Seven days ago we were complaining about London Welsh's tenancy at our ground and the impact it was having on our pitch. Suddenly the tables have been turned with Welsh announcing its intentions to buy the stadium. It may want to, but can it?
On Friday morning, Phil Gayle and friends announced that London Welsh were in discussions with Firoz Kassam to buy the stadium. Twitter was agog, this was big.
Let's look at this in stages; the first is the detail of the release itself. This appears to have come from a very general discussion with London Welsh about life in Oxford. Part of the day-to-day cycle of PR that happens to coincide with Saturday's games. In it they talk about working in the community. Perhaps the conversation started with the subject du jour; the pitch. It wouldn't be unreasonable to assume that this discussion might evolve into something about long term plans and relations with both Kassam and Oxford United. Good journalism aims to find angles, and when I say angles, I mean new audiences to read their stuff. An Oxford United angle opens a whole new audience.
What they actually confirmed is that they planned to remain in Oxford. Which is not an unreasonable thing to say; people are not exactly flocking to their games; they look like a cuckoo in the nest at the moment. There is nothing very London or Welsh about Oxford. I've been going to the Kassam Stadium for long enough to know that the alleged 10,000+ gate they claimed to have against Wasps recently was likely to be less than half that in reality. And that's a big game in their world. If they can establish themselves as an Oxford resident, then perhaps casual Oxford rugby fans would start going to their games.
To reinforce their long term commitments to the city, they said they were interested in the stadium. And, more crucially, that they were looking at ways of buying it, including how to finance it. So, this is more a casual interest in owning the stadium, not an imminent purchase.
The ambition is there; it's the same stated ambition of Woodstock Partners, but as they have found out, vision without finance is hallucination. The second thing to consider is whether London Welsh have the finance to actually do the deal. I have more important things to do than pour through their accounts, but the fact is that Welsh were in administration 3 years ago. They weren't saved by some Russian oligarch, they were saved, via the fraudulent behaviour of their receiver, by their previous owners. It's one of those deals that sends chills down your spine when you hear about it with a football club. There appears not to have been any new money in the club, just a financial restructure which made the problems go away… for now?
So where might the cash be coming from? The Aviva Premiership TV deal is worth £152 million over 4 years, even if that money were divided equally between each team in the division, which is unlikely, that's only £3.2 million per club per year. Nice money if you can get it, but not exactly enough to buy a £12 million stadium and run a successful rugby club. Sponsorship is likely to be fairly limited because the media coverage is hidden away on the BT platform which has a total available audience of 750,000. How many of that audience is likely to be a rugby audience? 10%, 5%?. The limited BT football deal is worth about 6 times the rugby deal, which gives you an idea of proportionate interest in various sports. And gates are small, as I've discussed.
It seems unlikely that Welsh have the finance in place; London Wasps, a dominant European force in rugby never achieved their ambition of having a ground of their own in Wycombe (either Adams Park or somewhere new). And that was during a time when rugby and the economy, as a whole, was booming.
So, the money needs to come from somewhere else, or the price of the stadium needs to drop. Assuming that Firoz hasn't had his heart melted by the changing shape of the ball, let's assume that he's prepared to stick at the £12 million asking price. Why wouldn't he? He currently has two tenants paying him rent, why drop the price? So, perhaps there's an outside investor ready to bankroll the deal. There are 'heavyweight guys in the Welsh community' claims London Welsh MD John Taylor sinisterly. Perhaps. There are some attractive elements to a deal like that; the entertainment complex, which is accessible and has parking, has revenue coming in 7 days a week and the conference centre offers similar opportunities. The hotel may also be attractive. But the stadium is the stadium. You can't do much more with a stadium than play sport in it. Or host Elton John. Maybe they're planning a series of Tom Jones specials?
You might buy the ground as a loss leader to get the money from the hotel, conference centre and entertainment complex. But assuming that you're a reasonably minded investor; you might want to see the stadium making some sort of money or at least covering some of its losses. Welsh are hardly packing them out, current average attendance is 4,303. But they've only played 6 games. That's 25,800 paying punters; 61,000 less than Oxford fixtures have brought in this year; amounting to perhaps £2 million difference in ticket sales year (a rough estimate). And their position in the Aviva Premiership remains precarious to say the least. Suddenly Oxford United become an important part of this deal. Like the minor partner with a deciding vote.
Oxford offers a pretty sound income stream; even in lean times it attracts solid attendances playing more games; that's decent money for tickets and other concessions. That's rent on the club shop, and so on. Has anyone seen any London Welsh merchandise in or around the Kassam? They don't have the footfall. Football is still bigger than rugby by some distance. Rugby's profile is driven, in part, by the quality rather than quantity of its audience. It's a more targeted, affluent, middle-class clientele, but it's not necessarily large. Not by comparison to the massive, but hugely varied football audience. This works for rugby at a national level because the scarcity of international fixtures allows tickets to be sold at a premium, alongside sponsorship and TV rights. It offers a concentration of well-off people with money to spend. At a club level, they simply don't have the volumes of people for interest levels to rise much above that of the lower leagues of football.
Which takes us to the final stage. What kind of landlord would London Welsh be? There's something suspicious about Welsh's stated ambition; short of some 'heavyweight Welsh investors', there's no real substance to their credibility. They don't have money, they don't have crowds, and they don't have success on the pitch. I would worry about their financial stability. On the other hand, they are a sports team who might be interested in sport rather than rent (as we have at the moment). If Welsh were able to do what Oxford can't and buy the stadium and with it achieve stability that could be a good thing. They won't survive without the income/rent from football, so they have little choice but to work with us. That means pooling resources benefiting from improved sports facilities, stadium development, joint marketing and so on. The pitch is the only thing that doesn't benefit from the deal but overall, but presumably there's a emerging science on how to achieve the balance between the two sports; enough clubs are doing it now.
One final thought; whilst this might just be a casual conversation which has got out of hand, you might want to question if this was serious then why is it public? Big financial deals are sensitive things; they tend not to be done in public. Investors don't want people knowing what kind of money they have available. Why release the information so readily? Especially when there's a second interested party involved; why publicise something to encourage your competitor into the bid? That means you will either lose or get into a bidding war. If you were serious in the short term, you'd keep it under wraps. So, perhaps this is just a marketing ploy by Firoz Kassam and/or London Welsh to try and draw Oxford into a deal they're currently reluctant to get into.