Big money for rugby in new TV contract

New Zealand rugby chiefs are celebrating a new broadcasting deal, saying it will silence doom merchants and shows that the current rugby diet is working.

The New Zealand Rugby Union and its Australian and South African partners scored big with a $455 million (US$323 million) News Ltd deal over five years, beginning in 2006.

New Zealand, which has healthy reserves, will gain about an extra $4m a year under Sanzar's new contract.

But it is heading for a break-even annual existence because of new programmes and exchange rate factors.

For the public, it looks largely business as usual. The expanded Tri-Nations and Super 14 series will operate under the same formats as they do now, and will be shown live on pay channel Sky.

NZRFU chairman Jock Hobbs said: "I don't think you can underestimate the importance and significance of what's been achieved."

Despite dire media prophecies, the unions - which hired TV sports executive Ian Frykberg to head negotiations - have done remarkably well.

News Ltd retains the New Zealand, Australian and United Kingdom rights, and South Africa's Supersport takes Africa.

South Africa, which has the British audience in its time zone, gets the best take - about 38 per cent of the three-way split.

The current 10 year deal is for US$555 million ($780 million), meaning the unions get $12.8 million extra a year between them.

With the Super 12 expanding to 14 teams, and three more Tri-Nations games, News gets 28 extra games a season for its money.

The deal has confirmed that traditional test series are largely a memory.

NZRFU chief executive Chris Moller said News Ltd's "very clear advice" was they created a "broadcasting dead zone" in one country.

Moller said audiences had steadily grown, and the increased payment from News showed its confidence in the status quo, leaving no room for the Pacific Islands, Argentina and Japan.

The Super 14 will retain a four-team finals system unless a change to when northern countries tour Downunder in June creates room for an expanded series.

The new Super 14 will start in early, rather than late, February so it still ends in May.

Moller said the NZRFU could win back the NPC broadcasting rights only from 2011, when it might move the domestic competition to a free-to-air channel.

But he was jubilant about the News Ltd deal, which "nails our financial security for the next six years and bankrolls our crucial initiatives".

New Zealand hopes to score an extra $2 million a year through Sanzar selling rights to Europe, Asia and America.

Although the News Ltd deal has increased the amount New Zealand will get in American dollars, a new currency exchange will help wipe out the NZRFU's annual surplus, predicted to be $20 million this year.

New Zealand scored a major bonus in the existing contract through a hedging arrangement which pegged the News Ltd money at around 42USc to the New Zealand dollar.

The exchange rate is now more that 70c, so New Zealand will lose heavily when the new contract starts.

The NZRFU - whose annual income has topped $93 million - had reserves of $37 million from last year which could reach $80 million by the end of next year.

Moller said the NZRFU was now confident it could pay for its high performance and community plans, and the NPC revamp, without dipping into reserves.

"Who can say what the exchange rate will be in 2006. But even at this historical high, we will still break even," he said.

"We can absorb the exchange rate and keep rugby in a healthy position ... and that's a pretty bloody good outcome.

"One newspaper suggested we would take a haircut of 50 per cent ...

"That's why it is such an outstanding deal. Not many pundits predicted this deal."

The deal

Worth $455 million (US$323 million) over five years to New Zealand, Australia and South Africa. The current contract with News Ltd is for $780 million (US$555 million) over 10 years.

Because the deal is done in American dollars, the NZRFU has much to gain if the value of the New Zealand dollar falls when the new contract takes effect in 2006. The union is protected in the present contract by a hedging deal struck when our dollar was weak.

The Super 14, which starts in 2006, will have 94 games, compared to 69 games in the Super 12.

The Tri-Nations series increases from six to nine matches.

News Ltd was opposed to the re-introduction of traditional test series played in one country - such as those between New Zealand and South Africa - because it would alienate pay television subscribers in the non-involved Sanzar country.