Online only
Former All Black captain David Kirk, now chair of Rugby New Zealand, takes a philosophical look at money, finances and living well. The cofounder and chairman of Bailador Technology Investments, Kirk sits on a number of other boards including investee companies of Bailador and charitable organisations.
As we all know in New Zealand there are two types of sporting endeavour. One is amateur and focused on participation, healthy living, personal development and community spirit and the other is professional, focused on structured talent development, televised competition and the generation of money to pay players.
As far as I am aware, every sport that a significant number of people want to watch, and are therefore prepared to pay to watch, is now professional. The sport I know best is rugby and I thought readers might be interested to understand how the business of rugby works in New Zealand.
Businesses are, of course, much more than their financial performance. Businesses are made up of people and have cultures and legacies and assets and risk profiles and all sorts of other things boards and management must be aware of and actively manage. But businesses are only sustainable, and will only keep operating in their current form, if they are financially successful. This is certainly true of the business of rugby in New Zealand.
Financial analysis begins and most often ends with understanding money in and money out. New Zealand Rugby, like all businesses, needs to generate income so it can pay costs.
Income for New Zealand Rugby comes from three major sources: the sale of media rights, sponsorship of our top teams (All Blacks, Black Ferns, All Blacks XV, Māori All Blacks and the Sevens teams), and three, match-day income, which is mostly ticket sales.
The major costs for New Zealand Rugby are payments to the professional players, investment in competitions, distributions to the community game, and the payment of staff, rent and other costs associated with managing a global professional sports organisation and a national community game.
As for all businesses income and costs must both be well managed for the business to be successful. But it is on the income side that most of the challenge, opportunity and risk lie for New Zealand Rugby so that’s where I’ll focus.
Broadcast media companies buy the right to broadcast rugby matches so subscribers, in the case of pay television and streaming services, will watch the matches on their platform, and advertisers will pay to run advertisements around the matches.
In a world without competition, four things determine how much a media company is prepared to pay for rugby broadcast rights. One, how many new subscribers can be gained by broadcasting the matches; two, how many subscribers will be lost if they don’t broadcast the matches; three, how much advertising income they will garner around the broadcast of the matches; and four, what it will cost to produce and broadcast the matches. In a world with competition, the same four drivers apply but the broadcaster must simply in the end, ‘pay more than the other guy’.
Big companies pay to sponsor sports teams, gaining the right to attach their name and logos to team jerseys, training gear and so on, so as to gain what is called ‘brand association.’ The All Blacks are a global brand epitomising, amongst other things, winning, teamwork, commitment to sustaining a legacy of success, innovation, humility, determination and self-belief.
The All Blacks brand has been built over 130 years and millions of people in many parts of the world admire the team. A sponsor of the All Blacks aims to have current and potential new buyers of their products associate the brand values of the All Blacks with their own brand.
Sponsorship is a numbers game on both sides of the ledger. Meaning the higher the number of customers the sponsor has and the higher the number of people know and love the All Blacks, the higher the potential sponsorship value. A potential sponsor of the All Blacks is of course busily building their own customer base. It is New Zealand Rugby’s job to build the number of people who know and love the All Blacks and our other teams who wear the Black jersey.
We introduce new consumers to the All Blacks by playing matches in places like the United States and Japan, but much more importantly we introduce new fans to the All Blacks through digital channels. We develop engaging and relevant short and medium length content and use the allblacks.com website and App (called NZR+) along with social media channels such as YouTube, X and Instagram to introduce, educate, and engage millions of people in the journey of the greatest rugby team, and one of the greatest sports teams, there has ever been.
Finally, match-day income, which is the third and smallest major source of income. Increasing income from matches requires us to have full stadiums, play more games, develop new competitions, and in some circumstances increase ticket prices. Match-day revenue growth is limited by the number of matches that can be played in a year, which is limited by player welfare and an already crowded annual playing calendar.
The sources of revenue to sustain rugby in New Zealand are changing. Last month, we signed a new deal for Sky to continue to broadcast domestic rugby for the next five years. Sky will pay less than they did in the previous cycle. This shortfall will be filled by new broadcasting revenue from international competitions, including Rugby’s “Greatest Rivalry”, a four-test series in South Africa and The Nations Cup.
Sponsorship is now the largest source of revenue for New Zealand rugby. The quick filling of the gap by Toyota and Gallagher Insurance when Ineos withdrew their sponsorship demonstrates the power of the All Black and other New Zealand rugby brands.
