Rugby: Record loss no cause for alarm

Losing money was preferable to losing the likes of Richie McCaw and Dan Carter offshore. Photo / Getty Images

The expected $14 million loss the New Zealand Rugby Union will post next month shouldn't induce panic nor lead anyone to believe the national game is broke.

A number of factors have driven what will be a record annual deficit, notably the most successful player retention of the professional age.

The worst economic recession for 50 years hardly helped; nor has a squabble with the bean-counters that forced the NZRU to recalculate the value of their foreign currency, giving them a bigger paper loss.

The true loss, once the accounting shenanigans are stripped out, is expected to be somewhere around $8m-$10m - still a significant amount but one the NZRU's coffers can handle. The national body has deliberately built a war chest giving it $70m of reserves for the purpose of riding out tough times.

While a loss of $8m-$10m is significant, it is infinitely preferable to having lost Dan Carter, Richie McCaw, Mils Muliaina, Tony Woodcock, Andrew Hore, Brad Thorn, Ali Williams, Keven Mealamu and Ma'a Nonu.

This is the crucial point for everyone to get their heads around - world class talent comes at a price and when the NZRU set out in 2008 to re-sign, through to the World Cup, their core group of senior players, they knew they had to offer a financial reward for loyalty.

"I don't think there is any doubt that the players feel that in the context of the New Zealand market, they are paid fair and reasonable value," says Rob Nichol, head of the New Zealand Rugby Players Association.

Figures to make a comparison are not available but the numbers from last year alone provide some indication of what it costs to contract elite talent.

The NZRU pays the salaries of Super 14 players and last year the total wage bill of the Hurricanes and Crusaders was slightly more than $5m each. The Chiefs and Blues total salary pots were both about $4.3m while the Highlanders squad was paid $3.8m.

That's a total of $22.4m, which breaks down to an average of $160,000 per player. Including the players, the NZRU has a total staff of around 240, putting them in what is surely a unique position where more than half their employees are paid in excess of $100,000.

Included in that $22.4m is about $4.2m in All Black and Junior All Black match fees. Each All Black was paid $7500 for every week the squad assembled and the Juniors $2500.

With significant numbers of inexperienced and new players contracted last year - and likely to be earning the minimum $75,000 as per the terms of the collective agreement - an average wage of $160,000 alludes to there being significant numbers of higher profile players earning well in excess of the average.

Rather than being lampooned for racking up such a heavy loss, the NZRU deserves ample credit for doing what it took to keep the best players here.

The All Blacks remain the critical source of revenue for the national game and their continued success attracts the broadcast and sponsorship dollars that filter down to the grassroots.

While the players who re-signed have seen improved pay deals, all of them turned down much bigger offers to head offshore.

"Our surveys show us that 99 per cent of the players love playing here," says Nichol. "They value the environment and the coaching."

The retention of so many key players had a direct impact on adidas' decision to extend their sponsorship to 2019. It also had a peripheral impact on the value of the soon-to-be-signed broadcast deal that will see New Zealand's income increase by about 20 per cent from next year.

The bulk of the NZRU's future income is locked in, giving the administration a certainty the Australians would kill for. New Zealand is in tip-top shape compared with their brothers across the Tasman. The NZRU will make a loss again in 2011, anticipated because of the World Cup, but the financial future after that looks bright.

The Australian Rugby Union ring-fenced $20m of its 2003 World Cup profits for the community game but has not seen the lift in profile or reach it was hoping for.

Of the remainder of its World Cup loot, an estimated $7m was blown on their failed version of the National Provincial Championship, while another $4m had to be found to float the Western Force in 2006. They barely have any reserves left and next season will welcome their fifth Super Rugby franchise in Melbourne.