It is no surprise that the Australian Competition and Consumer Commission has some issues with Seven Group’s query over its ability to mount a counter-bid to News Corp’s proposed $2 billion acquisition of James Packer’s Consolidated Media Holdings.
It has been quite obvious in all of the big sporting rights deals of recent years that Foxtel has become the pivotal player in determining the value and the free-to-air destination of the major sporting rights.
Consolidated Media, of course, owns 25 per cent of Foxtel and 50 per cent of Fox Sports so the notion that one of the free-to-airs might acquire it and gain significant influence over the affairs of the pay TV business raises some serious competition issues.
The value of a tie-up between one of the free-to-airs and Foxtel flows from the federal government’s anti-siphoning list, which gives the free-to-air networks first crack at all of the key sporting rights.
None of them have the money or the air time, however, to pay the $1 billion-plus now demanded by the major football codes and show all the games, so they need Foxtel as a partner. Indeed, Foxtel, without being able to bid alone for the rights, now broadcasts the bulk of the AFL and NRL schedules and funds the larger part of those massive rights deals.
If Foxtel were ever to enter into an exclusive alliance with one network, formally or informally, the duo would effectively be able to lock the other two commercial networks out of any realistic contest for broadcast rights – and dictate terms to the owner of those rights.
That’s why, from time to time, the market has speculated about a tie-up between Foxtel and Ten Network, given that News Corp owns the other half of Fox Sports and has a 25 per cent stake in Foxtel and Lachlan Murdoch is the dominant figure within Ten.
The issue of broadcast rights to sport seems to be the only one that particularly concerns the ACCC – it says joint bidding by Foxtel and the free-to-air networks on non-sporting rights is relatively rare, partly because the holders of the rights separate the free-to-air and pay TV rights and sell them in separate time windows.
Seven’s Kerry Stokes would have seen the ACCC’s statement of issues and its concerns about sporting rights coming.
While Seven sought the ACCC’s views on a potential acquisition of ConsMedia, in which it has a 25 per cent interest, it’s never been clear that it was actually contemplating a counter-bid and the market doesn’t believe it has the financial capacity to mount one on its own.
The approach to the ACCC has been seen more as Seven testing the range of options it has in responding to the News Corp offer and creating a perception of threat that would give it added negotiating leverage to extract some kind of extra value or concessions from News apart from the $500 million Seven would release by accepting the offer.
With the ACCC planning to make a final decision on its application by October 11 and the ConsMedia scheme meeting to vote on the News bid set for October 11 the ability of Seven to intervene, and its intentions, will presumably become clearer. Seven has the ability to vote down the scheme, which needs a 75 per cent vote in favour, in its own right.
Stokes doesn’t mind a fight but blocking the News bid would mean a stoush with both News and James Packer, who wants the $1 billion he would extract from ConsMedia to expand his casino interests.
If the ACCC’s statement of issues evolves into unambiguous opposition to the concept of a Seven bid for ConsMedia Stokes would still have the ability to vote down the scheme and therefore still have the ability to use that veto as leverage in negotiations with News and Packer.
News Ltd is the owner of Business Spectator and Eureka Report
The ACCC's check on a Stokes sport surplus
Seven Group boss Kerry Stokes is no doubt keen to extract as much value out of the impending sale of ConsMedia as possible – but the ACCC has likely, and predictably, limited his leverage.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free