Explainer: NZ Rugby's Financial Hit and What It Signifies

Analysis New Zealand Rugby (NZR) has released its financial outcomes, showing they're in the red rather than adorned with the traditional All Blacks colors. The organization reported a $19.5 million deficit. While this isn’t good news, there’s more behind the scenes than just assuming the money was squandered like on magical beans. It’s also not as simple as thinking the person leaving NZR offices in Wellington should remember to turn off the lights before closing up shop.

How many consecutive financial losses are we looking at here?

NZR reported a deficit of $47 million for 2022, followed by an $8.9 million shortfall for 2023. While this isn’t entirely unfamiliar ground, it’s certainly not where they wish to be headed.

So where's it gone?

The $19.5 million is quite substantial; however, this amount decreases considerably once the strategic commercial spending is deducted. This expenditure reportedly makes up about $11 million, leaving behind what experts referate as roughly "$8.5 million" in non-operational losses attributed primarily to the weakening of the U.S. dollar impacting the valuation of NZR’s hedging instruments positions. As such, termination of contracts early and failure to pay by INEOS , the hedges have been considered unproductive.

What is the business plan?

That $11 million has pretty much been spent. NZR+ and content creation , as part of a $38m investment over a four-year period. NZR+ is the direct to consumer content service, which offers access to both original content and match highlights. It has been seen as being a bit of a bust so far with a less than anticipated sign-up rate (despite being free) and subsequent pivot to distributing on YouTube and other social platforms, as well as New Zealand Rugby Commercial Limited (NZRC) boss Craig Fenton leaving following roughly a year in the position.

All of that critique is valid, yet NZR essentially must venture into this domain if it aims to stay pertinent in international markets as a worldwide sports entity—it simply needs to determine the optimal approach to achieve success. Regardless of critics' opinions, prominent American franchises, Premier League sides, and numerous others have employed this strategy for nearly thirty years. Even community-level squads are now generating their own material. One can argue convincingly that the perception of NZR functioning somewhat like a production house will likely intensify instead of fading away.

What about total income

Here, NZR can boast a positive milestone due to an income figure reaching $285 million – the highest it’s ever been. This success stems from having a complete domestic calendar for the All Blacks last season, highlighted by their impressive ‘home’ Test match held in San Diego against Fiji. Beneficial revenue-sharing pacts with the JRFU and RFU led to significant earnings from matches against Japan and England. The financial strategy employed in San Diego will likely be replicated when hosting the upcoming Test against Ireland at Soldier Field in Chicago later this year.

What distinguishes this from other national unions?

Even though NZR experienced a $19.5 million deficit, their reserves were reduced by just $500,000, bringing them down to $174.5 million. To put this into perspective, they still hold the highest reserves among major unions, exceeding those of England by more than $55 million.

The Rugby Football Union notoriously declared a $88m loss In the previous season, despite generating significantly more revenue than others (owing primarily to its ownership of the 82,000-capacity Twickenham Stadium), comparing the financial performances of different unions becomes challenging. For instance, Rugby South Africa managed to turn a small profit; yet, since the onset of Covid-19, it mainly supports just the reigning champions, the Springboks. A substantial number of these players are based overseas for their club commitments.

The nearest analogy to this situation would be Rugby Australia, which has recently released their financial report. $39.6m loss last year. Of that, $10m was integrating the Brumbies and Waratahs under its management and more than $5m on the voluntary administration and exit of the Melbourne Rebels - again, a series of events that would never impact NZR.

Sponsorship

Here things are progressing smoothly for NZR. Despite INEOS leaving, the quick settlement has made it seem like nothing significant occurred.

This week, NZR made an announcement that Toyota has joined aboard. A brand collaborator. This development isn’t just earlier than anticipated — previous projections suggested we mightn't hear about a successor for INEOS until next year — yet it also bolsters the All Blacks' reputation as a premium entity since Toyota is a globally recognised brand with substantial market presence and legacy in New Zealand. There’s widespread anticipation that once Altrad's front-of-jersey sponsorship agreement concludes in 2028, NZR will return to negotiations equipped to push for more than the $120 million agreed upon in 2022.

Should we anticipate this trend persisting?

One would think otherwise, yet this isn’t necessarily the end for the national sport. The player count remains robust at 157,000, with rugby’s broadcasting rights and viewer rates leading all sports nationally. Concerns linger regarding lower-tier event crowdsizes; however, total spectator turnout for Super Rugby Pacific has seen an uptick from last year. Despite these worries, All Blacks’ tests continue to be highly attractive events. Matches scheduled for Dunedin and Hamilton versus what is considered a less formidable French side have already drawn full houses, whereas games against South Africa’s Springboks and Australia’s Wallabies set for September at Eden Park promise similarly packed stadiums within short succession.

These won’t generate anything close to the kind of ticket sales that venues such as Twickenham can attract, so anticipate more frequently scheduled home games for America and Japan here. The main uncertainty lies with their business plan and when they will be able to recover the funds being poured into this initiative.

*This dataset omits France, as its precise financial information is extremely challenging to ascertain. Nonetheless, considering that the FFR has recently disclosed it had lost almost $60 million Given the significant issues with their hosting of the previous World Cup, we can safely assume that NZR would remain at the pinnacle of this ranking regardless.

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