Playing the long game could set league free, but no one's interested
Roy Masters
November 5, 2011
WITH the November 1 deadline for the inception of the independent commission passing, NRL clubs are in a powerful position to break the chains of the first-and-last-rights clause in the broadcasting contract the code has with co-owner News Ltd.
Rupert Murdoch's media empire has overarching control over free-to-air, pay-TV and online rights until 2027, meaning News Ltd merely has to equal the offer of a rival over the next 16 years to retain the rights.
The AFL has no such strictures, so when it negotiated its $1.25 billion contract with broadcasters, there were no ''lift up your skirt'' clauses that gave a rights holder access to the programming secrets of rivals, no global gorilla with the contractual option to chase every other bidder out of the room.
News Ltd's long-term control has the potential to depress broadcasting fees, despite NRL eclipsing AFL coverage this past season by 15 million cumulative viewers.
NRL clubs, which have refused to sign deeds releasing power to the proposed independent commission, are typically concerned only with immediate cash payments.
They have given little thought to News Ltd relinquishing its first-and-last-rights control as a condition of their signing the club deeds.
NRL chief executive David Gallop has been instructed by the current owners of the game - News Ltd and the ARL - not to begin negotiations with broadcasters until the independent commission is installed.
Any delay in the transfer of power to the new body will stall negotiations for broadcasting rights beginning in 2013 and therefore block the cash the clubs so desperately seek. However, the clauses in the existing broadcasting contracts are so complicated, the NRL is likely to spend most of next year in court anyway.
The free-to-air rights holder, Channel Nine, has a first-and-last-rights clause, and believes its highly valuable State of Origin property - which Channel Seven covets - can't be unbundled, as Gallop has intimated. Nine is expected to challenge the legality of any attempt to separate the three-game Origin series, or Test matches, from its existing contract.
Fox Sports, the pay-TV rights holder and joint venture between News Ltd and James Packer's Consolidated Media Holdings, also has a first-and-last-rights option. It charges Foxtel for the five games it supplies the subscription network, meaning Telstra, which half-owns Foxtel, funds the significant profits going to News Ltd and Packer. Who knows how long Telstra will tolerate this?
Telstra holds the first and last internet rights to NRL but is already in the Federal Court with the league over an action by Optus to stream content via Fetch, a potential rival to Foxtel. Sky New Zealand, a monopoly pay-TV company part-owned by News Ltd, holds NRL rights across the Tasman.
Unlike the Nine, Fox Sports and Telstra contracts, which expire at the end of next season, the Sky NZ deal has already concluded. Sky has made it clear it wants to pay less than the current $14 million a year, and has cited depressed ratings figures in this Rugby World Cup year.
However, ratings in the previous three years were positive and this year's finals, based on the exciting form of the Warriors, registered a big lift. Sky is offering less because it can, a warning Fox Sports could do the same. However, Foxtel needs to lock up premium sports content before the national broadband network roll-out, expected to be completed in the next five to seven years.
Foxtel has been instructed to reach 50 per cent of homes before the NRL can use the broadband network to launch NRL.com, an online service where all games are produced by the code and streamed live to homes. .
News Ltd's first and last rights until 2027 allow it to match any broadcasting proposal an independent commission would put before it, but News might find it less expensive to set up a new competition.
This is the basis of the demand by NRL clubs that News provide a guarantee it won't start another Super League. It cost News $450 million for the last rival league, and in the post-News of the World landscape, it would be unwilling to waste billions on another unpopular Super League.
Instead, the clubs, not bound by any licence agreements with the NRL, are the ones that could go it alone, backed by private funding. After all, formula one is worth billions and is owned by CVC Capital Partners … which also owns Channel Nine.
But the clubs are typically short-sighted, thinking only of next year's cash, rather than breaking the shackles of first-and-last broadcasting rights, which will keep the NRL in court next year, delaying any payment to anyone.
