By Shane Anderson (@globalgallop) for racing.com

  
Racing Victoria (RV) is working to bring forward a media rights deal with Seven West Media (SWM) as early as Tuesday with dedicated television coverage operating on channel 78.
This is entirely contingent on the three Victorian metropolitan race clubs signing up to the proposal.
Industry sources have said that the Clubs are aligned with the strategy of signing with SWM but are negotiating individual terms with RV.
Threats by Tabcorp to cease broadcasting Victorian thoroughbred racing as of June 16 came after RV announced that SWM was its preferred media rights partner in preference to Tabcorp’s Sky Racing.
RV has been working closely with the three metropolitan Clubs – the VRC, MRC and MVRC – along with Country Racing Victoria (CRV) since making its announcement on June 7 as to who should have the media rights for Victoria’s thoroughbred industry.
RV does not own the rights for Victorian Racing, they are individually owned by the three Clubs and CRV. RV has control of CRV’s media rights until 2028. Industry sources have made it clear that all groups are in alignment with RV in wanting to partner with SWM.
The industry has not been shocked but greatly disappointed by Tabcorp’s threat to cease coverage of Victorian thoroughbred racing as they have been operating on interim broadcasting deals since December, 2014. It is understood that Tabcorp’s response has galvanised the industry.
This is not the first time that the industry has been on the receiving end of threats from Tabcorp.
However, as earnings from the Victorian joint venture wagering partnership are material to Tabcorp’s overall earnings, industry sources believe that Tabcorp will want to come to an arrangement with Victoria soon.
The Victorian Racing Industry, the three codes of racing that covers thoroughbreds, harness and greyhounds, has a joint venture relationship with Tabcorp for wagering. The joint venture still has nine years left to run.
The decision to side with SWM over Tabcorp and Sky Racing is one that the industry sources say has not been taken lightly.
Why would RV be willing to take a risk in damaging relations with its joint venture wagering partner for the coverage of racing?
It all comes down to the offer made and whether that was in the best interests for Victorian racing. And based on the response from the Victorian industry, Tabcorp’s offer was nowhere near as attractive to what SWM made.
RV have never wanted an ‘either or’ approach to the negotiations around media rights for Victorian racing yet it appears that has always been Tabcorp’s approach.
Tabcorp offered a deal that bundles together all major components of Victoria’s media rights – domestic, international and digital – to be controlled by Sky Racing.
This offer was to be for nine years, matching up with the remainder of the wagering joint venture partnership that exists between Tabcorp and the Victorian industry.
Figures had been mentioned through various media outlets that Tabcorp were willing to pay $30 million per year for the duration of the partnership but this has now been dismissed as incorrect.
Tabcorp’s offer valued the domestic broadcast rights of Victorian thoroughbred racing at close to $15.5 million per annum, which would be run through the joint venture wagering deal, and come in closer to $12.5 million per annum net after expenses.
It is understood that Tabcorp valued international and digital rights at a combined $10 million per annum.
Tabcorp wanted to maintain the international rights for Victorian racing, which under the current deal is shared 50/50 by Tabcorp and the race club broadcast.
The Victorian industry has long been frustrated by the fact that the race club has no control as to what meeting is offered internationally, it is offered at Tabcorp’s discretion. Victorian officials are concerned that Tabcorp doesn’t view the product as being premium. Many feel that revenues are not being maximised in this area.
Tabcorp also wanted the non exclusive digital rights – through racing.com – to be run through the joint venture wagering deal with the industry.
In all, it is understood by industry sources that Tabcorp’s offer would be around $22.5 million per annum and run through the joint venture deal.
Tabcorp has also downplayed the value of Victorian thoroughbred racing yet the industry believes that the decline in pari-mutuel wagering has levelled off and fixed odds wagering has grown despite threats around the effect of the race-fields policy.
Industry sources say that Victorian racing is in a very healthy financial position. RV understands the importance of the joint venture relationship with Tabcorp and wants to strength the wagering deal. The media rights negotiations are separate to that joint venture wagering relationship.
RV and the Clubs have wanted shorter term deals and to be able to negotiate separately around media rights. This is a similar approach that other sporting organisations, such as the Australian Football League and Cricket Australia, have taken as it allows for technology advances and customer behaviours to be managed better.
Tabcorp’s nine year deal is considered unusual because of the changing environment that the industry exists in.
It has not been a strategy by the industry to bundle the rights together as it undervalues them individually.
Industry sources have confirmed that there is very little difference in the financial return to the Victorian racing by the offers made by Tabcorp and SWM around domestic rights. The major difference was around coverage.
It is understandable that Tabcorp wants to do a bundled deal as they would get more for less. Yet, RV and the Clubs believe that they can get a greater return for the industry by negotiating separately, especially around digital and international rights.
SWM wants to partner with Victorian racing for five years in a joint venture around domestic rights, with an opportunity for parties to extend beyond that at its conclusion. This means that SWM would have the license rights for the 5 years of the deal.
There would be a shared arrangement around advertising, which will likely include relationships with a variety of wagering providers, and could include Tabcorp.
The deal with SWM would not involve international rights or digital rights, giving RV the opportunity of dealing with many partners for digital coverage. RV has a non exclusive deal in place with corporate bookmaker Sportsbet and it is expected that there will be further announcements in this space this week.
Industry sources have also said a key component of the SWM offer is around customer engagement, working with the industry to better understand racing’s customers and grow numbers.
The industry is united in believing that improved customer engagement will provide significant wagering uplift. They are keen to continue to work with Tabcorp as the joint venture wagering partner to capitalise on this separately to any media rights discussion.
A deal with SWM would also create competitive tension for future media rights and wagering negotiations. The AFL similarly found competitive tension advantageous in media rights negotiations, significantly improving the value of its media rights over the past 15 years.
SWM would have a dedicated channel, utilising racing.com and other resources, that would operate on Channel 78, one of SWM’s datacasting channels that previously broadcast Fitness, Family, Home and Beauty content.
It is understood that this channel would be known as racing.com and would operate 24 hours a day. Outside of live race day coverage, the channel would also create additional programming content.
SWM would invest heavily in the joint venture, especially in production, yet take no equity in the racing.com business. The asset would remain in the ownership of the Victorian industry.
It is well known that SWM values highly live sports coverage on its suite of programming, arguably above all. The network already has a well established relationship with racing in broadcasting feature racing events around Australia.
In developing the racing.com channel 78 coverage, SWM would continue to honour the current arrangements that exist with deals on the main channel. This could mean that, during Melbourne Cup week, there would be the usual coverage that SWM offers on the main channel working side by side with the dedicated racing.com channel 78.
It is understood that the coverage of racing.com channel 78 would have an appropriate budget for all meetings, providing a minimum standard of coverage every day of the week, no matter region, that would meet what was considered the benchmark of recent years – coverage of Moonee Valley Friday night meetings on TVN. This would then be expanded for the premium meetings during the week, principally the metropolitan programs.
It is also understood that SWM would guide the industry over talent selection to improve the coverage of racing from what has previously been offered.
It is understood that the industry would be keen to eventually have discussions with other racing jurisdictions to strategically build content that would compliment Victorian racing in the ‘off period’ during the day. However, the main focus would to always showcase Victorian racing.
Racing industry sources believe that there will never be another opportunity like this again and that the upside in taking the opportunity to partner with SWM is potentially huge.
It is understood that SWM Chairman, Kerry Stokes, is across all aspects of the deal, with CEO Tim Worner and Director Ryan Stokes key players in negotiations.
RV recently signed a deal with Telstra for ten years which will see the industry adopt the Telstra Digital Video Network 2 (DVN2) technology, which will allow for multiple feeds to be broadcast from Victorian race tracks.
Tabcorp have historically controlled this technology but RV has changed this and upgraded the technology in the partnership with Telstra. The potential of this deal will allow for customers to choose what vision they would like to watch during a broadcast. Racing will be able to be broadcast in a way unlike ever before.
The RV board was 100% united in wanting to partner with SWM. This has not been lost on many in the industry. The VRC, MRC, MVRC and CRV are also aligned with RV but have delayed signing their rights while the finer details of their individual returns are agreed to.
The industry believes that this deal will strengthen the joint venture wagering relationship that it has with Tabcorp, and want Tabcorp to advertise on the new channel.
RV has also kept Martin Pakula, Victoria’s Minister for Racing, informed throughout the negotiation period.
The Victorian industry would be looking at an official launch of the racing.com channel 78 during the spring carnival, with the likely official launch being on Memsie Stakes Day on August 29. However, they are prepared to carry the racing.com Racing Live coverage from Tuesday so that Victorian racing is not lost to customers around Australia.
Racing Live on racing.com began coverage of Victorian racing on March 15 after the demise of TVN. The digital coverage has continued to build viewership levels over the past three months on racing.com, giving Victorian racing guaranteed coverage as media rights negotiations have continued.
SWM have responded to Tabcorp’s threat of ceasing to cover Victorian racing from Tuesday by fast tracking the capability of channel 78 to take the feed of Racing Live so that the industry is disadvantaged as least as possible, solidifying their relationship with the Victorian industry.
This would also put pressure on many pubs and clubs around Australia that broadcast racing through deals with Sky Racing. The annual cost for venues to carry Sky Racing’s broadcast of racing is believed to be $25,000 per year. What will be the response from venues around Australia if Victorian racing is not covered on the Sky Racing broadcast?