How Nine renegotiated its record NRL rights deal
Date: November 30, 2015 - 12:00AM
by Dominic White
Nine Entertainment Co's new chief executive Hugh Marks was dining with the free-to-air broadcaster's Queensland executive team at Asian restaurant Madam Wu's overlooking Brisbane's Story Bridge on Wednesday evening when the call came.
It was Nine's commercial director and general counsel Amanda Laing, who was back in Sydney's CBD at Clayton Utz, the law firm that represents the National Rugby League.
"We talked and it became clear that Thursday was the day to lock in the details. It made sense to come and help with the final negotiations," says Marks in an exclusive interview with Fairfax Media.
He postponed the rest of his tour of Nine's state offices and jumped on the first plane back to Sydney the next morning.
Laing and Nine's chief operating officer Simon Kelly had already spent all of Wednesday negotiating a historic broadcast deal with News Corp at the latter's law firm Allens, Nine having first been brought into the talks two weeks earlier.
Both sides had moved across town to Clayton Utz in the afternoon, along with Telstra, where each team was holed up in a private war room in between meeting to negotiate with the NRL and its commissioners such as Graeme Samuel and chairman John Grant.
News of the looming deal was broken on Wednesday night by Fairfax Media as Laing and Kelly were preparing to pull two all-nighters negotiating the fine print with wily veterans such as News Corp Australia's former CEO Julian Clarke and NRL chairman John Grant.
Clarke had reached out to Grant weeks earlier in an effort to restart talks on the pay-TV rights, which had collapsed spectacularly in August when the NRL snubbed News Corp's Fox Sports and struck a five-year $925 million free-to-air deal with Nine (breaking a tradition under which free and pay TV rights had always been negotiated together).
Bone fide call
News had since achieved its initial goal of unseating NRL chief executive Dave Smith, through a concerted campaign, and it was now ready to talk again.
"John Grant said the other day that the [original] Nine deal was a catalyst to getting things moving and you'd have to believe there was some truth to that," says Marks while "leaving it for others" to judge whether Friday's deal vindicates Smith's controversial strategy to go solo with Nine and force News to the table separately.
"I think Julian's call to John was bona fide saying 'let's see if we can work this out'."
For all of Rupert Murdoch's posturing about preferring the AFL, industry insiders say News was conscious that it would be a disaster to have a hole in its schedule where the NRL has for so long stood, particularly as its pay TV venture Foxtel is coming under ever greater pressure from cheaper rivals such as Netflix.
"The NRL is very important to their subscriber base and their product. It rounds off their product as [Fox Sports CEO] Patrick Delany [another key player in the talks] said the other day," Marks says.
By the time a dazed Marks arrived at NRL HQ next to the Allianz Stadium in Sydney's East on Friday lunchtime to sign the deal Nine had achieved its first priority, he says. "It was important for us to bring forward the effects of the deal straight into next year's schedule."
Nine enters 2016 against tough comparisons, without an Ashes tournament and against blanket coverage of the Rio Olympics on Seven's broadcast channels and digital channels.
"The Olympics disrupts every year it is on so that will be a big impact, but not as much probably as the Olympics when it's in better time zones," Marks says. "It wasn't really about that."
The importance of rugby league to Nine's fortunes is underlined by new OzTAM statistics showing that two State of Origin matches and the NRL Grand Final were the three most watched programmes in combined metropolitan and regional markets in 2015.
Importance due to consistency
As foreshadowed by Fairfax Media, Nine won the ratings year in all the key demographics although its share was nevertheless down in all the demographics and total people, as it was for the overall ratings winner Seven Network, while Network Ten managed its best growth in years.
(Marks, who sits down with Nine's programming team to discuss its 2016 line-up this week, questions Ten's ability to maintain its growth: "What they lack is consistency in news and current affairs and in sport. It will be much harder for Ten to maintain its momentum because those entertainment shows they have don't have the momentum that they used to".)
The NRL is important to Nine "due to consistency", he says. "That will improve next year when we go from a second delayed match on Friday to more Thursday and then a full schedule in 2017. Viewers obviously want NRL live, and now they will get it in high definition."
By returning the Saturday night game Nine had seized in its original rights agreement, Laing and Kelly were able to negotiate a $175 million discount over five seasons for the free-to-air network. Nine also made a $125 million saving as a result of Fox Sports' agreement to simulcast Nine's games.
The $300 million cut to Nine's fees, plus an extra $40 million over the next two seasons for Fox Sports to simulcast Nine's three games under the current agreement, is a boon for the network.
For its part Fox Sports, which is paying close to $1 billion, will have every game including immediate access to the broadcast of the three NRL games Nine has previously held on an exclusive basis, meaning all eight games each round will be shown live on Fox Sports for the first time.
Fox, which will launch a dedicated NRL channel, will have to carry eight minutes per game of advertisements sold by Nine on the free-to-air broadcaster's games, but will not run ads during actual matchplay.
Net gain to be made
Marks is happy with the $25 million a season Nine will recover from giving up exclusivity on its games. "Yes it certainly has an impact on our ratings and revenue to have a simulcast, but our view is that there's a net gain for Nine in those numbers."
Asked why Monday night football did not work out he says: "I expect the clubs find it difficult to get an audience to the grounds, they obviously played a big role."
But he is happy about having the Thursday night game. "It is coming into the end of week
and it is a much better night than Mondays certainly."
What then, does he think the rights market will look like when this deal expires in 2022?
"My own view is that event television will grow in value, in terms of relative impact versus other programming," he says.
"As for what will be the technological landscape, that would be a brave man to predict, but we are very pleased to have a long-term deal."
