As part of its network revamp under new CEO Hamish McLennan, Ten Network (ASX: TEN) has lodged a final $500 million bid with Cricket Australia for five years, trumping previous bids made by Seven West Media (ASX: SWM) and the Nine Network. The winning bid would see Ten broadcast all Test, limited over matches and domestic competitions.
According to The Age, the deal is said to include an offer of $400 million for the forms of cricket currently being shown by Nine, plus a further $100 million for the Big Bash league – currently only being broadcast by Foxtel, which is 50% owned by Telstra (ASX: TLS) and News Corp (ASX: NWS).
The Nine Network, which has been affiliated with Cricket Australia for around three decades, has approximately four weeks to match Ten's offer as part of its "last rights" agreement with Cricket Australia. Whilst Ten's offer is equal to $100 million per year, Nine has only paid $45 million per year over the past seven years, with FoxSports only paying $12.5 million annually for the Big Bash series and other domestic competitions.
The last rights agreement will allow Nine to have a final say to match any competitors' bids for the broadcasting rights, however, the network will have to toss up whether it is worth matching. Currently, cricket attracts around $60 million annually in advertising on free-to-air television – an amount that wouldn't cover the costs of the contract.
Ten, on the other hand, wishes to solidify an audience by broadcasting a major sport after a run of disastrous TV shows which failed to attract viewers. Should Ten hold the winning bid, FoxSports would also be locked out of domestic cricket.
Since the end of October, shares in Ten have regained 44% to $0.31, having fallen from around the $0.60 mark this time last year.
Foolish takeaway
Ten's market share would greatly increase should the network win the rights to broadcast the cricket in Australia. Based on the size of the contract, it would be unlikely to increase profit for the company, but would draw a larger audience base, which Ten desperately needs.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.
