Governance and the shaping of incentives of Ecosystem Asset holders Strategy and Assets Case-study: Sports-Media Nexus

1. APSM10(Assignment - 04)
Prepared By:
Deepa Shukla
Sanjay Gurtu
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2. 1. Governance & the shaping of incentives of
ecosystem asset holders
2. Strategy and Assets
3. Case Study: Sports – Media Nexus
1. Why did the media firm get involved in the
organization of the Rugby league?
2. Identify the main stakeholder & relations of control
amongst them.
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3. 3

4. 4
Strategy
1. 1908: Rugby was brought by NSWRL and become National League
2. 1961: Rugby match telecast started
3. 1990-92: Australian Broadcasting Corporation(Channel two) got
rights to telecast.
4. 1994-99: Series of Agreements between NSWRL, ARL(of which
NSWRL was a member) and Channel nine; granted exclusive
telecast right through Optus Vision on both:
1. Free-to-air and
2. Pay-television
Assets
1. Rugby event become key asset for broadcasting firms
2. Broadcasting Channels rating hovered from 17.3 to 46.7
3. 1982-94: Rugby League become extremely popular
4. 1995: 20-teams competition
Sports event had a distinct character of “now-ness”
the excitement over the uncertainty of outcome.

5. 5

6. 1. Significance of Super League
2. Background of Super League
3. Sports League Global Events– TV Plus Media View
4. Sport League and its Nature
5. Sport League-Media Nexus View
6. The key economic agent
7. Main Assets
8. The Source of the Conflict & Strategic Alliance
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7. 1. Significance of Super League
 There is an increased Commercial and Social Significance of Sports, Media &
Sporting Bodies worldwide
 The economics, events, competitiveness and management of local resources
surrounding the Sports Leagues Industry is under- represented in Management
Literature
 The general monopolistic tendencies of professional sports leagues are driven by
sports-media nexus worldwide
 The holistic analysis of the Super League saga in Australia affords lessons that
extend beyond the realm of sports and has many parallels worldwide in US,
Europe, etc.
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8. 2. Background of Super League
 With the advent of live broadcasting of on TV
& radio, the negotiation of television contract
has become the most economically rewarding
and biggest issue in the game since Nineties
 The commodification of sport,propelled by the
advent of television and pay TV which in turn
has resulted in commercial battles
 As the most popular television & spectator
sport in New South Wales & Queensland,
rugby league constituted a rich market in
Australia.
 From 1982 to 1994, Sydney TRP for rugby
league increased from 17.3 to 46.7, with rugby
league competition becoming the most
watched programs in Australia.
 The inability of “News Limited” to gain the
rights to televise the Australian rugby league
competition for its pay-television channel
Foxtel provided a key impetus for subsequent
moves to establish “Super League in Australia”
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9. 3. Sports League Global Events– TV Plus
Media View
 SkyB purchased the right to televise English
Premier League Soccer for £304m in 1992
 Rugby Football League in Britain accepted £87
m offer from BSkyB for a five year television
deal in 1995
 Manchester United produce profits of £28m on
a turnover of £88m in 1998
 Fox Network has agreed to pay Cablevision
Systems Corp. US$23-25m to sublicense 50
Yankees baseball games in 1999
 FIFA sold the worldwide TV rights for 2002-
2006 World Cup to Leo Kirch & Sports for
US$2.2b
 Ruport Murdoch’s Fox Network paid US$1.6b
for the rights to telecast NFL for five years
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10. 4. Sport League and Its Nature
 Careful handling of local resources is important
for the success of global strategies
 Effective management of resources is key to
production of ‘rugby league product’
 The use of sporting analogies as social
representation of competing businesses may,
however hold some dangers
 Key Resources include Players & Coaches,
Loyalty of Players towards the Game,
Contracts, etc.
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11. 5. Sport League-Media Nexus View
 Increasingly teams and clubs sell their rights
to broadcasters
 Direct ownership of sporting teams by media
moguls avoids the cost of paying for the rights
to broadcast their games
 The media sponsorship helps in many ways-
increased revenue, attract outstanding
players, fuels the explosion of interest in the
game, increase in their merchandise (T-Shirts,
posters, etc.)
 The global television networks aids sporting
teams in developing their ‘brand’ globally and
engage in further lucrative deals with other
corporate entities (like PepsiCo, Reebok,
Samsung, etc.)
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12. 6. The key economic agent
 Economic agent - The key economic agent in the core system
could be Media Tycoon Mr. Rupert Murdoch the majority
owner of ‘News Limited’ ( subsidiary of Fox). He formed the
local pay-TV channel Foxtel as 50-50 joint venture between
News Limited & teloc Telstra.
 ARL and NSWRL had limited experience with the sport-
television nexus when compared, for example to Mr. Rupert
Murdroch’s involvement in Europe
 He championed the creation of Super league and had fought
legal battles against the monopolistic nature of broadcasting
rights given to local Channel Nine /Optus Vision by
ARL/NSWRL
 He made several deals & alliances with players, teams, other
corporations to make it happen
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13. 7. Main Assets
 It was difficult to identify key resources & assets due the
complex nature of relationship of individual players,
coaches, etc.
 The complexity that makes them difficult to duplicate is
amplified in circumstances where no one individual
understands the ‘whole’.
 The key Assets as identified by News and NSWRL/ARL
were the players.
 The co-operation of some Clubs was also essential and
can be seen as asset, the co-operation of players
needed by new competition was equally important.
 Coaches were also deemed a key asset & instrument in
signing up players
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15.  Star was to own all intellectual property rights,and was to pay News a 15
per cent management fee.
 The licensee was required to maintain a team that was to participate in the
Super League competition, and each current club forming part of a
syndicate owning a particular licensee was to release existing players’
contract to enable the best possible team to be fielded.
 In parallel, separate deeds were signed between News and Star, the
relevant licensee and the corresponding clubs. As part of deeds, News
agreed to indemnify the club inter-alia from any liability that it may incur to
ARL and or NSWRL under the Commitment Agreement or the Liability
Agreement.
 Same was signed with Club’s Directors and officers. Eight clubs had
entered such deals for Super League.
 A deal was reached in Dec 1997 between ASL & ARL to form a merged 20
team competition from 1998. Comprising 8ASL teams, 11 ARL teams and a
newly formed Melbourne team.
 The arrangement was made against a backdrop of massive losses both by
Optus Vision and Foxtel.
 Through StarTV in Asia, BSkyB in Europe and Fox Broadcasting in US,
Murdoch has the ability to give a chosen sport global coverage!
 It was a conflict between Foxtel and Optus Vision for the international free-
to-air and pay-TV rights to the sport in Australia
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16.  The inability of “News Limited” to gain the rights to televise the Australian
rugby league competition for its pay- television channel Foxtel provided a
key impetus for subsequent moves to establish “Super League in Australia”.
 Foxtel is the pay-television channel 50 per cent owned by News Limited, a
subsidiary of Ruport Murdoch’s News Corporation, in a co-venture with
public telco Telstra.
 Optus Vision is the pay-TV channel comprising a co-venture between telco
Optus, Continental Cablevision and Kerry Packers’s
 Publishing & Broadcasting Ltd, which is also involved in the operations of
terrestrial Channel Nine.
 Later News and a subsidiary of Star league Pty Ltd (Star) entered into
separate heads of agreements with seven newly established entities
 In this agreement Star was to set up and promote a Super league
competition involving Australian and New Zealand teams.
 News was entitled to all shares in Star until start-up costs and accumulated
losses were recouped, after which the capital of Star was to be restructured
so that licensees could obtain shares entitling them to 50 per cent of the
vote at a general meeting.
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17.  The Super League saga in Australia adds to the pre-existing Sports-
Media Nexus in professional Team sports market for competition
 The increased revenue ensures higher payments to Players
 The Super League saga in Australia may well serve as a cautionary
tale to dominant firms (ARL & NSWRL) in seemingly stable Markets not
yet exposed to some of the newer technologies and the competitive
opportunities and risks these technologies afford
 The commercial value of these markets for competition incites extreme
rivalries behaviors that can promote Monopolistic Positioning
 Monopolistic tendencies of sports leagues developed from the network
effect that enhances the ‘rugby league product’ value
 Increases the number of persons (spectators) consume it
 A cycle of increasing returns thus eventuates, in which the appeal of
increased spectatorship to sponsors, merchandisers and broadcaster
leads to an array of complementary products and services that further
fuels spectatorship
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18. 18
main Assets/stakeholders
 Media (E)
 Spectators (F)
 Sponsors (P)
 League/ Sporting Body (F)
 Sports Infrastructure (E)
 Financial Stakeholders (E)
 Teams (C)
 Players(C)
 Coaches(C)
 Betting Organizers(P)
 Government Bodies (F)