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SBD Global/July 9, 2012/Media

Weak Advertising Causes Nine Network's Olympic Coverage To Fall In Question

The Nine Network must confront a loss of up to $30M for its coverage of the London 2012 Olympics, as the "weak advertising market hitting every broadcaster fails to fully compensate for the expensive broadcast rights and production costs of the Games," according to Darren Davidson of THE AUSTRALIAN. The free-to-air broadcaster and pay-TV company Foxtel paid $120M to the IOC for the rights to air the 2010 Vancouver Winter Olympics and the 2012 London Summer Olympics. Nine had "bullishly targeted" about $140M in advertising revenues. Nine Managing Dir Jeffrey Browne in April said, "The net value of the Olympics to Channel Nine will be in excess of $140M." However, TV network bosses predicted Nine would fall $10M-$15M short of its advertising revenue target, "and it had failed to sell all its planned sponsorship packages." An internal source said that Foxtel will "also incur a loss on its Olympics coverage." Unlike Nine, the pay-TV broadcaster "can enjoy economies of scale from its offering of eight dedicated channels," and does not have to focus on generating ad revenue. A Foxtel spokesperson said, "Our principal motivation is new subscribers, subscriber retention and getting subscribers to upgrade to sports packages." The Olympics shortfall will be "keenly observed by Nine's hedge fund lenders," who hold more than half of the company's senior debt and are standing by for the company to default on loan covenants. Hedge funds Oaktree Capital Management and Apollo Global Management "are looking to seize control of Nine by converting their loans into equity" (THE AUSTRALIAN, 7/9).

SEVEN COULD MAKE A MOVE: In Sydney, Michael Bodey wrote that the rights to the next Olympics "could be snatched by the Seven Network as Nine may not be in any shape financially to make a bid." The IOC has not yet entered negotiations with any Australian broadcasters for the rights to the 2014 Sochi Winter Olympics or the 2016 Rio de Janiero Summer Games. Seven regards itself as the "traditional home of the Games," as broadcaster of five summer Olympics in a row from Barcelona in '92, until Nine won the London rights. Industry sources said that Network Ten was "believed to be uninterested in bidding, and Nine might not be in any shape financially to make a bid." Several major sports broadcast deals are in play over the next 18 months and will "likely be more attractive to Australian broadcasters," including the National Rugby League, Cricket Australia, V8 Supercars and the Australian Open (THE AUSTRALIAN, 7/9).
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