News Corp CEO Robert Thomson’s arrival in Australia to drive the pay TV rights deal with the National Rugby League was the biggest backflip in Murdochdom since Rupert killed off News of The World back in 2011. That was an empire-saving decision, while Thomson’s rushed trip was the culmination of a decision to swallow a lot pride and nail a deal ASAP.
Rupert Murdoch was nowhere to be seen this time around, unlike in his mischief-making appearance for the signing of the AFL rights in mid-August. Thomson was just as culpable as his master in slagging the NRL for daring to do a deal with the Nine Network, which is the big winner by moving first and grabbing pole position, then reducing its costs by forcing others to buy key parts of its NRL deal from it. News/Fox Sports/Foxtel were out-played by David Gyngell, the former Nine CEO, and former NRL boss Dave Smith, hence the dummy spit and bagging of the NRL by Murdoch and Thomson at the AFL signing in August, with promises to henceforth favour the AFL over the NRL in the empire’s newspapers.
Some sports rights experts reckon Murdoch and Thomson’s hubris allowed the AFL to grab up to $200 million in extra value from the Murdoch empire — a move the NRL has now all but matched. That will bring a wry chuckle from the now-departed Dave Smith (News forced him out, via its hectoring Sydney and Brisbane tabloids). Gyngell has left Nine on a high in the wake of the best deal of his career. The Murdoch empire has sued to save itself and boosted the standing of the NRL, the commission that runs it and its chair, John Grant, who was under pressure from the cabal of greedy club chairmen who wanted more money to fill black holes in their battered balance sheets.
What changed everything was the sudden appearance of Optus as a possible rights contender (and reports of interest from a Middle East broadcaster). Optus snapped up the broadcast and streaming rights to the English Premier League in Australia, outbidding a complacent Fox Sports, which because its UK affiliate Sky was the No. 1 EPL broadcaster in the UK, thought it had a lock on the Aussie rights, as it had had for years. Optus then trailed its coat across the NRL impasse, sparking another bout of hubris from Thomson, who bagged the fans of the EPL in Australia, calling them “tragics” and bagged the quality of the EPL.
Within a week to 10 days of the Optus EPL deal emerging, talk started of a re-engagement between the NRL and News/Fox Sports/Foxtel, and a fortnight ago it was clear that a deal was on the way, culminating with the flurry of reports, meetings and leaks this week. Thomson’s secret, rushed visit to Australia (until news of his involvement leaked via the Fairfax papers) told the story. News Corp management and the Murdochs realised that to lose the NRL rights would cripple Foxtel (enraging its partner, Telstra, which has started the process of leaving Foxtel), all but wipe out Fox Sports, force massive financial write-downs on Foxtel (the nearly $2 billion it paid for Austar would be worth considerably less) and inflict massive losses on News Corp itself.
Why? Well, as explained previously, the NRL is central to the fortunes of Fox Sports and Foxtel, not the AFL. NRL games make up 60% or more of Foxtel’s most-watched shows each year. They dominate Fox Sports audiences and revenues. Austar was bought because of its dominance in regional NSW and Queensland, which are the two biggest NRL markets after Sydney and Brisbane and south-eastern Queensland. Just before the takeover by Foxtel in mid 2012, Austar had 755,000 subscribers, and most of those were NRL viewers via Fox Sports. As well there were hundreds of thousands of NRL subscribers in the Sydney and Brisbane areas. Well over 1 million, perhaps 1.2 million subscribers (of Foxtel’s total subscriber base of 2.9 million) would have been at risk.
Foxtel subscribers have an average revenue per user figure of around US$92 a month. That’s more than US$1000 a year, and as they say in the US, do the math: a million times US$1000 is a billion dollars, or a third or more of Foxtel’s annual revenues. Had that happened then the impact on Foxtel/Fox Sports would have been huge and News Corp might have needed rescuing by 21st Century Fox to keep the Murdoch media empire intact.
So it is no wonder there was a mass swallowing of pride and a rushed trip to Australia. The empire had to be saved from itself and its own hubris.
For a big laugh, read the fawning coverage of the deal in today’s Australian by media editor Darren Davidson and then Google some of his reports on the AFL deal in August and his bagging of the NRL and Dave Smith. They are as different as chalk and cheese, which is a sure sign of the panic that must have been growing across the News/Murdoch empire. Now everything is sweet until 2022, when it will be a different management team and the Murdoch scions Lachlan and James, who will have to deal with the streaming video competition and other emerging rivals. This deal has bought the Murdoch empire time to adjust and nothing more.