Money Comment: Ten's new owner flunks first big test, but how much will it hurt?

16:03  16 april  2018
16:03  16 april  2018 Source:   smh.com.au

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It was the first big test for Network Ten ' s new owners , CBS. And they flunked it . After a two-month spectacle of sports broadcast rights manoeuvring involving insults, empty threats, and a permanent realignment of the media landscape - all very exciting for people who care about this stuff

It was the first big test for Network Ten ' s new owners , CBS. And they flunked it . After a two-month spectacle of sports broadcast rights maneuvering involving insults, empty threats, and a permanent realignment of the media landscape - all very exciting for people who care about this stuff

CBS exec Armando Nunez (left) and Ten CEO Paul Anderson© Louie Douvis CBS exec Armando Nunez (left) and Ten CEO Paul Anderson

It was the first big test for Network Ten's new owners, CBS.  And they flunked it.

After a two-month spectacle of sports broadcast rights maneuvering involving insults, empty threats, and a permanent realignment of the media landscape - all very exciting for people who care about this stuff -  Ten is once again the odd man out. Or the biggest loser, if you like.

Its rivals in free-to-air television both locked down rights to broadcast premium summer sport for years ahead - Seven (together with pay TV giant Foxtel) last week emerged with cricket rights in a six-year, $1 billion deal; a few weeks earlier Nine snatched the rights to tennis for $300 million over five years.

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It was the first big test for Network Ten ' s new owners , CBS. And they flunked it . After a two-month spectacle of sports broadcast rights maneuvering involving insults, empty threats, and a permanent realignment of the media landscape - all very exciting for people who care about this stuff

[18-04-15 14:16] Opinion Business Companies Media & marketing Ten ' s new owner flunks first big test all games being simulcast on pay TV In aggregate, it represents an outsized source of costs, revenues and strategic leverage between networks and distributors CBS flunked its first big test in

Ten has nothing.  But just how damaging this proves to be, especially since Ten is now under the stewardship of a deep-pocketed owner, CBS, and shielded from the short-term whims of the markets, is a live question.

It's important to note that despite all of the excitment about sports rights, networks often lose money on them.

Citi analyst David Kanyes, for example, estimates that Nine will lose $20 million to $30 million a year on its tennis coverage, which is narrower than the $50 million per year he estimates it loses on cricket.

Yet this doesn't take into account the "Halo effect" of live sport. This 'Halo effect', one of the hardest concepts among analysts to quantify, is the notion that the benefits of sport to a network go beyond the advertising booked against the coverage of it.

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CBS flunked its first big test in Australia, but it could be a blessing in disguise.

Ten ' s new owner flunks first big test , but how much will it hurt ? CBS flunked its first big test in Australia, but it could be a blessing in disguise.

Networks can advertise heavily during summer sports coverage, which attract large audiences, in a bid to generate interest in other shows that will air during the official ratings season, beginning in February.

It was clear Ten didn't want it to be this way. "Obviously, we'd like to retain the rights or renew the rights," CBS Studios International president Armando Nuñez told Fairfax Media's Financial Review last month in the early stages of the rights process.

Change the channel: Foxtel and Channel Seven will show Australian cricket coverage from next summer.© EPA Change the channel: Foxtel and Channel Seven will show Australian cricket coverage from next summer. Ten lobbed a joint bid with Nine which was rejected by Cricket Australia (famously inspiring Cricket Australia chairman David Peever to describe the network as a "bottom feeder").

Having lost out, the company is now pushing the line that it dodged a bullet. The deal on the table was merely the scraps, it privately says, after Foxtel stitched up the main course. It involved no digital rights, and all games being simulcast on pay TV.

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The argument is not entirely without merit (Nine is making similar noises). But investors on Friday seemed to disagree that Seven had merely secured the scraps. They pushed Seven West Media shares nearly 13 per cent higher. Whether those gains prove enduring once analysts have weighed in remains to be seen.

The Big Bash League was a huge hit for the ailing broadcaster, and a relatively cheap one costing it only $20 million a year.

Ten now says it will will use the funds to invest in entertainment programming that runs over the summer.  CBS, which sensationally acquired Ten last year through insolvency proceedings,  is also indicating that it is in for the long haul.

"All of us at CBS are excited for Ten’s future. The creative energies and financial resources allocated to Cricket will be invested into new original programming that will further define Network Ten as a uniquely Australian free-to-air television network,” it said in a statement.

CBS's strong position in the US is, at least in part, explained by its sports coverage, including the US Masters golf tournament, and some NFL and college football games.

But it is going to have to adopt a different formula in Australia.

The importance of sport to broadcasters in the US was explained in a note last week by Pivotal Research analyst Brian Wieser.

Although sports ratings have been struggling in the US "the genre still remains an important source of viewing of traditional TV," he wrote. "In aggregate, it represents an outsized source of costs, revenues and strategic leverage between networks and distributors."

Ten has existed without summer sport before - it actually never really had any before it secured the Big Bash League in 2013.

Now it is going to have to make do without it again.

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