Economics

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USA Rugby Files for Bankruptcy; Will Other NGBs Follow?

29 Apr, 2020

By: Michael Popke

Colorado-based USA Rugby emerged as one of the first national governing body casualties of the coronavirus pandemic, filing for Chapter 11 bankruptcy in late March.

On March 20, USA Rugby suspended all sanctioned competitions and activities “for the foreseeable future.” In its March 30 announcement about filing for Chapter 11, the organization stated that “the current suspension of sanctioned rugby activities caused by the ongoing COVID-19 pandemic has accelerated the existing financial challenges facing the Union, and a reorganization process will now be progressed with input from World Rugby.

“While inherently important, the suspension of competition understandably resulted in significant loss of revenue from spring and summer membership dues, sponsorship drawbacks and additional revenue sources,” the statement continued. “USA Rugby was aware of the negative financial implications, however held with the essential suspension and instantly worked on potential solutions to mitigate the impact of lost revenue. Given the ongoing financial challenges following a 2019 budgetary overspend, the unplanned loss of income advanced an insurmountable cashflow deficit and immediate action needed to be taken in order to sustain operations within USA Rugby and the rugby community.”

As ESPN.com noted, USA Rugby posted a loss of more than $4 million in 2018. In 2019, the association spent more than $1 million on legal fees and overspent by nearly another $1 million preparing the men’s 15s squad for the Rugby World Cup in Japan. Additionally, ESPN.com reports, “USA Rugby began shrinking its office, reducing costs and decentralizing to give stakeholders more independence from the national body.”

“[The Chapter 11 filing] should have happened at least a year ago, if not two years ago,” Rugby United New York majority owner James Kennedy told the global rugby website RugbyPass. “Bankruptcy is what they needed to do. It was no individual’s fault, as there was chopping and changing personnel. It was a system that was just built to fail in a weird way. It was chronically underfunded, and because it was underfunded it wasn’t able to get the money it needed.”

Kennedy added that blaming the virus for bankruptcy was “a bit disingenuous.” 

USA Rugby is far from the only national governing body facing an uncertain financial future in the wake of the pandemic.

Combined projected revenue losses for 43 of the 50 national governing bodies in the United States will total more than $121 million between February and June, according to a survey from the NGB Council and reported by the Associated Press. About 80 percent of any given NGB’s budget typically goes to support athletes.

“Not including the U.S. Tennis Association — an outlier because of the massive revenue it generates from the US Open — the NGBs have a combined annual revenue of about $685 million,” the AP reports. “By comparison, the NFL and NBA each reportedly brought in about $8 billion during the latest completed season. Half the NGBs are little more than ma-and-pop operations, working with small staffs and on revenue not more than $5 million a year.”

A report in The Boston Globe states “a good portion” of NGB losses might be recouped by the rescheduled Summer Olympics , now slated for July and August 2021.

“I haven’t heard anyone say their NGB itself was going to go out of business,” Max Cobb, president of U.S. Biathlon and chair of the U.S. Olympic and Paralympic Committee’s NGB Council, told the AP. “But there’s very little buffer to absorb any revenue loss for an NGB. They all run on a very tight revenue and expense model, and very few have much in the way of savings.”

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