In funding game of two halves, NZ sides can’t foot it with Oz
Issue grows as costs rise and ticket sales fall, writes Brian Gaynor
Professional sports have become huge businesses, partly because of the massive revenue they generate from television and other broadcasting services.
Australian sports have a huge advantage over their New Zealand counterparts because of the larger population and competitive television sector across the Tasman.
For example, Australia’s National Rugby League (NRL) is generating an estimated A$400 million ($442.5m) from broadcasting this year, Australian Rules received A$367m last year, Cricket Australia A$282m and Rugby Australia $40m.
By contrast, NZ Rugby, which received broadcasting revenue of $80m last year, is our only sporting body to receive a material contribution from television.
The contrast between the two national cricket organisations is a good example of the wide Tasman gap.
Cricket Australia generated A$415m of revenue last year, with A$282m from broadcasting, while NZ Cricket had only received $63m of revenue but doesn’t disclose its broadcasting revenue.
Australian cricketers were major beneficiaries of this television windfall as players and umpires received A$73.4m last year compared with the $16.2m paid to players by NZ Cricket.
How can NZ’s major sports continue to remain internationally competitive and should the government be providing more funding?
Sports participation
It is important to note that rugby union, rugby league, Australian rules, football, cricket, and netball are the major professional team sports in NZ and Australia, but they aren’t the main participation activities.
As far as NZ is concerned, walking, jogging/running, gym activities, swimming and cycling are the major participation activities with rugby — our top professional team sport — just sneaking into the top 20 list.
The top five participation activities across the Tasman are walking, swimming, gym activities, cycling and jogging/running. Football (soccer) is in sixth position, cricket 14th and Australian rules 17th.
The table (above right) includes the revenue, profitability, and cash position of the major professional team organisations in NZ and Australia. The data shows that rugby union is clearly dominant in this country while Australian rules, rugby league and cricket generate far more revenue across the Tasman.
NZ Rugby has performed remarkably well since the sport became professional in 1995, particularly considering the country’s low population and uncompetitive television sector. Sky TV is the country’s only serious sports broadcaster and NZ Rugby will be in serious trouble if the NZX-listed company loses interest in the national game.
In the past 25 years, since the December 1996 year, NZ Rugby’s revenue has risen from $35.8m to $188.9m with television revenue increasing from $16.9m, or 47.2 per cent of the total revenue in 1996, to $80.1m or 42.4 per cent of income last year.
But the biggest change has been the payments to players, which have
increased from almost nothing in 1996 to $56.9m last year.
NZ Rugby is in a much stronger financial position than it was 25 years ago as it now has $49.5m of cash, cash equivalents and short-term investments compared with a $1m bank overdraft in December 1996.
However, rugby union has major challenges ahead including:
● Its domestic competitions have become increasingly unattractive with attendances and participation
rates declining.
● The lack of competition in the domestic television market is a significant issue.
● Rugby has struggled to develop the game globally as reflected by the exit of South African, Argentinian and Japanese teams from Super Rugby.
● Interest in rugby union has declined in Australia, as highlighted by the poor attendance at the recent Super Rugby weekend in Melbourne.
Finally, NZ Rugby is not transparent as demonstrated by its unwillingness to release the full details of its proposed Silver Lakes private equity deal.
Initially, the deal was rejected by the players and now by the provincial unions with NZ Rugby refusing to release any detailed information for public scrutiny as it continues to argue “trust us, we know what we are doing”.
The breakdown in the relationship between NZ Rugby and the provincial unions could be a huge problem in a highly competitive environment, as demonstrated by the lack of coordination between stockbrokers and the NZX.
Other NZ professional sports
NZ Rugby League is a small operation with total revenue of just $7.3m with $2.9m derived from NZ Racing Board grants and other grants.
NZ Football is also a small organisation although it had cash of $14m as at its last balance date.
It received 47 per cent of its revenue in the form of grants in its latest year.
NZ Cricket reported revenue of $62.5m last year with $3.3m coming from government and other grants and most of the rest from International Cricket Council (ICC) member distributions, broadcasting, and sponsorship contributions. The last three contributions are included as a lump sum item.
ICC membership distributions were maintained during the pandemic and NZ Cricket is hoping for a major payout from the 2023 Cricket World Cup in India.
Netball NZ is a well-run organisation with revenue of $23.7m for the November 2021 year, including $7.4m of grants and $13.4m of sponsorship. Netball NZ doesn’t disclose player payments.
Australian major sports
Australian Rules is clearly the most successful and progressive sport with total revenue soaring from A$382.2m a decade ago to A$738.1m last year. Over the same period, its cash position strengthened from A$107.4m to A$249.3m.
The annual pre-covid 2019 Australian attendance figures, compiled by Austadiums, illustrate the popularity of Australian rules:
● Aussie rules 8.0m
● Rugby league 3.5m
● Cricket 2.1m
● Football 2.0m
● Rugby union 0.5m Australian Rules has been remarkably successful because the organisation has had a clear and successful growth strategy as it has grown its home base in Victoria to Sydney, Brisbane, Adelaide, and Western Australia, plus the introduction of a women’s competition.
It is chaired by Richard Goyder, a successful businessman, and CEO Gillon McLachlan, who worked his way up through the organisation after reportedly turning down an offer to be CEO of Liverpool FC.
Meanwhile, NZ Rugby has a bias towards former players and shoulder-taps these individuals for board positions whereas competition is often intense for board seats at Australian Rules clubs and for its governing body.
The most disappointing feature of the Australian sports sector has been the mediocre performance of rugby union, both on and off the field, particularly compared with rugby league.
Since 2015, Australia Rugby’s revenue has increased by only 16.3 per cent, from A$84.8m to $98.6m while NRL’s income has risen 53.7 per cent from A$374.1m to A$575.1m.
Meanwhile, Rugby Australia’s cash has increased from A$10.3m to only A$12.2m while NRL’s cash has risen from A$44.4m to A$171.6m over the same six-year period.
Good governance has been a major contributor to rugby league’s performance. NRL has a strong marketing and transparency philosophy while former private school students govern Rugby Australia, many of whom are successful businessmen but haven’t been able to convince the organisation to become less traditional and more commercial.
Sports funding
Sports funding has become an important issue as ticket prices increase, attendances decline, and participation rates fall.
Sports NZ estimates that $3 billion goes to activities and sports, which is derived from the following sources: national and local government — $1.7b, participation fees — $0.7b, commercial sponsorship — $0.3b and gambling — $0.26b.
Much of this money is spent on infrastructure, sports facilities, swimming pools and parks with almost $0.2b for the creation and maintenance of bush tracks for walkers.
A comprehensive assessment of sports and activity funding is long overdue, particularly whether individuals and organisations using the infrastructure are appropriately charged and whether national government, local government and gambling funding is being distributed to the most appropriate sports and activities.