James Cooper
Hello and welcome to a brand new podcast aimed at lifting the lid on sport finance and delving a bit deeper into some of the most pressing issues facing the games we love and the games we play. In response to the need for an independent voice in such a noisy environment, Leonard Curtis has launched the Business of Sports series, which aims to provide validated sets of financial data plus professional commentary for major sports all in one place. As part of their multi-channel campaign, we're delighted to welcome you to our first podcast series entitled Sport, Structured. Put quite simply, it's all the facts and figures you need to know from the people who know what they're talking about. And backed by Leonard Curtis, who have more than three decades of expertise in recovery and turning things around. I'm delighted to say we're recording the podcast right here at the sparkling new broadcasting studio at UCFB's headquarters in Manchester. And we start the ball rolling by posing this question. Is it time for professional sport to grow up?
Before we look at that, let me introduce you to two people who've certainly got strong opinions on the matter at hand. And two gentlemen you're going to get to know a lot better in the coming months. Alongside me, someone who spent a decade running fast and catching rugby balls professionally, and who's now dedicated to stopping businesses dropping the ball with Leonard Curtis, it's Alex Cadwallader. And next to him, someone I love nattering to, a sports business expert who's also Dean of UCFB, and a professor too. It's Rob Wilson.
Gentlemen, welcome to the studio, welcome to Sport, Structured. As a journalist, I am always asking who, what, why, where and when. So I want to start with who, what, where, why and when, and start with who. So a quick potted of history, Alex Cadwallader, on who you are and why you're here.
Alex Cadwallader
Yeah, so I am working backwards. I'm currently a restructuring advisor at Leonard Curtis. And as you already mentioned, my day job is advising various stakeholders on the challenges and their options when dealing with financially stressed situations. Initially, you know, my dream when I grew up was not to be an insolvency practitioner. It was to be a professional sportsman and being supported by my family, I managed to achieve that for a few years, playing rugby union for some clubs in England and Wales. And then I made a decision, sort of mid 20s, that I wasn't quite going to achieve what I wanted to achieve, and took a decision to step away from the full-time game and left Newcastle Falcons and started this career. I continued to play semi-professional rugby at London Welsh, where I, you know, developed some of my best friends that I still speak to regularly. and all gone on to do different things in the business world. So that's a bit about who, do you want me to touch on what and why?
James Cooper
We'll do what and why in a minute. I want to meet Rob and get Rob introduced. Professor and a Dean, importantly, didn't play elite sport much like me. So we're in awe of Alex in many, many ways. But tell me a bit more about the journey and the story.
Rob Wilson
Journey and the story. So, I'm a professor of applied sport finance now working at the University Campus of Football Business. I think the key thing there about me is it's applied. So all the way through my academic career, I've tried to inquire, investigate, understand what on earth is going on in the professional sports sector. That means that we can deliver great education to students that's contemporary and is connected. And as that career kind of evolved and I moved up the ladder in career terms in higher education, so too did my external contact book. Meeting people like Alex, like the team at Leonard Curtis, which gives you an opportunity to practice what you preach, to connect with the people that are doing the hard yards on the ground. And that's what I think really defines me as a person is that knowledge applied, that applied sport finance in my case and connecting universities with industry experience.
James Cooper
So, Alex, Leonard Curtis. Well established over three decades. I think 30 offices around the country, more than 300 staff. Why mess around with sport?
Alex Cadwallader
Well, I'll be honest, it was a bit of a personal interest, and I felt a little bit frustrated that not enough attention was being played to one of my favourite sports being Rugby Union. There had been clubs that unfortunately had gone into administration, and I was sort of aware of the financial state and the losses that were being suffered and just felt that the model wasn't right. But no one was really highlighting it or weren't able to get the reach that we thankfully were. So, we also realized that sport is really ingrained in a lot of people's way of life, and it's actually quite interesting. The general public and those in the business world actually are quite interested in what's going on in sport. And that's timed quite nicely with the rapid increase of private equity investment into the sport and it's become more professional. So the desire for me initially, and I've been supported by everyone else at Leonard Curtis, was to really do a bit of a deep dive into Rugby Union and highlight some of the concerns, some of the challenges. And ultimately last year we put forward some recommendations, which thankfully we have seen some changes come through. So initially that was the remit, that was the desire. And we also wanted to engage with someone like Rob, who's well established in this space, understands how to deliver a certain message. Because it's quite different from what we do in our day job and there's a slight nuance to it. And Rob's been absolutely, and his colleagues have been invaluable in us being able to deliver what we've delivered to date.
James Cooper
How important was it having a report and the investigation of research that probably had teeth and gave you kind of freedom within the space? You're not dealing with stakeholders, you're not dealing with clients, you have the freedom to kind of lift lids and look wherever you need to look.
Rob Wilson
It's objective, that's I think really important. But it's also not a piece of research that's hiding away on the journal shelf somewhere that five or six people might read it. What we're able to do here is really connect applied knowledge, the work that Leonard Curtis is doing, against the backdrop of all the research and the deeper understanding that we can deliver as kind of quasi-academics. I forgot my elbow patches today. So, I'm sitting in that space of a higher education institution but also trying to have an impact in sector. I think it really amplifies the voice of what we're trying to do. It's hugely credible. People are starting to pay attention. I've lost count of how many times the work, particularly the first report I looked at, has been cited in big mainstream media. You have top executives talking about it. We are connecting now with chief executives and boards and some major sports organisations. And that brings with it a real richness of data, of understanding and allows us then to talk about the messages that I think need to be communicated, but also the big lessons that sport needs to understand because as the entry to the pod suggests, my view is that professional sport probably needs to grow up a bit and have a reality check.
James Cooper
So, it becomes a passion project. It becomes something more than that with loads more depth. Did you kind of know what you're getting into bearing in mind we're on the other side of things right now?
Alex Cadwallader
I think with rugby I knew what the answer was and it was about trying to highlight some of the concerns there. And then we felt the response that we had, that people were respecting our voice, were listening to us, we were getting traction. Then it was about looking at what other sports could potentially be open to us, taking a view and giving a view that people are prepared to listen to. And as I said, also, this does coincide with just a change in the general dynamic. I suspect you go back 10 years ago and ask a 15-year-old about PSR at West Ham. They won't have a clue. But I suspect a lot of them do now. And it is in the press. You turn on a news channel, where you used to work, and you do get updates on how close the club is to PSR. So, the climate has changed and the business models behind these sports, which often you also have to remember, sport isn't just a business. It's an integral part of society and can make so much change for good. And it's not all about the P&L and the balance sheet. But as soon as you start bringing in external investment, that's going to be their focus. And it does have knock on effects if you don't have a good structure and good governance in place and some sensible planning. So, yeah, I think we felt this was always a space that attracted some interest. And we've seen some of our competitors, not to say competitors, large professional services firms own top-end football and they produce an annual reports. And we're looking to do the same, but against a wider myriad of sports.
James Cooper
Yeah, it's more than just football, it's sport. And the credibility that comes with reports like this Rob means that other sports probably are scared of you knocking on their door, but also make me think it's a useful exercise as well.
Rob Wilson
We're all sports fans, whatever your poison, whether it's Premier League football, whether it's non-league football, whether it's rugby league, union; I have a particular interest at the moment in netball super league. My daughter plays and understanding the decisions that are being made in all of those sports, the rationale behind some of the investment we're seeing, the regulations and the governance positions that we are starting to visit all needs a bit of education. And that includes, for those boards, because sometimes a new regulation we put in place. And I imagine as a board member, you would sometimes fear that from happening. So, how on earth are we going to gain our competitive advantage now? We can't just drop 10 million pounds on player wages or 100 million pounds on a player transfer or, you know, spend 50 million quid designing a new engine in an F1 car. All of those decisions need to be calculated into being stood against this backdrop of competitive integrity. We need to understand that our competition is as important as we are because without them, we are nothing. So, I don't know if those boards fear the knock on the door. Actually, what we've noticed through these reports is that they’re starting to come to us and ask really discerning questions. What do you think about this? How do you think we might compete against these people or these other teams? The cricket report that we did most recently really shone a spotlight on the non-hundred clubs and the smaller first-class cricket counties that didn't host test cricket. First time they've ever seen that report in a single place so that they can see how they're actually performing against their competitive groups. And ultimately, I think what we're really trying to get out of this is a more sensible planning process that builds a more sustainable professional sport ecosystem that enables us to enjoy sport much more when we are inevitably stood on a terrace or sat in a corporate box or something like that.
James Cooper
So, before we jump into the data and the research I want to ask you one primary question. It's about the business of sport, which is what we're talking about. Is sport a business or is there just not a better word for it? Bearing in mind you're now a businessman, you know how successful businesses run and then you're looking at some of these other sports calling themselves businesses and not running themselves in the same way. Is it just not a better word for what it is or are they hiding behind sport being a business?
Alex Cadwallader
No, I think sports entertainment is a business and I think we have to accept that, when it generates the commercial revenue that it does, then you have to apply some of the sensible business rationale that you would to a normal business. The real uniqueness with it is the fans, the culture, how it's interwoven within society or not in certain circumstances and it's taking all those things into account but there's no way you could look at Mercedes Formula 1 team and not think that is a business. Now if you want to compare that to, I'll probably get the name wrong apologies, Loughborough Lightning's Netball team, you are basically trying to compare JP Morgan with the local fish and chips shop. So, they're very different businesses but it's still a business and they have responsibilities and where it is different is they don't necessarily and whilst from a governance point of view it is the case, we expect our sports clubs and teams to have a greater responsibility than just to their shareholders. You are looking after something that can deliver significant change, improve lots of people's lives, including participation at grass roots, the players that are there, the medical staff so on and so on, and the supporters. So it's a lot to take on as a business, an owner of a sports business where it's different from running JP Morgan when in reality they want their shareholders to get the best return possible.
James Cooper
There are moments as a host when you realise you've given someone a bag of sick to deal with and I apologise. A fairer question probably would have been and I’ll ask you this Rob. Is sport perhaps becoming a business? Is that maybe a better way of looking at it?
Rob Wilson
Yeah, I kind of agree with Alex, as soon as you've got something that resembles a transaction, you sell a ticket for entry to a game or to a cinema or wherever that might be, you effectively have a business transaction taking place. And all of those organisations, whatever their size, have to adhere to the first principles of finance, I think. The first thing I would always teach in a finance class is the selling price higher than the costs, can you pay your debts as they fall due. If you can't do those things, you can't effectively run an organisation. And then when we look at professional sport as a broader ecosystem, that cultural capital that Alex discussed and mentioned, you can start to see how much impact that has in a much broader community. So, you know, gone are the days of what we might call a traditional fan or a local fan. Manchester United have got local fans that are spread all over the four quarters of the globe. Loughborough Lightning or Nottingham Forest Netball, where Sophie plays, have a much smaller catchment area, but the principles are exactly the same. If they can't afford to pay their players or to pay the running costs of the organisation they’ll run into trouble. As fans, we don't want to be paying all ourselves because the ticket prices would just keep going up and up and up as competition improves. And that's meant this wave of external capital coming into the game, whether it's through owners or whether it's through private equity funds or other family offices. And all of that needs to serve the same sort of treatment.
Alex Cadwallader
I think James, just to make a quick tweak on your question, I think stringent business models are required more now than they were historically. You know, when we first started supporting teams, it almost be the local businessman who does really well can take their team up to the top league and it was a passion project. Whereas now, you know, that's a pretty dangerous slope to go down. And we've seen, you know, if you look at football clubs, they've got very close to the Premier League and then not made it. And then you see how much that family that owned that business has lost. You know, that model just doesn't work anymore. And so I think, you know, the models behind the clubs now have to be a lot more focused on the businesses, the fundamental structures and have a proper business plan. Whereas going back a few years, it was a bit you saw a lot more, you know, investors, also local business and wanted to take their local club, you know, the Blackburns of going back to the football, which a lot of our viewers are aware of. I think that's a lot less likely to happen now.
James Cooper
I want to talk through the reports, starting with Rugby Union, then go into cricket and kind of talk about the lessons that are learned there. The first question I want to ask you was on a scale of 0 to 10, where zero is dying man, 10 is superhuman. Where's Rugby Union at right now?
Alex Cadwallader
Rugby Union is still hopefully searching for a formula that works. It's in a much better place now than it was probably two or three years ago. The move to a closed shop for a period of time, whether we call it a franchise model or not, I think is sensible. I often say, you mentioned, you know, we want to give the figures. I often say if you look at Rugby Union, the club game in England, it's a business that turns over 200 million pounds on average a year. Historically, the clubs that combined spend about 230. So where I think they should get to is maybe for one year, just spend 180 or aim to do that, have a stable platform, give some certainty to the clubs that they will be there for the next two, three years, allow investors to see that there's some stability and not going to have to write out checks approaching 10 million pounds a year and you can grow from that. And then if you look at the profile of the investors that are coming in now, compared to, you know, when Worcester Warriors were, you know, open for new investment, it's chalk and cheese. I don't think Prem Rugby could have picked better profile of investors that are showing interest. Still got a long way to go. Because I know Exeter announcing they've just done a deal with the group that own AFC Bournemouth. But I doubt it's going to deliver a massive return for the incumbent owner. I suspect, you know, last set of accounts, they lost him 10 million pounds. So, it's not as if they've turned the corner and these clubs are trading at values that football clubs are. So, they've got an opportunity. It's a decent platform to grow from, but we're certainly not at 10 yet.
James Cooper
Give me a number.
Alex Cadwallader
I would say I think we're at five and they've got the opportunity to try and get it to six. But the game has sort of floated around three to five for the last 25 years, I would say James.
James Cooper
Rob, you're nodding at five. Is five about right?
Rob Wilson
I was thinking about six, but I'm the eternal optimist. What Alex is kind of pointing to is we've seen a shift in the types of people that have been investing in professional sport. So gone really, I think, are the days where that local businessperson that was doing really well, bought their local team for a pound because their mate had essentially spent all of their cash in it. It had fallen on hard times. And we saw that kind of going through the 60s, 70s, 80s, even into the early 90s where that was the typical reaction. Then you got some bigger investors, normally private individuals that had a lot more wealth. What we're now seeing are businesses acquiring these teams. So, there is a natural kind of maturity of these markets. And I agree with Alex that the investment that we're starting to see in rugby union seems a lot more mature, a lot more discernible. They're making some really smart decisions and they're moving away from that older school model. And of course they've got to because as the value of money goes up over time, so too do the valuations of those teams and they become less affordable for many, many more people. Which is why if you look at a Premier League football team, there are very few people or indeed organisations that can afford to make that acquisition. Rugby union actually is quite a cheap asset to buy.
Alex Cadwallader
Exactly. I think that's something you've got to be aware of. Whilst it's great these slightly larger entities that have multi clubs are putting their investment in, how much are they actually putting in? How far up their priority list is this investment to be? Because if I said, if I asked you how many any other clubs, the guys that are coming to Exeter, owned? You'd be quite surprised. AFC Bournemouth are the big ones, but there are lots of others behind. So is it just going to be, well actually we think Exeter is at a relatively low value, other people are putting some money into the league, let's just take a bit of a punt and see what happens. Or are they going to come in there, invest, try and really work with the other owners and the league to drive the whole league forward?
James Cooper
What's the difference though in investment when you're looking at 2019 and the big dollop of private equity money at £200 million just got eaten up like that didn't it?
Alex Cadwallader
It did. And I think if you'd, if the private equity firm had that opportunity again, I think they would have put some different terms and conditions on their investment in that if certain KPIs, if certain targets weren't achieved, they would have had greater control to make some changes. Because obviously they took some minority stakes in lots of different entities within rugby globally, not just in England, but they didn't actually have control, which we've always been saying, one of my initial points was how do I apply my day job to what's going on in rugby? The first thing you do is get all the data, understand the financial position, which we've done, and then you say, right, I need the management team, I need the directors to sit down in a room and work that through. In English rugby union, the club game, who is that? And that was the first challenge, how can I actually make this change? First of all, I didn't even know who I need in that room, and then they've all got different agendas.
James Cooper
And have you found out since?
Alex Cadwallader
The problem is it's the governance, because the RFU, Premier Rugby, the owners themselves all have a control of different entities, whereas, slightly deep into rugby, whereas the WRU do actually have that control. But unfortunately, what they put forward, which I supported earlier this year and last year in terms of the restructure, has now ultimately been rejected due to political pressure, local MPs, local councillors, saying, no, this is unacceptable, we want to go back to four teams, when they know that what they can't structure they have does not produce high quality teams, is loss making and has a knock on effect on the national team. So they already know that model doesn't work, and they have the ability to make the change much easier than we do in England, and they still haven't been able to do it.
James Cooper
How hard is it waving that flag that says, for the good of the game, and nobody appreciates it? You’re obviously passionate.
Alex Cadwallader
It is difficult, and rugby is a massive sport in Wales, it is their football, and even more so. So, for them, it's all about getting the communications right, getting us by in as much as possible. And it's a challenge, it's not easy. It's similar to when I think David Cameron mentioned, one time in Parliament, well, the Portsmouth fans can just go and support Southampton. It caused absolute uproar, and almost that's been implied, that's what should happen with teams in West Wales, the Ospreys fans supporting the Scarlett's. Well, they're our biggest rivals, how can you think that's a sensible argument? But Rob and I look at it from having an understanding of that passion, but also from what you're trying to achieve, what do fans of Wales want? They want a successful Wales team, and they want their regional clubs to compete. I think the answer to that is yes, and you just have to accept the grim realities of the Ospreys as a club, as a business, you can't compare it to Bordeaux and La Rochelle. They are five times, if not six times bigger, and you're trying to compete. So unless you make some changes, it's just not going to work.
James Cooper
I've got to say, in my podcast bingo, I never thought we'd get David Cameron, so I'm delighted about that, that's a rare card. You mentioned the French game, and again we're deviating a little bit away from the report, and I apologise for that. Why are they getting things so right, and we're getting things so wrong? Because their league is incredible, everyone wants to play there, I know money is involved as well clearly, but they have an entertaining brand, and they have a national team that clearly is better than our national team at the moment.
Alex Cadwallader
I think ultimately it's almost just based on what they naturally have there, James. So they don't have the Premier League to compete. The clubs that you probably argue struggle the most in France are the ones based in Paris, because they do have Paris Saint Germain but Rugby is part of their culture. You are a dad on a Saturday morning in Bordeaux, you’re not sure what you’re going to do, you know, Rugby is front and centre. Everyone goes on a Saturday morning to the centre of Bordeaux, and then walks a mile to go and watch a game. It's part of their DNA, because we don't really have that here. We also have Rugby League and Rugby Union, the French don't, and as Rob will attest, pretty much every metric when you compare the English game to the French game, theirs is three times bigger. They have three times more participants. They have the viewing figures are three times higher. So therefore, you have, ultimately as we said, money talks, but it's embedded in their way of life. If you wanted to go and buy, for instance, if you want to go and buy Brieve, who are in Division 2, the local council has to onboard you and be happy that you're going to be investing in the community, and so on and so on. So, I think one of our challenges in England and in the UK is that we always feel that actually we're the ones that started these sports, it's the home of Rugby, and we need to be at the very top. And we've seen it a little bit in cricket, the resistance we had when the IPL starts off in India, none of our players could play, how dare you, you're not going to play for England, you're going to be ostracised. When ultimately, I suspect a lot more people play cricket in India than they do in England, and you've got the same with Rugby in France. So I think we want to stop trying to compete with them, try to learn some things from them, but just accept. They are able to generate more eyeballs watching the game, and it is more part of their game. Sorry, more part of their society is watching Rugby than it is in England.
James Cooper
There’s part of me that’s spent half a minute just thinking about being a dad in Bordeaux, you painted that picture beautifully and I’m wondering why I'm a dad in Cheadle Hulme. Rob, when you looked at the bonnet of Rugby Union, you were probably thinking that with some trepidation this is going to be bad. Was it worse than you thought, or was it about...?
Rob Wilson
It was. I mean, we've been looking at financial reports from Rugby Union for a long time, but I hadn't really put them all together in one collective place. The headlines are stark, coming out of the report, the number of clubs that were technically insolvent on their balance sheets. Alex and I both have friends that are now working in and around the administration of the game, and you're thinking, that's their club. Their club is losing 6, 7, 8, 10 million. Where's the next wave of revenue coming from? And the whole thing to be perfectly honest was in disarray. You mentioned the private equity that came into the sport a few years ago. That all got fritted away on player wages. The salary cap was probably too high because we were scared about what was going on in France. And all those discussions around English players playing in France would not be available for the national team and so on and so forth. The whole thing was just a bit of a checkered mess. And I think what the report has really helped us do is put everything in one place, start to really unpick what's actually going on and start then to inform those decisions that probably need to be made to ultimately strengthen the sustainability of that sport.
James Cooper
And interesting, within that there was a performance index which monitored growth on the pitch and off the pitch.
Rob Wilson
And that's the kind of academic thing, we've been playing around with that model for 10 or 15 years ever since Dr. Dan Plumley, my sidekick, as you well know, is watching the episode. His PhD built this model for holistic performance and for the first time really puts together those ideas that you have to be competitive on the field, or rather question are you competitive on the field versus what's happening off it. And we always had this conundrum, which one drives the other? Is it sport and performance that drives your financial performance or is it the financial performance that drives sport and performance? And the honest answer as a prof is I still don't really know. What we do know is that the two are linked. So the more successful you are on the field, the more likely you are to be successful off it. We will always get some outliers. But what we find in professional sport is a big collection of teams that are in the bottom left quadrant, which is not particularly good on the field and they're certainly not particularly good off it in terms of their financial health. So that gives them performance indicators, markers to make better decisions and then hopefully move themselves into the top right quadrant.
James Cooper
Slightly related to this but not at all related to this. But having been a player and been out for what a player is out for. And there's no different for anybody else looking to get the best price. I think sometimes players are unfairly criticized for doing what everyone else does in any industry. But are you now in the camp that you can’t be paying players that.
Alex Cadwallader
Yeah, I think players should look to get paid as much as they can. It's a very short career. There is, in certain sports, there are long term implications for health matters that can arise at a later date. And that includes sort of mental health as well. And it's not particularly easy. I've been in the changing room in the middle of a re-structure with 16 months left on a contract and the governance, the regulators decided no, the league's changing and your contract is ultimately null and void. I was very fortunate that my owner came to us and said go and try and find another contract and I'll top up the short fall. Other owners just said well as per the law I owe you one week’s wages off you go. So, it is stressful. But it's not just the players. I think it's just the general spending and that's the bit that actually surprised me. I thought when you actually looked at wages it would be quite close to the salary cap but actually there's a lot of other spending that is going on. And a lot of it we felt when we put forward the franchise model could be saved if that was sort of done centrally. So, marketing teams, finance teams should actually work together.
James Cooper
It just makes sense doesn't it?
Alex Cadwallader
It does and one of the things our CEO Dan Booth, Leonard Curtis always says, starts off the meetings with directors, what does good look like? Start from there and then how do we get, understand where you are at the moment, what does good look like, how do we get there? And James that's the challenge. The guys that have invested and owned these clubs, are very successful businessmen, are very astute. Understand how to run a good business. But in this type of environment and some of it is their competitive nature. You know you get two very successful businessmen in the room and one of them says, no I want to spend as much as possible next year. I want my club to be European champions. Let's get rid of the salary cap. The other chap's probably just as successful but for whatever reason doesn't want to do that. Very rarely is he going to put his hand up or she and say I can't afford that. That doesn't work for me. There is the owner at Gloucester, fantastic, he's very open and it's no ego. He just says, no I will at maximum lose £500,000 a year. It's a very grown-up approach but it's very rare. You put two successful businesspeople with egos; they're not going to say I can't afford that and I know you can.
Rob Wilson
And they're the paradox by the way, Gloucester are my team and they've been awful on the field this year and it's largely due to the spending on player wages because the ownership is not prepared to lose much more than half a million quid. But as an academic, as a co-author of this report, absolutely what they should be doing is just not a shared objective yet across the league. And I think going back, that's why sport really needs to grow up and understand that you have to have your competition to exist. And actually, if you are delivering competitive sport, whatever that competitive sport may be, you all benefit from that. Look at the way the US system works, forget the promotion and relegation things, I almost think it's a red herring at times. But those owners will work with each other within a salary cap, with a commissioner, they will share some levels of sponsorship and what happens, you get different winner each year in most of their competitions and you just watch those franchise values go up and up and up. So, nobody's losing their money.
James Cooper
But there's a counter argument when you're part of the chosen few, as Ipswich Town are now, I'm delighted thanks to last week. I'm happy with whatever rules and a closed shop. When you're not in the closed shop though, it's a very different place to be isn’t it?
Rob Wilson
Very, very difficult and that's because of the way the rules have been set up. So, Ipswich will have the £120 million windfall for getting promoted to the league. And there's a big decision, how do you, because Wolves didn't spend it this year. They've got one of the youngest playing squads in the entire division, they finished second from bottom, I think, maybe even bottom. So, as a fan, you're looking at that thinking, well it's sustainable, we're doing the right thing, the advice we get given is bring your academy players through, usually young players. Increase their valuations and they will probably sell a few players this year for some top money. But they drop back into the championship with their parachute plan, but they're much bigger than everybody else. should get re-promoted. So, Ipswich will be facing exactly the questions that we've been asking through Rugby Union Rugby League right now. And how do they compete with those big 6-8-10 teams, whatever you want to say. The issue of the distribution is where it gets messy in football. So, we're enabling those big clubs in inverted commas to become bigger through sheer weight and volume of the money that they're being provided.
Alex Cadwallader
And it's never one size fits all. Having spoken to a couple of agents of some US sports stars, we don't quite appreciate the real nuances between their top leagues. Some of them do have cost control measures, some don't. And actually, when you try and unlock the history of how they got there, it will be players going on strike, it will be bargaining powers, so on and so on. So, they haven't just got this perfect model that every sport follows. And football is very different to rugby. One of rugby's issues, I still remember, I think in my opening forward, in 1997, Newcastle, I don't think they're the Falcons then, but they went out and bought Inga Tuigamala for £1 million. So, John Hall owned the football club and the rugby club. And I remember being a youngster thinking fantastic, the sport I love is now going to start paying the players exponentially better. This is great, this is really what I want to do. I don't think there's been a million-pound signing since then. So, rugby and football are very different. So just because we put forward some recommendations for a closed shop in rugby, I don't necessarily think you need it in football. They're different ways. What you want to do is avoiding the Sheffield Wednesdays, the Derby's, as best as you can. Sometimes regulators, I think, get too much criticism. And also, my query often, who is the regulator? Is the regulator basically just controlled by the owners already? Whereas clearly there's been some real push for this independent football regulator. But again, I'm not too sure exactly what control and what real change they can really make.
James Cooper
I want to steer back to data and to research and to the cricket report and link it up with Rugby Union. It seems to me that and based on what James Haskell said in the most recent report, that franchise rugby is the way forward. That's the most sensible choice. Is cricket then a panacea of how franchise cricket or franchise sport can succeed? Are there lessons to be learned there as well?
Alex Cadwallader
I do think there are lessons to be learned from how successful the IPL have been. But the same way that I've said we shouldn't get obsessed with what's going on in NFL, or rugby shouldn't just look at the Premier League and do the same. The numbers there are totally different from what we are trying to achieve. So the hundred money has come in, and I stripped it back to say, if I was advising a business that has been trading very consistently for the last 30 years, and suddenly half a billion pounds was thrown at a third of the clubs in that, how are you going to deal with that? Where does that money go? Those investors probably want their money back. What happens if you don't deliver the returns? You're trying to create a new product in a one-month window, where players are getting pulled absolutely everywhere. How many eyeballs do we actually have in the UK? And is there this massive desire to go and watch some hundred cricket in August when you've got everything else in the world that you could also watch? We often get, drive to survive for Formula One, obviously made a big impact, but there's only one Thursday to watch Netflix, something on Netflix a week. So, the challenge there, James, is what's this money going to be used for, and is the hundred actually going to be a success? A sign of success is that those franchises are going to be worth what these people put money in.
James Cooper
That’s the rub, isn’t it? We're talking about a year after the investment's been made, and some counties are doing great because they've got test cricket, and they're part of the hundred club. And then you look at Sussex being put in special measures.
Rob Wilson
There's the haves and the have nots right there. So, you've got your test match venues, you've got the hundred franchises, you've got the teams that are going to benefit from all of that additional revenue that is naturally now going to flow through the system. I think the ECB have been really quite smart with how they're releasing some of those funds actually. There should be not necessarily a suppression, but certainly a controlling of wages, so we shouldn't see what we saw in Rugby union, for instance, where all the money just washed straight back out. Because you have a two-tier system in cricket, if we allowed those players to get paid a lot more money because of that hundred windfall, it would really destabilise the have nots. And Sussex is a really good example. A little teaser for our next cricket report, we've been doing some work on the digital footprint of each of those clubs. Just to put it into context, Jasprit Bumrah, can post once on Instagram, and that will get more interactions than Sussex will get across the entire county season. So, there are huge differences in both the clubs that are existing within that, or the counties rather, that are existing in the ecosystem, and those that are really competing at the top end. So, there's a huge amount of disruption through hundred franchises versus the IPL versus the Big Bash, and I can really see that having a global competition format. That will destabilise clubs a bit more, and that's before we weigh in on the importance of counties in terms of their England player pathways and that type of thing.
Alex Cadwallader
So, the words Rob mentioned destabilise disruption, and this all assumes that this investment is going to be successful. So, let's assume the hundred is a fantastic success. We've caused all this destabilisation, disruption for the other counties, but with my other hat on, what happens when it also isn't a success? What have we been left with? And I know we're on one of our other podcasts and our reports, when we're talking about golf, that's what we're facing now. It's not uncommon to sports. You often get a disruptor who's putting money in, hopefully to allow the other competitors to compete. They've got a better financial model, or they've got a better route to market that allows you to change your model to compete. The real challenge is when the money comes in for other purposes, you then scramble around trying to protect what you have, basically destabilising your own proven model to try and compete. The disruptor then disappears and then you're left with just a bit of a mess. You're overpaying players, you're paying, ultimately just spending more money than you are generating and what's the impact of that? And my real concern is what happens if the hundred is not a success and you've caused all of this disruption for what?
James Cooper
But is it also survival of the fattest?
Rob Wilson
Yeah, but then we always come back to when's the bubble about to burst? And I think every time we inflate the bubble with the extra cash, we are risking that bubble bursting again.
James Cooper
But I mean, there's interesting things. You talk about what good looks like being a mantra and it's quite right. So, what good looks like. And in some ways, Lancashire is what good looks like because they're looking all trapped in the same way that Pierre Ockel's being built. And yet Lancashire finds themselves in the second division of the county championship. Yeah, and part of that's the beauty of sport, isn't it? Because going back to the index, not all the time do we see financially really successful clubs doing the best on the field.
Rob Wilson
So, you know, arguably that's going on in Chelsea Football Club at the moment. So, it's not a binary thing. If you do well financially, you will do well in a sporting context or vice versa. But what we look at is the structure of those organizations. And what are the key hallmarks that they have that can enable them to be more sustainable and more competitive? So let's look at cricket. If you own your own ground, you are likely to do quite well. If you utilize that ground for conferencing, for food and beverage and other external events, concerts, you're probably going to do quite well. If you have a test match that's happening at your county, you are probably going to do quite well. There's a challenge for all of those that don't have those things. So, we spent some time with Middlesex recently. They don't own Lords. They can't leverage lords. The MCC will generate all of the revenue from that. So that leaves Middlesex as quite a small county in that context. So, then you have to look at the structure of all the counties. So, should they be member-owned organizations? Should they be privately-owned organizations? Do they need to demutualize and so on and so on? And that's where, you know, again as an academic, it makes sport so much more fascinating than just seeing who puts the ball in the back of their net, who dabs the ball down on a try line, who hits a six.
Alex Cadwallader
And then, as I say, you've got nuances in every sport because one of the key reasons counties exist is to provide players for England. That isn't in the, you know, the memorandum of Arsenal FC. You know, that's just a by-product and so on and so on. So, the other thing I just want to stress, James, is that these are, whilst we're highlighting the challenge, it's still a fantastic opportunity and hopefully, you know, with making some sensible decisions, you know, the sports can benefit from it. But it does bring challenges to it.
James Cooper
My job is to ask the tricky questions of poke and prod. And I'm going to do that right now. Who is the greater, better, better-equipped custodian of the game, the RFU or the ECB? Based on research, I'm going to take it away from them and make it dispassionate rather than passionate initially.
Rob Wilson
What a question. I think, given, if we look at the present situation, so right now, I think the ECB are making some really good decisions about how that hundred money is going to be distributed. As I said, there will be challenges. There will be loads of opportunities with that. The numbers are smaller for the most part. The ECB are providing, you know, their club grants, which enable the England player performance pathway. I think all of that stuff says to me the structure is a bit stronger. Unfortunately for the RFU, and I'm probably a bigger rugby fan than I am cricket, if I'm entirely honest, there's been so much disarray across the union. Bill was challenged by, I think, the votes of no confidence, wasn’t he, last year. But when you speak to him, you know, a very passionate, discerning guy that wants the best for the English rugby union and the club set up within that. But because of the way the stakeholder mapping works, Premier Rugby, and then the owners of the clubs and how that governance works, it just makes it a bit more difficult. So, you're pushing me, James, and I'm going to say the ECB marginally.
Alex Cadwallader
Yeah, and I'd look at, you know, two recent events. Both the RFU and the WIU, in effect, decided that they were going to get some independent views on, you know, restructuring their own governance within the WIU and the RFU. And both then got put to members and were rejected. So, you know, going back to my question, who is in that room? How much control do the RFU actually even have on the club game? They don't have a great deal. There's meant to be sort of alignment, but when it comes to it, you know, are they actually able to work together as well as, you know, it's similar in a way that the ECB are. So, they both have those challenges.
James Cooper
The other argument from a financial perspective is it takes longer to chew through 500 million than it does 200 million, and maybe that gives them more time to do that.
Rob Wilson
Yeah, and again, it's all about numbers in the game. So, if you compare apples with oranges, a first-class credit county is typically smaller in financial terms than a Premiership rugby union club is. So, it will take them longer to chew through that 500 million. But again, you speak to some of the chief execs. Stuart Cain at Warwickshire is doing just an unbelievable job of extending that club into the community. Of course, they're big. Of course, they've got Edgebaston. And of course, they've got a hundred franchise. But they're talking about long-term decisions, you know, regenerating the ground, building things that will have asset value that will then ultimately provide long-term financial sustainability for the county. And that's the stuff we want to hear.
James Cooper
Does it make a difference that there's a relationship between the two divisions as well in cricket and there isn't that relationship in rugby union? Or is that being fostered? Because you want a situation where there is some health in that second tier.
Alex Cadwallader
You do,
James Cooper
you've played in it.
Alex Cadwallader
No, absolutely. And I had some fantastic times. And it was semi-professional. And most of the clubs in the champ, as it's been rebranded, are still semi-professional. But the gap is absolutely massive between. And, you know, whilst we are supportive of, you know, Ealing and Penzance and other teams that are performing the pitch, being promoted, it's pretty stark. I think Steve Diamond came out quite bluntly and said that
James Cooper
He does.
Alex Cadwallader
If you want to compete, you know, you need to try and put a squad together at very short notice after you've been promoted in, say, June. All the good players will have signed new contracts in December. So you'll be left with the likes of me to try and, you know, overpay to get someone like me to join. And you are, you know, I'm very, you know, it's the same, especially with rugby, just, you know, money does talk in terms of your, the amount that you spend on your squads. And it's going to cost you probably for that three-year period, 20 to 30 million pounds worth of losses, just to try and compete. You're unlikely to, you won't, you don't have the same infrastructure. You won't have the same people turning up every week. So it's a real challenge. It's a massive leap. So that's where the Div 1, Div 2 situation in cricket is much stronger.
James Cooper
I wanted you just to finally sort of do some crystal ball gazing, certainly in terms of rugby union. In five years' time, you mentioned Newcastle in 97, you're right. I think everyone was excited by that. In five years' time, we're going to see the Newcastle red bulls and we're going to see the Cornish Pirates as franchises. Is that what we're going towards?
Alex Cadwallader
I hope so. It's still a challenge. I think, you know, the one bit that really disappointed me from the report that we produced is that the clubs not in the traditional rugby heartlands are still struggling. So Newcastle and Sale probably have had it, and two best-ever players playing for the Jonny Wilkinson and Jason Robinson. And there are attendance figures now. I appreciate those players aren't playing anymore, but they've won the leagues, they've competed in Europe, are still really poor. You know, the revenue is still low. And if I asked Rob or yourself to name one of Newcastle Red Bull's signings for next year, could you?
James Cooper
Even with the research that I've done? No.
Alex Cadwallader
So, they still... So, we're still unsure exactly what Red Bull are doing. And I'd say exactly the same for Cornish Pirates or Penzance or whatever they'll be. Potentially, I would, you know, as I say, going back to the little thing that Rob pointed, you always have slight nuances. So, Bath, generally, however they perform, the same people go and watch on a Friday. Because it's part of their culture. And it goes back to what Bath have is similar, and Northampton and Leicester to a certain extent, it's similar to what you have in Brie, La Rochelle and Perpignan. It's part of your culture to go and play. And if the superstar isn't there, or they're not winning the league, you're still going to take your kids there on a Saturday morning. So, there are some nuances. What we do know, and the real disappointing thing is, in 25 years, we still haven't found a model that works, in non-Rugby Heartlands, in England.
James Cooper
But on the other side of things, it feels like there's a bit of a chase at the moment. You get Jason Dyson investing in the end. In Bristol, you get, sorry, in Bath, and you get Newcastle with the Red Bulls, you get Bournemouth looking at Exeter. It does feel as though there's a, I take your point as well that the sums are smaller, so the risk is less, maybe.
Rob Wilson
Yeah, the sums are smaller. I'll go back to what I mentioned earlier. They're cheaper to acquire as assets. And I think, you know, asking us to crystal ball gaze, I think in five years' time, that franchised Rugby Union plan will be a lot stronger than it is now. I think the onus is on the ownerships that are going into those clubs will be looking to run those clubs in a more financially sustainable manner. It might mean we have a dip in the salary cap at some point before we recover that. But I think Rugby has, in quite a mature way, has seen to what was going on and has decided within itself that we can't keep doing this because we've lost three far-big clubs, historic clubs in the case of teams like London Irish and Wasps. We've had experiments. We saw Wasps move from north London across to Coventry, and it was just a catastrophic failure, but probably not because the idea was necessarily bad, but the execution just didn't work out and there was too much politics involved. So, I think five years' time, we'll have a much more sustainable prem with some clubs that are performing well. I do worry in the same way that Alex said, Newcastle and Sale, just away from what you might deem a typical Rugby Union heartland. It's always going to be difficult. Goodness me, how many professional teams around the corner from Sale that are competing for those same funds and similar up in Newcastle in the northeast, do they need to differentiate somehow? I think we'll see an emergence in multi-sport groups so you've got different clubs in different sports. I'm going to wave the flag for Netball quickly because you look at the way the Nottingham Forest Football Club and Nottingham Forest Netball are starting to coordinate what they're doing. It's strengthening the brandsof both those sports. I think that's where we'll start seeing Prem Rugby going.
James Cooper
But it does need coordination. It needs understanding.
Alex Cadwallader
They've shown that they have listened and are considering long-term, and they're much better positioned now than they were when we did our first report.
James Cooper
I want to throw two questions to you before we finish. The first of those is purely Rugby union on the pitch situation, 18 months out from the world cup. If I talked to you in October when we’ve just beaten the All Blacks, you might have been talking about a world cup and suddenly we’re talking in a situation where we’ve lost to Italy for the first time. What England is going to show up in Australia in 18 months’ time?
Rob Wilson
Hopefully not the one I watched against Ireland
James Cooper
Or France. Or Italy.
Alex Cadwallader
I think if you look at that 12 run unbeaten run, a lot of them were Finn Russell missing the last-minute kick, some very tired Australians and Kiwis. So, there's always a balance. I think we have an opportunity to get to a semi-final. I think it's still a big step as to whether we can take on a French team, the All Blacks and the guys to beat are South Africa at the moment. So, I think we are, unfortunately, I don't think we're going to be celebrating the World Cup win.
James Cooper
But we're being positive, of course. Things can change.
Alex Cadwallader
Absolutely. And I see the RFU back Steve Borthwick. So, as a former university colleague back in my Bath University days, I hope he's successful.
Rob Wilson
That's another thing, by the way. Some of the research we've done previously talks about managerial change, and you are very often better sticking with the person than changing. So, they've made a big call sticking behind Steve this early. I think the Autumn would be quite interesting to see if they stick.
James Cooper
I want to round off with a very broad question. We've done really well to tiptoe around football because I think there's loads of noise whether it's football. Is it important for other sports like rugby union, like netball, like cricket, to look at what football's done but not be preoccupied by it? In the same way I think Manchester City benefited from never being... They were obsessed by Manchester United and they stopped being obsessed by Manchester United and went their own way. I know money helped with that clearly.
Rob Wilson
No comment.
James Cooper
And I don't want to go down those areas either. But other sports could have paddled their own boat rather than think, "There's the golden cow."
Rob Wilson
Yeah, Alex made the point earlier. We shouldn't be comparing sports with sports because rugby union is completely different to football. And actually, those narratives are quite damaging. Why can a player earn £300,000 a week? Because the sport thinks it can afford to pay that. You absolutely can't do that in this sport. I have the same challenges, I think I might have spoken to you in the past, James, same challenges around women's football, chasing this kind of equity in pay when you've got a sport that is generating a couple of million quid a year versus a sport that's generating £700 million a year. They are completely different in their ecosystem, so let's stop comparing them. And I think that's probably the big lesson. We have to look at where organisations fail. I live in Sheffield. Sheffield Wednesday had been through a torrid time since last summer. That is an example of how something can go so catastrophically wrong when bad decisions are made. And it might be a professional football club that was losing. I think they ended up, the owner was in the hole for about £170 million. HMRC have managed to get their money out. He might get £25 million back of that 170-odd. But they've been in administration. They are now going to recover. And I think sport should look at that as a case study. Forget that it's football. Look at the case study. What decisions did that organisation make? Where did they go wrong? What was the outcome of going wrong? In that instance, it was almost insolvency before they'd been rescued. And that's the lesson that all the sports need to learn and try and make sure they make decisions to avoid it.
Alex Cadwallader
Exactly. You can't just look at football and do the same as rugby. But lots of sports, a lot of the investors have looked at the success CBC had with Formula One. So, they bought it off Bernie for, let's just say, a billion. And they had 18 races. And thought, actually, why don't we have some more races? Let's go to 25. And then four years later, five years later, they sell it to Liberty Media for, you know, 16 billion. I'm not sure they are exact numbers, but about that. So now we're seeing in all sports, the demands on the players. And we are just putting, we're almost using the same model. Let's keep rolling out more and more of the same product, more matches, more games, more eyeballs, more revenue. But actually, at some point, it's a breaking point. And we're seeing it in every single league, every sport. So just because it works, it worked for Formula One, doesn't mean it works for football. If we get to the World Cup Final, you'll probably know better exactly when the World Cup Final is.
James Cooper
July 7th or 8th.
Rob Wilson
No one knows because it's such a long tournament now.
James Cooper
A Donald wouldn't buy a ticket.
Alex Cadwallader
Exactly. Can you imagine how many games, you know, Declan Rice or whoever would have played. And then he's meant to be in his absolute peak at the biggest game of his life. But then also from our side as viewers, you know, scarcity sometimes really drives desire and wanting to watch it. When we grew up, the opportunity to watch Maradona play, we'd heard about this guy. It was now we've seen all the time. And I appreciate things have changed with digital media and social media and so on and so on. But I do think there are different approaches as opposed to more and more and more of the same product.
James Cooper
Gentlemen, that's a really nice way to end our first podcast. I think anyone watching or listening will know we do things differently here. It's informed, it's experience led, it's data led, it's research led. Thank you for your company. Please come back for Pod 2. That's it for the very first edition the Sports Structure Podcast with Leonard Curtis. It's not just opinions we're gathering, but data, information and analysis, all with the aim of driving a bit deeper into how major sports functions financially, where they're at now and where they should be going.
Leonard Curtis
Sport, Structured
Episode 2
Transcript
James Cooper
Hello and welcome back to a brand-new podcast that's trying to do things differently by giving you the inside track on the data and analysis that reveals how the business of elite sport really ticks. In response to the need for an independent voice in such a cluttered and noisy environment. Leonard Curtis has launched the business of sports series aimed at providing validated sets of financial data plus professional commentary for major sports all in one place. It's a one stop shop for cutting edge sports research. As part of their multi-channel campaign, we're delighted to welcome you to the second episode of our first podcast series entitled Sport, Structured. Put quite simply, it's all the facts and figures you need to know from the people who know what they're talking about and backed by Leonard Curtis who have more than three decades of expertise in recovery and turning things around. We started our series by examining the state of rugby union and cricket domestically in conjunction with market leading financial studies led by Leonard Curtis. Now, as they say, timing is everything and Leonard Curtis have turned their expert eyes to the world of elite golf with a groundbreaking new report that shows exactly whether the sports positioned nicely on the green or looking up from the bottom of a bunker. I'm delighted to say I'm joined here in the wonderful new UCFB Manchester broadcast studio by three titans whose knowledge and insight is contained within the Leonard Curtis golf report. First up, someone who's an expert in restructuring and knows what it takes to flourish in elite sports, Alex Cadwallader, alongside the brawn of a Rugby union winger is the brains of an academic in Professor Rob Wilson. And finally, next to me, someone knows everything there is to know about professional golf and what’s going right now, Sky Sports golf analyst and coach to a host of big names. Simon Holmes. Simon's also the man who wrote the forward to the golf report declaring there's no version of the future for golf that looks like the past. What a place to start. Eelcome by the way, lovely to meet you, Simon.
Simon Holmes
Thank you so much.
James Cooper
Alex is very, very firm on being positive. And that's what we're trying to do here. We try and make this data led, try and make it research backed. We try to come up with recommendations where sport might go. But starting like that, it sounds like golf right now doesn't know where it wants to go or doesn't know who needs to lead it or what the future looks like. There's so many unknowns right now and it's moving by the second by the day isn’t it?
Simon Holmes
Yes, you know, so many times I think we probably look back at changes, 10 years after it happened and try to analyse them. Well, in this case, you know, golf hasn't changed much up until sort of that 2021, 2022 season when LIV came in and really challenged that existing ecosystem, that model. And so, this is this is sort of a real time view, headlines are being made in as we speak right now, you know, new dynamics are coming. We don't know what will happen to LIV the challenger. We don't, we do probably know what will happen to the PGA tour. But if it does win, how will it behave to the rest of the ecosystem? Those are all the things we’re going to uncover.
James Cooper
There are forwards and there are forwards and yours, it almost seems to be a passion seeping through because this is a game that you obviously massively in love with and enamored with. But also worried where it's all going, and what's going to lead and what it’s going to become. Is that fair?
Simon Holmes
I think that is fair. I see that. You know, I think we've seen it now in other sports, other commodities where that big money arrow kind of, you know, it comes slowly but once it stops on something, I just see that it tends to, it can easily destroy the place it lands. And so, as a passionate golfer, you know, I would like to see the best players play against each other on the best courses for something that's meaningful. I would like to see the top support the bottom in golf. So, I think that, you know, you need the bottom of the pyramid needs to have new talent and new playing opportunities. I think there's a lot of quality in the game from what you can learn as a young person. And I, I would hope that the beneficiaries on the top will really remember where they came from. PGA has always been amazing at having sort of supporting charity, four billion dollars gifted in the United States, very important charities. I think that's a little bit of our signature, a little bit of our sort of movement, as we as we have that in the sport. You know, for a mum and a dad to play with their kids, you know, you don't want that to be damaged.
James Cooper
Alex, I talked about research being cutting edge. You've got your timing absolutely right on this. How much work went into deciding golf was going to be the next place that Leonard Curtis kind of placed its hat?
Alex Cadwallader
I think we've always been focused on it with the changes that Simon has mentioned. The fact that you had a disruptor coming in with some financial might and challenging the way that golf was to be run and then absorbed by the audience. It was, you know, a prime sport for us to look at. And, you know, there were always concerns. And, you know, with my background, I've always looked at what is LIV's business model? What are we meant to be looking at? What are the metrics that are going to show that there will be a return on this investment? Because ultimately, sport has to be able to deliver that. And for the numbers that were being thrown around, and I think I spoke to you previously, James, you ask anyone on the street, would you prefer to buy Newcastle Football Club or hire Jon Rahm for three years? What do you think is going to be a better return for the same amount of money? So, I think it was a sport that was right for us to have a look at and try and understand the changes they're trying to push through. But as Simon says, what are the implications and what are we left with when you've had all this? The other league, the other tours have to respond to LIV. And what has happened to those now that LIV are now wobbling?
James Cooper
I guess it also helps when the business of business is done on the golf course, isn’t it?
Alex Cadwallader
Yes, absolutely. It is a sport that's very lucky that it does attract commercial enterprises and a lot of people enjoy playing that sport. It ticks boxes for lots of different people. You want that to continue. But it's not about the corporate golf world, as Simon says, it's about the children coming through. LIV was attempting to grow the game of golf, but in reality, has it really done that? And has the spending been pushed in a way that actually the tours can't invest in the ways they have historically because they've been chasing to keep players on their tours?
James Cooper
Rob, I think the pair of them were talking about handicaps and driving and putting. I think both of us were battling to take the caddy or the tee or the car out. I’m not sure. I'm not sure about the organic process between you and Alex when it comes to picking a topic. But when he said golf, was it Yippie or was it...?
Rob Wilson
Interesting. I wouldn't say Yippie because I had to do a lot of work on it. I tried to be optimistic. I needed to read up on golf as an ecosystem. So some of the stuff Simon educated me on over lunch about the dynamics of the tours, about how the players are ranked, about how the local golf clubs are so integral to the underpinning of the ecosystem and how then when it starts to get really interesting for me, the money flows and who's taking what out of the game. The difference is really between ostensibly individual sport, although I've been educated about how it's also a team sport and their elite formats, but how an individual sport can generate its own economic value and actually be much more sustainable as a model than we see in some of the professional teams. We spoke about some of them in episode one. We'll speak about some of them on later episodes of this podcast. So how that individually driven market, that highly commodified commercialized product was being driven across effectively westernized territories. And then we have this disruptive force, which is great when we're talking about governance and regulation and structuring, how this disruptive force was trying to do things very differently, engaging new audiences, at least from my perspective, promoting towards families, big entertainments, almost music festivals. We spoke about sportainment on the first episode. So how they were going to do that against, of course, a backdrop of public investment from the Saudi Arabia, sovereign wealth, soft power, sport, we call it whatever you want, the amount of money that was going into sport from that region to really validate the kingdom of Saudi Arabia as a place for sport. We've seen it, of course, with boxing, we've seen it with Formula One, we've seen it with golf. Obviously, they're going to start divesting now, but they've still got some big principal assets knocking around the globe that are all funded in a similar way.
James Cooper
Simon, I asked the gentleman in pod one about the health of the sport and rugby union on a scale of 0 to 10, 0 being dying man, 10 being a superhuman, super being. Where would you categorize golf right now between 0 and 10?
Simon Holmes
I think it's on the table and it's just about to get the big shot. So, it will be very interesting to see how all of the different players behave. For the first time ever, the PGA Tour, which has been just a governing body, really nonprofit organization and has had kind of like a linear series of maybe connected or disconnected events running for 11 months of the year. And now has got external equity coming in, right? So that means the behavior is going to be different, the focus is going to be different. So, they're not just delivering this sort of very linear ecosystem. Now they're actually going to have people who go, "Where's the profit? Where's my money? Where's the return? Are they going to behave differently?" You know, connected. You've also got now, player equity, right? So instead of just having a prize money driven reward system, now, those players will now have, they are a part of the group. And then you've got PGA Tour super mighty, right? Looks stable, looks as though it's solved any of those problems and it's knocked away the competitor. DP World Tour, passion of mine. It's global. It has the media package which LIV doesn't have. It has a huge pipeline of players. It has a long history. Definitely leans heavily on the financial support from the PGA Tour. If the PGA Tour starts to think about, "Okay, where are all my P&Ls going? Hey, listen, do I need that DP World Tour anymore?" You don't want that to be this power to disable this, right? And I think that if it's all America-centric, which is PGA Tour with their very easy viewing hours across their time zones, it is important to have children, for example, able to watch a meaningful competition, which DP World has always been able to do, being a much more global tour. So, I hope that that behaviour will be looked at as a part of, yes, you make your money 100%, totally get that, but also don't, when you leave and you take all your money, destroy what was there already.
James Cooper
It's a problem Alex, I'm sorry, Rob.
Rob Wilson
That's fine. I was just going to pick up an equity state piece. So, we wouldn't have expected that from a sport like golf. I think most of us as analysts would be looking at Premier League football, Major League soccer, NFL. Where are those new ideas coming from to reward players in a slightly different way rather than just throwing cash at player contracts? So, it's fascinating that golf has gone down that route. Part of that was probably because of the push they were getting from LIV. The need to change to modernize to extend their brand exposure. What we also know about players in themselves and athletes is that they are carrying much more value to the market now as digital platforms have appeared, as new ways of promoting brands have appeared. We've started to see new fandoms. So, individuals like us following individual players as opposed to teams. So, connecting the power of the person with the sport is a fascinating next step for any professional sport ecosystem. And I think golf will reap the rewards of that because of the superstars that are playing.
James Cooper
You have to be almost an academic to understand what's going on, bearing in mind the PGA tour made a loss, but PGA enterprises didn't. And then we're talking about illiquid equity. I don't know if anyone here, you’ll know Alex, what that involves, but this is stuff from accountancy and business. It's not stuff from sport.
Alex Cadwallader
Yeah, illiquid generally means that you can't just go and trade it without an event happening or meeting certain parameters. But yes, you're right. And ultimately, it's become an assignment before LIV, was there a general feeling amongst the world's top 50 players that they were ridiculously underpaid?
Simon Holmes
No, I would say quite the reverse. You know, if you look at sort of the catalysts for significant changes in prize money, I would say Tiger Woods's arrival in 1997 and the enormous spotlight that followed that man. And the huge increases in the media coverage, which was organic growth, which was it was valued into the system properly. There were this many more people watching and so therefore it became that much more valuable that made Tiger made all of his contemporaries millions and millions and millions in prize money right? Now, I would say, you know, there must be a way of factoring. Let's suppose you were to say, OK, what is a sustainable system? And if we looked at perhaps the players championship as maybe as maybe the one that's not a major, but it's not it's the best of the of the PGA events because it's a great course. It's in Jacksonville. It's very popular and mostly the top 50 players plus play. And then if you looked at the math’s and you said, could you have a prize money much more than 10 million in total and it be sustainable? In which case every single person contributing would be able to make the money that they wanted out. It might only be 10 million. That's about as much as you can have in prize money. So, with the players sweeping the table and having eight events at 20 million, they've done that as a reaction as a defense against LIV's aggressive move. If LIV can't do that anymore, I would see that that would be a place where there could be a real change in terms of player compensation.
James Cooper
Just wondering on the liquid equity. I love that phrase Rob. Will the PGA tour be looking at that and thinking, blimey we moved too quickly on that. We maybe wasted 200 million on Tiger 200 million on Rory. But we didn't need to do that because the bad man's going away.
Rob Wilson
Yeah, that comes down to strategy and happenstance, doesn't it? So did we in 95, 96, I was going through school at the time. I remember Tiger coming through. Did we really know he was going to be the superstar that he became? Did we know that he was going to get that huge backing from Nike and become the face of golf? I remember growing up watching on Adverts and that “I'm Tiger Woods, I'm Tiger Woods”, that was an explosion of a personal athlete that was connected with golf. We've seen similar with the likes of Lewis Hamilton in Formula One. David Beckham probably rings the bell the most in professional football. We were talking about Maro Itoje, weren't we off screen, off pod earlier on that there are always going to be these iconic athletes that emerge, but it's very difficult to plan for them. So, I don't think any of the tours will be looking at thinking that was a missed opportunity. We didn't need to spend that. I think it's more a case now of how do we leverage that and how do we deal with actually what we're seeing in golf is an uptick in player performance because no longer are we seeing single player dominance. We are seeing it spread across a vast number of different athletes aren’t we? You know, from your time when you were coaching Nick Faldo, you know, was one of one of the top two or three in the world. And it would be the same people that would be fighting for those championship wouldn’t it?
Simon Holmes
Yeah, I think in the Tiger years, it was interesting because I think you either if you were a fan of Tiger and he didn't really like his competitors, they never really played that well. So, the rivalries didn't function that well. Duval, not amazing. Vijay, not amazing. Ernie, not amazing. He was the gladiator. Right. And so, he dominated it. Now you could say, OK, you're a Scotty Scheffler fan. I'm a Rory McIlroy fan. Let's see what happens. There's two or three different people. And so, rivalries act also in an interesting way of accumulating eyeballs. And so, I think that the PGA Tour, as long as you keep seeing these different stars rising up, which means your pipelines have got to be really, really efficient so that your talent appears. Right.
Rob Wilson
Then that's extremely healthy for the ecosystem. And we see that it just tiers up and tiers up and tiers up. We spoke about on the first pod about the need to without being too academic. The joint nature of production says you can only have a game of football if you've got two teams, you can only have a golf competition if you've got, I don't know how many people, 25 top players that are in that final round. And that's what generates the huge sponsorships that we see in golf, the huge broadcast deals, and therefore the huge purses that players are ending up with.
James Cooper
I know in the research you talk about the pyramid, obviously, a very wide base of club players.
Rob Wilson
It's enormous.
James Cooper
Is it healthy, though? I mean, is it doing the things it needs to do to provide for the tip of the pyramid?
Rob Wilson
Simon's probably a better place to comment. There's certainly work to do at the grassroots. There are, as we get with lots of sports, huge access issues. If you're not brought up, having played golf, how do you access that? I was not from a golfing family, so I didn't pick up a club until I was probably in my mid-20s when I was playing crazy golf on a lads holiday. So, I think access is always going to be a challenge, but those local golf clubs are kind of sustainable businesses in their own right. They are generating decent amounts of revenue, and that's ultimately where the path will have to exist. And you've got your golf pros in clubs and the coaching opportunities that sit around that.
James Cooper
Alex, you've always challenged yourself, what does good look like? What does good look like when it comes to golf and not get anywhere near that?
Alex Cadwallader
I think I've mentioned to you, I can imagine LIV Golf will be a case study for the next 25 years at various business schools across the globe. And in the next seven months with these new restructuring stroke M&A investment advisors that have been appointed to the Board of Golf, and they have got a very challenging task of trying to sell a product which currently is proven as being horrendously loss making. LIV themselves have come out previously and said, "Well, don't look at the viewing figures and those metrics, we're judging it on something else." So, you know, I think if LIV had come across a product, a model that worked and did actually achieve what they publicly said they were looking to achieve, then that's great. That's good competition that strives the PGA to change and the whole sport can benefit from that. But what it appears to have done, the only different model they've got really is paying the players a hell of a lot of money and not actually generating anywhere near the revenue. And the impact of LIV is that the PGA tours had to take decisions to try and push their prize money up that I don't think are good for the foundations of the game. And that's the real impact of it. So full on disruption, but what was the PIF’s ultimate game with that investment into LIV? They're really in sport. The Middle East companies and wealth funds sponsor some of our big events already. They sponsor the European Tour, DP1 Tour, I appreciate it's not necessarily linked to particular kingdoms. The Saudi oil company sponsors parts of the women's tour, a couple of events. So they already had major events there. So what were they really trying to achieve other than, as Rob mentioned, trying to disrupt, achieve something else other than finding a better financial model. And the implications of that are dangerous for the game. The advantage golf has is that it is still a growing sport that is still the viewing figures are fantastic. It still attracts a lot of investment. So I would expect it to ride its way through this. I don't think the PGA Tour was suddenly going to collapse. And I'm sure DP1 Tour will come to some sort of agreement. But ultimately, it does set a hopefully it gives a real big warning to other sports to think about the implications of what can happen. The argument is what could you do to stop it?
James Cooper
I was going to say, isn't that the key issue? We don't even know what this is all about, do we?
Simon Holmes
When it first started, and there was little chats going on, as I understood it, what the Saudis really wanted to do, they were going to build or they will build, a big coastline full of golf resorts on their Red Sea coast, right? And what they wanted all of us to do was go and play golf there. So what they first wanted to do was to get into the golf scene, start to perhaps have three big events in Saudi where all the best players would come. That was, as I understood it, the very first ambition. Then I think they met people like Greg Norman and other people who then who suggested that there was another way. I think the Saudis were rejected by the PGA Tour and maybe that was a catalyst for them to sort of decide, okay, actually we will do this tour. But they did it in such a strange way, as you said, Alex, they invested billions into securing talent, but with no media distribution. Absolutely no media distribution. So their build-out, their player costs, their prize money, compared to any type of revenue stream or distribution so we could really watch it. You could watch it on YouTube. That, I think, was a real fundamental error. If you look at, if you look at something, maybe F1 teams are the only thing which could possibly kind of compare. You've got, Liberty Media has got an enormous package of distribution. It's totally organized. The platform is safe because you know if I'm investing into this, here are my returns and that's a very clear model. With no media partner and as it sort of, I'll build it and they will come, was an incredibly dangerous business decision.
Rob Wilson
And it's in congruent with a lot of the other things they've done. So the F1 Grand Prix is strategically delivered. The investment in Newcastle United is tied to a big Premier League and international broadcast rights deal. Even the Riyadh season, the boxing, the MMA stuff that they're looking at delivering, have much more strategically driven broadcast rights. I almost think they've sort of jumped the gun with the YouTube, with going onto YouTube. So saying our audience is going to be these young people that are bored and they don't want to watch 56 holes of golf over the course of a weekend. They want to see a shorter format. They want it to be a bit glitzy and glamory and eyeballs are on the screen and will generate some revenue from YouTube clips. And it just never came because you have to enable your audience to access. And nobody knew about it over in the kind of the mass market. The golf audience would have known about it and all decided, yes I'm going to tune in because I'm interested or no I don't agree with it and therefore I'm not going to. But they haven't captured that additional market and it's fallen apart very very quickly.
Alex Cadwallader
Yeah they took an approach and you look back at it and they almost want to do everything differently. Let's only play three rounds. Let's not have a cup. Let's all play at the same time and really challenge it and say this is for a new audience. And I understand that when you go and watch an event it's quite different. Actually the on course experience can be quite good as opposed and they would always pick just a sleepy PGA tour event that was between some masters that not many people go to. But actually if you look at the crown jewel, the open or the masters, part of golf is the tradition and they don't make massive changes to that. So I wouldn't, LIV hasn't identified a new model a new product to the PGA tour wouldn’t have found anyway. They would have been alive to the fact that Bryson going on Instagram and trying to do a whole in one over his house is going to garner more and more eyeballs. But that's not really driven by what LIV’s product was and what their business plan was.
James Cooper
So taking on that and then asking you a business question if you would get the call from the people trying to restructure LIV, is it I'm not here. Thanks very much. Is there an answer to what it is.
Alex Cadwallader
It's a challenge. You know you have got a model that is proven as being horrendously loss making the investment has gone into talent based on contracts that will come to an end. When you can even meet the remainder of those contracts without the fun. It's a very challenging a challenging sell. And you know I think most commentators don't expect LIV to get the funding that they require to meet the outgoings they have for the players already signed up. So it's it wouldn’t be a particularly task you'd want to be paid up front and you know you wouldn’t necessarily want success fee. So yeah it'll be a tough assignment.
James Cooper
Simon, you're the expert you know the fabric of golf to a two-pronged question. Did all the people that went to LIV not surprise you, baring in mind you know the characters. And then the second question that can you believe the sums of money that some of those golfers whose names aren't known across the planet are being paid when you look at the list Rob came up with, you’ve got 70 or 90 million pound a year players could walk down Manchester highstreet without being recognised.
Simon Holmes
Yeah I would say I think if Michaelson and I think was the first guy who went and if you compare let’s say Michaelson to Woods both were offered a deal. Tiger says no I'm going to stay with the tour because that's that's kind of my that's my legacy. Michaelson goes actually yeah slightly renegade attitude right. And then Brooks Koepka slightly renegade. You know Dustin Johnson, Patrick Reed, Cam Smith was a very surprising one to me. John Brown was a very surprising one to me. But then they're all just that little tiny bit outside of the boys club. And I think the boys club kind of held the line. Tiger called Rory, Rory called duhduhduh, and they said hold the line and they held the line. And then on terms of the pricing I am amazed that you know I hear that Michaelson was 200 million right. Now I don't know how they how they negotiated that or whether you just said to Greg Norman “Hey listen can I have 200 million?”.
James Cooper
It’s quite an easy negotiation.
Simon Holmes
Is that okay? And then and then and then those first 12 players and they took it they took a critical they took an important part of the golf population. So like my problem with it is I'm a golf fan so I watch a lot of golf and now I don't get to see the best players play against each other. And then the ones who have gone to LIV haven't improved their game. I feel like everyone else. I don't care about the tours or the players or whatever. I'm the one who's wounded. I'm the worst person off from this whole set of decision makings. And I'm the golf fan. I'm the passionate golf fan. I'm the worst off. Who's out there trying to make me whole.
Alex Cadwallader
The only thing I say the devil's advocate we touched on this earlier. I quite sometimes I think scarcity of seeing a particular player not every weekend I think can can can be beneficial. Overrides as in when we were growing up you only got to see Maradona during the World Cup. Whereas if you have all the best players playing against each other every week. Whereas now we sort of get blessed it's four times or maybe five times a year with the Ryder Cup seeing these Titans. But putting that to one side I fully agree with Simon taking a bigger picture view. Yes we've been denied seeing those players develop and everyone talks about are those players able to perform at the level they have been historically. Because they're playing courses that are totally different set up all around the world. They're winning shooting 25 under par and they're turning up at the US Open where you're going to win two over par. So it's Simon’s the technician here, he’ll know that's a very different mindset. You're not battle battle hardened.
Rob Wilson
Just thinking it through. Were you surprised that Mikkelsen was the one to go rather than Tiger. And do you think if Tiger had gone we might have been having a different story.
Simon Holmes
Tiger was made an enormous offer and he totally rejected it because he felt. You know if you look what he was chasing. He was chasing Nicholas record in the majors. Right. So that's a very different pathway that is historical fabric of the game. Embedding yourself in the Golf history forever. Mikkelsen plays much more. You know if you had if you were to take those two guys. You know they played golf in a very different way. Woods like Faldo like Mikkelsen like a Nicholas very much a chess match right. Mikkelsen very much like Palmer very much like Rory much more of a gambler. Right. I think there's a mentality there. That defines a lot of the decisions they're going to make because of that's their that's in their nature. And I think you know when Mikkelsen went and he probably took a three or four of the other guys and said okay listen. So you can't blame like you can't blame like Westwood and Paulter those guys because there's normally no free lunch. But I think that really was one of the only free lunches on the planet. You know end of your career. You know great players amazing reputations and come and play with us. You go right. But if you're in the peak of your career. Are you going to become globally an icon in this LIV environment which looked to us like you're promising us elite golf. But it looked like entertainment. It wasn't that you didn't you weren't the thing you said you were. We couldn't buy into that as golf fans. I think the whole thing has been an incredibly interesting exercise.
Alex Cadwallader
And something we're going to touch on I think in a future series actually the impact for the performers. The actors the entertainers the players. And you can't criticize them. And some of them are quite open. Others have unfortunately come up with phrases that get repeated back to them. But looking to grow the game whilst you know they're issues.
James Cooper
As a journalist.
Alex Cadwallader
Absolutely. But you know I would have answered that sort of the books kept the way and just been a bit more honest. But you know that's each of them. You know they're able to say what your gripes with the PGA Tour. Or come and play eight or nine events. We’re going to pay you a hell of a lot more money. And we all look up to them, we also look at these sportsmen and think that they love the game. They're passionate about the game. It's an absolute dream for them. It's the same as when we first went out there as a young kid chipping into a washing machine or playing with our friends. But elite sports as a performer and I wasn't at the elite level I danced around it. It's still a business and it can be quite tiring mentally tough. And if someone comes along with you says I can get rid of all of this. Here's a guaranteed 50 million. Play whenever you want whatever lifestyle you want. We'll fly you around on our private jet. And you'll know more than you ever would do what we do currently. I don't think you can begrudge many of them.
Rob Wilson
That's why I asked about the tie you're not going because when you compare it to a lot of the PIF investments. Look at the Saudi Pro League. Let's get Ronaldo. He's at the end of his career but we're going to go after Ronaldo. It wasn't we're going to go after Messi. We're going to go after Ronaldo. Messi's going after the MLS. And they built a structure around him. So all of the other players the longer list if you like the less well known that have also gone over because there's a huge amount of money at stake. Haven't got the eyeballs on the screens of the earworms and ears. It's all been built around CR 7 Christiano Ronaldo. The big difference there is that's generated broadcast revenue. It's got interest from private commercial endorsements private partners private sponsors. So the Saudi Pro League ecosystem is now maturing because of that iconic signing that it probably wouldn't have had initially. And I really wonder whether we'd have been having a very different conversation had it been Tiger at the peak of his powers. And then the whole economic proposition would have been slightly different for the competition itself.
Simon Holmes
I think that one of the things that happens if you look at one of their very early decisions, you know, they hired Greg Norman. Right. Probably. You know, very much a Marmite guy. Very fringey. Right.
Alex Cadwallader
Did you coach him Simon or not?
Simon Holmes
I never did. The problem is I've met him a couple of times and he's always been amazing with me so I couldn't really I couldn't really hold my head up and say,
James Cooper
So he’s been good marmite rather than bad marmite?
Simon Holmes
For me, for me, which will be my personal opinion. But at the time he's got like no chemistry with the woods clan, no chemistry with the with the the Rorys, et cetera, because he fell out with Nicholas. Right. So I think there's always been some tribal stuff there where he's kind of sat as a loner. He was friends with Nick Price, not anymore. He was friends with Nicholas. Not anymore. So when you've got that guy who's always sort of making the friction, making the friction until something breaks, if you would have if the Saudis, yes, or whatever would have gone to, let's say Steinberg, who manages, you know, woods and a few others, would that have all been different? If they would have not been told by Jane Moynihan actually know what golf isn't for sale. Guys, you're coming here and looking like golf is for sale, it’s not for sale. That was there's a there's some fundamental mistakes, which I think those initial threads feed themselves all the way back to where we are now as this looks as though it dismantles itself and we don't know what it's going to become.
James Cooper
I was going to say what you know about the PGA tour and bearing in mind your kind of golf journey started as the PGA tour. So you know these people, you know, the personalities. Does it become a monster because it's a monopoly and does the D.P. tour become some sort of way of playing back into the PGA tour for the people who've gone away from it? Does it come a kind of feeder championship? I mean, how does this play out?
Simon Holmes
Well, I think probably there was an option in the very beginning to help D.P. world tour. Right. And then when it became like instead of going into a harmonious way, hey listen, how would this work? How would this work? Then he went into a battle. That for me was definitely a Greg Norman dynamic of, OK, if I can't have this, you're not going to have it either. And I'm going to blow it up. Right. That is a bit bad. So now now there's the rational business decisions which you might look for Alex. Start to vanish. Right. And now you start to have irrational emotional decisions which cost a lot of money. Of, I'm going to do this anyway. And when you come down to sort of looking at, you know, the ecosystem, the golf professional has always had the professional golf tours has always had the tendency to be like a mirror smashed into every corner of the room. Right. It hasn't it hasn't had much cohesion. You take someone like Nick Faldo at their best. They'd be invited to play the three majors because they would have gone into it. And then maybe Nicolas just would have invited Faldo to play in his and maybe on a palmer would have invited him to play in Bay Hill. That was it. So there was always a bit of protectionism there. Now you've got the now you've got this alignment, the cooperation between the PGA and DP world where the 10 best DP world players go to America to play. All of this is good snakes and ladders. You know, as you go up and down the board. But the board that the whole board has to be counted the whole of the ecosystem, the content creators, the indoor golf, the, the, you know, all of the ways you can start to absorb more young people into the game must become part of the cost structure. Otherwise, the funding model is actually not properly done. You're not funding the whole of them. You're only funding the bits you want.
Alex Cadwallader
I think what was quite interesting was there's obviously that period where they're expecting the PGA tour and LIV to do a deal. And there was talk they were going to do a merger. And if that had been their strategy, and they'd been knocking on the door and just been told no, they thought, okay, well, we're going to be aggressive. We're going to take some of your knights and so on and so on. And then by all accounts, then suddenly news broke that they'd signed Jon Rahm. I wonder if you could go back to them now and say, you know, do you think that was a wise decision? Should you continue to actually then eventually with what may have been the original, the original aim to actually have a stake of the PGA tour and be at that table? Whereas I think as soon as they did that, I think talk of the merger just sort of stopped.
James Cooper
Will some of those players be writing kind of mea culpa letters to the PGA? Let me back in, please. And how will they be met by those people at the PGA who have reason to bring them in, but also big reason to shut the door?
Simon Holmes
I think it will go personality by personality. You know, I don't think that Bryson by by putting his name into the lawsuit for the against the anti competition against PGA tour will have too many PGA tour friends. Jon Rahm is an interesting guy. I think that he kind of does his own thing. You know, what is interesting is that Mikkelsen's brother was Jon Rahm's manager. So that could have been why Jon was pulled here. You know, what I what I don't know is, you know, what will happen to DP world tour? I think that's more fragile than we think it is. I think PGA tour has strengthened itself. And then I don't think that LIV has enough substance there under any kind of conditions to exist at the price point. It does. If it came down to like a DP world pricing, then I think it can definitely exist. But its talent is getting older. The players that it's paid for are getting older and not less expensive. So so they hold the cards, I think.
Alex Cadwallader
Do you know what they're doing with the Asian tour? Are they going to continue to fund that?
Simon Holmes
You would have to think that that will come to an end. Right. So that the Asia one and all of the other places where the Saudis through Norman or Asia so that the LIV players could get world ranking points. And so, you know, whereas that's not really needed, will they continue to behave like that? You know, if PGA tour ends up being a supreme winner, hopefully it has the good grace to find something, find a pathway back for the talent that wants to come back to the PGA tour who went to LIV. I hope that I know you can be quite annoyed with people for things they've said. But after two years, you're going to get over it. I hope and you'll be paid to get over it. Right. But us as golf fans, you know, from the from the two young kids, boy and a girl playing golf in a field all the way up through every single development tour, all the way to the PGA tour and the top of the four big tournaments. I hope that that will all be priced into this one thing while this while there's an awash of money.
James Cooper
I think what was interesting in your report was the context you put around the earnings situation. We all think that the earnings are sky high for golfers and they are. But then you put it in the context of other world global sports people in the top 15 Forbes five five golfers in the top 15 and the top 20 or something like that. It shows that if the PGA have the teeth and want to do it. They want to turn it into Netflix or they want to get the eyes and bums on seats. There's a lot of space still there isn’t there?
Rob Wilson
Huge amount of space is still in that marketplace. Just looking at the earnings, Rory could probably buy Gloucester Rugby Club 10 times over and still have some change in his pocket to fund it. So that's a conversation we might have to have at some point.
Alex Cadwallader
He’s invested into Ulster
Rob Wilson
Has he?
Alex Cadwallader
Yep.
Rob Wilson
Well that’s a disappointment. I do though think that what we'll see is a lot of hullabaloo now because PIF are pulling out their funding from LIV. I think there'll be a scrambling of conversations to try and keep that competition on next year, but it will be a vastly reduced amount. And it'd be interesting to see whether they can bring any commercial partners on board to try and address some of the issues that Simon mentioned. But my gut feeling is there'll be a market correction. So I think over the next couple of years, we'll start to see a dialling back of some of those top fund prize funds. The sponsors are probably going to be sighing a big sigh of relief that they're not going to have to pay over the odds to maintain their connection because they've got this disparate or this additional competition that they potentially having to pay for. So I think correction over the next couple of years. And that's not going to plateau player earnings. They will still be paid handsomely because it's a very lucrative sport to be involved in.
Alex Cadwallader
I think James, I think what you said, I don't necessarily think the golfers, there's that much growth than who paid as much as some of the major league baseball players or the NFL. And an interest in Formula one hasn't actually increased that much. The players.. the players? The driver's wages haven't gone up that much. But it's almost about is there growth for those that are in the top 20 to 70 in the world? Now is there growth for that? And that's the big question mark. Because if you look, going back to the financials, what we obviously look at, some of those sports, those heartland sports, do generate a lot more revenue than golf ever will. So where we want to get to is that players are paid what the tours can pay sustainably, but also achieving some of their other goals, which is making the game as accessible as possible. So trying to grow the game globally in a structured way, making sure there's the infrastructure, so on and so on. So the goal isn't for the tour to try and pay Rory. Tiger, Scottie, Cam Young as much as possible. So that's a couple of points. And the other thing I think the tour needs to think about, and it's challenging, is to reward the players that didn't go and stayed. But I'm trying to think of the chaps name. I think he came second in the Masters twice and then I was had a couple of back injuries, very thin golfer. But anyway, I think he was offered 125 million and turned it down. And subsequently, his career hasn't gone on. But that is unfortunately business that is life. We all have opportunities to go and join TNT sports or stay in the Sky Sports or go to be in Qatar. It is business. We often do hold our sports teams and leagues to a higher moral standard because we want them to achieve so many different things that a normal business wouldn't.
James Cooper
I started with you Simon and I want to finish with you. Do you look at golf in the future and think I'm excited about where this goes? Where the short form games, where there's stuff being played indoors, whether its Netflix treatments and Drive to Survive with golf rather than... Does that get you excited?
Alex Cadwallader
I assume you haven't watched Full Swing then have you?
James Cooper
No, no, no, no.
Alex Cadwallader
That is the Netflix version-
James Cooper
Why didn't they go Drive to Survive though? It is. I know, but use the same...
Alex Cadwallader
It is exactly the same.
Alex Cadwallader
You mean the natural word. The same production.
James Cooper
I mean, come on.
Alex Cadwallader
I would imagine Formula 1 might own that.
James Cooper
Well maybe they would have made some more money. Sorry.
Simon Holmes
No, I think that if you look at the leadership, I think that the leadership, the people that PGA tour have picked, the leaders for me, do definitely hold the history of the game as one of the real pillars, a foundation, a steel strand into the ground. That I think is important and I think it's heartening. If you look at the way a lot of the players have behaved and they've supported the tour, even though they had something lucrative over here, that shows me that the love of the game and the fact that history and behaviour, etc., is still important. I think that those things are very encouraging. There have been some unusual players in our normally very quiet clubhouses. They've come in with guns blazing and all sorts of cowboys with money flying out. Didn't expect to see them. It looks like they're leaving. Who remains? I don't think we're going to know, but in this time period, we will be able to watch it as it unfolds.
James Cooper
But is that exciting? Is it an exciting buyout?
Simon Holmes
Yeah
James Cooper
Or is it just a change?
Simon Holmes
No, I don't think it is just a change because I think there was a status quo that there were no ripples on that pond post before 2020, let's say 2021. It was this number of events. Here were the pipelines. The board looked exactly the same every single year. Sometimes the players moved over, but the board was the same, the environment was the same. Now I think in including content creators, the competition I think has now come. We are all of us in sports competing for people's attention. And attention is very fleeting. People say a 16-year-old won't sit and watch a four-hour program, and I think that's probably true. But they can have all of these little other gateways to join the game. I hope that gets bonded and brought together.
James Cooper
That's the secret isn’t it Rob? Finding other ways to get that kind of interaction and the eyes on the game.
Rob Wilson
Unlocking the audience is providing, it's basic, isn't it? Basic business, providing products that people want to buy and in a way that they want to provide them, and at a point at which they need to buy them. And that's the big challenge with any shifting demographic as generations move. What we saw as golfing, as indigent or professional football, rugby union whatever you want to look at, the youth of today are looking at it through very different lens, and with a vast array of different technologies that sport, because that's our business at the moment, sport has to engage with and make sure that they really capture the imaginations of those people because that's the lifeblood of what's coming up.
Alex Cadwallader
And I think the sad thing looking back at it, if you go back five years and said someone was prepared to put $4 billion into golf, how do you think we could do this, have a nice sustainable product, grow the game, do all these things? I doubt they would have said let's create a LIV tour, they would have used it in other ways. And the player that I forgot the name of was Will Zalatoris.
James Cooper
Is he right about that?
Simon Holmes
He is.
Alex Cadwallader
So he turned down...
Simon Holmes
Zalatoris or?
James Cooper
Or Alex? Alex is always right.
Simon Holmes
No, the thing which is amazing, if you came in and said, okay, here is probably going to be about $6 billion. Is there anything that we could do to golf that would improve it in any way? We'll fund it. That would have been amazing. The Ladies Golf. The Ladies Golf is an incredible platform. The quality of the players is just driving. There's great rivalries. It's completely global. It's an incredibly organised system. The LET players, there's a place where you could have had support, which I know they've looked at. But if you brought all of that together, and said okay not men's, not women's, but golf, from the beginning all the way around, you could have created an amazing system, I would think, and have some changeover.
James Cooper
Gentlemen, that's great. Thank you very much. What an astonishing four we'd be. Two drivers and two drivers. That's it for another episode of Sports Structured Podcast with Leonard Curtis. I hope he's showing you how we do things a little bit differently. Yes, there's informed conversation debate that's backed up by data, research and recommendations aimed at growing longer lasting and more sustainable sport for years to come. Join us again very soon when with the prem-final just around the corner of Twickenham, we'll be shining a bright spotlight on the battle Rugby union faces in this country to get over the try line. So thanks for being part of the Sports Structured Podcast. Look out for Pod 3. Coming very soon.
