The Nine Entertainment Co Holdings Ltd (ASX: NEC) share price is up by 1.09% at the time of writing, after the company announced it has reached an in-principle agreement with Rugby Union Australia for the rights to all Wallabies and Wallaroos test matches. This brings the 25-year partnership between Foxtel and Rugby Union Australia to a close.
What are the details of the agreement?
The agreement covers a number of high profile events internationally. For example, the premier domestic and trans-Tasman competitions including Super W, Super Rugby Australia and Super Rugby Aotearoa. In addition, it includes international matches featuring New Zealand, South Africa and Argentina, and the New Zealand and South African domestic competitions.
The three-year deal, based around both live free-to-air and subscription coverage, is worth approximately $100 million, and includes a two-year option for Nine to extend. Based on this deal, which only requires the approval of the body which oversees Super Rugby, Nine is launching Stan Sports. This will be a live and on-demand premium sports package to be offered as a bundle to Stan's streaming customers from 2021.
The launch of Stan Sports will enable Nine to provide extensive live and on-demand coverage. Additionally, the company advised it is progressing opportunities to invest in additional exclusive sports rights to drive its long-term subscriber growth and profitability objectives.
Company performance
In its FY20 annual report, Nine stated that digital now comprised almost half of the company's earnings before interest, taxes, depreciation and amortisation (EBITDA). This is a 38% increase on FY19. Its streaming service, Stan, has seen strong growth in active subscribers and profitability. Several financial KPIs saw increases during FY20. For example, revenue was up 17%, and group EBITDA was up 13%. The company attributed this in part to cost savings to tackle low advertising revenues caused by COVID-19.
In FY21, Nine plans to generate about 60% of EBITDA from digital businesses, along with more than 35% of group revenues from subscriptions.
At the time of writing, the Nine share price is $2.32 per share. Nine shares are up by 27% since the start of the year.
