Statement on TVN disaggregation
Racing Victoria (RV) has today announced that it is fully supportive of the decision by the Victorian representatives on the TVN Board to reluctantly accept the proposal by Racing NSW and the Australian Turf Club (ATC) to disaggregate Victorian and NSW thoroughbred racing media rights from TVN.
Once the disaggregation is complete, this decision will allow the Victorian Thoroughbred Racing Industry to get on with managing all of its media rights in the best interests of the Victorian industry, its 70,000 participants and its thousands of loyal and passionate punters.
In making the following statement, it is important to understand the role and responsibility of RV:
- RV is the Governing body for Victorian Thoroughbred Racing and its statutory rights and obligations is to look after the long term interests of the Victorian Thoroughbred Racing Industry;
- RV is not a shareholder in TVN, and does not control the media rights for the Victorian Clubs;
- RV is a joint venture partner of Vic TAB Pty Ltd (owned by Tabcorp), and Tabcorp owns the Sky Racing channels;
- RV is responsible for the overall wagering framework and policies that are the dominant source of funding for the Victorian Thoroughbred Racing Industry and its 70,000 participants; and
- Victorian Thoroughbred Racing is regarded as one of the world’s leading racing jurisdictions, and a world leader in the quality and competitiveness of its racing, its integrity systems and the appeal and audience of its racing carnivals.
“It is a great disappointment to RV that due to the increasing misalignment between how Victoria wants to grow our sport and the differing views of Racing NSW, that there is no other option but to accept the proposal to disaggregate our state’s rights from TVN,” RV Chief Executive Officer, Bernard Saundry, said.
“The Victorian Thoroughbred Racing Industry is completely united in how it will manage its media assets from here on. As a group, we will now be able to get on with pursuing an aggressive growth strategy working with aligned partners and acting in the best interests of our participants, along with punters and racing fans around Australia and overseas.
“The Victorian Thoroughbred Racing Industry’s long term goal is to get vision to as many punters as possible utilising multiple broadcasting options. Our priority will be working with media partners who will help us grow engagement in, and the audience for, our sport; to maximise returns for reinvestment back into our sport; and to fairly reward all of our participants.
“Since its inception in 2002, TVN has been an outstanding asset for Victorian and NSW Thoroughbred Racing. TVN has built a strong and loyal following, and has successfully grown its share of pay TV audience versus the Tabcorp-owned Sky Racing. TVN has also been regarded as an innovator across all Australian sports in delivering live and replay vision on digital devices, and has significantly grown audiences across the Racing Network digital assets.”
In making this statement, RV offers the following explanation as to why the shareholders have reached the decision to disaggregate the states’ rights, noting the increasingly divergent views of each state about the most appropriate future strategy for media rights:
- TVN’s origins were Victorian-only in 2002 with the aggregation of rights for the Victorian Racing Club, Melbourne Racing Club, Moonee Valley Racing Club and Country Racing Victoria. Over time, TVN expanded to include the ATC’s assets representing NSW metropolitan races, from which a robust and commercially attractive business has been developed;
- The strategy to expand TVN’s scope with the acquisition of NSW country and provincial media rights led to the addition of Racing NSW to the TVN Board from December 2012. This has unfortunately resulted in a two-year period of disruptive governance and tension amongst shareholders that has crippled TVN and led to today’s disappointing announcement;
- Through the aggregation of NSW country and provincial rights into TVN, Racing NSW was able to secure two spots on a total board of eight. As most decisions of commercial importance required a vote of acceptance by at least seven of the eight, Racing NSW effectively secured negative control over the commercial operations of TVN; and
- Furthermore, Racing NSW has a NSW Government-backed authority to veto any media deals for the ATC and NSW metropolitan racing. This has sadly weakened the ATC Board’s ability to manage its own media rights and shareholding in TVN.
The sequence of events that has led to today’s announcement are as follows:
- TVN has been unable to agree to Tabcorp’s (Sky Racing’s) proposed terms for a new media rights deal, primarily because Tabcorp (Sky Racing) have been seeking to pay TVN less money for more rights. Tabcorp has also sought to impose penalties on the already reduced domestic rights offer if the Victorian industry (i) increased its race fields’ fees; (ii) did not grant Tabcorp (Sky Racing) its international media rights; or (iii) increased coverage of its racing on free-to-air television. RV supports the Clubs’ decision to not accept Tabcorp’s proposed terms;
- From 19 December, Tabcorp (Sky Racing) decided to reject TVN’s revised proposals and as such, not broadcast TVN on Sky Racing channels into home or into pubs and clubs. TVN has been able to ensure wide broadcast of TVN via FOXTEL Channel 522 into homes, Agencies and pubs and clubs that have FOX SPORTS subscriptions; the free availability of TVN on desktop from www.racingnetwork.com, racing.com, and www.racingnsw.com.au and also the free availability on mobile devices via the Racing Network app;
- The primary source of income for TVN has been rights fees paid by Sky Racing. During this Sky Racing blackout period, TVN has not been generating revenue from media rights;
- Throughout 2014, the TVN Board and TVN Executive had been developing alternative strategies for the long term commercialisation of commercial, pay TV and digital rights that did not see Tabcorp having exclusive control of all of Victoria and NSW’s media assets;
- The Victorian Thoroughbred Racing Industry is supportive of exploring these strategies as it sees the widening of access to live and archive racing vision to more punters and more wagering operators as a core platform for growing our sport;
- Racing NSW has been consistent that an exclusive position with Tabcorp on all media rights was their preferred position, and were not convinced as to the veracity of alternative proposals;
- An example of this misalignment in views was that the TVN Board had previously agreed to the sale of live racing vision to wagering service providers. The Victorian Thoroughbred Racing Industry saw this outcome as a key source of revenue growth for TVN if TVN was forced into agreeing to the reduced terms Tabcorp (Sky Racing) was offering for commercial and pay TV rights. This would also be a key source of revenue for TVN in the Sky Racing blackout period. Racing NSW, however, used its negative veto to block TVN agreeing to a negotiated contract with a leading wagering operator in December 2014;
- With negative control over all commercial decisions, Racing NSW was effectively able to prevent TVN agreeing to anything other than an exclusive agreement with Tabcorp. The Victorian shareholders were not satisfied this was in the best interests of the Victorian Thoroughbred Racing Industry or the best strategy to grow audience and wagering for the sport;
- In mid-December 2014, Racing NSW informally offered to RV to agree to a disaggregation of the rights within TVN. RV could not agree to this proposal, as RV is not a shareholder in TVN, and, together with the Victorian Clubs, it was committed to the future of TVN. The Victorian Clubs also believed that the ATC was committed to the future of TVN and to exploring all options for the sale of media rights for NSW metropolitan racing;
- To be able to continue to fund operations in the Sky Racing blackout period, TVN needed to draw down on available debt with its bankers;
- To draw down on these funds required all shareholders to sign a debt guarantee to the bank. Victorian shareholders were willing to provide this guarantee and had the support of RV. The Victorian shareholders hoped that with more time, robust alternative proposals could help persuade Racing NSW to change its view, or that Tabcorp (Sky Racing) would improve its offer to commercially acceptable levels;
- Racing NSW, however, would only allow the ATC to sign a guarantee if all parties agreed to disaggregate the media rights from TVN. This leverage was linked to Racing NSW’s legislative right to approve all media arrangements for the ATC;
- As a result, the ATC could not provide the required debt guarantees to keep all rights aggregated within TVN. The Board of the ATC met on Christmas Eve and resolved to ask the TVN Board for the orderly separation of the TVN business;
- As a result, the near-term solvency of TVN was put at risk. Combined with the continued detrimental effect of Racing NSW’s negative control of commercial outcomes, these factors meant that the Victorian Directors on TVN had no option but to accept this request, and recommend to the shareholders the orderly separation of the media rights, and the appropriate break-up of the TVN business; and
- The TVN Board met late on Christmas Eve and agreed to an orderly separation, and to guarantee the funds required for TVN to operate within this period. It is anticipated that this negotiation will occur throughout January 2015.
RV’s understanding is that TVN will continue to operate throughout January 2015 in its current format, providing an extensive broadcast of Victorian racing into homes, pubs and clubs via Channel 522 on FOXTEL and digitally via the Racing Network assets.
In making this statement, RV would like to acknowledge the significant efforts of TVN independent chairman, Alan Jackson, and TVN Chief Executive Officer, Bruce Mann, in trying to steer TVN through the often misaligned interests of the shareholders, and in seeking to negotiate a fair deal from Tabcorp (Sky Racing) and other bidders.
RV would also like to acknowledge TVN’s loyal customers who have supported the station and its premium coverage and all of the staff at TVN who have worked tirelessly in difficult circumstances. RV will work with the Victorian Clubs to try and ensure the fair and appropriate outcomes for all staff through the transition period.
RV acknowledges that this unfortunate outcome will likely result in short term financial impacts for Victorian Clubs, and that the current Sky Racing blackout period may extend throughout January 2015.
In planning for this unfortunate scenario, RV and the Victorian Clubs would also like to reinforce to the racing community that:
- We are working together to finalise a plan to pursue a new model for managing the media assets of Victorian Thoroughbred Racing;
- We are committed to finding new and aligned business partners that are willing to work in fair and trusting governance models and commercial frameworks;
- We firmly believe Victorian Thoroughbred Racing is a world class premium product, and it is important to our long term interests to balance the wagering benefits of wall-to-wall coverage against the possible homogenised presentation of our sport. We want the best strategy to grow engagement with new audiences and expand wagering;
- We have significant capability already under our management that will help enable the future broadcast of Victorian Thoroughbred Racing, including (i) our production and outside broadcast company TRP; (ii) our majority equity position in radio station RSN 927; and (iii) our digital asset racing.com; and
- We will always seek to act in the best interests of participants, punters and racing fans alike to provide the best possible access to Victoria’s world class racing.