Thursday 1st March 2018
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New Zealand Rugby returned to profit in 2017 following a successful (financially at least) 10-match tour by the British and Irish Lions, which added $40 million to the bottom line.
The national rugby administration body reported a profit of $33 million in calendar 2017, turning from a loss of $7 million in 2016. Income rose 59 percent to $257 million.
Chief executive Steve Tew said profit beat NZR's forecast by almost 18 percent and income was 5 percent above its expectation.
"2017 had an unusual number of top quality international rugby matches played on New Zealand soil and as a result, NZR benefitted from a significant spike in income, mainly from increased gate takings and broadcasting revenue," Tew said. "This spike was in our financial projections and provided us with the confidence to invest heavily back into the game."
Lions tours take place only every 12 years and the latest was almost twice as profitable as the 2005 tour, which boosted NZR net profit by $24 million.
Chief financial officer Nicki Nicol said “match day” income (money associated with people attending games) was up more than 250 percent last year to $65 million. Sponsorships and licensing income grew by 14 percent to $62 million, with some attributable to the Lions tour, but other growth coming from existing and new sponsors.
NZR added several international sponsors to its pool in 2017, including watchmaker Tudor (part of the Rolex group), US venture capital firm Vista Equity Partners, and Vodafone.
But the biggest tranche of income last year (as every year) came from broadcast rights, which brought in $105 million – or 41 percent of the total.
NZ Rugby’s existing broadcast arrangements with Sky Network Television, don’t run out until after 2020, but Steve Tew said the organisation is already beginning to think about how the media and internet environment would look further out - and how NZR can maximise its profits from broadcast rights.
“Preparations are underway. We are continuing to work really closely with our long-term partners, including Sky. But we are open to all offers. At the end of the day, we need competition [to get the best deal]. During the last negotiations, there was intense competition and it would be great in the future if there were two or three players having a crack.
“There are lots of opportunities, but sports content sales is a complicated business,” he said.
Nicol said at the moment NZ Rugby has no plans to go it alone, in terms of broadcasting its own games, as some overseas sports codes have done. Thorny issues remain, such as who would actually film and produce the matches, if NZR didn’t sell rights to an existing production company.
Still, over the next couple of weeks, the company will host visitors from North America’s National Basketball Association, or NBA, regarded as one of the world’s most innovative organisations in terms of selling sports rights. NBA even has its own TV channel.
Meanwhile, some commentators have suggested that NZR’s tie-up with internet giant Amazon to make a documentary about the All Blacks, likely to be shown on Amazon Prime Video in the second half of this year, is a precursor to other deals with Amazon.
They suggest Amazon is in the market to bid for rugby broadcasting rights for 2021 and beyond.
While that's an opportunity for NZ Rugby, it poses a major threat to Sky TV, which yesterday halved its interim dividend, preserving cash while slashing the cost of its basic subscriber package to arrest a slide in subscriber numbers as it prepares for what may be an expensive battle over rugby rights.
Nicol said in the future, outside-the-square business development opportunities could be a good additional source of revenue for the sports body. Just before Christmas, NZR announced a partnership with Ngai Tahu Tourism to launch an All Blacks Experience attraction at Sky City, opening in 2019. It also did a deal with Apple to make All Black playlists - the sort of music the ABs listen to in the gym, in the pre-game Pump Up or the post-match wind-down, for example - available on Apple Music.
As an incorporated society, NZR can provide funding assistance to the provincial unions and the organisation has been able to lift the money in the Player Payment Pool, including holding $20 million in trust to be spent in future years, Nicol said.
“Provincial Union funding has increased by approximately $11 million a year," she said. "This is over a 50 percent increase in funding [for the 2016-2020 period] when compared to the previous five-year period, and an additional $55 million going directly to Provincial Unions. This is an important aspect of our strategy as our PU partners invest these funds to grow and develop community rugby – to ensure the base of our game is also strong and healthy.”
Nicol said NZR tends to look at its income profile in five-year windows because of the nature of the broadcasting cycle. Broadcasting brings in more than 50 percent of the organisation’s income in a non-Lions year.
Using that measure, average annual income had increased from $117 million in 2011-2015 to a projected $187 million between 2016 and 2020.
Even excluding the Lions tour, average annual income over the latest five-year period is still expected to be $169 million - 44 percent up on the previous period, Nicol said. NZR is in the enviable position of having 80 percent of its income through to 2020 secured contractually – mostly through broadcasting rights and sponsorship deals – with another 10 percent relatively secure from ticket sales, she said.
“This is a very strong position, which gives us certainty over the next few years – enabling us to really live the commitments and investments we want to make as part of our 2020 strategic plan.”
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