Rugby Australia’s return to surplus this year is a good headline, but the really important information is contained in the annual report.
Surpluses, of course, are a good thing coming out of the COVID period that brought rugby to its knees in England and Wales as well as Australia, while South Africa also continues to struggle.
But revenue and spending is where you get the big picture. Is the surplus a result of booming revenue growth, or chronic underinvestment? It’s a mixed bag. If it wasn’t, RA wouldn’t be kicking the tyres of private equity, despite projections of a $200m windfall from the British and Irish Lions tour in 2025 and men’s and women’s Rugby World Cups in 2027 and 2029.
RA’s revenue jumped from $98m to $129m in 2022, off the back of the Eddie Jones series against England, a $9m leap in broadcast revenue and increased sponsorship income.
It’s important to note that broadcast increase does not include the revised deal with NZ Rugby, which starts in 2024 and is expected to add another $8m or so to annual revenue.
Instead, the increase came from other broadcast sources, including the new Sky UK deal, which traditionally was an important part of the mix before the pandemic.
Rugby Australia continues to dither on investing in the areas that would make the nation a powerhouse again.Credit: Getty
So, good news — up to a point. Expressed as a percentage of NZ Rugby revenue, RA’s income actually decreased to about 47 per cent in 2022 from 51 per cent in 2021.
The Kiwis’ eye-grabbing NZ$47m ($43.5m) loss announced on Thursday was due to an explosion in costs/investment, call it what you want (more on this imminently). Their revenue growth was strong, largely on the back of broadcast ($NZ102m) and sponsorship and licensing ($NZ113m).
So, how did RA deliver a surplus? Well, it managed costs effectively and isn’t spending on lots of the things that will be needed to make Australian rugby a powerhouse again.
As an example, Super Rugby remains an asset that is chronically underfunded, both as a competition and in terms of direct grants to the Australian franchises. With just $1.64m to each club in 2022, RA’s surplus would be gone.
The Wallabies are in for a bumper few years with an inbound British and Irish Lions tour and a home Rugby World Cup.Credit: Getty
And, that’s before we even start on more funding for women’s rugby, a third tier competition to develop players and coaches, and more nourishment for the grassroots.
There are all things that Australian rugby sees value in, but the costs are actually eye-watering.
To give you a sense of the cost, NZ Rugby dished out a one-off payment of $NZ37m to stakeholders in 2022, plus $NZ34m in annual payments to the provincial unions, a large part of which was gobbled up by the NPC. It’s also investing a significant amount in women’s rugby – tens of millions.
All the nice things Australian rugby fans want are expensive. In fact, if you were being cynical about it, rugby league raids are actually far cheaper and bring more instant gratification.
New Zealand Rugby announced an eye-popping loss this week.Credit: AP
So, we can tell from RA’s annual accounts in 2022 that its revenue, although up, is nowhere near where it needs to be to support serious investment in the game.
With current liabilities of about $40m, even the projections of $200m from the Lions and Rugby World Cup – and it’s hard to check those at the moment – may not be enough to fund the Australian game in the long term, and they won’t start coming on stream for a few years.
Hence, private equity is in the picture. The idea of selling off a sizeable chunk of future revenue – not profit – comes with risk.
For example, the idea that RA could take, say $150m for 15 per cent of its commercial operations and then use that as a source of future dividends doesn’t make sense: the cost of that capital is always going to be higher than returns RA will be able to generate.
However, if RA wants to invest in Super Rugby – a potentially good competition trapped inside the prison of a flawed structure at the moment – women’s rugby and a well-devised third tier competition, then it might have no other choice but to do the dance with Silver Lake.
Despite the qualifications outlined above, it is possible to mount a reasonably positive interpretation of RA’s results. It’s good that the broadcast revenue is going up, and with audiences on Stan rising there must be an expectation of a better broadcast deal in 2026 onwards.
“We need to clarify, we’re certainly not out of the woods,” RA chief executive Andy Marinos said.
That’s fair. But they’ve probably put themselves back in the fight.
Watch all the action from the Super Rugby Pacific with every match streaming ad-free, live and on demand on Stan Sport.
