KEY POINTS:
In eight days the New Zealand Rugby Union will know how severe their financial losses for 2007 are.
Earlier this year, when the dollar was trading at 81 cents against the greenback, estimates put the likely loss as high as $15 million. That would have forced the NZRU
to cut their costs well beyond downgrading the biscuits in the boardroom as they did this year, when they cut $2m in discretionary spending.
A $15m loss in 2007, following on from a loss of almost $5m in 2006, will impact the core business - the playing and development of the game - which is why the NZRU executive team will be desperately hoping to see the greenback continue its resurgence during the next week.
On December 31 the NZRU have to value their offshore cash assets based on the currency exchange rates that day.
Their two major contracts, the Sanzar broadcast deal and adidas sponsorship, are paid in US dollars and the NZRU have accrued significant All Black match fees in British pounds over the past few years.
Up until 2005, the NZRU had cover to convert their US dollars at about 42 cents, regardless of the actual exchange rate. When that contract expired, the NZRU worked out their cost base on the basis they would break even if the New Zealand dollar was buying 65 US cents.
With the Kiwi currently buying about 75 US cents the NZRU are clearly not going to break even. A brief window in August this year when the dollar plunged to 66 US cents gave the NZRU an opportunity to repatriate some of their offshore assets and reduce their annual loss.
But the expectation is that the NZRU will still post a loss in the region of $5m to $8m. With an estimated $30m of debt likely to be accumulated in 2011 from hosting the World Cup, many decisions about the future of the game are driven entirely by money. As in the NZRU need to spend less and earn more.
It's the first part of the equation that is causing a few palms to sweat in New Zealand rugby circles. One initiative already confirmed is the axing of the Junior All Blacks in 2008.
The New Zealand Maori will take the Juniors' place in the Pacific Six Nations next year which has a double whammy in reducing costs. Firstly it means the NZRU save plenty by not sending the Maori to play in the Churchill Cup as they have done in previous years and secondly it means they don't have to pay a 26-man squad of Junior All Blacks $3500 each a week during the Pacific Six Nations.
Of more concern, though, is the future of provincial rugby which will be up for discussion in March next year. The reality is that a number of provinces are close to financial ruin. Certainly among the larger unions, there is strong belief a 14-team competition is unsustainable.
The competition only survives in its current form because of cash grants provided by the NZRU but they might have to be significantly reduced in the wake of the national body's own financial strife.
So while it can be argued that 14 teams is the best option in terms of player development, the future shape of the competition will be dictated by what New Zealand can afford.
Auckland chairman Ken Baguley said: "If you look back to the Boston Report which was one of the best bits of work done in this area it suggested an eight-team provincial competition was sustainable for New Zealand.
'I would like to think something earth-shattering will come from the meeting in March but I won't be holding my breath."
Where the mid-tier unions, and indeed the bigger unions, are being placated is in the NZRU's cash revenue generating policies.
Next year the All Blacks will definitely play 14 tests, possibly even 16. They will play Australia in Hong Kong for a reported US$2.5 million ($3.3m) the Saturday after the provincial competition final.
A week later the All Blacks will play at Twickenham, this time pocketing about £1m ($2.65m).
But the near $6m windfall comes at a cost to the provinces. They were led to believe they would have their All Blacks available from the quarter-finals onwards next year, but that now seems unlikely with the Hong Kong test the Saturday after the Air New Zealand Cup final.
The unions are up to their eyes in debt, forking out huge sums to contract All Blacks and desperate to rekindle interest in a competition that is not engaging the paying public. The appearance, even for just a few games, of the biggest stars in the game would help boost revenue but the NZRU are going to pull rank and keep the players fresh for the end of year tour.
The NZRU will not be swayed from their conviction that the All Blacks are the cash cow to be milked with the revenue dripped down the system.
It doesn't seem to matter to the board that they are in danger of turning the All Blacks into an exhibition side, a travelling act that will pitch up anywhere if they are shown the money.
All that matters is that the books balance come December 31.
