Rugby: Another loss looms

Poor ticket sales for the Hong Kong Bledisloe test against the Wallabies is one factor in lower than expected revenues for the NZRU. Photo / Getty Images

The NZRU is looking at new ways to make more money.

The runaway New Zealand dollar and a poor return from the Hong Kong Bledisloe Cup test are likely to see the New Zealand Rugby Union post larger than expected financial losses again next year.

The final figure is expected to be significantly less than the $15 million loss posted this year, but will still serve as a sharp reminder that the game in New Zealand continues to face extreme pressures to stay solvent.

The national body, in conjunction with the New Zealand Rugby Players' Association, are in the midst of a radical rethink as to how the game can be put on a more secure financial footing. Both parties accept they need to come up with something more innovative than simply playing more tests.

Costs can be restrained only to a point. The biggest expense is the players and, with global demand for New Zealanders growing, curbing salaries will simply result in an exodus to Europe and Japan.

The arrival of the new player collective has landed the game with a higher permanent cost base as well. Now 160 players have to be contracted and the minimum payment has risen from $65,000 to $70,000.

Each franchise has to also award eight wider training contracts - effectively bringing squad sizes up to 40 - and these are at a minimum of $20,000 per player.

Revenue growth is the means to improving the chances of player retention; it is the key to New Zealand retaining its No 1 ranking.

A host of factors have combined to make the current All Black side the team they are - detailed tactical analysis, improved fitness and basic skills and fairer interpretations of the laws. The biggest factor has been their ability to retain key players. Imagine this team without Richie McCaw or Dan Carter. What if Mils Muliaina, Ma'a Nonu, Brad Thorn, Conrad Smith, Tony Woodcock, Jerome Kaino and Kieran Read hadn't been persuaded to stay on until at least the World Cup?

These men and others have all been paid a premium to commit. The NZRU took the view in 2008 that it needed to tie in senior players through to 2011 and was prepared to offer significant financial incentives.

Expectations have been set in terms of what senior and other All Blacks are worth to New Zealand and the money has to keep pouring in.

For the past five years, the preferred means to make cash quickly has been to arrange extra All Black tests. As well as playing offshore Bledisloe tests in Hong Kong and Tokyo, the All Blacks have also played Wales, the Barbarians and England for significant fees.

But New Zealand Rugby Union chief executive Steve Tew confirmed last week that this strategy has been overdone and that, from 2012, the All Blacks will look to play only one additional test each season outside their Tri Nations and scheduled IRB commitments.

"Do we need to find other sources of revenue other than playing extra games? Yes we do and work has started on that but it is not easy," he says.

"Narrowing down the number of extra games we play has put some leverage back on our side of the table. We have put people on notice that we will not be playing for the money we have played for in the past. We want more money - significantly more money - or we just won't play the games."

Striking a higher fee for one extra game will protect the All Black brand; it will appease the players who, with extended Super Rugby demands from next year, are not keen on continually playing 14 or 15 tests in a year. But it will not increase overall revenue - it will return the same amount more efficiently.

Another area of attack for the NZRU is the existing model of gate revenue distribution where the home side keeps all the proceeds from those test played inside the designated IRB window.

Ideally, the NZRU wants to see a new revenue sharing model - one that better reflects the marketing pull of the All Blacks.

One idea mooted is for the Top 10 nations in world rugby to pool all the gate revenue they accumulate and then create a formula that distributes it according to a range of criteria.

Tew is a realist and knows that while some of the Home Unions have expressed an interest in exploring this concept, the complexities of changing the existing set-up will inevitably rule out any breakthrough.

"We have for years lobbied the IRB that the current model is flawed," says Tew.

"We play in venues that people have invested in. It's not a straightforward argument that we should get 50-50 of the gate for every test we play. There are structures in a number of different countries that you just can't unpeel overnight.

"It is an evolutionary process and we are mindful that we are hosting the World Cup next year and we don't want to rock the boat too heavily before then."

The most obvious avenues have the biggest obstacles, which is why Tew says the union has started to look to left-field ideas, which they won't talk about now.

"We are going to be looking to increase our revenue in existing areas over time. That may mean fewer sponsorships and more that are based overseas but that also comes at a price. The All Blacks do two things - they help bind New Zealand communities around a game that the majority of New Zealanders still hold dear to their heart. It is important that the All Blacks are seen in New Zealand, that they are touchable, real and there frequently.

"Secondly, this team when it is named does more to promote New Zealand overseas than any other brand."