Phil Taylor

Phil Taylor is a Weekend Herald and New Zealand Herald senior staff writer.

Rugby: Back in the black

NZ rugby's health depends heavily on the success of the All Blacks. Does that make it a one-trick pony? Phil Taylor spoke to rugby boss Steve Tew about the state of the game

The individual earning power of the All Blacks is tied to the small economy of NZ. Photo / NZPA
The individual earning power of the All Blacks is tied to the small economy of NZ. Photo / NZPA

The mood of the rugby boardroom this week was buoyant. The numbers issues around New Zealand Rugby's AGM were all in the black. As for the future, cautious optimism might apply.

Revenue, profit, pay, distributions to provincial unions are all up, and so, as the song goes, don't worry, be happy. A profit of $2.9 million was made last year, bringing to $6.1 million the profit made since the All Blacks won the Rugby World Cup at Eden Park.

A loss is projected for this year. Making ends meet is a constant problem, world domination on the field — not so much. The All Blacks are legendary in a way that may be unique. The team has won 76 per cent of its matches over 125 years, 83 per cent in the professional era, and has lost only one game since Stephen Donald kicked that penalty in October 2011. The team is the flavour of the past and of the present and yet the business of New Zealand rugby seems to be only squeaking by.

Rugby Union CEO Steve Tew questions the term. "Squeaking by? Yes, we have a commercial edge to us but we are actually an incorporated society that exists for the benefit of 26 provincial unions and the members which are rugby clubs and the individual members of those clubs.

Success should be measured not just in operating income over expenses but what we do with the money earned."

Total turnover of New Zealand rugby is about $200 million, costs amount to broadly the same. On the achievements side of the ledger: "a pleasingly high proportion of our talent" has been retained in the face of fatter chequebooks overseas, a healthy cash reserve (currently $63.7 million) despite the world financial crisis, and a full quota of provinces in the black when that sector of the sport was in crisis a few years ago. "We have been able to distribute a serious amount of money to our provincial unions who are the lifeblood. We have increased the grants to the unions by an extra $7.7 million over the next three years. That's because we have done better financially because the team has been so successful."

Tew's reference to "the team" rather than NZ rugby is instructive. Much of the revenue comes via the national team, and it is therefore also the bulk of downside risk. The income is a 40:30:30 split. The fattest chunk is from broadcasting deals, of which Sky TV is most important. The Herald's interview was delayed because Sky's John Fellet had rung and, says Tew, "when John Fellet calls, I answer". Sponsorship (the most valuable are AIG and adidas, the longest is the 33-year relationship with Lion's Steinlager) provides 30 per cent, with the rest coming from the likes of test match tickets and licences to run Super Rugby teams.

Super Rugby is struggling to get fans to the stadium. Tew said this issue was probably the most talked about by officials this week. That the union does well out of television rights for this competition doesn't take away from the seriousness of poor match crowds. Gates are the easiest way to increase money for rugby as a whole.

"If you are running a Super Rugby team, as I did for a while, another 5000 people at every game is a significant income boost. The trends are somewhat worrying."

Super Rugby may suffer from over-supply and lack of stadium atmosphere. "Super Rugby's problem in a nutshell is there is too much of it," says Auckland University of Technology sports marketing lecturer Michael Naylor. All Blacks and Super Rugby players are "everywhere" for nine months of the year. "It does lose that specialness," says Naylor, a Canadian who played the game for 20 years and is a former Florida State University coach.

Tew: "Are we over exposed? Possibly. Is it easy to fix? No." The Wellington Phoenix soccer team had also struggled during an up and down season, he notes. "The entertainment market is more competitive than it was, but it is also getting harder and harder to get people to turn up to a regular offering of what is the same thing, particularly when you can sit at home, close to the fridge, in front of a screen and be warm and dry."

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Compromise is complicated too, with three nations involved. Australia was "desperate" for more Super matches and Tew suspects a long season helps pay-TV companies justify charges.

Naylor believes crowds can be won back with creative marketing at each stadium. "If you get clever with the game-day activities you can really build that tribal fan community. There is evidence all over the world that that works."

For local evidence, look to the Breakers, who play in the Australian national basketball league. The farewell match for long-serving star C.J. Bruton was a good example of how to create game-day atmosphere.

"It is not just about the basketball," says Naylor, who adds that his wife will go to the Breakers because the entertainment goes beyond the game. "I love watching rugby but I have a hard time dragging her out, because it really is just the rugby."

Winning wasn't the be-all and end-all, either. "There are lots of [international] examples of franchises that aren't successful year-on-year in on-the-field performance that still manage to get people through the gates."

The top-down structure of rugby was questioned during research for this article. Provincial rugby is historically and culturally important but that fans were staying away was a clear example that things are not working, the Herald was told.

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A system built around funnelling athletes up to wearing the black jersey had been extremely successful in producing the All Blacks' unrivalled record, but a source questioned whether it was a narrow platform: "I wonder whether AIG money is propping up the system which is pretty fundamentally broken."

Major sponsor loss if the All Blacks don't win the World Cup next year, along with the lure of lucrative overseas offers, particularly to players in the shadow of the stars, were suggested as significant risks.

Tew says its a problem we have to live with, given New Zealand's means. "It's a free market, we will lose some."

Part of growing New Zealand rugby's income is working to grow the whole rugby pie.

"If rugby is going to prosper long-term globally, then it needs to grow in places where it is not currently strong," says Tew. "If we stay as a sport played by the home unions, France, South Africa and Australia, then that's all we will ever be and eventually we will stagnate and disappear."

New Zealand was committed to helping growth in Japan, where rugby has a strong foothold.

"You would never dismiss China but it is not beeping-hot on our list of priorities — and the same applies to the US."

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It was "very likely" the All Blacks would play the Eagles in the United States this year (Chicago is rumoured) and he suspects the team will one day go to China, where the women's Sevens team has played in each of the past couple of years.

Sevens becoming an Olympic sport is seen as a boost to growth prospects because it is easy to understand, fast-paced and now carries the Olympic seal. The title "Olympic champion" opens doors.

Research puts the recognition of the All Black brand in the same category as any of the world's iconic teams. "People think because the All Black brand is so successful and so popular that it is an easy sell in an international market. The difference is we are a country [team], we are not Manchester United or Ferrari. We don't just represent a club that is transferable across borders. You can be a Ferrari fan and not be Italian. It is a lot harder to be an All Black fan and not a New Zealander. That's the trick."

The goal is to make the All Blacks every other nation's second-favourite team. "We are talking to one or two potential commercial partners about using the All Black brand in Argentina and South America more generally. Brazil is an enormous growth opportunity for everybody at some point. It is fair to say rugby is a bit behind the eight-ball, but having the Sevens in the Olympics helps."

And should the World Cup not be won next year, we soldier on.

"It is the top strategic goal but no country has yet defended it and no All Black side has won it playing away from home," says Tew. "The enormity of that task is not lost on anyone but we have got a bunch of very determined people in the right seats on the bus, on and off the field. We'll give it our best shot. If we don't win, I'd like to think that the maturity we showed after the 2007 disappointment — which, in my view, set us up for 2011 — would be there again and we would recover and be better for it."


Steve Tew, chief executive, NZ Rugby Union. Photo / Richard Robinson
Steve Tew, chief executive, NZ Rugby Union. Photo / Richard Robinson

Honour of wearing black can outweigh cash benefits

At his earnings peak, soccer star Ryan Nelsen took home nearly as much as the All Blacks team put together.

In 2011, the Blackburn Rovers star earned 2.6 million, worth $5.6 million at the time.

In rugby's top tier, players such as Richie McCaw, Dan Carter and Kieran Read could be earning about $1 million. The top tier of All Blacks are paid $650,000. They can also earn the maximum Super Rugby retainer of $185,000 (rising to $190,000 next year). Personal endorsements (McCaw: Versatile Homes; Carter: Jockey and Daikin heatpumps) can push their incomes significantly higher.

Provincial ITM players receive a maximum payment of $55,000.

Players' prospects for future income growth are limited (and guaranteed) by the country's small population and the collective salary agreement. The latter ensures that 36.56 per cent of the union's revenue goes to its players. If the game earns more, the players do too.

"We are working in this together," says NZ Rugby chief executive Steve Tew. "Richie and some of the senior players we have been lucky to have in the past 10 years, they get that, they understand the partnership and that there is a lot more going on than just the bit that they get exposed to.

"For young men in New Zealand they are incredibly well paid, even though it's a short career. In the global context, we are a wee way off the market."

But wearing the black jersey was a significant factor in many deciding not to accept bigger money offers from overseas, not only for the honour but also the springboard it can provide. "Once you have worn that jersey, if you are smart you can set yourself up for life."

NBA star Steven Adams' listed salary for his first season is $2.6 million. The individual earning power of the All Blacks is tied to the small economy of New Zealand.

The risk factor for rugby salaries is that NZ rugby income depends on the power of the All Blacks and a couple of key sponsor relationships, notably AIG, the world's biggest insurance company, which came on board the year after the World Cup win. With the team having won the Cup and gone undefeated last year, interest in them is very high. But the "world champions" tag is up for grabs again next year.


NZ's rugby goals by 2016

• All Blacks win back-to-back World Cups
• Two golds in Rio Olympics
• Domestic rugby is financially healthy
• Rugby is sport of choice in Auckland
• Rugby is sport of choice for teenagers
• Global Influence (NZ Rugby continues high-profile influence)

- NZ Herald

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