T-shirts, Switzerland and Cathy Freeman’s running shoes: Nine’s year-long push to buy Olympics rights

The Kerry Stokes-controlled media company broke streaming, television, and revenue records because of the time difference between Tokyo and Australia (two hours) and lockdowns across Sydney and Melbourne, which meant that millions of people had little else to do than sit and watch the Olympics.

Seven had a strong association with the Olympics dating back to the 1990s, and periodically before that dating back to 1956. But this was the first Olympics that was broadcast via its linear TV channels and online video service 7Plus. The coverage included 45 dedicated Olympics channels across 7Plus, Channel 7 and its multichannel, 7mate.

The company’s chief executive James Warburton was still cautious. After taking over the leadership of a company with more than half a billion dollars in debt, he had become more prudent with costs. He was also unhappy with the amount paid under the deal struck in 2014, the value of which was written down multiple times.

At Seven’s half-year results in 2020, the company said: “The Group has recognised an onerous contract provision … the majority of the provision relates to legacy output deals for US content and the Tokyo Olympics.”

Media sources familiar with the deal told this masthead last year that Seven had lost about $60 million on the Tokyo 2020 Olympics, bringing total losses from the contract to about $120 million. This, combined with upcoming negotiations for two sports important to Seven’s strategy – AFL and cricket – meant Warburton’s approach to the Olympics negotiations was different. And there was another factor: Seven were told the IOC wanted $400 million for the next rights package, according to people familiar with the talks.

A Swiss rendezvous

In April 2022, Nine chief executive Mike Sneesby, director of television Michael Healy, general counsel Rachel Launders, head of content partnerships Anne Gruber and director of sport Brent Williams, flew to IOC headquarters in Lausanne, Switzerland. It was a six-day round trip that included a visit to Geneva and the business executives were accompanied by Today Show host Karl Stefanovic, who was there to tell the IOC how much he enjoyed covering the London 2012 Games (Nine had the rights that year). He was the consumer-friendly face in an otherwise business-heavy conversation.

They felt the meeting went well, according to people who attended, and the group shared dinner with the IOC team at La Croix d’Ouchy following the presentation. Nine executives were also given a look around the Olympic museum, a tour which involved admiring the Sydney Olympic mascots, standing on the podium and a close-up look at Cathy Freeman’s running shoes.

The talks with the IOC would continue from that point for another six-months, conversations which were complicated by three major local broadcast deals that Nine and Seven were interested in participating in.

Unlike other Olympic Games negotiating periods, the IOC was asking for money at a time when some of Australia’s most popular sports were also renegotiating deals. The AFL, Cricket Australia and Tennis Australia were all up for grabs, and Nine wanted an opportunity in all of these discussions. So did Seven.

Those rights were expensive. Seven and Foxtel secured the rights to the AFL in September for a historic $4.5 billion. Then in November, Nine extended its deal with Tennis Australia for more than $500 million over five years (when taking into account free advertising credits and other components of the deal).

Days later, IOC’s key deal makers came to town. Nine gave the executives, including Anne-Sophie Voumard, the president of broadcast and media rights for IOC television and marketing services, a tour of its North Sydney headquarters before taking them to dinner in Rose Bay. Seven executives also dined the executives when they came to visit Sydney, according to people familiar with the event.

As it became clear Nine was not going to succeed in its bid for the rights to Test cricket, the conversation with the IOC turned to money. And in the days before Christmas, Nine executives were informed they were the successful bidder. Seven made its offer for the next round of rights in August 2021, and it didn’t budge. Sources said the dollar figure offered was between $230 and $250 million. Seven was not going to match the $315 million offer.

On December 23, Seven’s Warburton sent a note to his staff: “The news is that we have made the decision to not retain the Olympics rights for 2024 to 2032. The hard part – we love sport and particularly the Olympics – so this does feel like a kick in the guts.”

“Whilst you would think this is negative news, the reality is that the Olympics has been uneconomic and led to substantial losses and put massive pressure on our balance sheet over a long period of time.”

UBS media analyst Lucy Huang put it more simply: “They will probably become more profitable”.

A deal with the IOC solidifies Nine’s position as a major player in live sports broadcasting in Australia. It is the crown jewel in a longstanding strategy that involves billions of dollars of investment in competitions such as the NRL, the Australian Open, and the Super Rugby, which Nine hopes will generate large audiences and advertisers.

Decisions have not been made on who will front the major event or how many journalists Nine will send, let alone what events will be broadcast on the television channels, free streaming service 9Now or paywalled platform Stan. One benefit is that Nine has the flexibility to shift and shuffle different events depending on audience demand.

But making money won’t be simple and the same risks that Seven faced still apply. Olympics are typically loss-making because of sizeable production and hospitality costs (about $400 million), and it is impossible to predict what the advertising market and economy will do over the next decade.

It is also complicated by the fact the next two Olympics are not in favourable time zones: Paris and Los Angeles will mean that Australians will likely be asleep for key sporting moments and award ceremonies. That will have an impact on audiences and revenue.

UBS is forecasting a $40 million earnings loss in Olympic years. While it expects the benefit of having the ability to rewatch live moments will help audiences, ultimately Paris and Los Angeles will underperform compared to Brisbane. But UBS does see some upside, suggesting it could boost revenue for Stan if Nine chooses to put some events behind a paywall.

“It’s great they’ve won the rights because the Olympics is a premium sport,” UBS analyst Lucy Huang said. “But we haven’t seen anyone that has been able to monetise them. Nine has got a lot of different platforms so they can now start to monetise content…but I think at this point, it’s too early to assume that they can turn a profit or breakeven, just because we just haven’t seen it done.

“Rights are just getting so much more expensive for premium sport, but we’re not really seeing the revenues come through or catch up.”

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Meanwhile, Barrenjoey analyst Eric Choi said in a note on Wednesday there was “potential” for Nine to breakeven. “We flag that recent Olympics have been loss-making, although these rights may still have the potential to wash their face,” he said. “To make a return on advertising revenues alone…each event would need to deliver around 1.5 points of share for [Nine] to ‘breakeven’. ”

For their part, Nine is confident because it can try and generate money across all of its assets, and use the Olympics to cross-promote its key programs such as Married at First Sight and The Block.

Asked about whether a similar scenario would occur again, Sneesby said on Wednesday he felt good about the plan.

“I’ve always said very clearly that we have a disciplined approach to how we invest in sport,” he said. “Quite clearly [the Games] is within our envelope.”

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