In a move that they may well regret in the years ahead, Nine Entertainment Co (ASX: NEC) and Ten Network Holdings Ltd (ASX: TEN) have failed to lob bids to broadcast the next three Olympic Games.
Only Kerry Stokes' Seven West Media Ltd (ASX: SWM) has lodged an expression of interest to broadcast the rights to the 2016 games in Rio de Janeiro, the 2018 Winter Games in South Korea and the 2020 Tokyo Games, according to the Australian Financial Review (AFR).
The AFR reports that the International Olympic Committee had originally wanted $230 million for the rights for the three games, but Seven West Media may well end up paying less than $200 million.
While industry sources suggest a price over $150 million would be unprofitable, we are talking about 2 major global sporting events (the summer games) and one lower tier event over the next six years. And it's not just about making money from those shows, but enticing viewers into staying on the network, and using the Olympics to promote their other shows. Major sporting events have shown their ability to attract large numbers of viewers in the past.
While Nine and Ten have not yet ruled themselves out, the AFR suggests Ten wouldn't want to spend that much and Nine is unlikely to bid. Nine lost an estimated $25 million on its coverage of the 2012 London Olympics according to the newspaper. Foxtel, jointly owned by News Corp (ASX: NWS) and Telstra Corporation (ASX TLS), also hasn't made a bid yet, as it is likely to pick up parts of the Games from the winning free-to-air bidder anyway.
What is not yet known is whether the broadcast rights will extend to digital media rights, which would allow the winning bidder to air the Olympics via apps to subscribers. That could enable them to pick up much more revenue than through their regular free-to-air channels, as well as reaching a greater audience. Who knows what the digital media world will look like by the time the Tokyo Olympics comes around in 2020?
Foolish takeaway
I've long thought that Australia can't really support three commercial free-to-air networks, and that one of them will fall by the wayside eventually. With this Olympics move, Seven definitely appears to want to be one of the two that will be left standing.
