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Where now for Channel Ten?

Just days after its bid for the rights to broadcast international cricket was matched by Nine Entertainment, Ten Network’s (ASX: TEN) chief executive Hamish McLennan has expressed his company’s interest in acquiring rights to broadcast the tennis in Australia.

Seven West Media (ASX: SVM), which has held the rights to broadcasting the tennis over the last 40 years, is currently in talks with Tennis Australia to extend its contract, which expires after the 2014 Australian Open in January. Whilst Seven is in exclusive negotiations with Tennis Australia until 30 September regarding the extension, McLennan has suggested that the organisation would be “mad to not put it to the open market”.

The Australian Financial Review quoted McLennan as saying “If you look at what happened with cricket the rights went up… [by 118%] so unless they test the market they don’t know how monetize-able it is”. As such, it has become clear that, should a deal not be reached during the exclusive negotiation period, Ten is likely to ‘bid hard’ for the broadcasting rights.

It is believed that Seven’s dominance over recent years has largely come about due to its ability to promote its new television programs for each February ratings season during tennis matches – after all, many of the tennis matches are played during prime time viewing. As such, the tennis would be an ideal pick-up for Ten in order to gain a more permanent audience base following its plunge in advertising revenue, which has seen its affiliate Southern Cross Media  (ASX: SXL) seek new alliances elsewhere.

As part of its new approach under McLennan to gain a more mature audience base, Ten has purchased rights to broadcast the Big Bash domestic cricket competition for a sum of $100 million, as well as the 2014 Winter Olympics in Russia for $20 million. Meanwhile, some of its television shows which have smashed the ratings are no longer having the same effect on audiences, whereby its MasterChef program has slumped to as low as 19th on the ratings board, gathering only 489,000 viewers nationwide on Thursday.

Foolish takeaway

Currently, shares in Ten Network are sitting at 27.7c per share, having climbed from 22c in November. Although the market reacted positively to McLennan taking over the reins, the company still faces very turbulent times. Should a new deal with Southern Cross Media not be signed, it will be a question of ‘now what?’ for the network.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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