Channel Nine: Inside the station?s $925 million NRL score
NICK TABAKOFF BUSINESS EDITOR-AT-LARGE THE DAILY TELEGRAPH AUGUST 11, 2015 12:00AM
IT was Nine Entertainment Co?s golden point moment ? but it came at a cost.
Late on Sunday evening, deep into the latest instalment of Nine?s top-rating The Voice, Nine boss David Gyngell received a personal phone call at his home in Sydney?s eastern suburbs from National Rugby League chief executive Dave Smith.
After a week of tense negotiations that went into the early hours of the morning at the Bligh Street Sydney headquarters of NRL lawyers Clayton Utz last week, Smith was calling to confirm that Nine had won the rights to broadcast the NRL on free-to-air TV until the end of the 2022 season.
Earlier on Sunday evening, Nine?s commercial director, Amanda Laing ? who many said was the real hero of the deal, through a *series of around-the-clock meetings ? personally hand-delivered Gyngell the final papers to sign at his Dover Heights home.
The phone call between Smith and Gyngell sealed a deal which will see an unprecedented $1.7m a game paid for the rights to screen four rugby league matches a week ? a far cry from rugby league?s first rights deal in 1973, in which the code?s then NSW boss struggled to make $1000 a game in selling the rights from the ABC.
It represents the first component of the NRL?s bid for $1.7 billion for its overall broadcast rights.
Gyngell last night admitted that the cost of the deal was crippling. ?It is the right deal for the company and its shareholders,? he said. ?But we?ve certainly paid for it.?
Gyngell has recently denied ongoing media speculation that he will soon depart as Nine?s CEO and therefore would not be present to see through the new rights deal.
Sports rights are increasingly crucial to networks facing splintering audiences in the new media world.
The deal will be worth $925m to the NRL if Nine retains media exclusivity on all four matches, which would be screened in prime time from Thursday to Saturday nights, and in the current 4pm Sunday timeslot. That means that Nine would effectively pay $185m a year for each of the five years of the contract.
However, if Fox Sports or some other pay TV party pays for simulcast rights to Nine?s games, the free-to-air network is likely to pay $125m less, or $800m for the rights. If the NRL is to achieve the $1.7b figure, it would need to reap $800m from the pay TV rights and online rights to all eight matches a round (including simulcasting) from Fox Sports or some other player, given the reduction in the figure Nine would pay. It could expect to reap an *additional $100m from the New Zealand TV rights.
Under the current deal that ends in 2017, Nine is paying $85 million a year in cash and $10 million a year in advertising, for a total value of $475 million over the five-year contract. Fox Sports is paying $550 million over the current five years ? $100 million a year in cash and $10 million a year in ad space.
Nine guaranteed yesterday it would pay between $325m and $450m more than the previous figure over the five years. However, it will gain extra rights ? increasing its number of live games each week from two to four. It will also receive non-exclusive digital rights to screen matches on online service ?Jump In?.
It is understood Nine is looking at having at least some games screened in high-definition through its multichannel, GEM.
The process by which Nine and the NRL reached the deal had started around May. Nine brought back on board its former network managing director, Jeff Browne ? a 30-year veteran of sports rights negotiations ? to help with talks. Two months ago, Browne was spotted by journalists attending a league judiciary hearing at the NRL?s Moore Park headquarters deep in conversation with Smith.
Initially, there had been some suggestions that a coalition of Fox Sports, Nine and Ten would jointly bid for the rights. Insiders say the NRL decided ?about a month ago? to break up the free-to-air and pay-TV rights.
Nine?s Browne was spotted having a beer with Smith at Woollahra?s Centennial Hotel in July, intensifying speculation of an imminent deal.
But it was last week where insiders say things got really serious, with the initial talks moving from a room in the Fox Entertainment Quarter to the Clayton Utz Bligh St headquarters as the need for confidentiality intensified.
While Smith and Gyngell remained key figures for the two parties, it was former Queensland Treasurer Andrew Fraser, now the NRL?s head of strategy and investment, and Nine?s Amanda Laing who burnt the midnight oil on finalising the deal. At the peak of last week?s talks, one marathon 20-hour session ended at 4.30am.
Lurking behind the scenes for the NRL was its commissioner and former ACCC head Graeme Samuel, who is also one of the country?s leading sports negotiators.
He was the key figure in pushing the last rights deal over the $1 billion mark, and gave advice on squeezing every last penny out of the current Nine deal. It is understood it was Samuel who pushed for the NRL to do a deal quickly with Nine, given the network?s healthy balance sheet after its sale of Ticketek.
IS LEAGUE SIDELINING ITSELF ON A FUTURE DEAL?
Nick Tabakoff Comment
THE National Rugby League believes its $925 million deal with the Nine Entertainment Co leaves it with the best possible chance of achieving its goal of making $1.7 billion-plus for the overall free-to-air, pay TV, online and international rights.
However some media analysts say the code must be careful not to overplay its hand.
Those close to the code will be focused on keeping ?competitive tension? in the bidding process. Insiders say the NRL was very keen to avoid having a single bid from a coalition of free-to-air and pay-TV operators lessening competition for the rights.
The NRL argument goes that by *hiving off the free-to-air component it was doing everything possible to ensure maximum prices be paid for both the FTA and pay-TV rights. With the NRL now having done the FTA deal early, they think they have plenty of time to nut out a lucrative pay-TV solution in a rapidly changing media environment.
There is a belief within the NRL that, with how media is consumed changing, international companies like Netflix and even Google could yet enter the fray in the two-and-a-half years before the next rights deal starts.
But some observers warn the NRL against *assuming such companies have an interest in Australian sports rights.
?Nowhere in the world has Netflix bought sports rights,? one analyst said.
Sources also suggested Fox Sports would look to reduce the amount it was prepared to pay given Nine?s increased access to live games.
Before the Nine deal was struck a succession of top media figures were *involved in negotiations. Seven Group Holdings chief executive Ryan Stokes and key executive Bruce McWilliam were in talks from the Seven end, *departed Ten chief executive Hamish McLennan and Fox Sports chief *executive Patrick Delany all held talks with the NRL about a possible deal.
One interesting component of the Nine deal is that the NRL are receiving an up-front payment which some insiders *yesterday put at as much as $20 million. It is understood this figure will be *distributed to clubs.
It is known some clubs are not as *profitable as others, and the up-front cash is seen as a key factor in winning over the NRL grassroots on the deal. Of the 16 NRL clubs, only South Sydney, Canterbury and Brisbane make a profit. Four others ? Newcastle, Gold Coast, St George Illawarra and Wests Tigers ? are only surviving on NRL loans.
