Gallop’s fatal 2007-2012 TV deal
There’s been a lot said and written about David Gallop’s departure from the NRL the last few days. Many have praised him for the job he has done the last ten years, while others are happy to see the back of him.
But the one theme I have been hearing is that if Gallop had the resources, then he would’ve become a proactive leader. But unfortunately for Gallop and the NRL, they only had themselves to blame for the lack of resources thanks to the previous underwhelming TV deal that was negotiated back in July 2005.
The deal, worth $500 million deal over six years or $83 million a year. It seemed like a good deal at the time, however things were to change six months later when the AFL signed off on a deal worth $780 million over five years. That’s $156 million a year.
When that was announced, many involved in the NRL, whether it’s the players, coaches or administrators were left scratching their heads.
How did the AFL get a deal that was worth almost double of the NRL? Many cited the influence of dying Channel Nine boss Kerry Packer, who was either trying to retain the rights to the AFL, or was hoping that if Seven regain it, it would pay “overs” for it.
Ever since his passing, a stark contrast has developed between stations Nine and Seven. Nine has debts close to three billion and trying to sell off assets, while Seven is in a strong financial position and has taken over from Nine as the leading network.
Others have cited for the huge gap in revenue due to the fact that the AFL have a longer game and have natural breaks for commercials to fit in. Another reason is that industry insiders suggest that the AFL has more of a national appeal.
But the NRL does have a team in New Zealand, and has State of Origin, which has some of highest ratings annually on Australian TV.
The real heart of it has to be the NRL and in particular Dave Gallop.
In 2002 and 2003, the NRL lost Mat Rogers, Lote Tuqiri and Wendell Sailor to rugby union. The reason those players moved codes is the ARU offered more money.
In 2003, the NRL cancelled the Dally M awards after a fallout with the Rugby League Players Association over pay and conditions. The rugby converts, plus the RLPA dispute were early warning signs to the NRL that it needed to bring more revenue to the game.
When you dissect the deal that was struck in July 2005, there are a few things that should be brought to light.
The NRL didn’t give networks Seven or Ten a decent crack at the rights, who at that point in time were trying to form an alliance to get the AFL rights from Nine.
Gallop, a lawyer by profession and from what I gather with very little business background, did the deal, along with a few senior NRL figures. The key problem here was the conflict of interests that surrounded the NRL, News Ltd, Fox Sports and Channel Nine.
The NRL, part owned by News Ltd, was negotiating a TV deal with Fox Sports, who was also part owned or controlled by News Ltd (50%). While Channel Nine at the time also had part ownership (50%) of Fox Sports.
A quote from a Roy Masters article ”Scrooge-like rights bid feared by NRL” on March 18, 2005.
“News Ltd, which owns half the NRL, can’t really lose because money which it pays from its TV pocket ends up in its sports pocket. Packer, though, won’t like bidding against himself.”
So hopefully in a clearer sense, the NRL got screwed by News Ltd and Channel Nine. There was no bidding tension between Fox or Nine, because Nine and News Ltd together owned or controlled Fox Sports, with News Ltd part owning the NRL.
That’s why Nine and Fox Sports got the NRL rights relatively cheap. The end result, Nine and News Ltd came out winners, while the NRL were the losers.
It certainly was a confusing state of affairs.
Since 2005 onwards, the NRL, lead by Gallop were becoming a reactive business. Players like Sonny Bill Williams, Karmichael Hunt and Israel Folau left the code for other sports. The money offered from French rugby and the AFL couldn’t be matched by the NRL simply because of salary cap restrictions and lack of money.
The only solution the NRL came up with was to withhold half of the rep payments from State of Origin, which would go to loyalty fund, which players can’t touch until they retire. It was designed to prevent players switching codes.
Players earn $20,000 per Origin game. Despite this, I don’t think it would stop players heading to another code or competition if the offer is too good to refuse.
The two big scandals that engulfed the code during Gallop’s time regarded the salary cap. The Canterbury Bulldogs in 2002, and the Melbourne Storm from 2006 to 2010, in which the Storm were stripped of two premierships. While we don’t want teams to cheat the cap, both the Bulldogs and Storm teams were terrific teams to watch.
The standard was higher. Albeit controversially.
Has the salary cap made the NRL a mediocrity standard competition or an even one? The salary cap was supposed to protect clubs from going broke, and therefore spread the player talent, yet some of that talent went either to other sports or went to the English Super League.
The only way the salary cap can be effective is if the NRL brings more revenue to game, with the TV deal central to that. That way the cap can be raised much higher, which means the NRL can keep players spread evenly in the NRL at a higher standard.
Reduced revenue to the game, would mean reduced salary caps per team, which may mean status quo like it has been the last six or seven years. More players would be lost to other sports and competitions. It would also mean clubs would struggle financially thanks to the gap between the NRL grant and the salary cap.
So basically what have the NRL learnt since they’ve done the TV deal of 2007-2012? First, you should never have a media company part owned the NRL, and therefore be involved in TV negotiations with a company they already have part ownership with. Second, make sure you go to the market, allow Seven and Ten to have their bids.
I believe Gallop had no business acumen.
Fast forward to 2012. An independent commission was set up in February, meaning the end of News’ involvement in the game.The commission headed by John Grant, along with interim NRL CEO Shane Mattiske and recently acquired corporate advisor Greenhill Caliburn will be the key figures in the TV negotiations. A large team compared to Gallop’s relatively small one in the previous negotiations.
It’s also well known that Gallop’s role in the negotiations had been relatively minor, if not non-existent. The media have concentrated on the personality clash between Gallop and Grant, but in my opinion, Gallop was used to a certain style of governance for a long time, but now had to answer to somebody (commission).
What’s interesting with the I.C. is the two decisions they made this year, getting rid of the McIntyre finals system and parting ways with Gallop, have been done, quickly, effectively and immediately. There was no ongoing sagas in the media, which so often happened under Gallops tutelage.
In conclusion, the TV deal of 2007-2012 was bought cheap by Fox Sports and Channel Nine, thanks to the endless conflict of interests. The NRL should never find itself to be in that situation again.
What the future holds for the NRL relies on capabilities, planning, vision, and proactivity of the new CEO and the independent commission.
If the commission pulls the right reigns, the NRL has it’s best years ahead.