A court case involving Harold Mitchell, the man most credited with the rise of Australia’s media buying industry, has opened a window on normally secretive negotiations for the exclusive rights to broadcast elite sporting events.
Mitchell, according to allegations made to the Federal Court, is said to have summed up the state of sport broadcast rights six years ago: “Nine has the cricket, Seven has the tennis and football, and Ten gets the dregs."
The adman and philanthropist is also alleged to have told then Tennis Australia CEO Steve Wood to “keep off the grass” and don’t try to change anything. Mitchell, in a detailed defence, denies this.
The legal action by regulator ASIC (Australian Securities and Investments Commission) centres on deal making, and backroom maneuvering, in 2012 and 2013 for the broadcast rights to the Australian tennis open.
The case started in November last year. Mitchell’s defence, prepared by law firm Gilbert + Tobin, has only recently been lodged with the Federal Court.
Mitchell, who started in advertising in 1960 as office boy and was inducted into the AdNews Hall of Fame in 2012, sold his Mitchell & Partners to Aegis for $363 million in 2010.
The corporate watchdog has compiled a long list of emails, phone calls and records of meetings to make its case around allegations that Mitchell, then a board director of Tennis Australia, gave confidential information to the Seven Network.
The civil penalty proceedings in the Federal Court before Mr Justice Beach relate to the lead up to awarding in 2013 the domestic television broadcast rights for the Australian Open to Seven for five years, allegedly without a competitive tender process.
ASIC also alleges that information about other potential bidders for the broadcast rights was kept from the board of Tennis Australia.
Mitchell and then fellow Tennis Australia board director Stephen Healy, a lawyer, deny wrongdoing.
The face-to-face negotiations took place during a series of meetings, sometimes in hotels in Melbourne or in corporate offices or at the home of Mitchell.
The players included Tim Worner, CEO of Seven, his chairman, billionaire Kerry Stokes, and the then Tennis Australia CEO, Steve Wood.
Senior industry figures mentioned in court papers include David Gyngell, then CEO of Nine Entertainment, and James Warburton, then chief executive of Ten.
Also sniffing about the broadcast rights was IMG Media Ltd, an international media and sports company. IMG Media is said to have made an offer to tennis Australia but the sum involved isn’t mentioned in court papers.
Another player, according to ASIC, was Bruce McWIlliam, commercial director of the Seven Network and one of Australia's top media executives, whose role is detailed in a Statement of Claim lodged by ASIC in the Federal Court.
At one stage, McWIlliam is said to have described proposed changes by Tennis Australia to a draft agreement for exclusive broadcast rights as a “piece of crap”, a “piece of Swiss cheese” and a “stitch up”.
The comments were made on 6 November 2012 in an email to then Tennis Australia CEO Wood, according to ASIC.
At that time, Seven, which had been the television partner of the Australian Open since 1973, was very keen for the deal to be extended. Court papers show Seven had one eye at all times on rivals Nine and Ten.
Seven CEO Tim Worner circulated a paper to the directors of Seven West Media recommending speedy approval of the agreement negotiated with Tennis Australia because he anticipated that the cricket rights negotiations would shortly conclude.
He told the board: ”We would not welcome the prospect of a cricket-less Nine or Ten arriving on the scene.”
Seven was eventually successful. On 17 May 2013, Seven made its final offer, a total fee of $195 million for five years, well above the $100.75 million struck in the previous agreement in 2007.
A deal was publicly announced 14 June 2013.
But ASIC says Seven's rival Network Ten, then chaired by Lachlan Murdoch, had said it had been willing to bid more than $40 million a year for the rights. The total over five years would have been higher than Seven's offer at $200 million or more.
A consultancy, Gemba, produced a report at that time saying it believed Tennis Australia could significantly increase the amount it received for broadcast rights.
Around the same time cricket broadcast rights went for $590 million in a five-year deal which saw fees rise 118%.
ASIC alleges neither Mitchell nor Healy informed the board that Ten was very interested in acquiring the domestic broadcast rights and might pay more than $40 million a year, significantly more than Seven.
In January 2012, ASIC says Mitchell, without the knowledge or permission of the Tennis Australia board, told McWilliam at Seven that Ten was interested in acquiring the domestic broadcast rights.
“All will be ok,” Mitchell is said to have told McWilliam.
Mitchell denies this.
ASIC bases the allegation on a 7.6 minute phone call from Mitchell to McWilliam and an email from Stokes, the chair of Seven, to Worner, his CEO.
At a board meeting on 3 December 2012, Mitchell told Tennis Australia directors that he and the CEO would continue to work on an agreement with Seven.
“Steve and I will wrap this up and come back to board,” he is alleged to have said.
In May 2012, sports and media consultancy firm Gemba International valued the Tennis Australia free to air TV rights at between $148 million and $212 million over five years, not including pay TV, online and mobile rights.
According to ASIC, Mitchell later that month informed McWilliam that Ten might pay a fee of $40 million a year for five years for the domestic broadcast rights. Mitchell, according to ASIC, advised McWilliam that he had been dismissive of Ten’s interest. Mitchell denies this allegation.
On 15 June 2012 at the Olsen Hotel, part of the Art Series Hotels, at South Yarra, Tennis Australia’s CEO Wood and Mitchell met with representatives of Seven, including McWilliam and Lewis Martin, managing director, Seven Network Melbourne, to negotiate the terms of a new broadcast rights agreement.
ASIC alleges, based on telephone calls and an email from Seven’s Worner, that Mitchell told Seven prior to the hotel meeting that he would support the television network’s position in the negotiations. Mitchell denies this.
In August, McWilliam indicated he was concerned that Ten was interested in acquiring the domestic broadcast rights.
He told Mitchell, says ASIC, that Seven’s negotiation strategy with Tennis Australia would be to emphasise Ten’s financial difficulties and that Nine was committed to cricket.
In September 2012, Seven sent an email offering $121 million to Tennis Australia.
In October, Mitchell sent an email to Tennis Australia CEO Wood saying the domestic broadcast rights should be granted to Seven in the next week or so.
That email was forwarded to McWilliam with a note: “Let’s wrap this up next week. Leave it to me.”
In March 2013, Mitchell is alleged to have told Tennis Australia's Wood: “The long standing arrangement of media rights in Australia was that Nine has the cricket, Seven has the Tennis and football and Ten gets the dregs."
The $195 million, five-year deal with Seven was announced in June.
The landscape has since changed.
The rights to tennis broadcasting changed hands in 2018. Nine secured the exclusive in a five year, $300 million deal.
Foxtel and Seven took the media rights for cricket in a deal worth at least $1 billion over six years.
The AFL is with Seven, Foxtel and Telstra in a $2.5 billion deal over six years until 2022.
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