Seven West Media (ASX:SWM) has signed up exclusive broadcast rights for another five years with Tennis Australia.
According to the Australian Financial Review (AFR), Seven West will extend its 40 year exclusive coverage of Australian tennis, by paying significantly more than its existing $105 million five-year contract, and by convincing Tennis Australia not to put the rights to a public auction.
According to the AFR, the new deal is worth an estimated $30 million a year, and will run for five years beginning after the 2014 Australian Open, when the existing contract expires.
The deal is a major blow for struggling rival Ten Network Holdings (ASX:TEN), which is aggressively bidding for sports broadcasting contracts to strengthen its current precarious position. Last week, Ten's boss Hamish McLennan said Tennis Australia would be mad to not put the rights to open auction. The AFR understands that Ten was willing to bid $45 to $50 million a year for the tennis contract.
Ten has had two minor wins, scoring the five-year rights to the domestic Big Bash cricket competition for $100 million and the 2014 Russian Winter Olympics at a cost of $20 million. Ten lost out to its other rival Nine Entertainment for the full rights to all cricket matches in early June, despite lobbing a stunning $550 million bid.
January and February is an important time for broadcasters, coming just weeks before the official ratings year. That allows the free-to-air broadcasters to promote their up-coming programs, while attracting as many viewers as they can. For Seven, the Australian Open is vitally important for that purpose, while Ten will use the Big Bash League to do the same, while Nine has the Ashes and other international cricket matches as the platform to promote its new season shows.
Foolish takeaway
While Ten has had some minor wins against its rivals, it has been losing market share, sliding to just 19.7% of the advertising market, with Seven taking the lion's share with 41.8% and Nine at 38.5%. Ten will need to pull out something special to put pressure on its rivals.
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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.
