Networks thrust and feint to repel Demetriou's cash grab
Roy Masters
April 1, 2011
NRL boss David Gallop fired a shot in the turf war between the football codes mid-week, proclaiming at a Men of League function that round one of the AFL produced its lowest crowd in years, while rugby league set its highest.
But both codes face a joint enemy: the broadcasters believe AFL boss Andrew Demetriou has become too greedy, meaning his expectation of a $1 billion rights deal should not be aped by the NRL. Channel Nine is the outsider, engaged in a side battle designed to drive up the price of the AFL and force down the NRL's value.
The AFL's deal with Foxtel has been concluded and Demetriou is locked in final, furious negotiations with the free-to-air networks to drive up the price past the $780m agreement set five years ago.
Channel Nine boss Jeff Browne, who is a former AFL lawyer, and network star Eddie McGuire, who is also chairman of Collingwood, are showing interest in AFL rights, but mainly to drive up the price rivals Seven and Ten must pay. If Seven/Ten pay ''overs'', it achieves two purposes: the AFL gets more money for the game loved by the Victorians and Seven/Ten have no money left to spend on the NRL.
This would allow Nine to enter the auction for NRL rights - which expire at the end of 2012 - as the sole free-to-air bidder.
But Seven owner Kerry Stokes has declared the AFL ''greedy'' and Ten shareholders James Packer and Lachlan Murdoch believe they are already paying too much for sport.
Nine's worst-case scenario would be to end up with both AFL and NRL. No free-to-air network makes money from AFL. It is a loss leader, keeping viewers tuned to shows on which it can turn a profit. According to a recent Citigroup report, free-to-air TV coverage per year of AFL generated $75m in advertising revenue and cost $93m to acquire, not including production costs. It warned that if the price of AFL TV rights increased in the next contract, it would impact on the value of the shares of Seven, Ten and Foxtel's owners.
It's expected the AFL will receive $100m a year from Foxtel, up from the current $53m it pays for four games a week. Foxtel will have an additional game because of the entry of Gold Coast and Greater Western Sydney in the competition in 2012, plus the pay TV network will share a further two games with Seven and Ten. Foxtel may also simulcast the finals, except for the grand final.
It all adds up to improved coverage for a network whose subscription rates in the south and west of Australia are well below those in the northern, rugby league states.
If Seven/Ten share games with Foxtel, they will lose viewers and advertisers in a deal under which they now pay $90m-$100m a year.
Foxtel will show the games live and if the free-to-air channels continue their practice of delayed coverage (in order to load up with commercials), Seven and Ten will leak even more viewers to pay TV.
So, if Foxtel delivers $100m and Seven/Ten yield and pay the same, Demetriou has his $200m a year, or $1b over five years. If Seven/Ten play hardball, Demetriou will announce $1b anyway, slipping online rights into the bundle.
The AFL now receives $60m over five years, or $12m a year, from Telstra for online rights. The value of sport's internet rights are expected to increase significantly over the life of the next broadcasting contract.
Any increase in what Telstra pays could come from more live BigPond games, meaning a further devaluing of pay and free-to-air rights.
But Telstra, along with its co-owners of Foxtel, News Ltd and James Packer's CMH, in which Stokes also has a shareholding, all agree football costs too much. Once the AFL deal is announced Ten will close its digital, all-sports channel, One HD, taking one more bidder out of the auction for NRL rights.
