Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Rogers Communications CEO Nadir Mohamed, left, and his BCE counterpart George Cope. (MARK BLINCH/REUTERS/MARK BLINCH/REUTERS)
Rogers Communications CEO Nadir Mohamed, left, and his BCE counterpart George Cope. (MARK BLINCH/REUTERS/MARK BLINCH/REUTERS)

Allure of certainty makes partners out of rivals Rogers, BCE Add to ...

At first glance, it would appear that Rogers Communications Inc. and BCE Inc. have just paid more than $1-billion to buy something they already own.

Friday’s deal to acquire a 75-per-cent stake in Maple Leaf Sports and Entertainment Ltd. gives the country’s two largest telecommunications companies something far more important to them than the prestige of owning a historic hockey franchise. They now have a lock on the regional television rights to Toronto Maple Leafs games – that’s 51 hockey games a year, not to mention Toronto Raptors basketball games and matches played by Toronto FC, the city’s pro soccer club.

More related to this story

But as the city’s sports fans know, most Leafs games are already broadcast in one of two places: on Rogers-owned Sportsnet, or TSN, owned by BCE’s Bell Media unit. Both networks also carry Raptors and Toronto FC games.

So why spend big? The real investment here is for the future – to prepare for an era in which sports television rights become ever more expensive. By becoming allies, the two companies that now dominate sports broadcasting in Canada have ensured their duopoly will continue in the biggest TV market in the country.

With both companies eyeing the asset, neither could afford to let it fall into the other’s hands – or be sold off to another bidder. Instead, Bell and Rogers have secured their TV rights for the Leafs, which expire in 2015, and for the Raptors, whose deal is up in 2014, and ensured they will keep their hold on some of the most lucrative content on their channels.

Once the current deals are up, Rogers and Bell will split Leafs, Raptors and Toronto FC TV rights roughly 50-50, and have locked in those rights – and their price – for at least 10 years, according to a source with knowledge of the matter.

“Certainty has a value to Bell shareholders because, without a doubt, we’ve secured TSN as a leader in sports. Until you have the arrangement, it means nothing. Once you have the arrangement, your actual risk in your other business has been decreased,” BCE Inc. chief executive officer George Cope said in an interview Friday. “This ownership secures us that for periods longer than normal. We paid for that.”

That’s a priority for both organizations, which have formed partnerships on some ventures (such as the 2010 and 2012 Olympic Games) at the same time as they’ve been competing fiercely to bolster their rival sports networks.

“The transaction is all about securing long-term access to content that is phenomenally important to Canadians,” Rogers CEO Nadir Mohamed said in an interview. “We’ve been building a tremendous brand with Sportsnet and we want to be recognized as the No. 1 media sports brand in Canada.”

It also prevents the launch of a well-connected competitor. MLSE has a broadcast licence for a “specialty” cable sports channel – tentatively named Real Sports, according to sources – that could have snatched away those games once the deals with Sportsnet and TSN had expired.

Such a business model – owning a team in order to feed a television station with games – already exists widely across North America. Indeed, it’s the key reason Rogers bought the Toronto Blue Jays a decade ago, an investment that has worked out better than many critics predicted it would, as the value of the baseball franchises has gone up.

Because there is a third shareholder involved in MLSE, Larry Tanenbaum, Rogers and Bell still have to pay a market price for the television rights to Leafs and Raptors games. But as the largest owners of MLSE themselves, the two companies will, in essence, be transferring most of the rights fees to themselves.

“Sports rights are going up. Sports channel fees to subscribers are going up. So Bell and Rogers are protected on that where all the other [cable and satellite providers]are going to have to eat it,” said one analyst speaking on condition of anonymity.

What remains to be seen is the fate of existing channels MLSE owns: Leafs TV, which holds the rights to 12 Leafs games a year, and more games on NBA TV Canada and GOL TV.

One thing the deal does not allow the competitors to do is increase the exclusive sports content they make available to customers on their mobile phone networks. In a decision this fall, the federal broadcast regulator determined that telecom giants who also own media assets could not withhold that content on alternative platforms, and would have to make it available on commercial terms to competitors such as Telus Corp., for example.

But the real value for both is still in TV – the one type of TV that viewers, and advertisers, will still pay for.

“Live is going to be much more valuable, from a content perspective,” Mr. Cope said. “…Anything that has a contest attached to it, people don’t want to PVR. We saw that at the Olympics. What the Olympics value was … The PVR [personal video recorder]technology, which is great for us in our [satellite]TV business, is not necessarily great, obviously, in the advertising business. We’re starting to say, okay, where is the value? … Live content is going to matter.”

With files from reporter Rita Trichur

Follow on Twitter: @susinsky

 
  • RCI.B-T
  • BCE-T
Live Discussion of RCI.B on StockTwits
More Discussion on RCI.B-T
Live Discussion of BCE on StockTwits
More Discussion on BCE-T

More related to this story

Topics:

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories