Rugby eyes apps sale as it redraws TV rights deal
The Australian
April 26, 2015 6:35PM
Darren Davidson
Business Media Writer
Rugby league is tearing up the game plan for media rights, paving the way for the option of splitting the free-to-air television deal between two networks and selling matches direct to fans via apps.
Australian Rugby League Commission chief executive David Smith is targeting a new record billion-dollar TV rights deal as he builds a war chest to take on the AFL. “All possibilities are on the table,” one source said. “We want to go into negotiations with a lot of flexibility.”
Mr Smith phoned executives at rights holders the Nine Network, Fox Sports and Telstra on Friday morning to give formal notification he was starting talks early, as exclusively revealed online by The Australian.
The former banker, who is credited with improving the code’s top-line performance, has pulled forward negotiations by one year in a surprise move to blindside the AFL, and maximise the number of bidders.
He also contacted executives at the Seven and Ten networks last week to ensure competitive tension in the bidding process so the code can reap significantly more than the five-year $1.125 billion deal signed in 2013.
While Nine is determined to retain exclusive free-to-air TV rights, the network is said to be open to the possibility of sharing some matches with Ten or Seven.
Amid limited revenue growth in a challenging advertising market and cost inflation, Nine is keen to avoid a repeat of the tense and sometimes complicated talks it held with Cricket Australia in 2013.
Although Nine had last rights to the new cricket deal, in which it only had to match the highest bid, Ten stunned everyone, especially Nine, with a whopping bid. Ten lodged a $550 million offer for all cricket, which was about twice as much as CA had previously received.
Nine was forced to match the offer, and Ten walked away with cricket’s Big Bash League.
For Seven, the network’s immediate priority is to hold on to its exclusive AFL rights. But Seven insiders confirmed they were interested in participating in the NRL’s rights auction.
Bidding for rights as they come up for renewal has become an even fiercer game, which will make for an intriguing spectacle in the coming months, particularly if AFL chief executive Gillon McLachlan kicks off formal talks for his rights following informal chats with media companies in recent months.
If Telstra decides it wants to hold on to the NRL’s digital rights, it will face intense competition from the free-to-air networks, which view the digital component as far more valuable than previous rounds.
The telco has a sponsorship and digital rights agreement with the NRL worth more than $100m, extending the six-year, $90m deal it signed in 2007.
But the exclusive online and mobile rights are now seen as undervalued by many analysts.
While sports bodies like the NRL have been hedging their bets to maintain profitable free-to-air and subscription TV partnerships, they have never sold matches directly to fans.
However, the potential move risks upsetting Foxtel, which will not pay a premium for rights without exclusive access. The value of sports rights lies in the allocation of access and the level of exclusivity broadcasters get.
In the US, media analysts have estimated that Disney-owned ESPN would become vastly more expensive for sports fans under a mooted direct-to-consumer model. After running the numbers, analysts said the app would cost about $30 a month if it were unbundled from the pay-TV package and sold separately. This is five times the $6 a month that ESPN now costs as part of the subscription bundles sold by cable operators.
Mr Smith has moved early after The Australian revealed Mr McLachlan postponed his own talks due to ongoing uncertainty surrounding the sale of potential bidder the Ten Network. The AFL Commission decided to wait for Ten’s future to be clarified to maximise competition tension and get the best deal.
