New Zealand Rugby: Financial woes continue with $19.5m loss in 2024 - Gregor Paul

Its latest accounts show that revenue lifted by 7% from $267m in 2023 to $285m in 2024, but that total expenses increased 10% from $276m to $304m over the same period.

The transformational revenue growth NZR forecast – promised – as part of its sales pitch to do the deal with Silver Lake in 2022 has not materialised, and the figures released today suggest that the partnership has only managed to bring a modest hike in income, and that it is money which has proven expensive to generate.

But despite the accounts being splattered in red, and the continued absence of any significant new income streams or game-changing contracts, NZR chief executive Mark Robinson has painted the latest numbers as relatively encouraging when compared with other major unions and insists the underlying story is one of growth, and that the decision to partner with Silver Lake is paying fruition.

He said: “Pleasingly, we continued to grow our commercial revenue, with strong results in sponsorship and match-day revenue, we retained our cash position and reserves and, operationally, delivered a near break-even result.”

The revenue growth story explained

Any business posting a 7% jump in revenue in 2024 would feel it had cause for celebration given the underlying economic conditions and, on the surface, NZR appears to have enjoyed a 15% jump in broadcast revenue; a 4% lift in sponsorship income, while it almost doubled its returns from match days (ticket sales and corporate hospitality) from $17m in 2023 to $32m in 2024.

But 2023 was a World Cup year and that meant the All Blacks only played two home tests and one at Twickenham, where they shared the proceeds with the Springboks.

Much of NZR’s revenue is directly linked to the number of tests played and where they are played. On that basis, to measure 2024 against 2023 is therefore not an apples-with-apples comparison. A fairer or more accurate comparison is to contrast the results achieved in 2024 against those delivered in 2022 when the All Blacks played six home tests, with an additional game against Japan in Tokyo.

The antiquated financial model in rugby works on a reciprocal basis whereby the host nation keeps the revenue generated on match day, but there is room for nations to schedule games outside of the World Rugby designated window (three weeks in July, three weeks in November and the Rugby Championship) and strike whatever commercial terms both parties can agree to.

In 2022, NZR made $28.3m from match-day revenue, so in real terms, NZR saw a $2.7m lift in 2024.

It presents as a growth story, but in actuality, it’s a disappointing return as the All Blacks played a “home” test in San Diego against Fiji – they could have played in Hamilton but opted for the US instead – and also games against Japan in Tokyo and England at Twickenham, where they received cash payments.

In effect, they had eight revenue-generating games in 2024 compared with seven in 2022 and only made $2.7m additional revenue.

This suggests two things. Firstly, it seems NZR is not maximising potential returns from the additional games the All Blacks play.

In 2012, $4m was banked for a one-off test against England at Twickenham which was a double-header with the Black Ferns, but the 2024 numbers suggest NZR is not commanding similar or improved fees for these “commercial” tests.

Secondly, the number posted in 2024 was affected by neither of the tests against Argentina in Wellington or Auckland selling out. There were around 8,000 unsold tickets for the former and 4,000 for the latter.

Broadcast income climbed back to $100m (it was $102m in 2022) because it was also impaired in 2023 due to less content.

The undeniable power of the All Blacks brand

The genuine growth story is the rise in sponsorship, which jumped by $5m, mostly due to signing new partners Bupa and Mitsui.

And sponsorship is the area in which NZR can feel it is delivering beyond expectations. It has been the fastest-growing asset class in its portfolio for the past decade, climbing from $55m in 2016 to $72m in 2019 and $125m in 2024.

The numbers support the assertion that the All Blacks’ brand is strong and capable of attracting international investors.

The recent announcement of Toyota as a replacement sponsor for British petrochemical firm Ineos – a deal that was struck in a timeframe well ahead of expectation – is further proof that big companies are lining up to build an association with the national team.

Money in the bank is NZR’s top-performing asset

The real star performer was the interest that was banked from Silver Lake’s $262m investment, which returned $14.3m compared with $8m in 2023.

The return was higher because Silver Lake, having invested $200m in two $100m tranches in 2022 and 2023, paid out another $62m in January 2024.

On a 2024 to 2023 comparison, broadcast income dropped 2%, match-day revenue rose 13%, sponsorship 4% and income from interest rose 78%.

Is NZR right to downplay the $19.5m loss?

NZR says that $8m of the $19.5m deficit can be attributed to foreign-exchange losses. The national body receives significant amounts of income – various sponsorships and match-day payments – in foreign currency and it operates with hedging contracts to offset changes in the exchange rates.

Its hedging contract in 2024 was ineffective, but the $8m sits as a paper (accounting) loss rather than a cash loss.

NZR says the other $11.5m was a result of investing in future commercial growth – mostly in content and the upkeep of its digital streaming platform NZR+ – hence its determination to downplay the headline figure of $19.5m as catastrophic.

The narrative is being spun to suggest that a paper loss from foreign exchange conversions and an investment in growing future commercial revenues are not really losses at all.

But the spin-doctoring can’t stop a different, more concerning picture from being visible in the numbers.

Money out is a bigger problem than money in

NZR has a cost-management problem, one it is no closer to fixing than it was three years ago when the issue was starting to come to light.

It spent $28m more in 2024 than it did in 2023, and of most concern is that it appears the growth in expenditure is directly linked to the decision to partner with Silver Lake and deliver its investment thesis.

Firstly, it saw the interest payment it had to make to Silver Lake jump from $8.9m in 2023 to $12.2m in 2024 because of the additional $62.5m that it opted to take from its equity partner in January last year.

The $262.5m invested by Silver Lake currently sits as a loan on the balance sheet – paid at a 4% interest rate – but this year, it has the right to convert that into equity. If it does so, Silver Lake will be able to claim an annual distribution of 7.5% of net commercial revenue (its $262m investment equates to a 7.5% stake in NZR’s commercial assets which are valued at $3.5bn).

This could see the $12.2m interest payment jump closer to $20m next year.

But NZR also saw what it lists as administration costs climb from $21.9m in 2023 to $27.8m in 2024 – a 27% rise – and this suggests that playing additional tests in foreign countries and managing the wider portfolio of sponsors and servicing their needs is coming with a significant uplift in auxiliary costs (personnel, travel, entertainment).

And this is a problem because Silver Lake’s investment plan is to grow the All Blacks’ fan base around the world and monetise it, primarily through the creation of digital content and showcasing the team in foreign markets.

While the strategy makes sense, the cost of winning new business and brand building is so far outweighing the returns.

The Silver Lake investment thesis explained

At the heart of the Silver Lake investment thesis lies NZR+. In time, the plan is for NZR+ to be a one-stop content hub, where fans can read news about the All Blacks, watch content and buy tickets and merchandise.

The business model is not aiming – at this stage – for NZR+ to operate as a direct source of income, but as an indirect contributor.

The premise is that it will win followers and viewers, and this will create a suite of statistics that will enable NZR to sell sponsorships and media rights for more money because the brand will have greater exposure and investors will have better data about who they are reaching.

It’s on this argument that NZR is determining the almost $12m it spent on NZR+ is as an investment in future revenue growth rather than a cash loss.

When Silver Lake first invested, $38m was set aside to invest in new projects. Robinson says: “In 2024, we drew down $11.7m to invest in NZR+ to continue to grow its reach and tell our stories. While this is about the long-term, we also believe this is generating positive commercial outcomes in the short-term.”

Is NZR following the right strategy but failing to execute it?

Robinson is optimistic the latest accounts vindicate the decision to partner with Silver Lake. He believes the heavy expenditure in NZR+ and the plan of taking more tests offshore to build the All Blacks’ brand will ultimately deliver transitional income flows.

In crude terms, he’s saying NZR is still in a heavy investment phase following the Silver Lake transaction – and that’s why costs are high.

Not only has there been significant cash pumped into content creation, so too was money invested last year in a new merchandising and licensing partnership with Fanatics.

This is the start-up phase of new revenue streams and the implementation of a whole new business plan, so Robinson’s argument is to be patient: give it time, and he believes revenue will outgrow costs.

And he argues that in time, revenue will continue to grow exponentially – but costs won’t.

But the evidence to think he is right is simply not in the latest numbers. The accounts show that despite having an estimated $18m poured into it over the past two years, NZR+ has only gathered 280,000 registrations, while the All Blacks Youtube channel has around 1.1 million followers.

As a valid comparison, there are social-media influencers who have generated millions of followers and millions in revenue on content budgets in the low hundreds of thousands of dollars.

The level of expenditure is a bigger problem than the lack of audience, because that has almost killed any prospect of NZR+ managing to cost-effectively pay its way indirectly by driving up the value of future sponsorship and broadcast deals.

NZR says its growing audience from its content play is changing the conversations it is having with potential sponsors and making the All Blacks brand more valuable to commercial partners.

But any future uplift in sponsorship values that are attributed to NZR+ need to be weighed against the cost of the content creation and the cost of winning that audience.

The accounts don’t make it clear, either, what the potential is of NZR+ to become a direct contributor by charging people to watch live games behind a paywall.

The accounts say that Rugby Championship games were shown in 58 “dark” territories – countries that don’t have a broadcast agreement – for free.

And that: “In addition, paid subscription to live matches was trialled in Germany at €11.99 ($22) per month, or €29.99 ($55) for a season pass.

“Insights from the trial will help us understand the paying audience better and inform future subscription plans in other territories.”

Gregor Paul is one of New Zealand’s most respected rugby writers and columnists. He has won multiple awards for journalism and written several books about sport.