In the race to bag what could be a billion-dollar broadcast contract, New Zealand Rugby (NZR) is in danger of backing the wrong horse.
The national body is currently sitting on a broadcast deal worth around $100 million a year until the end of 2025.
But it’s already welladvanced in its strategy to determine how it can strike an improved deal in 2026.
Financial forecasting in 2021 showed it was targeting a $70m jump in total revenue by 2026 - much of that attributable to an improved broadcast deal that could be worth close to $1 billion if it’s a five-year agreement.
It now appears committed to backing itself, through the creation of a dedicated content hub that it owns and operates, to radically change its broadcast income profile.
It has been an open secret that NZR has been gathering content ahead of launching its hub, and now it has lodged the domain name NZR+.
NZR+ will initially offer behind-the-scenes access to the various national teams through short video clips and mini-documentary style projects.
It will be free to access, and the short-term aim will be to capture registrations as the national body has been told by its equity partner Silver Lake that the All Blacks should have a significantly larger marketing database than they currently do.
Post-2025, it will evolve into a more sophisticated offering with live games and exclusive long-form content available behind a paywall, and essentially NZR hopes it will become a sales and marketing portal for All Blacks fans where they can watch games and buy merchandise.
While NZR+ will begin life as a free service, it will become a means by which the national body monetises domestic and international fans and it is forecasting that it will make $20.4m from this portal over the next five years.
A dedicated channel that engages and grows the fan base and brings in money is clearly a good idea, until the potential costs are factored in.
There will ultimately be tangible value triggered by gathering customer data as this will help present a more detailed offering to future broadcast partners, sponsors and even advertisers on NZR+.
But the real money maker will be selling access to live content and it’s here where the risk-reward scenario becomes hard to gauge.
Streaming platforms require not only significant upfront capital investment, but they come with hefty ongoing operational and production costs.
Then there is the question of what live content becomes worth to a broadcaster such as Sky when it may no longer be the exclusive owner.
The indication is that the new hub will co-exist alongside a major broadcast partner — meaning that domestic consumers will be able to choose between Sky and NZR+.
Sky chief executive Sophie Moloney told the Herald in late March she is comfortable with the concept of NZR+, but the value of future broadcast deals would have to reflect the loss of exclusivity.
How much less Sky would offer if it was having to compete with NZR+ is hard to know, but as a rough guide, it wanted $30m from TVNZ when the two parties looked at a sub-licensing proposal in 2021.
NZR may be gambling that it can afford to take less guaranteed income from Sky post-2025, absorb that drop, cover all the associated costs of NZR+ and generate enough income from it to be materially better off by making All Blacks tests available through two channels.
Certainly, the model is alluring given the power of the All Blacks to attract an audience.
But brand profile doesn’t automatically convert to dollars and the risk for NZR is that it may be overestimating the potential revenue of NZR+ and underestimating the costs.
Silver Lake is right that there are millions of people offshore with knowledge of the All Blacks, but to term them all as fans implies that they can all be monetised.
Which is unlikely because the research on which Silver Lake is building its thesis is quantitative rather than qualitative, and a teenager in Texas who has watched the haka on YouTube is never going to part with cash to enhance their relationship with the team.
Revenue, therefore, might be harder to generate than is currently being anticipated and if NZR wants to distribute its own content, it will need to invest in a sales arm and significantly inflate its marketing budget as it currently seems to rely mostly on Sky to promote the game.
The hub will need other content, the generation of which will be expensive and it’s going to be difficult for NZR to persuade its prospective audience that what it produces is authentic.
NZR+ will be a commercial channel producing content that fits a carefully crafted brand narrative, yet it will try to masquerade as a free-spirited hub with no restrictions on its editorial licence.
Fans in search of engaging, credible storylines can’t be fooled and so an expensive-to-run channel, only offering rugby and battling perceptions of being an in-house marketing arm, may not be the horse for NZR to back if it wants to boost its broadcast income to a billion dollars.