Rugby Australia CEO Phil Waugh: 'You can’t keep living on future revenues.' Photo / Photosport
THREE KEY FACTS:
Gregor Paul is one of New Zealand’s most respected rugby writers and columnists. He has won multiple awards for journalism and written several books about sport.
OPINION
The poor old Wallabies are trying to claw their way up the world rankings from an historic low of ninth, and they are desperately trying to make punitive interest payments on the $80m debt facility they were afforded by an Australasian fund manager.
Their Super Rugby sides are living beyond their means – one went bust this year – and they haven’t had a champion for 12 years. They are operating collectively against the might of the NRL and AFL, both of which are in possession of billion-dollar broadcast deals while Rugby Australia labours away with just $29m-a-year from Channel Nine.
To top it off, the Wallabies suffered a humiliating record defeat to the Pumas in their last test, just a few days after they had it confirmed that New Zealand and South Africa are all but putting a bullet through the Rugby Championship so they can tour each other’s countries every fourth year.
Australia, it seems, may not be dead as a genuine rugby force, but it’s surely only a matter of time given that their Super Rugby joint-venture partner and oldest pal in the world game has sold them out to go play with their other best friend, South Africa.
But as mad as it may sound, the big winners in the next broadcast cycle between 2026-2030 may be Australia.
Things may not be as broken as they seem and while it’s probable, maybe even inevitable, that the All Blacks will retain the Bledisloe this year and probably next, things may be different by the 2027 World Cup, certainly by the next one in 2031.
Australia’s significant advantage over New Zealand is that their financial position is quickly salvageable.
Australia is expecting revenue of around $225m to come from hosting the British and Irish Lions tour and two World Cups in 2027 and 2029.
That will see them pay off their loan (sharks), and once they come out of debt, they can set up a long-term financial model where they stay out of debt because unlike New Zealand, they haven’t sold part of their revenue streams in perpetuity.
Rugby Australia chief executive Phil Waugh, who spoke at length to the NZ Herald when he was in Auckland last week, said: “We have got a debt profile that we are managing and we need to pay that debt back.
“Then we need to go into a new broadcast cycle and we need to have a sustainable game so the money we make there, we can invest into a legacy fund that we can invest back into the community game.
“You can’t keep living on future revenues. You have got to get to a sustainable model.
“The economics of the game are not sustainable as they are. It’s a combination of how do you maximise your commercial revenue and get to a cost base that matches your revenue?
“We have all been living beyond our means and trying to stay with player inflation and obviously the leagues across the world are feeling it.”
Whether private-equity suitors rejected Australia or it was the other way around, the decision to not sell a share of their future commercial revenues may prove to be the smartest ever made.
Those entities – Six Nations, English Premiership and United Rugby Championship – that jumped into bed with private-equity investor CVC are now regretting it.
The forecast revenue growth hasn’t been delivered, the magic ideas that were promised haven’t eventuated, and all that has happened is that the same amount of money now has to be shared with one more stakeholder.
New Zealand Rugby, despite having significant cash reserves and its continued insistence that its decision to sell a 7.5% stake in its commercial revenue to US fund manager Silver Lake will deliver a long-term shift in its financial profile, may in fact be in a more precarious financial position than Australia.
It continues to burn through those cash reserves, all the while knowing that it will only keep 92.5% of all its future earnings from next year.
Trapped in this scenario, held hostage in its decision making, NZR is having to look for the short-term commercial gain rather than pursue strategies designed to set the game up for the long-term.
A case in point is the decision to agree a reciprocal tour schedule with South Africa, which will bring broadcast and sponsorship windfalls, but effectively kill the long-term viability and value of the Rugby Championship.
New Zealand’s problem is it has consigned itself to grabbing all it can now because next year it will need to find around $20m to pay Silver Lake. That’s why it’s easier to believe that Australia will be in significantly better financial shape than New Zealand by the end of the decade.
“We explored it,” Waugh says of doing a private-equity deal. “But given what we had coming down the pipeline, given the equity markets and the multiple at the time on the enterprise value, we decided to go down the debt path.
“I am not going to talk about other unions. Our union is focused around sustainability and on the long term – maximising our enterprising value.
“If we do that the right way then we will have a lot more options in the future.
“Right now, we are very comfortable with the path that we are on. My focus is on setting the game up in perpetuity and the longevity of the game, not on short term commercial sugar hits.”
There is growing proof that there is a direct correlation between financial health and high-performance success – Ireland’s rise to the top of the world game coincided with better financial management by the national union. There’s every chance that if Rugby Australia can fix the balance sheet, it can fix the Wallabies.
New Zealand’s domination of the Bledisloe Cup, partially built on its superior financial might, may not last for too much longer.
There’s a valid question to be asked whether Waugh’s journey to bring financial sustainability to rugby in Australia may have been scuppered by New Zealand and South Africa’s secret plans to do their own thing.
Australia will land massive paydays from the Lions tour and World Cups, but what sort of international schedule will it be selling to broadcasters in the 2026-2030 cycle?
And will Channel Nine, or any other broadcaster, be willing to up the current $29m a year (imperative if it is to start living within its means) given the sporadic nature of the Rugby Championship and the uncertainty about who the Wallabies will be playing every year?
Again, though, Australia may be better placed than it seems. It has been able to extract a commitment from New Zealand that in 2026 and 2030, there will be at least two Bledisloe Cup tests, and maybe a third if they can agree on a way to inject an Anzac test into the calendar.
There’s a provisional plan to play one in Perth in 2026 as there is the promise of significant state funding to do so, but playing a test in April will require all sorts of other considerations – such as the potential impact on Super Rugby and agreements about how many training camps can be held prior to the game.
Waugh has also been assured that the Springboks will take a full-strength team to Australia for one-off tests in 2026 and 2030.
It may prove significantly more appealing for Australia to market the Bledisloe and a one-off Springboks test as separate entities – rather than get the Australian rugby market excited about Rugby Championship fixtures, given it’s a competition the Wallabies have so rarely won.
Waugh says they will likely look to play additional fixtures in 2026 and 2030 against Argentina, Japan and Fiji, and for Australian fans, there may be no discernible difference in the next broadcast cycle between Rugby Championship and non-Rugby Championship years.
By comparison, New Zealand and South Africa are giving their fans a boom-bust cycle – one in which they are making it hard to be excited in those three years between the tours of 2026 and 2030.
And the kicker in this is that the Australians have the chance to take a share of New Zealand and South Africa’s income as part of a wider Sanzaar revenue sharing agreement that is currently being negotiated.
They also have to negotiate a revenue-sharing agreement just with New Zealand for Super Rugby, and as Waugh suggests, Australia may have more leverage than is realised.
“It has to be a partnership and despite what may have gone on before my time I like to think we have got a strong relationship at the moment [with New Zealand].
“We will continue to have robust conversations to ensure the region is strong. We know we are not holding up our end of the bargain on performance but we are doing everything we can to fix that.
“We have got a big country with a big population and a big GDP. We breed good athletes, we just have to make sure they want to play rugby, and we have got the right structures around them and that we are setting the system up for success.
“There is a lot to like about Australia. It becomes very lonely if we are not competitive for rugby in New Zealand.”
Veteran Sam Cane is given his farewell test appearance.