Pierre Karl Péladeau: “We shouldn’t be surprised if TVA Sports ceases operations”

Big news this morning in La Presse: Pierre Karl Péladeau casts doubt on the future of TVA Sports.

The piece was written by Richard Dufour, responsible for coverage of Québécois listed companies, financial institutions and financial technology companies at La Presse.

In essence, Richard Dufour echoes the words of Pierre Karl Péladeau during TVA Group’s annual shareholders’ meeting, held yesterday morning in Montreal.

“We shouldn’t be surprised if TVA Sports ceases operations […] after investing over $230 million, as we say in Latin: don’t throw good money after bad! […] we can say it now: TVA Sports will not have the means or the business models to pay the colossal amounts that the National Hockey League is asking for the national rights to broadcast hockey games, as we understand it from the agreement recently reached between Rogers/Sportsnet and NHL management” – Pierre Karl Péladeau

Oh boy! If I can’t afford a Lamborghini, I won’t have a Lamborghini. A simple, elementary-level logical deduction.

With a rule of three, we can come to the conclusion that if Pierre Karl Péladeau claims he can’t afford to pay for the NHL’s French-language national rights, he won’t have the NHL’s French-language national rights, right?

Especially since TVA Sports has lost $230 million since it opened, and PKP is concerned about the new agreement signed between the NHL and Rogers (Sportsnet).

Why is he concerned? It’s simple: a company that loses money every year isn’t going to start making money if you dramatically increase its spending.

TVA Sports lost around $20 million over the last twelve months. During the same period, the network had to pay around $70 million for the right to broadcast NHL games (including only 22 Canadiens games, which is what works best in French-speaking Quebec).

Since national English-language rights have more than doubled – from $4.5 billion (Canadian) to $11 billion (Canadian) over twelve years – it’s safe to assume that the NHL and Rogers (Sportsnet) will be asking the French-language broadcaster for two to three times as much money over the next twelve years. With a new bill of $170 million a year, TVA Sports’ losses would become stratospheric. Even with 32 or 34 games instead of 22, as I mentioned a few months ago..

That’s why PKP came out publicly in front of his shareholders earlier this week… and said what he said. Understandably, no publicly-traded company is going to make that decision.

Shareholders and decision-makers will certainly recommend closing the money-losing division… and it’s going to lose more.

But two questions remain..

1. Pierre Karl Péladeau made it clear yesterday morning: he’s not going to negotiate in public. That means he’s still negotiating..

That he’s still open to the idea of broadcasting NHL games..

But that he’s not close to an agreement. At current rates, TVA Sports isn’t in, but it could be if the parameters change.

Will the NHL and Rogers put some water in their wine, seeing that the Franco-Québécois reality is not rosy, and that if they don’t, neither RDS nor TVA Sports will be able to broadcast NHL hockey in French? One is better than two, right?

Did Pierre Karl Péladeau think this would put a little pressure on both levels of government (the media are demanding more support from governments to get through the current crisis… and not just support for public state media)?

Did he say what he said in an attempt to get the CRTC, which has been awaiting a ruling for years on the royalties Bell is not paying to offer TVA Sports to its subscribers, to budge? Wouldn’t such revenues help offset regular annual churn?

2. Could TVA Sports stay open without the NHL’s French-language broadcast rights?

Good question! On the face of it, we’d be tempted to say yes. The network pays $70 million a year, plus production and talent costs, to lose $20 million. If you take away that $70 million, you’d think they’d make a profit.

Except that if you take away the NHL games, your revenues will drop too. I can’t see TVA Sports staying open without NHL hockey. Too many people would unsubscribe, and advertising revenues would take a big hit.

Conclusion
This isn’t the first time Pierre Karl Péladeau has gone public about the possible closure of TVA Sports. He did it in 2019, he did it a few years ago on 98.5..

But this time, with the NHL contract coming to an end, it’s more serious than before. There won’t be any penalties to pay, if you want to shut down (and stop broadcasting sports on your money-losing channel).

Except that I get the impression that PKP is still in negotiation mode, and that if the price of rights drops, he’ll be on board. Because, let’s face it, Bell Media can’t afford to gamble so much money on national French-language rights..

And if no one offers the asking price, that price will inevitably drop, since the rights will have to be sold. At the current price, TVA Sports will not renew its agreement… and will most likely close. But we’ll see what happens next..

The presence of TVA Sports has made the NHL and the Canadiens millions of dollars more. But how? By twinning national and regional broadcasting contracts.

If the network disappears, the club and the league will put a lot less money in their pockets. It’s the law of supply and demand.

PKP wanted to provoke the league, Rogers, the CRTC, the provincial government and the federal government with his exit. Will it work? We’ll see.

But he tried something.

Extension

There’s always the option of a split between TVA Sports and RDS that refuses to die when I talk to people in the business. However, I don’t get the impression that this option is very high on the list, especially as Bell and Québecor are more competitors than teammates. If it happens, it will be a last-minute option to save everyone’s bacon.

We’ll see.