"Our new strategy focuses on responding to the wants and needs of today's participants, particularly young people. We want to sustain traditional sports that Kiwis love, but need to respond to the growing interest in less formal active recreation.
"If we lose our active, sporty lifestyle, there will be a high price to pay for us as a nation."
Tri NZ expressed disappointment with the decision.
"We did not expect the level of reduction from Sport New Zealand towards our community initiatives," chief executive Craig Waugh said.
"The full reduction will not take effect until mid-2017. In the meantime we look forward to further discussions with Sport New Zealand to better understand their thinking."
The fear among NSOs is such decisions could result in job losses and weaken the respective sports' influence in fostering inclusivity and talent at grassroots level.
Contrary to the NSO cuts, Barry said investment into Regional Sports Trusts had been preserved, because of their role delivering to local and regional communities.
A sum of $18.1 million per annum is directed into initiatives which impact on young people, local delivery in low participation communities, and competitive sport. That includes specific investment in coaching, talent development, targeted Auckland initiatives and Māori participation.
The intention is to meld the decision with the government's Childhood Obesity Plan, including Play.sport designed to improve the quality and quantity of physical education and sport in schools.
"There is a risk of looking at it as winners and losers," Barry said. "But overall the winners should be all New Zealanders.
"There a focus on youth and what we would consider 'at risk youth', or those who are not participating at a level we would like, such as those in Maori and Pasifika communities. That's why there's an emphasis on basketball, volleyball and waka ama."