Tennis ace Lulu Sun; Black Ferns legend Portia Woodman; Oasis guitarist Noel Gallagher; All Blacks coach Scott Robertson. Photos / Getty Images, Photosport
The American private equity company is failing to deliver for our national game and drastic times require drastic actions; NZR’s growing financial hole; Manchester City super-fan Noel Gallaher lashes the Yanks.
OPINION
Rugby is fond of the old expression “taking someone out”. It’s usually an on-field term, whether by fair means or foul, but let’s take it off-field.
It’s time for New Zealand Rugby (NZR) to take out Silver Lake.
Now more than two years in, the much-ballyhooed $262 million deal with the American private equity (PE) company is being revealed as a dud.
Silver Lake promised a fruitful association with our national game. Instead, the grapevine is bare.
The financial results released last week by NZR are deeply troubling. The national union has dug a huge hole for itself in agreeing to dance with the PE types – and it’s only getting deeper.
It’s now reached a point where the shovel needs to be put to the side and the search for a ladder begun.
Back-to-back record losses over the past two financial years weren’t in NZR’s script during the selling of Silver Lake’s credentials to the provincial unions and wider rugby family back in 2020 and 2021.
Those unions are on track to pay a dear price for their greed and gullibility. Unless the rot stops, reduced funding for all of them is fast looming.
Simple maths demonstrates that: NZR revenues needed to increase 15.5% from $270m two years ago pre-agreement to $312m by now just to offset the dilution factor within the Silver Lake deal.
Instead, there has been zero increase.
NZR and its provincial unions are effectively already $42m behind in just two years if they are to retain the current funding levels.
The consequences of the dilution are far-reaching.
It’s not just the provincial unions facing potential funding cuts. It will also affect All Blacks’ wages if the player payment pool does not grow, as well as the development of the women’s game.
And the hole will only get deeper if revenues don’t grow.
Rather than an interest charge note on the loan to date, NZR’s payout to Silver Lake from next year moves to the full 7.5% dividend. That’s $21m on $270m of revenue.
When you add in the revenues needed to offset that dilution, next year’s revenue target now becomes $335m. That’s a jump of $67m from last year’s revenue alone, just to keep provincial union and player funding at the current level.
Where is that going to come from? Especially with a heavily reduced Sky broadcast deal looming.
There will be those who claim Sports Insider’s judgment is harsh because the new Silver Lake-conceived commercial arm, New Zealand Rugby Commercial (NZRC), was held up in its establishment and also in the recruitment of its boss, Craig Fenton.
I accept circumstances change and plans need to be altered. It’s the continual misleading of the rugby public that grates.
Fenton’s goal is to extract more revenue from global rugby fans. He’s had his feet under the desk at Parnell’s NZRC offices long enough now for us to understand his strategy.
It’s the same as Silver Lake’s UFC sports playbook – create your own digital platform and make your own content, monetise it and then distribute it directly to the customer (the lauded “direct to consumer” or DTC model).
It is a strategy that disregards that the go-it-alone DTC model, now more than two decades old and still being adopted by over-ambitious sports brands, teams and leagues, is struggling to reap the predicted rewards.
Only the really super brands like the UFC, NFL and NBA are making it work – and even then they need the help of YouTube, Instagram, TikTok and Facebook to monetise it.
If Big Tech’s platforms deliver you more eyeballs on your content than your own platform, why build your own?
Yet NZR’s financial records show the organisation spent $11m establishing its NZR+ platform, which includes an app.
The key point is that NZR+ is a zero-subscription model. In other words, you don’t pay for the content. That’s not a long-term sustainable model for anyone (as the world’s mainstream media has learned).
NZRC seems to have already learned this harsh lesson. After less than stellar numbers for its app after launching it, it pivoted to pushing its content, such as the All Blacks-themed In Their Own Words episodes, to whoever will take them (YouTube, Sky, RugbyPass).
The tagline now is “it’s all about meeting the customer where they are”. Hmmm.
So let’s get back to this increasingly deeper financial hole.
Complicating this swelling financial quandary is NZR’s failure to deliver on new projected revenues of $16m from what was grandly titled as “New Business Initiatives” in a 2021 Price Waterhouse Cooper report on the Silver Lake offer.
These predictions, which were NZR’s, were used to help sell the Silver Lake deal to the provinces and rugby public around the national union’s financial future. They are now looking like a work of fiction.
While predicted revenues fail to materialise, the cost of doing business in the content world is spiralling and contributing further to NZR’s challenges.
NZR’s Silver Lake deal is in perpetuity. That doesn’t change even if they exercise their right after five years to sell their shareholding on.
If things don’t change in the revenue stakes and we end up $67m behind required targets by the end of the next financial year, the situation is only going to get worse.
The Silicon Valley tech bros are being exposed in much of their sports thinking.
It’s already been disastrous in Australia’s A-League, where a Silver Lake-endorsed digital channel strategy burnt through the bulk of an A$140m ($154m) investment, leaving club owners with nothing to show but still facing lusty dividends payable to the Americans for a one-third ownership of the league.
And if it’s unfair to judge after two years of the deal, is a five-year snapshot a more accurate crystal ball?
That now exists around CVC’s disastrous impact on the English Premiership club rugby competition. CVC has now basically taken over the financially troubled Premiership.
Sticking with Silver Lake risks similar outcomes. If NZR runs out of money at the end of 2031 (which could happen), private equity can gobble the game up for next to nothing and we will have forever forfeited our control and the destiny of a code many of us love.
Silver Lake is not justifying the tens of millions our national game is now paying Silver Lake for what is supposed to have also included their nous and not just their money.
Drastic times require drastic measures.
NZR has $270m in reserves. Silver Lake invested $260m. Buy them out and take back control of your own destiny.
If you’re as confident about the All Blacks brand as you say you are, back yourself to build your reserves.
It’s time to end this madness.
Sorry, one last thing... did I note that management and director fees have doubled to $7.5m while all of this has unfolded?
Now for something a little more inspiring...
One of England’s key men will be missing from the coaching box when Scott Robertson’s All Blacks run out in Dunedin on Saturday night.
Former England rugby league captain Kevin Sinfield has been granted compassionate leave by head coach Steve Borthwick to fly home to attend the funeral of his great friend and former teammate Rob Burrows this weekend.
The inspirational Burrows lost a five-year fight with motor neurone disease last month.
Sinfield, England’s skills and kicking coach, raised millions of pounds for charity in support of his former Leeds Rhinos league clubmate, running a host of ultra-marathons to raise awareness of the disease.
The bond between Sinfield and Burrows has been one of sport’s tragic but inspiring stories of recent times.
“I’ll be home for two days and then I’ll be back out here getting ready for the second test,” Sinfield told the English press.
“It has been tough. I got to see Rob before he passed. I knew he was poorly but I walked in to see him and I got a big smile off him, which was brilliant. He passed on the Sunday afternoon and on Monday we were in camp before coming out to Japan.”
Some of the millions Sinfield has raised have been directed towards the establishment of the Rob Burrow MND clinic in Leeds.
Can’t say Sports Insider is an Oasis fan, but I love how Noel Gallagher didn’t mince his words when it comes to fears over the “Americanisation” of the English Premier League (EPL).
The volatile Manchester City super-fan has become increasingly concerned over the number of American owners of EPL clubs and how vocal they are becoming.
Nine of the EPL’s 20 clubs are now American-owned and some, like Chelsea’s Todd Boehly, are voluble around wanting to make changes to the league, including All-Star games and ending promotion and relegation.
All of this, of course, is about making more money.
Cue a tirade from Gallagher – which was bang on the mark.
“Once there are 14 American owners in the Premier League, it’s over. They will vote for no relegation. There will be rule changes and all sorts of mad shit,” an angry Gallagher said after media stories that several future EPL games could be played in the United States.
“Honestly, the Americanisation of football is not good for the game.
“I couldn’t care less if a Man City ‘customer’ in New Jersey wants to see a game. Get off your f***ing arse and come to Manchester then. Why are we talking about schlepping out to Abu Dhabi for a League Cup final, FA Cup finals in Bangkok?”
(For the record, Gallagher’s beloved Manchester City has been fully owned since 2008 by Sheikh Mansour bin Zayed Al Nahyan, a member of the ruling family of Abu Dhabi.)
“It [football] will change drastically in the next decade and 20 years from now it will be unrecognisable... it will be a slow erosion. And we are going to be powerless to stop them...”
Preach, brother.
Portia Woodman-Wickliffe: Our greatest women’s rugby player will hang up her boots after next month’s Olympics. What could add icing to an already stellar career? A season with the wāhine at the Warriors in their return to the NRLW next year?
Michael Hooper: The former Wallabies captain called time on his career this week after being passed over for Australia’s men’s Olympic Sevens team. Tough, durable and a world-class flanker, Hooper would not have been out of place in a black jersey.
Lulu Sun: Became the first Kiwi since Marina Erakovic in 2011 to win a main draw singles match at Wimbledon. Add in that her vanquished opponent was the world No 8 and it seems life is indeed shining for Sun.
Antoine Dupont: The world’s best rugby player continues a remarkable season of seamlessly slipping between sevens and XVs by playing a star role in Toulouse’s 59-3 flogging of Bordeaux in the French Top 14 final. As the Guardian noted, if Dupont strikes gold in sevens at the Paris Olympics, it will cap the most incredible season by a single player in the game’s history.
Veteran Sam Cane is given his farewell test appearance.