Worth a read
Knife Edge: How will NZ Rugby survive 2021?
Richard Knowler
Nov 01 2020, 05:00
New Zealand professional sport is on the knife edge, as coronavirus meddles with tournaments, sapping revenue, crowds and broadcasting rights so crucial for paying the bills.
In Britain, Prime MInister Boris Johnson has “paused” plans for a partial return of sports fans to stadiums. UK sports say that will cause “irreparable damage” to them and the community. Might that happen here?
Stuff’s Knife Edge series, which started last Sunday, looks at the future of professional sport in New Zealand. How long can professional sport survive in current conditions; will it need lifebuoys thrown to keep afloat; just how important is a trans-Tasman bubble?
It wasn’t a happy coincidence that NZ Rugby happened to have $93 million stored away when Covid-19 struck in March.
The money in the form of cash, term investments and managed funds was set aside as insurance to the event of an unforeseen financial crisis, and when the mighty crash came NZ Rugby could at least take comfort from knowing it wouldn’t be wiped out.
That didn’t mean it wasn’t forced to act swiftly, and make brutal decisions. NZ Rugby, like many companies around the globe, asked its 180 staff - including contracted players - to accept pay cuts. Later it culled up to 50 percent of the staff.
NZ Rugby chairman Brent Impey told media after the annual meeting on April 30 that the financial loss for 2020 would be massive: “I can’t tell you a figure … I will say it’s in the tens of millions of dollars, but a heck of a lot less than the 93 (million dollars) which would take us out.’’
This was after NZ Rugby had announced a loss of $7.4 million for 2019, an improvement on the budgeted loss of $11.8 million. The damage caused by the pandemic has been horrendous, and the ripple effect through to 2021 and beyond will be significant.
Super Rugby was shuttered in mid-March, the inbound tests against Wales and Scotland were scrapped and the Rugby Championship has been reduced to a three-team Tri Nations competition because the Springboks have refused to participate.
Adding to the mayhem, NZ Rugby lost the Rugby Championship hosting rights to Australia. There will be no northern tour, either. Fewer games mean reduced payments from broadcaster Sky, as well as a drop in income from ticket sales and advertising from home fixtures.
The birth of Super Rugby Aotearoa, in conjunction with crowds attending under alert level 1 was a saviour for the 5 clubs; NZ Rugby was grateful it could offer Sky content in the form of SRA, Mitre 10 and the Farah Palmer Cups and the two Bledisloe Cup tests in New Zealand. It was like a ray of bright light in the gloom, while the remainder of the sporting world watched with envy.
When Impey was asked after the annual meeting about how much of its cash reserves it could drill into, he said boards generally have a policy and that NZ Rugby’s was “broadly’’ 40 percent of its fixed operating costs.
“With a [potential] two-thirds drop in revenue, we’ve also had to bring costs down. We’re looking at a multi-million dollar loss this year, but we’ve got ourselves into a position where we’re able to come forward into next year.’’
You need optimism at a time like this. Prior to Covid-19 that $93 million would have been considered a tidy nest egg. When the dirt hit the fan, it became a saviour as NZ Rugby braced for a 70 percent decline in revenue.
Chief financial officer Nicki Nicol reiterated: “This strong cash position at year-end and robust application of our reserves policy has allowed some much needed respite to support the organisation with revenue shocks associated with Covid-19.’’
What does 2021 hold in store for NZ Rugby? It’s a question CEO Mark Robinson, Impey and his board will no doubt be asking themselves on a regular basis. So much is still beyond their control. The dates for Super Rugby Aotearoa, to be followed by a proposed competition against the 5 Australian sides, have yet to be confirmed. As for a test programme, we have heard zilch. The tests are a major money spinner for NZ Rugby; it’s what broadcasters and audiences crave but the task of shipping an All Blacks squad across borders will remain a complex affair.
Given the British and Irish Lions tour of South Africa next year may not go ahead, it’s uncertain whether the All Blacks will be able to have a crack at the world champions in the Republic in 2021.
NZ Rugby could ask the Players’ Association to ask the players to accept a reduced wage packet to help slash costs, but it won’t want to alienate them and push them offshore.
Don’t forget the provincial unions, either. Even before the pandemic, many PUs from the Mitre 10 Cup and Heartland competitions were struggling. To retain their identities, and remain relevant, the Mitre 10 Cup provinces, who contract players directly, appear certain to ask the Players’ Association to amend the collective bargaining agreement so that players are paid less. Because without this, PUs could go to the wall. Again, this is fraught with negative connotations, because rather than stay in New Zealand the talent may head overseas.
Last year was a record year of investment into rugby in this country, with $195 million, a 2 percent growth over 2018, being poured back into the game. International and domestic competitions, players and teams accounted for just over three-quarters of expenditure.
When Sky NZ renewed its broadcast deal with NZ Rugby to screen content such as All Blacks, Super Rugby and Mitre 10 Cup games, reported to be worth around $400 million over 5 years, it was awarded 5 percent of the company’s shares as part of the new relationship.
The balance sheet notes the investment was recognised on November 1 at an acquisition fair value of $19.4 million. On that same date Sky disclosed it had issued NZ Rugby 21,801,325 shares at 89 cents.
This week those shares were valued at around 15 cents, reducing NZ Rugby’s investment, which must be held for a minimum of 2 years before they can be sold, to $3,270,198.
It’s a black eye NZ Rugby could do without, given everything else that has happened since it confirmed that deal. But it’s in for the long haul on the score, as it is in terms of trying to protect and nurture the sport in his country.
Sacrifices will need to future-proof the game here. The question is where, and for how long. As Impey said after the annual meeting, it just “poured like hell’’.
https://www.stuff.co.nz/sport/rugby/...y-survive-2021