Andrew Kellaway of the Wallabies chases down the ball against Brodie Retallick of the All Blacks. Photo / Photosport.co.nz
This week, there will be a transtasman get-together in Sydney as New Zealand Rugby and Rugby Australia staff plan marketing, promotional and media strategies for Super Rugby Pacific 2023.
When this meeting was put in the diary, the intention was to be planning longer-term, but that all changed when RA chairman Hamish McLennan revealed a few days before the Super Rugby final last month, that his organisation was not committed to the competition beyond 2023.
"All bets are off from 2024 onwards with New Zealand," he said.
"We'll honour our commitments in 2023 but we need to see what's best for rugby in Australia leading up to the Rugby World Cup in Australia in 2027."
It was a revelation that genuinely shocked the professional rugby communities of both countries due to its tone, timing and content.
The timing looked strategic, the bomb going off just days before the Blues hosted the Crusaders at a sold-out Eden Park and a few weeks after Australia had secured the hosting rights – with the help of New Zealand's votes - for both the 2027 and 2029 World Cups.
But the tone and content were more of a surprise. Super Rugby, after years of daft expansions and bickering between the various partners, was finally in a format that was re-engaging fans and relations between New Zealand and Australia were also, seemingly, stronger than they had previously been.
A new independent transtasman council was being formed to replace the compromised Sanzar as the tournament's manager and both national bodies were talking about jointly investing in this entity and seconding staff to it when McLennan revealed that RA wasn't committed beyond 2023.
He said that RA was considering a private equity deal and didn't want to be locked in to any competition format long-term so they could consider alternatives to present to potential capital partners such as Australia going it alone with teams from the Pacific region and Japan.
But while McLennan tried to present a bright, alternative future for Australia – one where they ran their own, lucrative domestic competition with the support of a private equity partner, NZR didn't buy any of it.
They felt that McLennan's stance had been taken partly as payback for the way NZR had tried to take control of Super Rugby in 2020 when Covid hit and forced a fundamental re-think of the competition's geographic footprint, format and ambition.
NZR was accused of unilaterally disbanding the alliance and kicking out South Africa – which wasn't entirely true. South Africa already had one foot in European club competitions and when borders closed, they were always going to fully align with the North.
But it is true that NZR wanted to own Super Rugby, believing it would make themselves and the competition more attractive to private equity investment.
In July 2020 on the back of the findings of the Aratipu Report, NZR announced they wanted to run and own an eight-to-10 team competition and invited Australia to make expressions of interest to have a maximum of three teams.
"The expression of interest I'm not interested in and if they send it over, I won't open it," McLennan told the Sydney Morning Herald.
It was a power play designed to let Australia know who the dominant partner in this part of the world is, but so too was it a reflection of the concerns within NZR about the state of RA's finances.
And it's this discrepancy between the two union's respective balance sheets that sits at the core of their tense and fractious relationship and ultimately why McLennan is threatening to walk Australia out of Super Rugby.
The threat is essentially a play to grab a share of the superior broadcast deal NZR struck, and it's being made because RA, despite knowing they have cash windfalls coming from the 2025 British Lions tour and 2027 and 2029 World Cups and potentially from a $165m private equity capital raise, are in desperate need of an immediate injection of cash.
NZR, which has cash reserves of $54m, believes RA has debts of between $40m and $60m. In May last year RA borrowed $40m from a US investment firm at unfavourable rates.
The Australians also had to ask World Rugby for an advance on the compensation it pays the major nations in lieu of not being able to play their usual number of home tests to attend the tournament.
RA has got big money coming its way, but it's not coming soon enough and part of the reason they are in such dire straits is that former chief executive Raelene Castle rejected a $59m a year offer from long-term broadcast partner Fox and having gone to the open market, ended up signing in late 2020, a three-year $36m pa deal with Channel Nine.
And it's the history to these deals which is all important to the future of Super Rugby and the ability of NZR and RA to find a solution to fixing their troubled relationship.
Historically, the Sanzar partners – New Zealand, Australia, South Africa and Argentina had split broadcast revenue. Each country negotiated their own broadcast deal and allocated a value to what the Super Rugby and Rugby Championship component, and this was then shared in a 30-30-30 (New Zealand, South Africa and Australia) split, with Argentina taking 10 per cent.
The upheaval caused by Covid changed everything, however. NZR agreed a $500m five-year deal with Sky TV in October 2019 – one that would begin in 2021.
If the pandemic had not struck, a component of that money would have been put into the Sanzar pot to be shared, but mid-way through 2020 all parties agreed given the uncertainty, that they would operate under a "catch what you kill" agreement and so when later that year RA confirmed their new deal with Channel Nine, they did so knowing there was no revenue-sharing obligation.
NZR had secured three times the broadcast income of RA which is another reason why they wanted to own Super Rugby and restrict Australia to just three teams in the competition – the Kiwis didn't think their friends across the Tasman had the finances to operate more teams and they weren't going to share their revenue to help them.
When RA insisted in November 2020 that they would only sign up to play Super Rugby if they had five teams, NZR agreed on the basis they continued to not share revenue and both parties respectively met all their own costs.
By late 2021, RA was struggling to meet the costs of operating five teams and again, was looking jealously at NZR's $100m-a-year broadcast deal and made a retrospective case that they should be entitled to a share of that cash given their contribution to Super Rugby.
NZR, determined to ensure Super Rugby Pacific went ahead in 2022, agreed to pay RA $5m and will do so again next year.
But having given RA the veritable glass of milk, they now want the cookie to go with it.
Given their debt pile and their lack of playing resources, it is a stretch of anyone's imagination to believe RA could successfully finance their own professional competition and McLennan's suggestion that they could lure the Fijian Drua and possibly also Moana Pasifika to an Australian competition fails to present the financial reality of the current situation.
This narrative that has been pushed by RA that there is a broadcast income inequity needs to be more fully considered.
NZR's broadcast income is no longer $100m per annum. Given the changed nature of Super Rugby, the national body is understood to have agreed a $16m repairment with Sky – which will see a $4m reduction in payments for the next four years.
There is the $5m being paid to RA, while somewhere between $3m and $4m is being paid directly to Moana Pasifika and Fiji Drua.
NZR is also paying seven-twelfths of Super Rugby's costs and then there is the more ambiguous business of working out what value should be attributed to Super Rugby.
NZR has sold all of content rights to Sky which includes provincial rugby, women's rugby and the in-bound All Blacks tours – none of which have historically been shared with Sanzar.
RA, which does not have a domestic provincial competition, are making a disingenuous comparison by highlighting the totality of the two respective deals.
And when McLennan said of NZR last month that: "Their aggressive reaction towards Australia perhaps shows why they are not good partners," he was effectively confirming that he would see New Zealand as much better partners if they could see their way to coughing up yet more of their broadcast income.
And so this is where things sit – tense and embittered and if there is to be a resolution, both parties are going to have to agree a mutually acceptable financial agreement that works for both the short and longer term.
