News Corporation chief executive Robert Thomson has warned the Rupert Murdoch-controlled company will not pay “ridiculous” prices for cricket TV rights as broadcasters find it harder to justify huge increases to the hundreds of millions they are already paying for sports rights.
News Corp wholly owns sports broadcaster Fox Sports Australia, which is in the midst of a merger with pay TV provider Foxtel, as revealed by The Australian Financial Review in August. News currently owns half of Foxtel with Telstra, but the ownership structure will change to 65 per cent held by News Corp and 35 per cent by Telstra once its merger with Fox Sports is completed.
With News Corp looking to secure some cricket coverage for Foxtel, Cricket Australia may be able to get more for its rights if it can attract more parties to an auction.
Sources said News Corp is in discussions with free-to-air broadcasters to try to carve out a slice of Cricket Australia’s looming broadcast deal. Fox Sports is keen to get its hands on some cricket rights, as revealed by the Financial Review, and is thought to be planning a dedicated cricket channel like it has done with the NRL and AFL.
Simon O’Dwyer
‘It’s complicated’
However, Mr Thomson tempered expectations of a huge jump in the amount the rights will attract.
“Cricket is, for many people, an interesting game, it’s complicated, has various forms … and clearly it’s a part of the Australian summer and Australian viewing in the summer that we’re interested in,” he told investors during the company’s second quarter results presentation.
“It will be fascinating over coming weeks to track the negotiations of cricket rights. It’s pretty fair to say we aren’t going to pay ridiculous prices for any rights, across the world.”
Cricket Australia was said to be targeting $200 million a year for its next broadcast deal, although industry observers have been trying to temper Cricket Australia’s expectations by suggesting the right may sell for a sum closer to $150 million.
The current Cricket Australia deal was worth roughly $500 million in cash and contra over five years; $80 million a year was paid by Nine Entertainment for rights to international matches and $20 million per year by Ten Network for the Big Bash League. Analysts have forecast the next rights deal could see the price of the Twenty20 tournament jump to as much as $60 million a year.
The missing piece
However, Nine chief executive Hugh Marks and Optus chief executive Allen Lew, who is also looking at cricket rights, have warned sports rights have to come at a price that is beneficial to both sides.
Revenue pressures from the likes of Google and Facebook are making it harder for traditional media players to justify the hundreds of millions paid for sports rights.
Cricket is seen as the missing piece in the Fox Sports’ offering – while it has rights to Australia’s international tours, it has no international or Twenty20 matches played in Australia, which have much more friendly broadcast times and attract larger audiences.
News Corp, like all other media companies, has not been immune to the changing digital environment, which has pushed earnings in its traditional businesses down. Its digital real estate segment was the biggest contributor to its earnings in the first half of 2017-18, thanks largely to its majority-owned REA Group.
In the six months ended December 31, News Corp said its loss narrowed to $US16 million ($20.5 million) from a $US305 million shortfall in the year-earlier period, which included write-downs on its Australian newspapers, including The Australian, The Daily Telegraph and the Herald Sun, as well as Foxtel.
First-half revenue rose 4 per cent to $US4.24 billion from the year-earlier $US4.08 billion.
Total earnings before interest, tax, depreciation and amortisation climbed 27 per cent to $US578 million from $US455 million in the year-earlier period. The improvement in earnings in the first half was offset by a $US174 million charge result from US tax reform.
EBITDA in News Corp’s digital real estate segment grew 32 per cent to $US214 million in the first half, making it the largest contributor to the company’s earnings. With the added earnings from acquisitions, the company’s News and Information Services segment grew 13 per cent to $US213 million.
REA, which also reported on Friday, saw net profit drop 55 per cent to $132.5 million, thanks largely to a gain of $161.6 million in the previous corresponding period from the sale sale its European business.
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