It was American economist Aaron Levenstein who compared statistics to a bikini, saying, “what they reveal is suggestive but what they conceal is vital.”
Based on the recently published NRL financial accounts, ARLC chair Peter V’landys is dressing the code in a top-to-ankle swimsuit.
For the first time since 2012, the accounts for the financial year ended October 31, 2020, do not reveal income from broadcasting.
Instead, total revenue is shown as $417.273 million, rather than divided into broadcast and non-broadcast revenue, as it was in 2019.
Broadcast revenue from Nine Entertainment, Fox Sports and Telstra represents the greatest source of income to the governing body, suggesting that V’landys clearly wants to shield it from public view.
Perhaps he doesn’t want to reveal the extent to which the code took a hit from broadcasters as a result of the COVID-19 disrupted season, compared to the AFL.
However, it is possible to tease out the NRL 2020 broadcasting income by examining the cost of non-broadcast revenue.
The margin for non-broadcast revenue is historically around 50 per cent. In 2020, the costs of earning (accountants call this COGS – Cost of Goods Sold), the non-broadcast revenue, was $65.445 million, listed in the financials as “Event, Game and Sponsorship”.
This is the amount of money spent on putting on the show. To establish the non-broadcast revenue number, you simply multiply the COGS of $65.445 million by two, meaning the non-broadcast revenue was around $130.89 million.
Subtracting $130.89 million from the published total revenue of $417.273 million, reveals broadcast revenue to be $286.383 million, or $274.865 million if JobKeeper is excluded.
Pre COVID-19 broadcast revenue for 2020 was estimated to be $330 million, meaning the NRL gave broadcasters an approximate $50 million to $60 million discount.
The exact figure will be known when the NRL is obliged to lodge its accounts with the Australian Securities and Investments Commission in approximately 30 days time.
The AFL’s financial report showed its broadcast revenue dropped by $45 million from $397 million received in 2019, compared to the NRL’s discount of $50 million to $60 million on 2019 broadcast income of $324.6 million.
In other words, rugby league took a bigger hit on less income – although the NRL’s discount, structured over three years, was weighted towards year one.
This is understandable, given reports Nine’s Hugh Marks threatened to further disrupt the resumption of the already shortened NRL season with legal action, unless he reached a satisfactory discount.
However, V’landys also gave Nine further discounts. According to information forwarded to the Australian Stock Exchange, Nine had projected savings on rugby league for each of the 2021 and 2022 seasons of $27.5m, although that figure also includes a cut in Nine’s production costs.
Nine subsequently bought
Rugby Australia’s broadcast rights for the three years from 2021 for $100 million, raising whether the savings Nine gained from the NRL were used to buy the TV product of its century long rival.
More significantly, what will be the position if Nine, having been awarded generous discounts, doesn’t renew its free-to-air rights with the NRL when they expire at the end of the 2022 season?
We don’t know how much of the $50 million to $60 million discount was split between Nine and Fox Sports but V’landys was able to renegotiate Fox Sports deal past 2022 to 2027. V’landys describes the terms of the five-year extension as “commercial-in-confidence” but it was good news for the Murdoch owned company who, in the words of one Fox executive, “can’t get enough of rugby league.”
If Fox Sports took a small slice of the $50 million to $60 million in order for the NRL to be sufficiently cashed up to fund its clubs in 2020 – in exchange for a longer deal – it also demonstrates what a great short term outcome Nine received.
The AFL gained
extensions with both its broadcasters, Seven and Foxtel, delivering $946 million over 2023-24, or an average of $473 million per year.
Considering the NRL was scheduled to receive approximately $340 million in 2021, now reduced by at least $27.5 million as a result of Nine’s discount, the gap with AFL seems likely to grow.
Unless, of course, V’landys has negotiated a monster extension with Fox Sports! Alternatively, Seven has to fund its promised increase to the AFL, with industry sources saying it has overpaid by $50 million.
The NRL cut approximately $50 million out of headquarters costs to fund its clubs in 2020. Both codes will step into new slim-lined suits this season as football department budgets are slashed but the data suggests rugby league will continue its strategy of addressing its financial problems via cost-cutting, while the AFL traditionally approaches theirs through revenue raising.
