NHL deal to help Rogers in pick-and-pay regime: analysts

Rogers Communications Inc.’s new 12-year deal for the broadcast and multi-platform rights to National Hockey League games is a $5.2-billion bet that Canadians will pay to maintain access to NHL games if they’re forced to choose between costly sports specialty channels in a future pick-and-pay environment, industry analysts said. In a release Tuesday, Rogers said it reached a deal with the NHL that will give Rogers-owned broadcast stations the TV and multi-platform distribution rights to all nationally televised NHL games starting in the 2014-2015 season and running through 2025-2026. Under separate deals, Rogers will sub-licence the broadcast rights to some games to CBC/Radio-Canada and Quebecor Media Inc.’s TVA Group Inc. subsidiary over part of that time, the company said. Nadir Mohamed, Rogers’ chief executive, said in a press conference Tuesday that the NHL content will help “solidify” Rogers’ position “as Canada’s number one sports destination.” “Sports content is a strategic pillar for Rogers and NHL hockey is the Holy Grail,” Mohamed said at the Toronto press conference. “Two years ago, I said we wanted Sportsnet to be the number one sports media brand in Canada. Today, we’re positioned to do just that.” The Rogers deals come at a time when the CRTC is consulting on the future of the Canadian broadcasting system, and shortly after the federal government said in its October throne speech that it wants to see Canadian TV consumers have more flexibility to subscribe to the individual channels they want, as opposed to larger, pre-packaged bundles of channels. The deals also come at a time when fears over consumer cord-cutting have led to increased competition over the sports content rights as broadcasters gamble that live sports content can continue to appeal to those consumers in an environment where consumers have more programming options, such as over-the-top services like Netflix. According to CRTC data released in April, the Rogers-owned Sportsnet specialty channel was one of the most profitable specialty stations in Canada in the 12-month period that ended Aug. 31, 2012, recording $21.6 million in pre-tax profits over that period while serving approximately 8.8 million subscribers. Rogers-owned spin-off channels Sportsnet One and Sportsnet World recorded $28.5 million and $2.4 million in pre-tax profits over that same period with 6.1 million and 91,000 subscribers, respectively, while The Score, which Rogers purchased earlier this year and subsequently rebranded as Sportsnet 360, had 6.7 million subscribers and $5.2 million in pre-tax profits in the 2012 broadcast year. BCE Inc.-owned TSN, a rival sports specialty channel, was the most profitable specialty channel in the 2012 broadcast year with $37 million in pre-tax profits and 9.2 million subscribers. TSN has been shut out of national NHL broadcasts after this season. Brian Schecter, a media consultant and president of Puddle Duck Productions in Vancouver, said in a telephone interview that Rogers’ deals with the NHL are designed to protect Sportsnet from subscriber losses in a pick-and-pay TV environment, particularly if consumers decide they can’t afford to subscribe to both TSN and Sportsnet. “If the government is serious about going to pick-and-pay … betting that people are more interested in taking hockey than they are in taking NFL football,” Schecter said in reference to TSN’s rights to NFL and CFL football games. “Rogers is making a very strong statement that they’re no longer thinking of themselves as the junior partner in the Canadian sports cable world, that they’re going to be the dominant player.” Gord Hendren, president of Charlton Strategic Research agreed that Rogers’ arrangement with the NHL sets it up well for a pick-and-pay environment. “Certainly, in that world, I think this is going to be an asset for Rogers,” he said in a phone interview. RBC analyst Drew McReynolds said in a phone interview that Rogers’ deal for the NHL rights is consistent with its long-term efforts to anchor its broadcast properties around high-demand sports content. He said the deal will position Rogers to “battle” with TSN for sports viewers in a pick-and-pay environment. “Ultimately, if you do go to a pick-and-pay environment over time, if you look at the penetration of Sportsnet and TSN in Canada, it’s unlikely that both of them are going to hold their levels,” McReynolds said. “It will ultimately boil down to some households picking one over the other. There is no question this helps Sportsnet along in that battle.” McReynolds said Sportsnet’s access to national NHL games should also allow Rogers to increase the price tag of the carriage deals it strikes with other broadcast distributors that want to offer Sportsnet to their subscribers. Sportsnet had $115 million in subscriber revenues in the 2012 broadcast year, the CRTC data said, accounting for nearly half of the channel’s $234 million in total revenues. The deal with the NHL, McReynolds added, could also help Rogers maintain cable-TV subscribers by offering them additional access to view games and bonus content through their mobile devices and personal computers when they’re away from home. “If Rogers can present a very effective sports anchor to TV everywhere … all of a sudden you’ve got access to all of these games on smartphones and tablets, it may make you think twice in terms of cutting the cord,” he said. Scott Henderson, a spokesman for BCE’s Bell Media subsidiary, said in an emailed statement Tuesday that TSN will continue to broadcast regional NHL games in the years ahead, as will its French-language station, RDS. He said TSN will air 10 Toronto Maple Leafs games in the 2014-2015 season, 26 Maple Leafs games starting in 2015-2016, and more than 60 Winnipeg Jets games through 2021. RDS, he said, has a deal to carry Ottawa Senators and Montreal Canadiens games this year and expects to renegotiate a longer deal for those rights. BCE, Henderson added, also pursued a deal to secure the rights for the national NHL games secured by Rogers. “We submitted a bid we believed was valuable for the NHL and appropriate for our business but were ultimately outbid,” he said. “In hockey, our partnerships with the Leafs, Jets, Canadiens, Sens, and Hockey Canada (including the World Juniors) remain core to our TSN and RDS TV, radio and digital properties.” Rogers said in its release that the 12-year deal with the league will require the company to pay “just over” $300 million in the 2014-2015 NHL season that begins next October, with annual payments increasing to more than $500 million by the last year of the deal. The company, it added, will also pay a $150-million fee up front. Under Rogers’ sub-licensing deals with CBC, the public broadcaster will continue to air its flagship Hockey Night in Canada program featuring regular season hockey games on Saturday nights over the next four years, as well as some playoff games including the Stanley Cup Finals. The public broadcaster, which has seen its parliamentary appropriations cut by $115 million since 2012, paid approximately $100 million per year for the national NHL rights, the Globe and Mail reported in 2007 when CBC signed its most recent deal with the NHL. Hubert Lacroix, CBC’s president and CEO, said at the press conference Tuesday that the Crown corporation was not “in a position to spend taxpayers’ money” in the “high stakes” game of hockey broadcast rights. He noted that CBC will not pay Rogers to sub-licence any of the NHL games under the new deals, and that Rogers will receive all of the revenues from those broadcasts. “Rogers takes on all of the revenues from all of the properties,” he said. “We have no costs that come with that so we don’t pay any broadcasting rights. … What we get out of this the ability to continue to promote some of our programs through the iconic Hockey Night in Canada evening.” TVA Sports, TVA Group’s sports specialty channel, will also gain exclusive access to French-language, multi-platform rights to national NHL games as part of a separate “multi-year” deal, Rogers said. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

NHL deal to help Rogers in pick-and-pay regime: analysts

News | November 26, 2013

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