Ever since Rogers Communications Inc. sealed a deal to grab a near-monopoly on hockey broadcasting in Canada for 12 years, questions have lingered about whether it could squeeze enough value from the precious NHL rights to make its $5.2-billion gamble pay off.
Now, as the deal’s first season enters its final games, the company’s chief executive officer says it made money on the inaugural campaign, and expects a reasonable return over the life of the contract despite the hefty price tag.
“Categorically, we will make a 10-per-cent margin this year and the deal has been profitable for us,” CEO Guy Laurence said in a lengthy interview this week. “And given it’s our first year and we’ve learned a lot and all the rest of it, I don’t see why it won’t be profitable ongoing.”
Rogers’ expansion of the number of games on national television, as well as experimentation with new mobile platforms and camera angles, have driven its Sportsnet network to the best ratings in its 17-year history. And the number of Canadians who tuned in to a game on TV or online is up 2 per cent to 28.8 million.
But there is still much work to do to boost audiences and attract new hockey fans to the fold. Advertising partners who were promised a whole new game see room for improvement on viewership. A dismal year for the country’s biggest draw, the Toronto Maple Leafs, dragged audiences on some Saturdays down 15 to 20 per cent, which in turn sapped ratings for late-night games on the West Coast.
In one sense, hockey, though just one part of a division that accounts for 14 per cent of total company revenue, provides a test case for a larger effort at Rogers to turn a corner after several tough quarters. Mr. Laurence described the push to launch hockey coverage as a template for how to operate “as One Rogers,” the name he has given to his plan to streamline a vast company with sometimes disparate divisions and thousands of overlapping processes.
But some analysts are skeptical about the extent to which the NHL deal could benefit other areas of Rogers’ business.
They see serious challenges in its wireless and cable divisions, the high-margin businesses that bring in the majority of the company’s revenue. Rogers has long been Canada’s biggest cellular provider but in recent years it has ceded ground to BCE Inc. and Telus Corp., steadily losing market share quarter after quarter. And although Canadian TV subscriber numbers have yet to drop off precipitously, Rogers continues to shed cable customers and faces a particular threat from BCE’s Bell Fibe offering.
Pivoting to host an unprecedented number of hockey broadcasts was no easy feat. Mr. Laurence introduced long-time employees from different divisions who had never met, and he describes getting all 28,000 Rogers employees working together to leverage the rights as a “herculean” task. The company had 45 weeks and one day to build its production, programming and marketing infrastructure before the first puck dropped, and “the one day turned out to be very important,” he said.
“If I was kind of marking the scorecard, I think we had a very good season,” said Mr. Laurence, the British telecommunications executive who took the helm at the company in December, 2013.
Leveraging a $5.2-billion investment
Inheriting 12 years of sweeping hockey rights was “the best going-away present I could ever be given by an outgoing CEO,” Mr. Laurence said, crediting his predecessor Nadir Mohammed and Rogers Media president Keith Pelley for securing them.
The deal’s eye-popping price is mitigated by the fact that TVA Sports and RDS took over French-language rights and regional Montreal Canadiens games, funnelling about $120-million each year back to Rogers. That leaves $3.7-billion owing to the NHL over the life of the contract, or an average of $308-million per year. The first season cost less, but Mr. Laurence said the annual payments escalate by a “single-digit percentage increment.” That means Rogers will have to continue to find ways to boost its revenues in order to maintain its margins.
Over its last seven-year contract, the CBC spent about $100-million per season for the rights to broadcast Hockey Night in Canada on Saturdays.
“[NHL commissioner] Gary Bettman’s a very difficult man to negotiate with, okay?” Mr. Laurence said. “We paid top dollar for these rights and we assume we’ll make a fair margin based on industry standards. Period.”
But Mr. Laurence notes the 10-per-cent profit margin includes only what the NHL licensing deal contributed to the media business, and does not count spinoff benefits hockey may bring to the wireless and cable divisions by helping retain customers and driving higher data usage. Customers who watch hockey and engage with the sport on their mobile phones are half as likely to leave the company, Mr. Laurence said.
“Even if the media side took a bit of a hit, I think there’s upside we haven’t even counted in our figures for this year and for years to come,” he said.
But Mr. Laurence acknowledges the company has fallen behind in the crucial area of customer service. Under his tenure, Rogers has launched a renewed effort to overhaul myriad back-end processes and improve the customer experience. Yet Telus made this a strategic focus in 2008 and now benefits from remarkably low customer turnover rates. BCE also turned its attention to the issue in earnest before Rogers. (BCE owns 15 per cent of The Globe and Mail.)
“I personally don’t think hockey has done anything to move the brand in terms of making it a more consumer-friendly place. I don’t think it’s helping them sell one more cellphone or one more computer modem,” said BMO Nesbitt Burns analyst Tim Casey. “I think fixing customer service is still job one there.”
Mr. Laurence agrees there is little direct link between hockey and customer service. But he notes that a recent report showed Rogers reduced its complaints by 20 per cent over the six months that ended Jan. 31.
“Do I believe we could have made so much progress as we have so quickly if we hadn’t had the poster child of working on the NHL project across 28,000 people?” he said. “The answer is no.”
‘An extremely good partnership’
Key partners in the Rogers deal proclaimed their delight with the first season’s results – but also a desire to do better next year.
“I didn’t and couldn’t and wouldn’t have expected anything more than they did,” Mr. Bettman, the NHL’s commissioner, said in an interview. But looking to next season, he added: “I think we need to take everything we did in year one and kick it up a notch.”
The NHL has become one of Rogers’ closest allies. Mr. Laurence and Mr. Bettman have forged a tight relationship and stay in regular contact. They have seen eye to eye on plans to develop new digital technologies and bring a “stars-first philosophy” to Rogers’ coverage of the league, “so it’s not about escrows and strikes and fights and all this kind of stuff,” Mr. Laurence said.
Rogers has even signed hockey’s newest superstar Connor McDavid, who has yet to play an NHL game, to a two-year contract for marketing and appearances promoting Rogers products.
“Nothing we’ve done in season one was not done without us discussing it with the NHL. And, to be clear, that’s not because they sit in some kind of policing role. It’s because we have an extremely good partnership,” Mr. Laurence said, noting that staff from Rogers and the NHL are in touch “daily” to share research and data and decide “on a day-to-day basis what they’re doing.”
For the NHL, the shift in focus has been a welcome change from the often combative coverage led by Ron MacLean at the CBC. The host routinely grilled executives on issues inside the league office, from revenue to labour strife and team relocation. (Mr. MacLean still hosts Coach’s Corner as well as a new show, Rogers Hometown Hockey.)
“I think with less of that talk, that’s one of the reasons ratings are up,” Mr. Bettman said. “I think a lot of people found it annoying.”
The question now is whether the tight-knit relationship has left the partners too entwined, and how Sportsnet will handle sensitive issues such as player safety or struggling southern franchises as they arise.
“Nothing gets in the way of our journalistic integrity,” Mr. Laurence said, and “all our media outlets have complete editorial independence.”
For his part, Mr. Bettman bristled at the suggestion that the NHL’s close involvement could skew Sportsnet’s coverage.
“They cover the game in a straightforward manner. We don’t try to exercise editorial control,” he said. “When you look at the number of hours that they’re covering, and the logistics of doing that, of course our organizations are in daily touch.”
The number of Canadians who tuned in to an NHL game on TV or online is up 2 per cent to 28.8 million. But Rogers needs to draw even more fans to help make its $5.2-billion gamble pay off. The company’s Sportsnet network has produced documentaries throughout the season to help fans learn more about past stars and today’s best players on and off the ice.
Engaging the community
Mr. Laurence’s mantra for hockey broadcasting is simple: Concentrate on the fan and everything else – the ratings, the advertisers, the subscribers – will follow.
So far, ratings results have been mixed, with Wednesday and Saturday evening games yielding larger audiences than past years, but late-night contests and Sunday broadcasts failing to keep up.
Rogers deserves high marks for creating, scheduling and promoting a massive amount of new programming, said Brian Cooper, CEO of sports marketing consultancy S&E Sponsorship Group. But he gives the first season “a solid B” grade. Some sponsorship partners were charged 20-per-cent higher fees based on a 5-per-cent lift in viewership, which hasn’t materialized. And that means Rogers may have to adjust what it charges for next season’s ads.
“Now that the hype has blown away and [advertisers and sponsors] have some historical numbers, I think it’s easier to go in and you have leverage on both sides,” Mr. Cooper said.
Mr. Laurence said in terms of his internal targets, “I would have been happy with flat [ratings].”
Yet several of Rogers’ investments and experiments have paid clear dividends.
The company claims Sportsnet surpassed Bell Media’s TSN as the country’s top sports brand for the first time ever over the past 12 months. Its average audience across Canada, at 167,000 viewers, outstripped TSN’s, and Sportsnet claimed a larger share of English-language viewers. All Sportsnet networks saw double-digit growth in viewership, including a 14-per-cent bump on the main channels and a 51-per-cent increase for Sportsnet One.
Hockey was the largest single driver responsible for Sportsnet “taking the crown,” Mr. Laurence said.
(A spokesman for TSN noted that the network added three new channels last August, and holds a slim lead in the ratings since then.)
“I’m proud of what [Sportsnet has] delivered,” Mr. Laurence said. “We didn’t just take what we were given and replicate the status quo. We set out to change things in the way that we broadcast the game, scheduled it, presented sets.”
As TV’s traditional audience increasingly shifts online, finding new ways to present hockey to fans is vital to the future success of Rogers’ hockey coverage.
This season, the company introduced new camera angles through the GameCentre Live streaming service, such as cameras mounted on the referee’s helmet.
The next frontier will be in player tracking, with the NHL working to put chip technology in players’ clothing, and perhaps in the puck – technology that could be ready to roll out by mid-season.
Mr. Laurence expects the new technology could be ready to roll out by mid-season, and “I think that will move the game significantly forward.”
Rogers is also claiming a win with Hometown Hockey, its new Sunday night broadcast that travelled to 25 smaller towns and cities such as Dollard-Des-Ormeaux, Que., and Prince George, B.C., to set up community-based festivals based on the Hockey Day in Canada tradition.
The TV ratings for Sunday games often trailed more established NFL and CFL football broadcasts in a competitive lineup, but Mr. Laurence said building a new franchise typically takes years. And more than 175,000 fans and 208 youth hockey teams showed up for the events in person.
In Thompson, Man., an estimated 5,000 people turned out for the festivities and a moment in the spotlight, in a town with a population of 13,123. “We couldn’t buy this positive national news story and to really promote our community and what it’s like in northern Manitoba, northern Canada,” said Mayor David Fenske.
Sponsors also love the opportunity for outreach. “For us on the ground, it engages the community. We have our branch managers out,” said John Doig, chief marketing officer at Bank of Nova Scotia. “We wouldn’t have done Sunday night hockey [sponsorship] on the broadcast if we couldn’t have had the community piece.”
Rogers has renewed the franchise for a second season of 24 Sundays, with host Ron MacLean back at the helm. The program will move to Sportsnet from the City network.
“[Hometown Hockey] gave us an opportunity to engage with fans at a different level,” Mr. Laurence said. “... We know it creates a hugely positive view of the company.”