After Nine’s cricket catch comes Ten’s next serve

Ten will probably enter a bidding rally with Seven for the 2015 tennis rights, and after watching the cricket rights war Tennis Australia should be licking its lips.

Maybe it says something about the state of cricket in Australia when the process behind its commercial rights negotiations seems to get more press than the team’s upcoming tour of England.

Regardless, there has been more reported about Cricket Australia’s current broadcast negotiations than there has been in years past, with Nine emerging triumphant at the eleventh hour with the rights to the highly contested test, one day international and international Twenty20 matches.

Ten, who had put in a significant $500 million bid for the entire rights suite, managed to successfully win the rights to the domestic Twenty20 Big Bash League at a price of $85 million in cash for a five year term. The Sheffield Shield and the domestic one day competition were not a part of either the Ten or Nine deal, and are expected not to be picked up by any broadcaster.

Cricket Australia would be satisfied with the result. The combined price Nine and Ten are paying over five years represents a 60 per cent increase on the previous rights deal. On top of that, Nine has thrown in a reported $50 million of contra advertising, with Ten giving up $15 million of contra over the five years.

The fact that Nine matched Ten’s aggressive offer demonstrates the value that live sport can command in this country. At the same time it shows that there are only a handful of live sport rights that are worth serious money and can command serious audience – these being the AFL (held by Seven), V8 Supercars (held by Seven), NRL (held by Nine), the Australian Open tennis (held by Seven) and the cricket (Nine and Ten). Deals for these franchises are generally longer term and subject to first and last rights options by the incumbent broadcaster, allowing them to match or better any competing deal.

Ten CEO Hamish McLennan has openly stated the network wants a high profile sporting code on the network and explained that, strategically, sport can provide a solid foundation to fuel audience for other programing, the problem seems to be that securing one is proving difficult.

The current NRL deal covering Nine and Fox Sports doesn’t expire until 2017, with the current five year AFL deal across Seven and Fox Sports ending in 2016. Seven signed a two year deal with V8 Supercars earlier in 2013 which will expire at the start of 2015, and Nine’s current cricket deal covering international test, ODI and Twenty20 will extend out to the completion of summer in 2018. This rules out AFL, NRL, V8’s and Cricket. The only sport left for Ten to make a serious play at is the Australian Open tennis, its current five year deal expiring at the completion of the 2014 event. If Ten misses out on the tennis the reality is it won’t be able to secure a major sporting franchise until 2015 at the earliest, not an ideal situation for a new CEO who is under pressure to turn things around at the network.

The last deal struck by Seven and Tennis Australia valued the Australian Open at a yearly cost of around $21 million. That is roughly the same price Ten valued the domestic Twenty20 competition at in the just completed Cricket Australia negotiations. There is no doubt that the next tennis deal beginning with the 2015 Australian Open will command a significant premium to the price Seven has been paying. But how much?

Back in January members of the Tennis Australia board were pushing to lock in broadcast rights with Seven without looking elsewhere, despite the Australian Open providing its host broadcaster with perhaps the most powerful programing marketing vehicle in Australia. Given the spirited bidding over the cricket, especially with the Australian team’s recent performance issues, this recommendation seems strategically flawed. It is entirely possible that when Ten bids for the tennis against Seven later this year it could drive the price close to $40-$50 million annually.

Would Seven pay $40-50 million per year if it was forced to? The answer is probably yes. The Australian Open provides over 160 hours of programming right before the commencement of the ratings year. The evening sessions of the tennis are historically strong performers - with a metro ratings range anywhere between 900,000 and 1.3 million during week one, and - depending on victors – 1.3 million to 2 million in the finals week. Seven is a well-oiled machine when it comes to packaging and selling cross platform advertising for the tournament, yet the real win it receives isn’t necessarily from ad sales, but the springboard it offers its key February to June programing suite.

This year saw Seven heavily promote the likes of My Restaurant Rules, Packed to The Rafters, AFL, Revenge, A Place to Call Home and Sunday Night – all of which have performed well for Seven and played a large role in its consistent ratings wins in the year so far. It also provides valuable cross promotion for Seven’s leading news, morning and current affairs vehicles. In short, it gives Seven a huge advantage at the start of the ratings year to promote its shows in a powerful way.

Ten understands the value of this as much as Seven. Its low overall ratings position, coupled with its lack of other media assets has made it tough for the network to build audience for key programing. While Masterchef Professionals premiered at the 1.2 million mark in late January for Ten, it quickly dipped below 1 million and by mid-March was at 721,000 for the marquee Sunday night episode. In contrast, My Kitchen Rules premiered at 1.6 million for Seven late January, however was delivering close to 2 million viewers per episode in mid-March. With Ten struggling to get a show aside its 5pm News in the nightly top 20, the network is left without a strong vehicle to promote upcoming programing.

The tennis could provide Ten with this, as well as 14 days and nights of strong programing in January, a positive story for investors, and good news story for advertisers. The tennis plus Big Bash Twenty20 puts some oomph behind Ten’s sport suite, and would also setup a never before seen January programing battle, a battle where Seven is potentially left without the programing foundation it has had for the better part of the past four decades. Surely Hamish McLennan must be wondering ‘what if’ in this scenario and what it could mean to restoring Ten’s value to shareholders, staff and advertisers.

The real winner from the cricket broadcast rights deal might not be Cricket Australia, or Ten, or Nine. It might well be Tennis Australia, who finds themselves in the perfect situation with a highly sought after broadcast asset, a market with no other large scale sports rights available, and two broadcasters who don’t want to have to face the prospect of not securing it.

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