With five more years on the Academy of Motion Picture Arts and Sciences’ current contract with ABC for the Oscars, the Academy is looking to extend it. I hear that reps for organization have reached out to ABC about opening talks on a new deal.
Renegotiating the TV contract early is not new for the Academy and ABC. The last time around, they reached a new agreement in February 2011, three years before the old one was set to expire. That deal, hammered out between then-president of the Disney-ABC TV Group Anne Sweeney and president of the Academy Tom Sherak, runs through 2020.
Still, opening negotiations on a new pact halfway through the current one is early (last time around, there were six years between renegotiations). The overtures to ABC have come as the Academy is mounting one of its biggest initiatives ever, the building of a new museum, set to be completed in 2018.
It is a huge undertaking, and the Academy recently racked up debt to help finance it, selling $341 million in bonds, the vast majority of it to be used towards the $300M cost of the museum. In conjunction with that, Moody’s Investors Service revised its outlook on the Academy from stable to negative, citing “heightened credit risk over the next 12-18 months with reliance on the conversion of pledged commitments to cash receipts to fund debt repayment, and the construction risk for the large Academy Museum of Motion Pictures on the campus of the Los Angeles County Museum of Art.”
While pretty high, the Aa2 rating assigned to the bonds “incorporates the Academy’s dependence on revenues from the broadcast of The Academy Awards ceremony, representing 75% of total operating revenues with contract renegotiation risk,” Moody’s said.
Since the Academy is so heavily dependent on ABC’s license fee for the Oscars, a new long-term deal would minimize the “contract renegotiating risk,” securing that cash pipeline for the next decade or so. Increasing cash flow and liquidity are considered key to the Academy’s ability to maintain a strong credit rating and secure low-interest rate loans as it funds the museum.
The Academy would likely seek a license fee increase from ABC. The Oscars have been undervalued, according to observers. As of 2011, the domestic (ABC) and international TV rights, which are negotiated separately, brought in about $70 million to the Academy, which it uses to beef up its operational budget in addition to staging the Oscar telecast and the Governors Ball. That year, ABC netted more than $80 million in ad revenue for the telecast. With the value of big live events ever growing in today’s fragmented, delayed/on-demand viewing TV universe, the ad rates for the Oscars have been climbing, with the network raking in more than $100 million for the most recent 2015 show.
I heard that the Academy may also pursue a some sort of upfront cash payment as part of a new deal with ABC, which would alleviate its financial burden footing the bill for the museum, designed by Pritzker Prize-winning architect Renzo Piano, which will include a 1,000-seat screening theater under a rooftop sphere with a view of the Hollywood hills.
It is unclear whether talks between the Academy and ABC have started, but the two companies are expected to eventually extend the partnership. The Oscars have become synonymous with ABC — outside of the first few years in the 1950s and a brief period in the 1970s when the show was carried by NBC, it has always aired on ABC. With parent Disney putting such big emphasis on strong brands, it is highly unlikely the broadcast network would let an iconic one like the Oscars go.
Reps for ABC and the Academy declined comment.