AFL close to extending TV deal with Seven as Foxtel holds out for discount
By Zoe Samios and Jake Niall
June 4, 2020 — 9.43pm
The AFL is on the brink of securing a two-year extension of its television rights deal with Seven West Media at a reduced price but pay TV operator Foxtel is holding out for an even bigger discount.
Multiple media industry sources who requested anonymity because the negotiations are confidential told The Age that Seven is seeking a cost reduction on its current deal in exchange for a two year extension that would give the AFL more financial certainty in a weakening economy.
Foxtel, Seven and Telstra secured a
$2.5 billion six year deal with the AFL in 2015 that runs until 2022. Seven's two year extension would take its deal with the AFL out to 2024.
Seven, which is controlled by billionaire Kerry Stokes, is aiming to save between $30 million and $40 million on its AFL rights bill this year based on a 22 to 23 per cent reduction in games played this season, sources said.
A pro-rata payment based on an 153-game season along with finals, previously reported by The Age, is at the foundation of the re-negotiation but sources also indicated
Seven was also looking to suspend the three per cent annual inflation rate included in the deal.
Seven was expected to pay about $150 million to the AFL this year under its existing deal.
Both Seven and Foxtel have been facing significant financial challenges in a tough environment for media companies that predates the coronavirus pandemic. The broadcasters believe AFL games this year have lost significant value due to the absence of crowds and reduced lengths of games, but AFL chief executive Gillon McLachlan is still expected to drive a hard bargain in the negotiations.
In an indication of how tightly held the negotiations have been, Hawthorn president Jeff Kennett, a member of the AFL's 'war cabinet' during the COVID-19 pandemic, said he had "no idea" about the situation. "I have no idea. We haven't been taken into the AFL's confidence," Kennett said.
Seven and Foxtel declined to comment.
Seven, which booked a $66 million half-year loss in in February, has net debt of $541.5 million and chief executive James Warburton has been looking to slash costs across the business.
The AFL currently costs Seven about $20 million to produce annually, but that figure would be reduced in the interim due to talent being unable to fly interstate and reduced staff on site during matches.
Foxtel, which is controlled by Rupert Murdoch's News Corp, has also been battling subscriber losses amid fierce competition from streaming services. News Corp wrote down the value of the business by $1.3 billion in May.
The pay TV provider is holding out for an even larger reduction on its AFL rights costs than Seven to account for the loss of games and subscriptions to its set top box and sports streaming service, Kayo.
Foxtel, which contributed about $1.3 billion to the AFL deal in 2015, now believes it overpaid, sources said.
The company has stood down more than 200 staff and axed more than 300 jobs in the last few months due to the suspension of sport and large falls in spending from advertisers due to COVID-19.
In recent years media executives have publicly disputed the large amounts they have paid for sport, which in many cases acts as a loss leader for other programming. They argue production costs they incur in addition to rights fees cannot be recouped up in advertising dollars.
The AFL will return on June 11.
https://www.theage.com.au/sport/afl/afl-close-to-extending-tv-deal-with-seven-as-foxtel-holds-out-for-discount-20200604-p54znm.html#:~:text=Foxtel, Seven and Telstra secured a $2.5 billion,its deal with the AFL out to 2024.
