Record income, profits yet New Zealand Rugby remain concerned

All Blacks coach Steve Hansen and NZR CEO Steve Tew. Photo / Getty

New Zealand Rugby hauled in excess of one quarter of a billion dollars last year. It was easily the most income they have banked in a year and it led to them posting a record $33 million profit.

The financial picture for the national game has never looked so rosy - the money has never quite rolled in like this.

Yet optimism is only cautiously making its way through NZR headquarters. There is no sense of the game having hit the jackpot as the expectation is that the game here will encounter some strong headwinds in the years to come.

The Lions tour was the key driver of the increased revenue - generating $40 million of extra income. That was slightly higher than expectation but it's money that only comes every 12 years and therefore NZR has to spread the windfall thinly.

Not only that, but last year it spent some of the predicted Lions income by increasing payments to the provincial unions.

But really, what's keeping everyone from celebrating, is that while the money has never rolled in quite it has, nor has it rolled out quite as quickly either.

NZR is, metaphorically, running to stand still as the costs related to every part of the game are increasing. Due to the revenue sharing agreement with the New Zealand Rugby Players' Association, any jump in NZR income tends to be diverted into what is known as the Player Payment Pool - the fund from which the professional players are paid.

Much of the increased revenue is being used to increase payments to players to ward off the threat of them heading overseas. New Zealand's players are always in demand globally, but those on the frontlines of the talent retention war say the market here is under unprecedented pressure with French, English and Japanese clubs all more aggressive and all offering individuals more money than they ever have.

As consequence, NZR has placed $20 million in trust that will be available to bolster the PPP between now and 2020.

That money is being diverted to ensure that as foreign pressure for players inevitably increases next year and beyond, that NZR has the resources to fight it.

The other major headwind that lurks is the impending renegotiation of the current broadcast deal which expires at the end of 2020. In 2016 NZR enjoyed a 100 per cent increase in broadcast income and banked $104 million from TV and media companies last year.

They also saw a 14 per cent hike in sponsorship and licensing income - mainly from improving terms with AIG, Sanitarium and ASB - and as a result have 80 per cent of their future income until 2020 locked in.

But the great unknown is what happens in 2021 and NZR chief executive Steve Tew says the next broadcast rights agreement effectively holds the key to the financial future.

"Unlike a lot of other organisations we have a significant proportion of our income locked so it can't grow," Tew said.

"We have sold what we have sold. But to be sitting on 90 per cent of our income for the next three years is a pretty safe position to be in. But post 2020 we have a deficit projection that we can't live with so we either change our expenditure model or we find ways to generate more money.

"That why we are have diversify revenue streams but we are also working hard to make sure that the next broadcast negotiations are fruitful.

"It is far too early for us to be predicting numbers but we have some projections in-house that look at low, middle and high outcomes and who knows what the world will look like? The way people are consuming sport is changing rapidly. If we don't make it [TV income] grow then we will have to shrink the business."

Tew says broadcast negotiations will likely begin later this year.