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Rogers Plays Hockey

Alan Breznick
11/27/2013

TORONTO -- Talk about a hat trick.

Rogers Communications Inc. (Toronto: RCI) has achieved hockey's ultimate individual feat of scoring three goals in one game by locking up the Canadian TV, mobile, and Internet streaming video rights to National Hockey League (NHL) games for the next dozen years. The landmark pact grants Rogers national Canadian rights to regular season games, playoff matches, all-star games, studio shows, and all other things NHL for a cool C$5.2 billion (US$4.9 billion), starting next season.

The deal far eclipses all previous media rights deals for the NHL, a league that has struggled to compete for fans with the more popular National Football League (NFL), Major League Baseball (MLB), and National Basketball Association (NBA) in the US but still dominates the Canadian sports scene. To put the contract in some perspective, Rogers agreed to shell out more than twice the previous record sum of $2 billion that Comcast Corp. (Nasdaq: CMCSA, CMCSK) paid the NHL for a similar rights deal in the US two years ago. And, at the time, many industry observers thought that Comcast was paying way too much for those rights.

In landing the Canadian NHL rights through the 2025-26 season, Rogers iced out its three main rivals for hockey action -- TSN, the Canadian Broadcasting Corp., and French-language network TVA. That's similar to what Comcast did in 2011, when it outbid ESPN, Fox Sports, and Turner Broadcasting System Inc. for the US media rights.

Also similar to Comcast, Rogers will air the games on its national cable sports network, Sportsnet. In the US, Comcast is carrying NHL action mainly on its national cable sports channel, NBC Sports Network, as well as on the NBC broadcast network.

But, unlike Comcast, Rogers will share the spoils with two of its bidding rivals. Under separate agreements announced Tuesday, CBC and TVA Sports will each sub-license NHL games from Rogers for at least several years. Among other things, those deals will allow CBC to continue its popular, long-running tradition of airing weekly "Hockey Night in Canada" games on Saturday nights.

The three companies didn't disclose how much the sub-licensing rights are worth. But industry analysts said the pacts could end up covering as much as 80% of Rogers' NHL rights costs.

Beyond the sheer size of the pact and its long-term nature, the NHL deal is notable for its scope. Besides gaining the national TV rights for all NHL games and the out-of-market rights for all regional games, Rogers also scored the exclusive rights to hockey action on all possible media devices and platforms. That means the company will also control the NHL rights for TV Everywhere service to tablets, smartphones, and other mobile devices, Internet streaming, terrestrial and satellite radio, and out-of-home distribution.

All those rights should be quite valuable to Rogers because of its unique position in the Canadian market. As well as being the largest MSO in the nation, the vertically integrated company is also the largest mobile operator and a major broadcaster and content provider. In addition, Rogers owns several Canadian sports teams and stadia outright, shares ownership of a couple of others, and has "strategic partnerships" with two other teams.

Rogers said it will pay out the C$5.2 billion to the NHL in phased amounts over the next 12 years, starting with an upfront payment of C$150 million over the first two years. Its annual payments will climb from slightly over C$300 million next year to about C$550 million in the contract's final year.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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albreznick
albreznick
11/28/2013 | 12:37:21 PM
Re: Deal Worth It?
Yep, Jim. I agree. I think that's where Rogers is headed with all this. What's also interesting is that they are apparently recouping much of the rights costs thru their sublicensing deals with CBC and TVA. So maybe they didn't overpay after all. Or maybe everybody's just overpaying like crazy so it doesn't matter. I can't tell anymore.  
jhodgesk1s
jhodgesk1s
11/28/2013 | 9:15:41 AM
Re: Deal Worth It?
I agree, it looks like a lot for the rights. Still, there are a number of other factors to consider. Rogers is both a dominant cable provider and mobile operator + it is a joint owner with Bell of MLSE (aka the Toronto Maple Leafs) which is the top NHL franchise according to Forbes at $1.1B. As well, there has long been talk about a second franchise in the GTA area. I wonder how that would play out. Either way, it likely means more content and higher base prices or pay per use fees for mobile and cable services in Canada.
aryezacks
aryezacks
11/28/2013 | 3:48:29 AM
Re: Deal Worth It?
According to Forbes, the average NHL team is worth $413M, an increase of 46% over last year...so basically, they are spending $5.2B to broadcast a league in Canada for the next twelve years that they could have bought outright for about $8.5B a year ago.

If Rogers can recoup that money, then NHL franchises are undervalued, but I think they grossly overpaid.

 
albreznick
albreznick
11/27/2013 | 6:51:12 PM
Deal Worth It?
So Rogers is shelling out  ton of money for the Canadian TV, radio, media streaming and mobile rights to NHL action over the next dozen years. They are getting a lot over a long time. But is this all really worth more than $5 billon? Can Rogers recoup the money that it's spending? What do you think?
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