Financial uncertainty clouds prospects
As New Zealand Rugby works towards a sustainable future, there are issues facing the game around the globe, writes Gregor Paul
These are confusing as much as they are compromised financial times for New Zealand Rugby.
Earlier this year, the national body unveiled an annual profit of $33 million on the back of record revenue of $257 million.
Boom times indeed, except in the same breath NZR chief executive Steve Tew warned of troubled times ahead.
Much of the $33m profit has already been invested and the giant hike in revenue was mostly attributable to last year’s British and Irish Lions tour.
So the true financial picture is less buoyant. Worse, the true picture is one where NZR is spending between $5 million and $7 million a year more than it has, which is why Tew said: “Post 2020, we’ve got a deficit projected which we can’t live with.
“That means we either change the expenditure model or find ways to generate more money. We have to diversify revenue streams but also work very hard to ensure the next broadcast negotiations are fruitful.”
These aren’t desperate times but there is a creeping angst about how the books will balance after next year’s World Cup.
There is a foreboding sense all is not well in the Southern Hemisphere set-up and that the weakness of the Sanzaar alliance will soon have a material impact on the financial standing of New Zealand which has, to date, managed to immunise itself from the dramas afflicting Australia and South Africa.
The biggest worry for NZR, as always, is that it won’t be able to garner the war chest it needs to retain key playing personnel.
This has been the perennial battle for NZR since the dawn of the professional age and while it hasn’t won every battle to keep the best here, it has comfortably won the war.
But the fight never stops and the pressure point changes. NZR has tied in Rieko Ioane beyond next year’s World Cup and is likely to persuade the likes of Beauden Barrett, Brodie Retallick and Sam Cane to lock in to the 2023 World Cup.
The money will be there to keep the best but the question will then become how much further does the available budget spread?
That’s the issue — once the top players have been kept, the financial projections suggest there will only be a limited pool left to retain others.
And this is effectively what Tew was referring to about unsustainable spending. NZR can’t keep investing more than it has and so the middletier of New Zealand’s talent base is going to feel the financial squeeze ever more tightly in the next few years.
Compounding the budgetary dramas for NZR is the need to keep investing in women’s rugby.
Everyone is hopeful that in the not-too-distant future, the elite level of women’s rugby will start generating revenue to sustain itself, but in the meantime, NZR is having to split its existing pie between more mouths.
Somehow the financial picture needs to be altered before 2021 and NZR can’t gamble everything on the next broadcast deal being the sole instrument of change. It has to find other means to replace the missing millions.
Agreement has been reached to change the June test window to July in 2021 which will allow Super Rugby to be played in one continuous bloc and, if the format reverts to a traditional round-robin as has been suggested, that competition could become more of a revenue earner.
There’s a long way to go, though, before anything is agreed about the future of Super Rugby, and as NZR knows painfully well, the prospect of unanimity between the partners is slim, and they can’t bank on that particular competition making a financial recovery.
While shifting June to July has been agreed, there is still no clarity on what the test structure will look like in November post 2020 and hope is fading, if indeed it was ever developing at all, that World Rugby will be able to create a new model for sharing revenue from test matches.
There is, to no one’s surprise, internecine warfare in Europe between club and country over the proposed changes to the season structure in 2021.
Such is the stalemate and exasperation, that World Rugby deputy chairman Agustin Pichot suggested this week that executives from the major nations have to be prepared to meet again next month to see if they can agree a way to organise and divide the revenue generated from the November tests in a more sustainable way.
“If you ask me as a businessman, the business side of it is not working,” said Pichot. “If you ask me as the playing side, it’s not working. Is the international game under threat? I think it is. Look at the balance sheets of some nations and you can see exactly where we stand.
“By the 2019 World Cup, we need to have a blueprint for the next 10 years. On a scale of one to 10, I think we’re four out of 10 now [in terms of finding a solution] but before, we were not even on the chart. We need to push that needle from four to at least six or seven. I’m not going to be an accomplice to rugby’s ruin.”
If agreement can be reached, New Zealand may see more future revenue from playing tests, but that is a big if, as the Northern Hemisphere unions have all straddled themselves with burdensome debt by investing heavily in the bricks and mortar of their respective national stadia.
Everywhere NZR looks, there is both opportunity and threat; there is optimism and wariness and hence the reason there is some angst about what sort of financial future the game here is facing.