What: Shares in television network owner Nine Entertainment Co Holdings Ltd (ASX: NEC) are trading 2.8% lower on Monday morning after announcing an agreement with the National Rugby League (NRL) for broadcasting rights to the 2018 to 2022 seasons.
Nine's fall is bucking the trend in the market this morning which has seen the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) trade around 0.1% higher.
So What: The agreement sees Nine holding the exclusive free-to-air (FTA) rights for broadcasting four premier league live games each week, as well as rights to the Finals series, State-of-Origin and other special events matches. As part of the deal, Nine also has the free streaming rights for these games.
Shareholders will hope the huge deal which will cost a massive $185 million per year is money well spent. Certainly live sport remains one of the key opportunities for FTA television networks as advertisers are still enthusiastic about gaining exposure to these large viewer numbers.
Now What: The pricey deal with the NRL could more-than-likely rule Nine out of bidding for the AFL rights given the costs that would be involved in a successful bid for both major sporting rights. That means Seven West Media Ltd (ASX: SWM) is likely in the poll position to retain the AFL rights given the weaker state of rival Ten Network Holdings Limited (ASX: TEN).
The re-listing of Nine hasn't been a profitable affair for buyers of the initial public offering (IPO) with the stock down 27.5% since returning to the ASX in December 2013. The question for investors to contemplate now is whether the upside potential could outweigh any further downside risk. Certainly holding on to the NRL broadcast rights is a positive in terms of viewer numbers, however, ultimately it will be the return on investment which matters.
