Moana Pasifika have presented a new business case to New Zealand Rugby after an initial feasibility report revealed a funding hole in excess of $20 million, forcing the team to slash operating costs for their proposed 2022 entry into Super Rugby Aotearoa.
In the race against time and money to get a long-awaited Pasifika team off the ground, Moana Pasifika co-chairman Pelenato Sakalia remains hopeful the proposal will come together but a potential share of broadcast revenue remains a sticking point that could make or break the team's future.
The Herald has obtained the feasibility report, summited by Deloitte partner Doug Wilson in September, that reveals a $25.94 million funding shortfall for Moana Pasifika's proposed 2021 Super Rugby entry, and a $20.39m shortfall for the team's likely 2022 launch.
The report states player payments would be $10.05m for 2021 – double the respective five New Zealand Super Rugby teams – and include an additional $1.2m of one-off transfer fees for a dream roster that targeted luring likes of former All Blacks loose forward Steven Luatua back from Bristol.
Crucially, the report also reveals an expectation for $6.5m in competition contributions/broadcast revenue.
In late September New Zealand Rugby made the controversial decision not to include a Pacific team in Super Rugby Aotearoa for 2021, citing financial and time pressure concerns, with the Deloitte report understood to be a factor in that verdict.
Earlier this month, following NZR's final board meeting of the year, NZR chief executive Mark Robinson indicated there were no guarantees Moana Pasifika or Fiji, the preferred partners for a 12-team competition that includes the five Australian teams for 2022, would gain signoff.
"We're very committed to doing our absolute best to see if we can make those teams a reality but there's a huge amount of work to be done and we're all very aware of the various challenges that sit in this area to try and make that happen," Robinson said.
In the past three months, since the initial Deloitte report, Moana Pasifika have worked with New Zealand Rugby executive Chris Lendrum and consultant Jeremy Curragh, holding weekly meetings to overhaul their business plan.
NZR executives spoken to by the Herald are now optimistic Moana Pasifika's bid will get across the line, describing the team as the missing link in the Pacific Island's high performance chain, yet say the financial equation is walking a tightrope.
Moana Pasifika co-chairman Sakalia told the Herald the team's new business case, presented to NZ Rugby, had amended the significant funding holes from the Deloitte report.
Sakalia said $7 million was stripped from operating costs and forecasts over a five-year period now projected a surplus over $2m.
"We were looking at a $20 million shortfall over a four-to-five year period and we are now in the fiscal positive in 2022," Sakalia said.
"We're actually in a position where we're not dissimilar to the other Super Rugby franchises where our numbers, pre-playoff in our first year being 2022, we're coming out on a positive."
Deloitte's report states $16.29m in funding was required for a breakeven scenario in 2022 but Sakalia said by aligning with the Counties Manukau Rugby Union and shrinking operations, Moana Pasifika drastically reduced costs by leveraging areas such as the executive team, head office, doctors, physiotherapists, and gym facilities only used during the provincial season.
"When you're a start-up you always look at ways to be innovative to reduce your cost structure until you can be fully self-sufficient," Sakalia said.
"By taking a slightly different perspective we've been able to significantly reduce our costs and still be a Super Rugby compliant operation."
Rather than seek investors, Moana Pasifika are now working closely with the Samoan and Tongan governments to ensure both are active participants in the potential franchise.
World Rugby, the New Zealand and Australian governments, through avenues such as the Pacific Reset Fund, are other funding avenues that may be explored.
"It's a totally different equation now," Sakalia said. "We're not needing investors per-se but we are in discussions with key parties about underwriting until we've got our revenue stream up and running. We may still look at doing some capital raising but it's not mandatory anymore."
While Moana Pasifika appears to have addressed major funding issues, significant barriers to their entry remain. Sakalia says on paper the team is financially viable but "there's still some big, big things up in the air."
The Herald understands these include the Blues holding concerns about a second franchise being based in Auckland, with Moana Pasifika planning to train at Bruce Pulman Park in Takanini and play four home games at Mt Smart Stadium, one in Samoa and one in either Sydney or Brisbane.
Playing eligibility – what percentage of the team will be required to swear allegiance to the Pacific nations – is a point of tension that is fundamental to the team's purpose.
The most pressing issue, however, is how broadcast revenue will be split between existing and potential new entry teams.
NZR and Sky have an existing five-year broadcast deal worth around $100m annually but this was agreed for a 14-team Super Rugby and must, therefore, be renegotiated before any licence to run teams in a new competition can be issued.
Sakalia believes NZR are facing a significant reduction in broadcast revenue from Sky without South Africa and Argentina's involvement. He says this scenario strengthens Moana Pasifika's case for a significant broadcast share, should the same $100m per-year deal be retained during negotiations.
"When the pressure gets put on NZR to determine what is their contribution going to be to Moana Pasifika it comes across as they are making a gift or investing but I'm interested in all the commercial elements that need to be worked out and then how do you carve it up."
Moana Pasifika has identified a shortlist of coaches and players but cannot engage either until their potential broadcast share is finalised, the licence issued and their business plan signed off.
Until then, it's a race against time with the playing squad needing to be contracted by the end of March and vital broadcast negotiations ultimately beyond their control.
"Are we going to be in a position to have the licence finalised by then," says Sakalia, "the competition company confirmed and everything squared away legally with Sanzaar?
"Is the Sky deal really going to negotiated and finalised and certainty prevail by the end of March?
"It's difficult for me to see how the competition funding can be resolved in the time period we need to finalise and contract our players."
With those defining moving parts yet to fall into place, Moana Pasifika's future is poised on a knife-edge.
Forty-three South Island co-ed principals have asked the national body to intervene.