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Jan 7, 2016
Sports Programming: PVR/DVR Proof!
It was with much fanfare in the Fall of 2013 that Rogers scooped the NHL’s Canadian national broadcast rights from Bell Media, for the tidy sum of $5.2 billion over 12 years (starting in the 2014-15 NHL season). Following Rogers’ marquee rights purchase, many had predicted that Rogers Sportsnet specialty channel would leapfrog over Bell Media’s TSN in the ratings game. In fact, it was recently confirmed that Rogers flagship sports channel, Sportsnet, has secured the overall number one spot for 2015.
Surprisingly, however, what catapulted Rogers to the top of the ratings race was not its NHL deal. While Rogers enjoyed some monthly ratings wins in the first year of the NHL rights deal, to many observers’ surprise, the ratings boost for 2015 overall was attributed to the Blue Jays late season surge and playoff run. As recent media coverage explains, the ratings juggernaut kicked into high gear following a series of high-profile trades executed by the Blue Jays in the summer. This had a dramatic impact on television ratings: in September, the Jays averaged 1.61. million viewers, nearly triple Sportsnet’s 2014 Blue Jays ratings. Even the late afternoon playoff games (which many Blue Jays fans complained about) garnered more than 2.5 times the ratings to Toronto Maple Leafs broadcasts on the same day.
It is difficult to gauge the impact of this ratings boost on Rogers’ bottom-line financial results: as a vertically integrated broadcast distributor-programmer, any increase in the fees that Sportsnet can charge to its affiliated Rogers cable operators is essentially an accounting entry. Further, given that Rogers owns the Jays, the rights fees paid by Sportsnet to the Jays is yet another accounting sleight of hand.
However, it is likely that the Jays’ performance will give Sportsnet significantly more bargaining power vis-à-vis other broadcast distributors outside of Rogers’ territory in negotiations for the distribution of the Sportsnet channel. A recent analysis by Globe and Mail telecom reporter Christine Dobby explains that Sportsnet received an average of $2.38 in payments from various broadcast distributors (cable, satellite and IPTV) per month per subscriber while the equivalent revenue for TSN was approximately $3.07. As Dobby explains, if Rogers could close that gap, it could enjoy up to $70-million in additional revenue.
A longer term issue that will have to be addressed is the impact of the CRTC’s going-forward rules on bundling of channels into large packages. Following its Let’s Talk TV process, the CRTC has now implemented rules giving consumers more flexibility to avoid large packages and choose channels on a “pick-and-pay” basis. This could have a dampening effect on overall penetration of channels such as sports programming services. The impact of these changes have spooked the public markets, which have taken a substantial chunk of value off the market caps of large media companies in the U.S. (see here for example) and in Canada (see here for example. These development shave the potential to have a significant impact on the business model of many cable services, including sports channels and ultimately the price paid for the rights.
In another development, Rogers new 12-year term as the exclusive owner of national NHL broadcast rights has piqued the interest of the Competition Bureau. That is the topic for another HPC post.