Gerard Martin: Sorting out a few economic props

The decision to award New Zealand the sole hosting rights for the 2011 Rugby World Cup should have been easier to pick.

Certainly the confidence shown by competing bidders, South Africa and Japan, before the decision suggested both believed that New Zealand would come a distant third. But the comprehensive nature of the effort from the New Zealand Rugby Union and the Government ultimately proved irresistible for the International Rugby Board.

As well as lifting the benchmark for future bids, the union had covered all the bases; from the quality of the broadcasting coverage, to player and fan safety and enjoyment and, by gaining the demonstrable commitment of the Government, it could give the international board a guarantee that the commercial requirements would be met.

Maybe many pundits missed the point, but compared to the other bids - no matter their significant individual worth - it would have been a major injustice if New Zealand hadn't been successful. Quite probably, New Zealand also wanted (and needed) it the most.

The fact remains that the first Rugby World Cup, hosted by the then-amateur union in 1987, was the catalyst for many changes within rugby.

With less than two years to plan for the tournament, it earned a creditable $9 million and matches were broadcast to 17 countries. This demonstrated rugby's latent commercial appeal. Despite its reluctance to sanction the concept, the international board adopted the Rugby World Cup as its own shortly afterwards.

Eight years later, the income that rugby had earned for New Zealand in 1987 grew significantly with the introduction of the game's professional structure.

The commercial attraction of rugby effectively opened the way for the game to become a major contributor to our economy.

The decision by Rupert Murdoch's News Corporation to buy broadcasting rights to the three-nation Sanzar competition provided a significant new revenue stream for the rugby union and for New Zealand.

While also opening the game to far-reaching commercial pressures, New Zealand's share in the US$555 million ($800 million) News paid over 10 years completely revolutionised our national game.

Despite the money involved, the full impact of rugby's professionalism may still have passed many people by. On the surface, only the elite athletes involved appeared to earn any major financial advantage.

Being the focal point of the game, and with some said to earn incomes far greater than most CEOs, this was hardly surprising.

On the periphery however, the introduction of professionalism has led to the development of a broad range of new careers and jobs; from sports administrators to trainers, player-managers and coaches, leading to better management of local sporting facilities and training and sports education programmes.

Broadcasting rugby has also been instrumental in the financial success and growth of Sky TV and to a lesser extent, TV3, which bought delayed coverage.

Sky's decision to buy Prime has been partly driven by its interest in having its own network to broadcast free-to-air rugby coverage.

Stadiums have been developed in many centres, generating significant construction work for local economies.

However, it wasn't until the British and Irish Lions tour this year that most New Zealanders finally understood the fundamental change in rugby's role.

With Tourism NZ's estimation of an influx of $130 million to our economy from the 11-game Lions tour last year, rugby is no longer just a part of New Zealand's culture; it now has an arguably more critical role as a driver of our economy.

All provinces and cities that hosted a Lions match have benefited.

So financially successful was the tour that the rugby union announced in September that it would distribute an additional $8 million of its income back to its 27 provincial unions - on top of an already planned $14.7 million.

While the magnitude of this infusion of money into local economies from a national sporting organisation is unique for New Zealand, it would have been impossible in rugby's amateur era.

So great are the economic advantages of the Rugby World Cup that all unions that hosted a Lions match - and others that didn't - will have started planning to host at least one cup match, if not more, in 2011.

Because decisions regarding where each game will be played are likely to depend on the relative ease of transporting and accommodating large rugby squads and their many supporters (in the thousands for many of the 20 World Cup teams), - some centres may still have some work to do to make sure they have the accommodation and services to cope.

Nevertheless, the rugby union is anticipating a $400 million influx of foreign exchange for the economy generated by events leading up to, during and surrounding the 2011 tournament.

Six years out from the first of the cup's 48 matches this could still be considered a conservative estimate. Whatever the case, it will make an enormous difference to New Zealand.

Given these economic advantages, it should not have been surprising that the Government worked with the rugby union to win the hosting rights.

Notwithstanding that, involvement in the World Cup should be a major vote winner for the Government (all things being equal, the tournament will coincide with election year), New Zealand needs to regularly host major international events that generate income from overseas.

Within New Zealand, many regions understand this well. For example, North Shore is searching out and winning international events to host that bring external revenue into its city, from yachting and table tennis to an Olympic qualifying tournament for weightlifting.

Taranaki, too, is well on the way; apart from the recent ITU triathlon event, it will host its third biannual Womad festival in 2007 and it regularly brings in other international drawcards that attract many to the province.

These are demonstrations of regions ensuring they look outside their boundaries for income that generates and sustains more local employment and funds the infrastructure to land more and bigger events.

The work of the rugby union and the Government in winning the Rugby World Cup hosting rights is the international extension of this; in effect, bringing in foreign exchange that is eluding us in other parts of the economy.

That battle is now behind us.

Ahead for many New Zealanders is plenty of planning; not just for 2011 but also for building the infrastructure that will allow the country to host more international events of this nature - maybe never as big as the Rugby World Cup, but potentially just as lucrative.

And while the rugby union has the relative luxury of almost six years to plan the 2011 event, it still has many other challenges on its plate.

Its recently renewed Sanzar broad-casting agreement that heralds the start of the Super 14 in 2006 is scheduled to end in 2010.

Negotiation of this agreement in late 2004 showed the heavy reliance of the Australian and New Zealand unions on South Africa's ability to leverage time zone advantages to earn income from the large Northern Hemisphere broadcast markets.

Both New Zealand and Australia need to keep South Africa on side beyond 2010.

Leveraged from the Sanzar broadcasting deal are the rugby union's many sponsorship contracts, the biggest of which is with adidas. Said to be worth $130 million, its term extends through to the 2011 World Cup.

The extra international profile accorded the All Blacks by New Zealand's winning of the hosting rights should mean the union is now in a stronger position to favourably renew its broadcasting and sponsorship contracts early.

In underwriting the day-to-day administration of the rugby, these are even more critical than the Rugby World Cup itself.

They are also just as critical for New Zealand if we want the influx of foreign exchange from professional rugby to continue and the national game to survive.

In effect, rugby's traditional cultural role is now measured by its ability to contribute to the economy.

As a consequence, the "stadium of four million" theme developed by the rugby union for its hosting bid needs to be more than just a concept or a slogan if the rugby union is to able to sustain rugby over the long term.

As a country, it is truly to our cultural and economic benefit that all four million of us are on the All Blacks' side.

* Gerard Martin completed his thesis on the history of professional rugby in New Zealand as part of a communications studies degree at AUT. He is manager, communications and business development, for an Auckland region development agency.