The NRL is facing the prospect of almost a $60 million drop in broadcast revenue as part of negotiations with its television partners, as Nine Entertainment Co attempts to secure a substantial discount for the shortened season.
With clubs and players waiting anxiously for the NRL to sort out its financial distribution model in 2020, the Herald has learnt that Nine is trying to pay at least 24 per cent less than the terms of the original contract.
Channel Nine headquarters in Willoughby.Credit: Rhett Wyman
Sources close to negotiations have also told the Herald that the Nine Network wants to pay less for the State of Origin series - which has been moved to after the grand final in November - arguing that it will not be able to write the advertising revenue that it would have in the middle of the year.
Nine believes already tough advertising conditions could be worsened by the potential broadcast of the Twenty20 cricket world cup scheduled to be played in October and November.
The NRL on Tuesday confirmed that it would play a 20-round season from May 28, which is four rounds less than the usual regular season. The coronavirus crisis has sparked a round of tense negotiations between the code and its two television broadcasters over who should bear the financial impact of the shortened season and weakened advertising markets.
Nine was due to pay $118m in 2020 for the broadcast rights, although the network has now indicated to ARLC chairman Peter V'landys that it wants to pay only about $90m. V'landys, who has already persuaded a reluctant Nine into accepting the May 28 start date, may argue for a less substantial discount. Nine is the owner of this masthead.
THE BREAKDOWN: CHANNEL NINE'S 2020 NRL BROADCAST DEAL
- Total broadcast deal: $118 million ($10 million already paid as part of loan in 2018)
- Regular season value: $80.24m (68 per cent)
- Per round (3 games): $3.34m
- Per game (total 72 games): $1.11m
- Finals and Origin value: $37.76m (32 per cent)
- Already paid: $38.5m
- Remaining: $79.5m
- What Nine intends to pay: $51.5m
- 2020 intended saving: $28m
Media sources say Foxtel, which was due to pay about $190m this year, is willing to only deduct the value of the four rounds lost at a saving of about $30m.
Nine, however, wanted to play a maximum of 17 rounds when the competition returned and doesn't believe it should pay for an additional three rounds of football that also goes beyond the original schedule of an October 4 grand final.
Nine chief executive Hugh Marks is arguing for at least a seven-round reduction compared to Foxtel's four, highlighting the discrepancy between the two parties' degrees of desperation for the NRL to return in 2020.
Sources close to the negotiations have told the Herald that Nine has already paid $38.5m in the first quarter, which includes $10m the network gave the NRL as part of a $50m interest free loan at the start of the broadcast cycle in 2018.
Under the original contract signed off between former Nine boss David Gyngell and ex-NRL chief executive Dave Smith, Nine agreed to a slightly back-ended deal worth $575m over five years.
That deal includes three games per week over the 24-round season (simulcast with Fox Sports), the finals series and the exclusive rights to the State of Origin series and the NRL grand final.
The free-to-air network considers the regular season to be worth 68 per cent of the annual value, which equates to about $80m in 2020, with finals and Origin valued at 32 per cent (approximately $38m).
Another point of contention is likely to arise in coming days over when the broadcasters will be expected to make their next payments. Both Fox Sports and Nine failed to make their quarterly payments on April 1, with the next payment due on July 1.
The NRL, however, will argue that because both parties missed their April 1 instalments, the next payment will be due on May 28, the day the competition returns.
It's understood Nine would prefer to stick to the original schedule of July 1 to assist with its end-of-financial-year report, a notion the governing body is understood to be willing to consider given the network helped bail it out in 2018 with a $50m loan.
Nine and Foxtel are both also pushing for a three-year extension to the current broadcast deal, which expires at the end of 2022. That might have an impact on how much the NRL can extract from its partners, as it favours ensuring its short-term viability over longer-term gains.
The NRL is expecting the value of the deal to drop in 2023-2025 but is hopeful of reducing its operational costs and increasing its non-broadcast revenue to offset the predicted shortfall in broadcast dollars.