Nine warned huge NRL rights deal could become a ‘financial albatross’
Nine Entertainment faces a potential financial disaster if it overpays for NRL rights.
JAMES MADDEN
Nine must be wary of overpaying for the NRL broadcast rights, lest the long-term contract becomes a financial albatross around the struggling company’s neck, a leading media analyst has warned.
“There is no arguing that the NRL is a marquee winter live sports franchise for Nine. However, we encourage management to pay heed to the fact that its current depressed market value and agitated shareholder base cannot tolerate an exorbitant jump in rights costs,” Morningstar’s director of equity research Brian Han wrote in an analyst’s note.
The NRL’s current broadcast deal set to expire at the end of the 2027 season, and
Australian Rugby League Commission chair Peter V’landys has publicly stated his ambition to secure the biggest media deal in the history of Australian sport – which, if realised, would exceed the seven-year, $4.5bn agreement the AFL signed with Foxtel and Seven in 2022.
In his analyst’s note, Mr Han observed Nine’s share price had fallen 5 per cent in the 10 weeks since it announced it had acquired outdoor advertising company QMS for $850m, leaving its market capitalisation “at just $1.6bn”.
In December 2021, when Nine renegotiated an agreement to extend its NRL broadcast rights until the end of the 2027 season, its market cap was $4.96bn.
“The risk is that basically the NRL deal could be like an albatross around Nine’s neck for many years to come, especially when you’re facing a future where there is – no matter what they say – an uncertainty about linear TV going forward,” Mr Han said. “You’re talking about a company whose market cap is dwindling and it really doesn’t have the financial resources to pay what Mr V’landys wants.”
At close of business on Friday, Nine shares were trading at $1.02, a year-on-year drop of almost 25 per cent. Nine CEO Matt Stanton has previously said the looming NRL contract will be assessed “on a commercial basis … and it has to stack up on its own”.
That said, if Nine fails to secure the NRL rights, it would be left without a top-tier live sport in Australia, with Seven and Foxtel locked in to cover both AFL and cricket well into the next decade.
Nine does have the broadcast rights to the Australian Open tennis, which runs for two weeks in January, and the Summer and Winter Olympics until 2032, but the AFL and NRL are by far the biggest revenue drivers for television networks in this country.
However, Mr Han said Nine did have some factors in its favour at the negotiating table.
“Nine’s two free-to-air TV competitors (Seven and Network Ten) are even less able to afford the rights; the anti-siphoning rules are there to be leveraged against the NRL; and the days of (sporting bodies) justifying big increases in rights costs on tenuous concepts such as “promotional platforms” … are over – certainly in this age of on-demand streaming and bite-sized consumption of entertainment,” he said.
It’s understood Nine will be looking to showcase some games on its subscription streaming platform Stan if it wins the rights, but also feature some live games – most probably Friday Night Football – on its free-to-air channel.
The Australian has previously reported that the
Seven Network is interested in making a play for Monday Night Football, should the NRL move to revive the early-week timeslot as part of the sport’s next broadcast deal.
Despite some claims that Seven might also be interested in State of Origin matches, it’s unlikely the recently merged media company would have the resources at its disposal to succeed in a bidding war for the lucrative tri-series showpiece.
“Seven just doesn’t have the money to be a major player in NRL, so a tilt at Monday Night Football would be the extent of it,” one network insider said.
Paramount, the US owner of Network 10, is cashed up and expected to table an offer for the NRL broadcast rights, or part thereof, but the entity’s push for the AFL was famously overlooked in 2022, despite its bid exceeding that of Seven at the time.
It’s understood the AFL was jittery about selling the rights to a network with limited experience in delivering a top-tier sport.
It remains to be seen if the NRL holds a similar view, or whether Mr V’landys will simply use Paramount’s interest to drive up the price for rival contenders.
Foxtel chief executive Patrick Delany has repeatedly said he does not speculate about sports rights, but the company’s new owner
DAZN is expected to make a serious pitch for the NRL deal.
Nine broadcast and streaming boss, Amanda Laing, told The Australian on the weekend Nine intended to “continue (its) successful partnership with the NRL and the fans long into the future.”
It’s expected the NRL broadcast deal will be finalised by July. Mr V’landys did not respond to questions from The Australian.
