The recently signed $90 million premiership naming rights sponsorship between Telstra and the National Rugby League is on the verge of collapse following a significant loss by Telstra in the Federal Court yesterday.

Telstra wants to stop the Premier Media Group, known as Fox Sports, from broadcasting game highlights online and selling the footage to arch rivals Vodafone and Hutchison. Fox Sports is owned by News Limited and PBL, and with the National Rugby League 50%-owned by News Limited, the dispute puts the NRL in a difficult, if not impossible, position.

Even though the court would not grant Telstra an injunction against Fox Sports, the matter will go to a full hearing. When that happens, the NRL will have to decide which party it will side with — its sponsor or its part-owner. The issue is further complicated by PBL, through Channel Nine, holding the free-to-air television rights for the NRL.

When Telstra renewed and upgraded its naming rights sponsorship in March — after signalling last year it would not be doing so — it indicated that the ‘new media’ opportunities were central to the new deal.

Judging by the comments from Telstra’s spokesman after yesterday’s significant court loss, the future of the $90 million sponsorship is under a very dark cloud. If Telstra withdraws, the NRL will lose in cash terms around $12 million a year — the balance is in marketing/promotions.

On the basis of Phil Gould’s assessment of the NRL finances, the NRL can ill afford to lose $12 million a year. If Telstra does walk away mid-season, it won’t be easy for the NRL to find a replacement, though financial circumstances will make it imperative for it to do so. Perhaps PBL, or News Limited, will step into the breach?

The fallout among Telstra and News and PBL may have wider ramifications given the ownership structure of Foxtel itself. This court case, regardless of the outcome, is hardly conducive to good shareholder relations!

And it is potentially very bad news for the NRL, at a time when it is under pressure to increase payments to the clubs to allow an expansion of the salary cap, and forestall rugby union poaching, which, given the parlous state of Australian rugby today, is likely to increase in the coming months.