thread is about USAR no longer being entitled to any commercial income from the most important and salable asset within US rugby, namely...the new Olympic sport of seven a-side-rugby.
BTW, pay no attention the the fact USAR current event cost for sevens equals fed-x grounding two signs, great savings mate!
4) And finally, the 'clubs and organization' are never going to 'receive a cut from the television broadcasting rights'...this is what your beloved administration just sold you FOOL! This is what we are blogging about. They fu*king sold all the commercial rights to the new Olympic sports!
Norris, you are welcomed to keep your confused head buried in the sand. But either admit you shouldn't be commenting, or that you are part of this administration attempting to sell shit to the membership as cake.
Posted by: please! | 08 October 2009 at 09:15
Norris eats glue.
Posted by: Elmer | 08 October 2009 at 18:30
You all make fun, but Rugby League is slowly but surely making small inroads. I have people come to me at work and say hey I saw rugby on Spike TV but it looked really funny etc. etc.
While all the pissing and moaning is going on these blogs David Niu is concentrating on exposing League to whoever he can. Smart plan. Get high school kids who play LAX exposed to league, pretty soon we'll have LAX kids who are cross over Leaguies in the off season. HMMMMMMM.
Posted by: crashtheline7 | 09 October 2009 at 05:00
Oh yeah, and it is also very common for Leaguies to play 7s so there goes the Union corner on that market should it be approved for inclusion in the Olympics.
Posted by: crashtheline7 | 09 October 2009 at 05:02
I'm in a growing group of people, that although we greatly prefer union to league, we are so sick to death of USAR in the body of foreign assholes like Melville and Roberts, we are now open to league.
Maybe the parts of the game all break away, like high school, college and super league and we stay working in union, or maybe rugby in America just needs a fresh start under leagues rules.
Open to it either way.
Posted by: open to the idea | 09 October 2009 at 05:48