Rugby: NZR in $5m budget cuts over two years

New Zealand Rugby is expected to try to cut spending by more than $5 million over the next two years for its long-term sustainability.

On the face of it, the figure seems alarming but NZR chief executive Steve Tew says for an organisation that typically turns over $150 million to $170 million annually, it is merely being prudent.

In fact, Tew says the situation was worse a few years ago but after strategic cutbacks and savings, it is now at a manageable level.

NZR finds itself here for a few reasons. The first is much of the soon-to-be-revealed profit — thought to be anywhere between $20 million and $40 million — from last year's British and Irish Lions series will be banked.

This once-in-12-year event provides a major boost to NZR's coffers but must be carefully spent over time. As it stands, this spike also acts as a form of compensation for revenue agreements around the June and November test match windows, where home nations retain gate takings and those in the north with larger stadiums reap the rewards.

The second is more complicated, based around international sponsorship agreements with the likes of adidas and AIG, and foreign exchange cover for which NZR can't plan on conversion rates staying as they were when originally locked in.

The other factor is the player payment pool, which enjoys a healthy flow of 36 per cent of NZR's revenue each year — another reason the Lions profit must be eked out.

The Herald on Sunday has learned this means saving upwards of $5 million over the next two years.

"Over a period of time, we know we are going to spend more than we are earning, so we've been working hard for the last three or four years to increase revenue," Tew said.

"It's just a business doing what it needs to do to ensure it is as cost-efficient as it can be and is maximising revenue opportunities.

"We work on five-year rolling financial projections and we had a deficit that wasn't sustainable. We've come some way to bringing that down to a manageable number."

Deficits are not uncommon for sports organisations. The NRL has lost $15.1 million over the past three years, last season dropping almost $4 million.

While NZR recently added commercial partnerships with Apple and Amazon to their already full stable, clearly the global climate it operates in remains challenging.

In the fight to retain leading players, salaries also continue to rise. Then there are the semi-professional and amateur levels of the game which need constant funding.

"It's not a driver of this exercise but it's definitely part of our reality. The French market has heated up and is more aggressive than they've been for a very long time. Bigger numbers; longer deals, younger players. That's just our reality."

Ultimately, NZR will budget to lose money for the next few years to ensure it doesn't eat away at reserves.

But it has also necessitated a hard look at all areas where money can potentially be saved.

"We're looking at everything; how we run the organisation, how we travel, competitions we run, how teams are outfitted," Tew said.