Restructured Television Deal in light of Covid 19

[Karl15]

THE CURRENT DEAL

With all the discussion over the TV rights thanks to Covid19, I think it has shed a bit of light on how the current TV deal is broken up.
The deal for 2018-2022 was announced as a $1.8 billion deal by the NRL in November 2015.

The NRL annual report shows broadcast revenue as $317.992 million in 2017, and $324.995million in 2018 and broadcast contra of $23.623 million and $24.450 million in 2018 (with the accounting notes showing a 2% annual increase over the life of the deal due to the inflationary value built into the deal). That means, over the life of the deal the broadcast revenue will be $1.655 billion cash and contra will be $125 million, meaning the total broadcast deal between 2018-2022 will be $1.78 billion

Channel Nine originally signed a deal for $925 million to telecast a Thursday night, Friday night, Saturday night and Sunday afternoon game in August 2015. It was then reported that in the revised Fox/Nine/Telstra deal announced in November 2015, that Fox Sports had agreed to purchase the Saturday night game for $175 million, and paid $125 million to simulcast the Thursday, Friday and Sunday games plus the finals (excluding the Grand Final) that Nine broadcast, leaving Nine with a commitment of $625 million over 5 years.
This figure is somewhat confirmed by Nine's recent release to the ASX saying they would save $130 million if the NRL is called off. Obviously, this would mean Nine has paid $650 million not $625 million

Fox Sports last year reported Telstra had committed $15 million annually as part of the deal, including $20 million in over the life of the deal as a digital partner.

That would mean the break up of the television deal would be as follows :
$650 million paid by Nine
$950 million cash paid by Fox Sports
$125 million contra provided by Fox Sports
$55 million paid by Telstra
$20 million paid by Telstra as a digital partner
totals $1.8 million as reported when the deal was announced,
This matches the NRL annual report figures of $1.655 in broadcast revenue, $125 mil as contra and $20 mil in digital revenue (digital revenue would also include some advertising on their website)

I'm assuming the contra is all Fox Sports' as Nine reported to the ASX that the $130 million in savings if the NRL didn't go ahead would affect both P&L and cashflow

If I was trying to monetarise what each game is worth annually for Channel Nine, I would estimate
25 x Sunday afternoon games $1 million each
25 x Thursday night games $1.3 million each
25 x Friday night games @ $1.3 million each
8 x Finals @ $2.5 million each
1 x Grand Final @ $5 million each
3 x State Of Origin @ $5 million each
TOTAL $130 million

If I was trying to monetarise what each game is worth annually for Fox Sports, I would estimate (cash only) based on how they ne-negotiated with Nine in 2025
75 x Simulcast Nine games @ $275,000 each
8 x Simulcast Nine finals @ $546,875 each
117 Exclusively live games @ $1.41 million each
TOTAL $190 million

2020 AS IT CURRENTLY STANDS

What does that mean for 2020 under the current deal?
If the NRL was to play 15 rounds, 3 Origins + finals as reported, the amount owing by the networks would be :

CHANNEL NINE
30 x Thursday and Friday night games @ $1.3 million each
15 x Sunday games @ $1 million each
8 x Finals @ $2.5 million
1 x Grand Final @ $5 million each
3 x State Of Origin @ $5 million each
TOTAL $94 million

FOX SPORTS
45 x Simulcast Nine games @ $275,000 each
8 x Simulcast Nine finals @ $546,875 each
75 Exclusively live games @ $1.41 million each
TOTAL $140.5 million
TOTAL NINE + FOX $234.5 million

WHAT DOES THAT MEAN GOING FORWARD?

From here on, this is just contecture on my part

The issue facing the NRL and the networks, is with the impact of Covid19 and nobody spending advertising money, is that Nine doesn't have $94million to spend this year. Fox Sports doesn't really have $140 million to spend either, but if they don't start getting some live sport back on Kayo & Foxtel, they're both likely to fall over, which will cost News Corp much more than $140 million. Hence, why Fox Sports (and don't think for a second News Corp wouldn't lay the boot into the NRL if it suited them) haven't publicly bought into Channel Nine's fight

Channel Nine has been agitating to rewrite the NRL agreement. In other words, pay less money but also gives them the chance to change parts of the deal that haven't worked for them. Thursday night hasn't proved as big of a hit as they had hoped, and they have found that Foxtel having live simulcast rights has affected their ratings much more than they expected. I expect what Nine will ask on an extended deal is (at current cost)

25 x Fri games currently $1.3 mil each + $275K exclusivity)
25 x Sun games currently $1 mil each + $275K exclusivity)
8 x Finals @ $2.5 million + $546,875 exclusivity
1 x Grand Final @ $5 million each
3 x State Of Origin @ $5 million each
TOTAL $115.625 million
I suspect Channel Nine will ask for that package at about $100 million per year going forward, meaning Nine is asking for a 13.5% discount going forward

Fox Sports won't like losing their advertising pitch of Every game live, but the plus for them is they would pick up an additional exclusive game each week. I suspect Nine will push strongly for their Friday night game to be the other one played) so the 6.00 Friday game will be pushed to Sunday night. Fox Sports also preferred Monday nights to Thursday nights in the previous deal, so I suspect the Thursday night will be moved to Monday night. This works well for the NRL as well, this gets the Friday night Channel Nine game back as the first game of the round, and the undoubted "Game of the round." Also, by having 1 game Friday, 3 games Saturday, 3 games Sunday 1 game Monday, it makes it easier to design a draw where players always get 6 days rest
I expect what Fos Sports will ask for in an extended deal is (at current cost)
21 x 3.00 Saturday games @ 1.41million each
25 x 5.30 Saturday games @ $1.41 million each
25 x 7.30 Saturday games @ $1.41 million each
21 x 2.00 Sunday games @ $1.41 million each
25 X 6.30 Sunday games @ $1.41 million each
25 x 7.00 Monday games @ $1.41 million each
TOTAL $200.22 million
Fox Sports won't pay more than they are now, so will agree to paying the $190 million they pay now. That's essentially a 5.1% discount on current rates

Add in $10mil contra from Fox Sports, the $100 million from Nine and $190 million from Fox Sports, and it adds up to $300 million per year. The NRL can announce a TV deal of $1.8 million for 2021-2026, the same as their last deal so they can save face (even though it's for an extra year)

WHAT ABOUT 2020 NOW?

The NRL is still keen on running their 15 round season. I think Nine and Fox Sports will agree to the new game times and broadcasting arrangements to start immediately, and the NRL will agree to an approximate 20% discount on this years games. I think the deal will end up looking something like this
Cost per game 2020 Cost per game 2021-26
Friday Night Game 8.00 NINE $1.09 million $1.36 million
Saturday 3.00 FOX $1.07 million $1.34 million
Saturday 5.30 FOX $1.07 million $1.34 million
Saturday 7.30 FOX $1.07 million $1.34 million
Sunday 2.00 FOX $1.07 million $1.34 million
Sunday 4.00 NINE $0.88 million $1.1 million
Sunday 6.30 FOX $1.07 million $1.34 million
Monday 7.00 FOX $1.07 million $1.34 million
8 x Semi Finals NINE $2.1 million $2.64 million
1 x Grand Final $3.46 million $4.32 million
3 x State Of Origin $3.46 million $4.32 million

The total for the 2020 NRL TV rights (excluding contra) for 15 rounds will be

NIne Network
2 x Thursday night games @ $1.09 million
15 x Friday night games @ $1.09 million
15 x Sunday games @ $0.88 million
8 x Semi Finals @ $2.1 million
1 x Grand Final @ $3.46 million
3 x Origin @ $3.46 million
TOTAL$62.37 million

Fox Sports
6 x Simulcast Nine games (Rounds 1-2) @ $198,000
88 Exclusive Live Games @ $1.07 million
TOTAL $95.348 million
TOTAL NINE + FOX in 2020 (20% discount) $157.718 million

 

[Perth Red]

Good break down of the figures. There's a couple of areas in regards to linking the 18&19 media revenue in the NRL annual report you need to factor in. One is overseas rights, around $20mill a year, other is the cash advances the game got on this deal which will have come off the amounts now being shown annually. From memory it was $100mill from Fox and $50mill from Nine. Finally digital revenue isnt sitting in the media revenue line, its sitting in the non-media revenue line.

Id be surprised if each SOO isnt worth more than $5million. Not sure what a top rated programme sells in advertising but Id have thought 3 one off events that are responsible for a significant top market positioning would be worth more?

Nine have already paid the 1st qtr of this year so their savings are more like 75% of $125mill ie $93.75 mill to NRL (plus of course savings on production costs)

Is the $15mill Telstra element a payment to Fox as their partner or to the NRL Also where does the naming rights sit in all that? (worth around $10mill a year at least)

 

[Karl15]

Thanks for the feedback Perth Red. You’re right about the international rights - New Zealand would be worth maybe $20mil a year at a guess and I suspect we give it away to anyone who wants to show it in other countries. I don’t think the prepayment should affect the P&L figures in the nrl annual report, it would affect cash flow but the income item would be adjusted for it (I know, i’m an accountant and sound like it )

 

[Karl15]

Perth red, I also wouldn’t be surprised be surprised if the international rights were sold to fox sports as part of the deal and they onsell them to sky in nz

 

[Perth Red]

Perth red, I also wouldn’t be surprised be surprised if the international rights were sold to fox sports as part of the deal and they onsell them to sky in nz

That hasn't been the case previously and doubt it would have been this time given they are worth around $20mill a year.

Its interesting that the main goal is raising more revenue That seems like a logical goal for any business, but when you start to eat at the core of what your business exists for to do it you have to question if it is top priority. Maybe by reducing club spending and the need for such large funding to states the game cold choose media partners and deals that were in the best interest of fans. Can anyone honestly say as a fan of a NRL club the last 7 years of year on year revenue increases has significantly added to their enjoyment or motivation of following their club?

 

[colly]

THE CURRENT DEAL

With all the discussion over the TV rights thanks to Covid19, I think it has shed a bit of light on how the current TV deal is broken up.
The deal for 2018-2022 was announced as a $1.8 billion deal by the NRL in November 2015.

The NRL annual report shows broadcast revenue as $317.992 million in 2017, and $324.995million in 2018 and broadcast contra of $23.623 million and $24.450 million in 2018 (with the accounting notes showing a 2% annual increase over the life of the deal due to the inflationary value built into the deal). That means, over the life of the deal the broadcast revenue will be $1.655 billion cash and contra will be $125 million, meaning the total broadcast deal between 2018-2022 will be $1.78 billion

Channel Nine originally signed a deal for $925 million to telecast a Thursday night, Friday night, Saturday night and Sunday afternoon game in August 2015. It was then reported that in the revised Fox/Nine/Telstra deal announced in November 2015, that Fox Sports had agreed to purchase the Saturday night game for $175 million, and paid $125 million to simulcast the Thursday, Friday and Sunday games plus the finals (excluding the Grand Final) that Nine broadcast, leaving Nine with a commitment of $625 million over 5 years.
This figure is somewhat confirmed by Nine's recent release to the ASX saying they would save $130 million if the NRL is called off. Obviously, this would mean Nine has paid $650 million not $625 million

Fox Sports last year reported Telstra had committed $15 million annually as part of the deal, including $20 million in over the life of the deal as a digital partner.

That would mean the break up of the television deal would be as follows :
$650 million paid by Nine
$950 million cash paid by Fox Sports
$125 million contra provided by Fox Sports
$55 million paid by Telstra
$20 million paid by Telstra as a digital partner
totals $1.8 million as reported when the deal was announced,
This matches the NRL annual report figures of $1.655 in broadcast revenue, $125 mil as contra and $20 mil in digital revenue (digital revenue would also include some advertising on their website)

I'm assuming the contra is all Fox Sports' as Nine reported to the ASX that the $130 million in savings if the NRL didn't go ahead would affect both P&L and cashflow

If I was trying to monetarise what each game is worth annually for Channel Nine, I would estimate
25 x Sunday afternoon games $1 million each
25 x Thursday night games $1.3 million each
25 x Friday night games @ $1.3 million each
8 x Finals @ $2.5 million each
1 x Grand Final @ $5 million each
3 x State Of Origin @ $5 million each
TOTAL $130 million

If I was trying to monetarise what each game is worth annually for Fox Sports, I would estimate (cash only) based on how they ne-negotiated with Nine in 2025
75 x Simulcast Nine games @ $275,000 each
8 x Simulcast Nine finals @ $546,875 each
117 Exclusively live games @ $1.41 million each
TOTAL $190 million

2020 AS IT CURRENTLY STANDS

What does that mean for 2020 under the current deal?
If the NRL was to play 15 rounds, 3 Origins + finals as reported, the amount owing by the networks would be :

CHANNEL NINE
30 x Thursday and Friday night games @ $1.3 million each
15 x Sunday games @ $1 million each
8 x Finals @ $2.5 million
1 x Grand Final @ $5 million each
3 x State Of Origin @ $5 million each
TOTAL $94 million

FOX SPORTS
45 x Simulcast Nine games @ $275,000 each
8 x Simulcast Nine finals @ $546,875 each
75 Exclusively live games @ $1.41 million each
TOTAL $140.5 million
TOTAL NINE + FOX $234.5 million

WHAT DOES THAT MEAN GOING FORWARD?

From here on, this is just contecture on my part

The issue facing the NRL and the networks, is with the impact of Covid19 and nobody spending advertising money, is that Nine doesn't have $94million to spend this year. Fox Sports doesn't really have $140 million to spend either, but if they don't start getting some live sport back on Kayo & Foxtel, they're both likely to fall over, which will cost News Corp much more than $140 million. Hence, why Fox Sports (and don't think for a second News Corp wouldn't lay the boot into the NRL if it suited them) haven't publicly bought into Channel Nine's fight

Channel Nine has been agitating to rewrite the NRL agreement. In other words, pay less money but also gives them the chance to change parts of the deal that haven't worked for them. Thursday night hasn't proved as big of a hit as they had hoped, and they have found that Foxtel having live simulcast rights has affected their ratings much more than they expected. I expect what Nine will ask on an extended deal is (at current cost)

25 x Fri games currently $1.3 mil each + $275K exclusivity)
25 x Sun games currently $1 mil each + $275K exclusivity)
8 x Finals @ $2.5 million + $546,875 exclusivity
1 x Grand Final @ $5 million each
3 x State Of Origin @ $5 million each
TOTAL $115.625 million
I suspect Channel Nine will ask for that package at about $100 million per year going forward, meaning Nine is asking for a 13.5% discount going forward

Fox Sports won't like losing their advertising pitch of Every game live, but the plus for them is they would pick up an additional exclusive game each week. I suspect Nine will push strongly for their Friday night game to be the other one played) so the 6.00 Friday game will be pushed to Sunday night. Fox Sports also preferred Monday nights to Thursday nights in the previous deal, so I suspect the Thursday night will be moved to Monday night. This works well for the NRL as well, this gets the Friday night Channel Nine game back as the first game of the round, and the undoubted "Game of the round." Also, by having 1 game Friday, 3 games Saturday, 3 games Sunday 1 game Monday, it makes it easier to design a draw where players always get 6 days rest
I expect what Fos Sports will ask for in an extended deal is (at current cost)
21 x 3.00 Saturday games @ 1.41million each
25 x 5.30 Saturday games @ $1.41 million each
25 x 7.30 Saturday games @ $1.41 million each
21 x 2.00 Sunday games @ $1.41 million each
25 X 6.30 Sunday games @ $1.41 million each
25 x 7.00 Monday games @ $1.41 million each
TOTAL $200.22 million
Fox Sports won't pay more than they are now, so will agree to paying the $190 million they pay now. That's essentially a 5.1% discount on current rates

Add in $10mil contra from Fox Sports, the $100 million from Nine and $190 million from Fox Sports, and it adds up to $300 million per year. The NRL can announce a TV deal of $1.8 million for 2021-2026, the same as their last deal so they can save face (even though it's for an extra year)

WHAT ABOUT 2020 NOW?

The NRL is still keen on running their 15 round season. I think Nine and Fox Sports will agree to the new game times and broadcasting arrangements to start immediately, and the NRL will agree to an approximate 20% discount on this years games. I think the deal will end up looking something like this
Cost per game 2020 Cost per game 2021-26
Friday Night Game 8.00 NINE $1.09 million $1.36 million
Saturday 3.00 FOX $1.07 million $1.34 million
Saturday 5.30 FOX $1.07 million $1.34 million
Saturday 7.30 FOX $1.07 million $1.34 million
Sunday 2.00 FOX $1.07 million $1.34 million
Sunday 4.00 NINE $0.88 million $1.1 million
Sunday 6.30 FOX $1.07 million $1.34 million
Monday 7.00 FOX $1.07 million $1.34 million
8 x Semi Finals NINE $2.1 million $2.64 million
1 x Grand Final $3.46 million $4.32 million
3 x State Of Origin $3.46 million $4.32 million

The total for the 2020 NRL TV rights (excluding contra) for 15 rounds will be

NIne Network
2 x Thursday night games @ $1.09 million
15 x Friday night games @ $1.09 million
15 x Sunday games @ $0.88 million
8 x Semi Finals @ $2.1 million
1 x Grand Final @ $3.46 million
3 x Origin @ $3.46 million
TOTAL$62.37 million

Fox Sports
6 x Simulcast Nine games (Rounds 1-2) @ $198,000
88 Exclusive Live Games @ $1.07 million
TOTAL $95.348 million
TOTAL NINE + FOX in 2020 (20% discount) $157.718 million

Thax for all the work you put in -good info

 

[magpie_man]

Compelling reading, thanks Karl

 

[Starkers]

great work Karl15

 

[taipan]

Yep Karl15, you "done" good on that assessment.

 

[Stormwarrior82]

Karl15 - good job on the details.
When talking about total 18-22 tv deal I believe the clubs did receive about $50mil as an advance payment prior to the TV deal started.

wonder if the nrl will bring up the fact that playing all games in the same stadiums will significantly decrease the production costs for broadcasters.

not sure why everyone thinks 2021 and 2022 should be renegotiated as well? They should be business as usual. hold them to the current deal in those years unless the broadcasters are willing to pay more.

 

[tri_colours]

I don't have access to the Telegraph , but there latest headline says Ch.10 have withdrawn from any bidding war.

Coming from the Telegraph I would put my house on it though.

 

[magpie_man]

I don't have access to the Telegraph , but there latest headline says Ch.10 have withdrawn from any bidding war.

Coming from the Telegraph I would put my house on it though.

They likely won't need RL, they've just gotta wait for 7 to keel over and then scoop up the AFL for a song...

 

[Starkers]

Gould now taking a more measured angle towards the NRL ... feels like Ch9 got the message: https://www.news.com.au/sport/nrl/p...m/news-story/8d39dd5cd77785ee523e97f34cb88b67

 

[Phil McGrawhan]

Lol the mention Of Ch 7 interest has really got 9 acing a lot friendlier .

 

[Vee]

Very different attitude from Gould while still trying to save face and say that Nein are really good guys who care about the game. More BS from BS.

 

[Perth Red]

Gould now taking a more measured angle towards the NRL ... feels like Ch9 got the message: https://www.news.com.au/sport/nrl/p...m/news-story/8d39dd5cd77785ee523e97f34cb88b67

"Free-to-air broadcast partner Nine, which tips millions of dollars into NRL coffers each year along with Fox Sports"

Anyone would think they are donating the money! They are buying a product that allows them to make more money ffs!

“Whatever money is invested in the game into the future has to be better managed than it was, the money has to be put aside for rainy days and the game needs to be able to support itself financially for a long period of time,” Gould said

WTF, he's still on it. The NRL had about $75million plus the $6million club bail out fund in the bank when this hit. How much does he think the NRL should put away "just in case"? No business is carrying 50% of annual revenue in an emergency fund you idiot!

Someone needs to remind him of what he said in 2016!
Gould: "At the end of the day this commission and this game needs to put the players and the clubs first because they put on the show and they've been playing catch up for some time."
https://www.smh.com.au/sport/nrl/pe...t-solve-nrl-funding-feud-20161202-gt2cck.html

 

[ground zero]

NRLA Should invest in stadiums. Offer the Govermeant rent free stadiums parra etc

 

[Perth Red]

NRLA Should invest in stadiums. Offer the Govermeant rent free stadiums parra etc

afl had to borrow heavily to buy marvel and that was at a significantly knocked down price. I’m sure if nsw gifted nrl bankwest for $75mill they’d buy it! Imagine how much flak the nrl would get now if they were carrying a $200mill debt because they’d bought a stadium!
Not sure what the profit margin is on owning a stadium, they’d be a lot of maintenance and over heads and doubt nrl clubs would want to pay full whack rental. You’d also need one with multiple tenants to make it worthwhile so your only talking about three possible stadiums, Anz, bankwest or allianz. Marvel stadiums hostS. 43 afl games a season plus 5 Aleague. For nrl equivalent would mean 4 Sydney clubs playing out of one stadium fulltime.
Which stadium do you suggest they should buy?

 

[Starkers]

NRL should just be given the Homebush precinct. Stick a leagues club there, maybe a wet n wild.