How COVID-19 created sustainable rugby league for NRL, Nine and Foxtel
Against expectations, the NRL is back on the field and two decades of unsustainable broadcast rights inflation has ended.
In late April, interim NRL chief executive Andrew Abdo and chief digital officer Alex Alderson were in a meeting with Nine managing director of commercial Alexi Baker at Rugby League Central on Driver Avenue in Sydney's Moore Park when the room began to shake.
Abdo was used to the shaking at NRL headquarters following the demolition of the Sydney Football Stadium and the beginning of a rebuild. Over the next month Abdo, along with Australian Rugby League Commission chairman Peter V'landys and broadcasters Nine and Foxtel, led by CEOs Hugh Marks and Patrick Delany respectively, would shake the foundations of the NRL.
They were about to end two decades of unsustainable broadcast rights inflation with a rumoured combination broadcast discount of $150 million over the next three seasons.
Abdo, the South African-born former Deloitte director, had just been put in charge of rugby league in Australia, a role he holds ambitions to keep. His first major task was repairing a frayed relationship with long-time free-to-air broadcaster Nine, owner of
The Australian Financial Review, which was unhappy with what it saw as a one-way relationship and was prepared to walk away from the second sport in as many years after dumping cricket in early 2018 in favour of tennis.
All of this came amid a shutdown of sport globally, thanks to the spread of the coronavirus, which instantly saw the NRL's largest revenue supply dry up, despite substantial growth in non-broadcast revenue in the past five years. V'landys committed the NRL to coming back by Thursday, May 28.
"This pandemic is accelerating trends that were already happening, they’re just happening a lot faster," Abdo says. "You can sit back and try and defend or you can embrace it and figure out a way to be more sustainable through it."
Cutting out $70 million
In that April meeting at NRL HQ, Abdo, Alderson and Baker went through the NRL's plans, how it would cut $70 million of costs out of the sport to focus on getting revenue into its 16 clubs and developing the wider rugby league game, as well as how Nine commercialises the NRL.
Analysis by the Financial Review showed that NRL TV rights had grown by a compound annual growth rate (CAGR) of 9.8 per cent from 2001 to the first year of the most recent deal in 2018, while media company revenues went in the opposite direction.
The NRL's core team to get the new deal over the line was Abdo, V'landys, Alderson and general counsel Eleni North.
Foxtel's team was made up of CEO Delany, Fox Sports CEO Peter Campbell, Foxtel general counsel Lynette Ireland, chief financial officer James Marsh and Foxtel chief commercial officer Amanda Laing, a former Nine executive who worked on the broadcaster's current deal, once she completed Foxtel's HBO-Warner renewal in early May. Laing is also a former ARLC commissioner.
Nine's core team was Marks, Baker and general counsel Rachel Launders.
Most meetings were done via the phone and video conferencing, although V'landys had face-to-face meetings with both Marks and Delany at Racing NSW headquarters in Druitt St, Sydney, where the ARLC chairman is CEO. In a mid-April meeting, the three executives, in the only meeting with all of them together, laid out what shape they wanted a COVID-19 season to take.
Less than two months ago, Nine and the NRL couldn't have been further apart.
On April 9, Nine had launched a scathing attack on the NRL, effectively aimed at then-chief executive Todd Greenberg, accusing the game's administration of years of mismanagement and a bloated head office at the expense of players, clubs and supporters.
Greenberg, who would dispute such claims, was sidelined from crucial broadcast conversations with Nine and pay TV broadcaster Foxtel. V'landys would take the lead. While there had been rumblings about Greenberg's future well before COVID-19, Nine's statement was the nail in the coffin for his time at Rugby League Central.
By April 20, the former Canterbury Bulldogs CEO was gone.
Marks was frustrated at a lack of collaboration from NRL leadership at the time and an insistence rugby league would play out a full season, just pushed back later in the year, and that would be enough to meet the contract, and payment, requirements.
Before the negotiated discount, Nine was paying, on average, $115 million per season for its contract, although the actual amount differs due to a $50 million upfront payment to help NRL cash flows in 2016. Nine's $27.5 million a year saving for the 2021 and 2022 financial years includes rights fee discounts as well as production and service arrangements.
On March 13, the NRL and AFL had been thrown into disarray when the Morrison government announced it would ban gatherings of more than 500 people to stymie the spread of coronavirus. The ban would come into effect after the NRL's first round on Monday March 15. Rugby league planned to push forward with its season, but without crowds.
A week later, on March 22, after the NRL had played most of its second round without crowds, Fox Sports CEO Peter Campbell rang Greenberg. Campbell, a former member of the AFL's 10-person executive team and its former general manager of media and broadcasting, had a suspicion that the AFL was planning to suspend its season. He was correct, with the AFL calling a media conference to make the announcement that day at 4pm.
Greenberg was adamant the NRL would play on. However, the next day, the season was officially suspended.
Before COVID-19, Foxtel, which completed a merger with Fox Sports in 2018, had been going through its own massive, and at times painful, transition as it sought to recast itself as a streaming business and massively reduce its broadcast cost base. In November 2018, it launched its sports streaming service Kayo.
After a fall back from 402,000 paying subscribers in November 2019 to 370,000 in February, it had hoped the NRL and AFL seasons would see that service take off again.
On April 8, Foxtel announced 200 redundancies and would add at least another 70 in the following weeks. Delany expressed his desire to transform quickly. Conscious of staff morale, the Foxtel CEO didn't want a long stream of job losses to become a weeping sore.
Streaming-led future
Delany and Campbell's approach going into negotiations with the NRL was maintaining the rights it had and securing them long term as a pillar of its streaming-led strategy.
In order to reduce the number of people leaving Foxtel amid the lack of sport, the business opened up its movie channels free to sport subscribers, and made all its other tiers available for free for all subscribers.
Fox Sports kept its core Fox League Live and Fox Footy Live shows running every day, but with fewer suits and more shorts and t-shirts and broad conversations, ranging all the way to Matty Johns talking about drug addiction within the ranks of the Third Reich in World War 2.
Foxtel, a much more sport-led business than Nine, was keen to get the NRL going again as soon as possible, but held reservations the game's administrators could resume games by May 28.
Then, in late April, video emerged of NRL star Nathan Cleary breaching social distancing rules and, in a separate incident, players Latrell Mitchell and Josh Addo-Carr breaching self-isolation protocols. It was the last thing the NRL needed as it tried to convince broadcasters and governments to help them.
But seeing how hard the administration came down on the players, Delany and Campbell became convinced V'landys could get the game back on track at the end of May.
"It shifted the conversations, they could see we were very strong on it. To earn the community’s trust we had to do better," V'landys says.
By May 18, the NRL, Nine and Foxtel had agreed to the main principles of a new deal. If it had been under normal circumstances, a final deal would probably have been announced at that meeting. In 2015, the NRL, Foxtel and Nine all locked themselves in the offices of law firm Clayton Utz and thrashed the deal out.
With COVID-19 restrictions, it took until last Thursday to seal the deal, with negotiations over phone and Microsoft Teams from offices and the homes of all those involved.
The new deal, sealed within an hour of the return of the NRL at Suncorp Stadium with the Brisbane Broncos and Parramatta Eels last Thursday, gives both broadcasters discounts for a shortened 2020 season, for the final two years remaining on the current TV deal, and for Foxtel an extension to 2027.
"It provides certainty to us, we’ve got seven years of certainty to get our house in order," V'landys says.
"The traditional broadcast model returns the most to a sport. As that traditional model turns to [streaming], I think that won't return as much to the sports, I think we need to take advantage of the traditional model."
