During CRTC license renewal hearings this morning of its 17 TV services, Rogers executives shared insight on the reasons why they pursued their mammoth $5.2 billion NHL rights deal. One factor was to help stop the bleeding from its City TV network and another was the fear rival Bell could get the games instead, reports The Globe and Mail:
The traditional economics of broadcasting are disappearing, and only TV channels with multiple sources of revenue – from both advertising and subscriber fees – will be able to make money on sports in the future, according to Keith Pelley, president of Rogers Media.
The costs of sports rights “have escalated at a gargantuan rate,” Mr. Pelley told the Canadian Radio-television and Telecommunications Commission, which is weighing the renewals of 17 Rogers-owned TV services, including City network and Sportsnet. In the United States, rights costs “have doubled over the last 10 years. And it’s also happened in Canada.”
In a nutshell, Rogers sees hockey as a way to diversify away from its reliance on U.S. broadcasting as Canadian TV viewing habits change. NHL hockey will cut City TV’s expenditures on U.S. shows by roughly 20 per cent. City TV has struggled to compete with Bell’s CTV and Shaw’s Global TV networks due to its smaller footprint.
Pelley also revealed the plan to expand City TV as a coast-to-coast network was “five to seven years too late,” as it has lost $238 million since 2007 ($38 million lost in 2012 and $42 million in 2013).
The Rogers NHL contract has Saturday night games subsidized by public broadcaster CBC, as the latter will pay production costs, but Rogers will keep advertising revenue from Hockey Night in Canada games.
Rogers recently invested $3.29 billion in the Federal Government’s 700MHz spectrum auction, which the company says will benefit NHL fans with faster downloads when streaming live games, which will also surely increase revenues as customers adopt larger and more expensive data plans.