This week there was some big news in the sport of rugby and for one particular team in English rugby as Newcastle falcons were purchased by Red Bull. Earlier in the year Newcastle Falcons had asked for a bailout loan to make it through last season. The club will now be known as Newcastle Red Bulls and be the envy of all the other clubs in the Gallagher Premiership.
This is the first major investment into a club in the UK since 2016 which shows you how significant this is and more importantly this is a new face. Red Bull is involved in many sports such as motor racing which includes Formula One, football, skydiving, skiing, stunt flying, BMX and skateboarding.
When one thinks of team sports like football Red Bull are known for their academies nurturing talent and then selling the players on for a hefty fee. This is a sound business model and one I am sure will be replicated with the Newcastle Red Bulls. The sport of rugby in the UK has been struggling financially ever since the sport turned professional with very few clubs having any type of business model that is successful.
Over the years the league has lost the likes of Wasps, London Irish and Worcester due to bankruptcy so the financial strains are very real with rugby not having the same type of television deals as football. The sport is growing with television audiences on the up and is down to younger supporters following the game.
Red Bull coming into the sport of rugby is a huge positive as they can obviously see growth as otherwise they would not have purchased a club. Newcastle is an obvious club because of it's proximity in Northern England and with no rivals close by this should have a large support base to fill the stadium. The name Red Bull would attract young players to the academy from across the country on name only plus the players would know they are financially secure. The financials are a big draw card knowing there is no risk of going under.
Newcastle falcons had a recruitment freeze in April this year with mounting debts of over $50 million and a negative equity of more than $25 million so in theory they were bankrupt. Red Bull would have purchased the club paying off the debt owed and the chances are that was the purchase price which is a steal when you know you can turn this business around. Newcastle Falcons would not have been able to exist this season and would have disappeared entirely.
This is a no risk investment for Red Bull as this could be billed as an advertising expense so in reality this costs them absolutely nothing. Red Bull has rebranded the club and kit in Red Bull colors and naming rights so they have already got mileage out of the purchase. Red Bull will not stop here and expect to see other deals brokered especially with advertising in the sport or naming rights of a competition.
Last season the combined debt of the Gallagher Premiership teams in the UK exceeded $300 million so there are other clubs facing what Newcastle have been facing for a few years now. This could see sporting groups/businesses like Red Bull seeing the opportunity and cherry picking teams picking them up for bargain prices. These are only bargain prices if you can turn the business around though as each club would need significant work and rebuilding.
If the UK can get their grass roots rugby on the same levels as South Africa then the sport will boom over the coming years.