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The truth behind NZR's finances
By Ben Smith
The headline generated by NZR’s latest annual results was the -$19.5 million net income loss, but the truth of the matter is far less problematic, at least from a year-over-year perspective.
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It also doesn’t reflect the nature of NZR’s operating model, which is that they do not solely exist for the purpose of making a profit.
As guardians of the game, they always have to reinvest and spend back in areas which do not generate a financial return.
But even from a financial standpoint, NZR finished in a stronger position than 2023, which as a World Cup year saw match day income plummet as a result of hosting just two All Blacks Tests.
What matters is cash and cash flow rather than paper losses and NZR turned around a -$23.2m cash deficit in 2023 into a $9.3m cash surplus from operations in 2024.
With the All Blacks back playing five home Tests the main revenue drivers of broadcast, sponsorship, licensing and match day receipts surged. What’s more, cash payments to suppliers and employees went down from the year before.
When operations are in the black from a cash flow perspective, it signals a sustainable position generally speaking, if that can be maintained of course.
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With the addition of Silver Lake financing arrangements, NZR ended up bolstering cash reserves by $54.1m to sit on a pile of $83.2m cash. In addition to $125m in term investments, there is a sizeable amount of liquid assets in excess of $200m.
While there has been ‘blackflation’ over the last decade with the cost of the ‘teams in black’ increasing significantly, it’s not materially chewing up cash reserves.
This is the strongest position NZR has been in from a balance sheet perspective.
However, the clouds on the horizon is the potential financial crunch from the renewal of the TV rights for the next cycle combined with the ongoing drain by the provinces.
The current deal with Sky TV is for $111m per year and it was reported earlier that the two renewal deals on the table are for $75m per year without the new Nations Championship, and $85m per year with it.
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Either way, it’s a sizeable haircut that will have ramifications. A revenue reduction of $26 million, or more, annually is going to hurt.
Retaining players is going to be harder, however you’d expect the squeeze to be on the middle and lower tier of player contracts. Given the All Blacks brings in most of the money, the top All Blacks will be retained on whatever needs to be spent to do so.
Extracting the most value from the rights could see rugby, namely All Blacks rugby, split up on multiple subscription platforms. Consumers will have to get used to paying more for All Black rugby than before if its not all on Sky.
We’ve witnessed the power struggle between the provincial unions, NZRPA, and NZR over the last couple years culminating in the overwhelming vote against the NZR governance reform backed by the NZRPA.
The provinces flexed their power and refused to be discounted out of the running of rugby. But the provincial game is really the heart of the issue.
The provinces received $40.5m in funding from NZR, down from $43m the year before, and it doesn’t return a dime back.
Provincial unions will argue that they bring monetary value to the ‘bundle’ of rugby TV rights sold by NZR to Sky. Others would argue the viewership of provincial rugby is at an all-time low and as a stand alone rights deal for NPC wouldn’t be worth anywhere near $40.5m.
It’s professional in nature in every way except for the one thing that matters, which is making money. In reality it is masquerading around as professional sport. Without the funding it would collapse overnight. 25 of the 26 unions were found to be ‘insolvent’ without NZR support in 2023.
The bubble they’ve been living in would pop without NZR, piling money into high performance programmes while playing games in empty stadiums.
Any business with a $40 million black hole in their expenditure would rightly try and stop that bleeding, but NZR can’t, with the provinces holding voting power to upend the NZR board. It’s a ball and chain that can’t be removed.
At some point the rubber meets the road. And that point is the next rights deal as Sky can’t keep paying overs for a bundled product like NPC that doesn’t pull in enough viewers. They had to stump up and pay a huge amount for the last rights cycle due to the presence of Spark Sport, who are now out of the picture.
So how do you revive provincial rugby? That’s a difficult question that might not be possible. It’s clearly a money pit in its current form and showing no signs of improving.
One radical option is to offload the cost of the provinces to people who can afford it, which means privatisation and individual owners like the Top 14 in France, which has become the world’s premier domestic competition. Doing that would free up a huge amount of funding for NZR to put into initiatives with a better return.
Once in the hands of private owners a number of things may happen.
Each union may receive more funding than the currently do, as wealthy owners pile in reserves and start streamlining operations. However, they will likely ruthlessly shed dead weight and inefficient spending (high performance programmes) in order to try build something viable.
Winning fans would truly become the number one priority, as opposed to lip service and meaningless corporatised jargon. In the nature of competition, an interesting free market for players could develop over time livening up the game.
At some point they might even go head-to-head with Super Rugby Pacific for time in the calendar which would be a drawback for NZR. The success of a privatised part of the game risks over-running NZR’s own business.
Or there might not be a market for private ownership at all, given the relatively small market size of New Zealand. It might be deemed un-saveable.
NZR can handle funding the provinces as it is right now. When the next rights deal comes through, there will be more pressure to do so.
It would be disastrous if the $200 million in reserves were to bleed away, continually funding the unprofitable venture of provincial rugby. The likely outcome is that NZR passes the TV rights haircut on, reducing their funding putting further pressure on the unions.
One way or another, the provincial unions are going to get the financial wake up they need. They can’t keep operating as they are.
The problem for NZR is not any of the Teams in Black or women’s rugby. It’s the provincial unions who financially can’t stand on their own feet.
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The NPC needs to go through a cost cutting exercise by restructuring it into geographic divisions like the NFL does (AFC East, NFC North, etc). You will have NPC North for example which will have Northland, North Harbour, Auckland, Counties Manukau. NPC East and so on. It will be home and away round robin within each division, and then home or away against one other division. At the end you'll have a division champion crowned for each, then you will take the 4 winners and 4 wildcards (highest ranking non divisional champions) into the playoffs. This format will cut travel costs and increase excitement as teams will be able to play for more silverware and increase their rivalries against neighbouring provinces.
LOL!! Gotta love how a former financial analyst and auditor says that reporting losses arent problematic.
Haha your hypocrisy is funny Ben. Do you not realise thats NZRs job? You were right, yes, NZRs job is to spend their money, it goes to the Provinces. It’s then the Provinces job to spend that money on the community, that’s how it works.
You have to go all the way down to the true club before you get to scraping away with raffles and subs trying to get extra revenue to run all the grades they can, to see where the buck stops. It’s still used and spent exactly the same way all down the chain though.
If what you’re actually trying to talk about is the National Provincial Championship costs, well then that’s not NZRs problem. That’s a SKY TV issue. We know that rates above the NRL in terms of views, at least it had done, it might be a decade since I’ve heard any new data on such numbers, for the big Warriors games each week. That Sky feels the need to go from doing maybe four Super Rugby games a week max, full production value, to seven NPC games at full production every week, is anybody’s business. I find broadcast of 1st XV games to be perfectly adequate myself. It’s on them if they’ve wasted money putting more effort into broadcasting the NPC than SR though.
As far as the angle of the article, I would love to put that club level rugby on the same pedestal as provincial. Give clubs who do do the hard yards for themselves a shop front were the best are playing each other across the country. Add a club league into the rugby mix alongside SR and NPC, however they want to try and use them. NPC is a fantastic concept and has been run down by NZR to where it just fits a need now, rather than growing organically like it had been, but there are also bound to those out there with stronger ties to club rugby, particularly in the main centers. Even have them up against each other, fans and players choosing on or the other, club or province.
But to re-iterate the point you’ve missed Ben, how much are you prepared to lose by reducing funding to the provinces? If we treat this discussion as just about 3 months of NPC at the end of the year, how much should we be putting towards those players developments? Surely it simply comes down to whether they keep losing funds or not? If they’re doing fine like you suggest and revenue keeps increasing, then everything is currently working as intended. So what we need is a proper analysis of revenue, and something that breaks down the value of having SR players running around in the NPC instead of overseas, which is broken down against teams in black, or womens etc.
Even with all the history and love thru the ages some of these provincial unions need to combine less teams less games better quality create 2 conferences finish with an old skool North v South game …concessions even executions would be needed
Why’s that? They already have two and what’s the point of changing teams?
Either you can afford to hold a national Heartland competition or you can’t for me. Just let them play in their pockets instead, maybe NZR can spend some money to bring the last of them together for a Cup competition or something.
If you were to privatise the NPC who would buy it? Not many would line up to do so. NZR has a problem it will struggle to fix and cutting off the legs of the unions will affect player pathways and retention and will make NZR less competitive. If the middle and lower tier of player suffered with their contractual requirements which are currently being met by NZR then they will be swallowed up by overseas giants. Imagine if Rueben Love, Peter Lakai, Folau Fakatava, Billy Proctor and several others were to be on the market with underwhelming contracts. How quickly would a Toulouse, Bordeaux, Munster, Leicester, La Rochelle, Toulon, Racing or Leinster come calling not to mention the Japanese clubs. The All Blacks will eventually also take a hit due to the lack of development at lower levels and player pathways to Super Rugby will become more complicated. They will be forced to select from overseas and this will be a huge hit on Super Rugby. Like it or not the NPC cannot be allowed to die but also cannot continue in its current form. NZR therefore has a huge problem and the bubble will burst at some point. That is what people are rightly concerned about.
NPC had huge viewership numbers, hard to know how/why people watched it though. That’s probably going back as far as a more common time for it to have All Blacks playing in it. It’s definitely been dealt blow after blow to it’s.. image, but NZR.
It must be hard, because I think everyone would love an organic, sustainable, and more enjoyable NPC, but as you say it’s got the problem of being needed by the NZR to fill a specific niche it may not be suited to.
In regards to your worries though, those clubs should already be maxed out on talent. New Zealand is no longer the only union playing country that needs to provide the world it’s players. There’s always new markets arising however, and the MLR is most likely to be the next treat.
I would assume that the provincial unions are able to sit back as the NZR money props them up. They need to get more proactive in generating foot fall and revenue in addition. Get people in the habit of attending games. Start with kids and families, give people a reason to attend beyond the rugby too.
No. You’re as bad as Ben. They job is to spend revenue, NZRs is to create it.
So when you’re talking about community involvement, it’s purely to help “drive the machine”?
This should indeed be a much bigger component for PU’s, I agree. Not because they generate money though, but because the game is there for them! Right now they appear to just be happy to sit back and let the fans come that want to come, be it games, day activities, trainings etc, you have to be fairly tight circle to be in the know to have involvement in this things I’d say. Getting the information to the community needs just as much a focus as anything else, get them out on the airwaves and spending on reaching people they don’t normally reach. It will take away money going to those involved in the actual game, but coming down to watch your team train or play is really you now being involved. What I mean is PUs are probably too focused on getting revenue from gates etc, like you. I reckon they should be more focused on allowing the enjoyment of the communities love for rugby to come through.
Don’t worry Ben, SA Rugby will swoop in and save New Zealand Rugby.
Chin up mate, we all have the bi-annual tours to each other’s countries look forward to, starting next year, I believe.
Who doesn’t want to watch the Springboks & All Blacks tours???
As I remember, there was talk about broadcasters wanting us to go back to tours form before 2019, so I would not be surprised if they turned out to be cash cows in terms of broadcast revenue.
As for your liver during and after the tours, well better start taking care of it now before you arrive in SA and guys start to ply you with liters of brandy.
I’d hope you were able to do the same when traveling to NZ (assuming Ben lives there) Wayneo!
I think there has always been a hankering for the old traditional tour aye, I think it’s probably actually grown stronger over the years, hoping Saffers will want to visit and give a Lions tour type injection into rugby here!
the biannual tours will likely do well only because they will be comparatively much less terrible than the “world league”
ultimately having an extended tour to the same country every 2 years is just too frequent. After the first couple it will lose its lustre.
So the provinces aren’t making any money, everyone knows that. But what would rugby in nz be without it? I wouldn’t call myself a rugby fanatic, but I do watch the NPC. I never watch women’s rugby. Does it even return a profit? Would love to know.
Yes you can’t really play questions and answers with a poor article like this though.
Ben first has to even ask himself if Super Rugby can break even! Let’s ditch SR too huh, too expensive lol
Ridiculous discussion but hey, that’s Ben Smith for you.
The two aren’t even comparable. Super Rugby Aupiki only runs for 7 weeks, and has 4 teams. That’s two games a week (12 games), plus one in the final. The NPC on the other hand runs for 13 weeks, and has 14 teams. That’s 70 games, plus 7 in the playoffs. The NPC needs to reduce the number of teams, reduce what they’re paying players, and reduce the length of the season.