Seven prepares for Games to be cancelled

Seven West Media is preparing for coronavirus to force the cancellation in what would be a financial disaster for the network.

Spectators wearing masks watch a runner compete in the Tokyo Marathon on Sunday Picture: AP

Seven West Media is preparing for coronavirus to force the cancellation of the Tokyo Olympics in what would be a financial disaster for the network amid struggling ratings and growing debt.

The Australian understands that Seven has been in close contact with Olympics organisers, advertisers, and legal insurers over possible “worst case scenarios” should the Tokyo Games be cancelled due to the coronavirus outbreak in Japan and the region.

Seven West Media paid around $200m for the rights to the 2012, 2016 and 2020 Olympics and has based its entire 2020 strategy on ratings and advertising around the Tokyo Games.

Two weeks ago Seven posted a $67m loss with debt of over $550m, more than double the company’s market cap.

Its shares slid to record lows of 16c on Friday.

The IOC has set aside $981m for broadcasters should the games be cancelled or postponed, but Seven would still lose out enormously from advertising deals. While corporate insurance for large events is common, Seven did not say whether current broadcasting rights agreements or their advertising deals are ­covered.

An industry source said infectious disease would be more rarely covered than terrorism or weather events, and cover for broadcasting may not flow through to sponsorship deals.

“They may just have to give the money back,” another said. A Seven spokesman told The Australian they had not been advised of any further changes to the Olympics due to coronavirus.

“We’re obviously monitoring the situation very closely.

“However, at this stage there’s been no official advice from the World Health Organisation or the International Olympic Committee that there will be any change to the Olympic Games.

“There’s really nothing further to say for now.”

While some qualifying events have been disrupted or moved, IOC president Thomas Bach said on the weekend the Games were “continuing as ­planned”.

Barry O’Brien, founding chairman of advertising group Atomic 212, estimated the sponsorship deals for Seven were worth “$90 to $100m.”

“If it did happen it would obviously be a massive blow to Seven, and obviously the athletes who have trained for years to achieve this,” he said.

“I think another problem is the promotion of the new shows like Plate of Origin which they would have locked in for after the Olympics to use as leverage. It’s not just a two-week event, it’s an investment over a 12-month period.”

However he doubted the Games would be cancelled. “I think it’s highly unlikely that they don’t go ahead. The Japanese have $5bn worth of sponsorship rights tied up in this thing. With all those big Japanese companies, I can’t see them doing it.”