Rogers enjoying playoff boost, but benefits hard to quantify

Having five Canadian teams reach the NHL playoffs for the first time in more than a decade is set to translate into a winning season for Rogers Communications Inc. as it completes the first of 12 years of a $5.2-billion rights agreement with the National Hockey League. The inclusion of the Montreal Canadiens, Vancouver Canucks, Ottawa Senators, Winnipeg Jets and Calgary Flames in the playoffs will “spark a number of good outcomes for us,” Rogers Sportsnet president Scott Moore said in a phone interview, citing higher ratings, more advertising revenue and subscriptions, as well as boosts to Rogers’ telecom services. Moore said that having five teams in the playoffs gives Rogers “the opportunity to certainly make our year, and maybe even exceed our year, as far as our financial goals.” He declined to provide more detail about those projections, adding only that the company was “bang-on” regarding for the regular season. “But you make or break your year in playoffs, and having five teams in the playoffs certainly bodes well for us.” Moore expects ratings to go up, noting that historically when Canadian teams have been in the playoffs, audiences increased from 55 to 85 per cent. “So those are significant numbers,” he said. Rogers spokeswoman Jennifer Neziol said in an email Thursday, citing data from Numeris, that the number of those who watched some or all of the first playoff game between Ottawa and Montreal was 9.4 million, “an increase of 50 per cent in comparison to the last first round Game 1 matchup between Montreal/Ottawa on May 2, 2013.” The number of views on Rogers’ online service NHL GameCentre Live was 129,643. Neziol said the first Calgary-Vancouver game drew 7.1 million viewers, "an increase of 60 per cent in comparison to the Canucks' most recent first round Game 1 matchup” in 2013, and 46,468 views on GameCentre Live. “Our phones have been ringing off the hook from advertisers who want to be part of it,” Moore said. “Many smart advertisers hold back a little bit of money this time of year just in case there’s a lot of Canadian teams in, and depending on how the Canadian teams do.” “The ad revenue, when you’ve got this many Canadian teams, you’re talking multiple millions of dollars,” a number Moore clarified could be up to $10 million, though he added that it depends on variables such as how many series go to a maximum seven games. “My new CEO , who is from Britain, he asked me to assess where we are for the season. And I said no because in the NHL, unlike the Premier League or other sports, you don’t know how many games you’re going to get, you don’t know how many Canadian teams will be in it,” he said. “If we had Montreal-Ottawa, Vancouver-Calgary and Anaheim-Winnipeg all go seven games, that’s tremendous for us. … If they’re all four-game sweeps, that’s a disaster.” Moore noted that because of how the series are set up, at least two Canadian teams will make it into the second round. The ideal scenario for Rogers, he said, is that two Canadian teams meet in the final, something that hasn’t happened since Calgary beat Montreal for the Stanley Cup in 1989. Rogers also expects Sportsnet subscribers to grow and for the channel to improve its distribution across the country. “We haven’t had playoffs on Sportsnet, and that’s one of the reasons we got the rights , was to boost Sportsnet viewing,” Moore said. He noted that the deal with the NHL gives Sportsnet an advantage in a pick-and-pay world because “if you’re making decisions as to which networks you want to have, and you’re a sports fan and a hockey fan, you have to have Sportsnet.” Moore added that NHL GameCentre Live, which it introduced as its own product this season, is “a crucial part of our strategy,” and that this is the first year all playoffs are available on the service, which was previously offered directly by the NHL. Rogers provided GameCentre for free to its Internet and wireless customers this season, which increased usage, Moore said. “For a telecom company, that’s great news. It increases people’s preference to buy Rogers to begin with, and it uses a certain amount of data, which is always good for us. And people tend to increase their data plans with us,” he said, though he couldn’t predict how many more people the company thinks will subscribe to GameCentre as a result of the playoffs. Troy Crandall, a telecom analyst with 3Macs, said in a phone interview that while having this many Canadian teams in the playoffs is good for Rogers,the benefits are difficult to quantify and depends on which teams have extended runs. “If you had a team like Montreal, with so many fans across the country, go deep into the playoffs right to the final, that would be huge, I think,” he said, noting that Rogers could “charge a fortune” for those ad spots. A team with a smaller fan base, like Winnipeg, may not draw as much interest or drive ad rates as high, he said. “I think it all depends on the team, … how many fans of that team across the nation there are. I don’t know if just being Canadian is quite good enough,” Crandall said. Moore said analyzing whether Rogers’ $5.2-billion bet on NHL rights has paid off by looking at ratings of games is “missing the point.” In January, concern over hockey viewership led Canaccord Genuity analyst Dvai Ghose to downgrade Rogers' stock. “I’ve been very consistent in saying that the value of this deal is in what it does for the value of Sportsnet from a subscription and rating standpoint, and how we use the deal to increase preference for Rogers wireless and Rogers cable, and GameCentre has been key to that,” Moore said. On Friday, Ghose said in a research note that he expects Rogers' first-quarter results for this year to be “sluggish,” despite “strong revenue growth driven by the NHL contract.” The quarter will see negative impacts due to a number of factors, including “continued wireless roaming reprice and loss of share,” higher-than usual expenses to retain customers due to the double cohort effect, “high wireless churn, driven by poor service and overly aggressive multi-year promos in 2013,” as well as the CRTC's elimination of 30-day notice for cancelling TV service, Ghose said. Moore said that the impact of the playoffs on Rogers’ performance can’t be measured in ad revenue alone. “The only way of looking at sports, which was advertising versus cost, is literally from the 1970s … and some reporters are looking at the deal that way. Well, we have multiple revenue streams,” he said, citing advertising, subscription revenue and wireless revenue. “And we’re hitting on, if not all cylinders on all those platforms, we’re pretty darn close.” He added: “If we did deals the same way we did in the 70s, we would be out of business,” he said. Gord Hendren, president of Charlton Strategic Research Inc., said in a phone interview that “there’s no question that this is a good scenario” for Rogers, though it’s not a perfect one. If the Toronto Maple Leafs were also in the playoffs, or Canadian teams were in five different first-round series, as opposed to four of them playing each other in two series, that would also have been better for Rogers, he said. At the same time, Hendren added, “there are some very interesting stories here. There are some underdogs, which can really create a lot of interest. So, for example, the Winnipeg Jets are clearly an underdog story, as are the Calgary Flames, as are the Ottawa Senators.” Dave Heger, a U.S.-based telecom analyst with Edward Jones, said that the benefits will be tiny compared to Rogers’ overall revenue. “I would say it’s an incremental positive,” he said in a phone interview. “Even if it drove … an extra $10 million of revenue in the quarter, even if it’s pretty much pure profit, dropping that in the bottom line is only like a penny a share of earnings.” He added: “It’s certainly not something that dramatically moves the needle for them. … more of a psychological positive.” Barry Kiefl, president of Canadian Media Research Inc., noted that there are a lot of advertisements that are sold locally, and that many of those advertisers wouldn’t necessarily “step up to the plate until they knew the home team was in the running.” CBC/Radio-Canada, which held NHL rights until this year, won’t benefit in the same way, Kiefl said in a phone interview. Under the deal between CBC and Rogers, Rogers covers the costs of producing all the games the CBC airs, and in turn keeps the advertising revenue. On Friday, the CRTC approved a television network licence for Rogers that allows it to continue broadcasting Hockey Night in Canada on the CBC. Kiefl said that because of the playoff lineup, “it’s possible, for the next eight weeks or so, that there will be very few and far between evenings when the CBC will have any ad revenue.” “Whereas if they’d had a movie on, or some series on, they could make some money,” Kiefl added. “But this way, they’re completely locked out of any advertising revenue. So it’s a significant hit for the corporation. It’s great for Rogers, but it’s a hidden problem for CBC.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Rogers enjoying playoff boost, but benefits hard to quantify

Broadcast | April 17, 2015

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