Surprised this hasn't been posted yet, they are talking it up on 2SM, just astounding to see the amount of money that has been lost to the game from this incompetent TV deal, imagine how much better our game would be with this money.
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No easy answer to the $1b question
Roy Masters
November 20, 2010
The NRL and AFL should receive approximately the same rights fees as they generate roughly the same amount of money.
A senior TV executive recently told NRL boss David Gallop of the AFL's expectation of its next broadcasting contract: ''No one at the AFL wants to accept the fact that they got hit on the arse by a rainbow with their last contract.''
The comment was in reference to Channel Nine's then owner, Kerry Packer, making a deathbed offer of $780 million over five years for the rights, a sum that a Channel Seven-Ten consortium was forced to equal under its first-and-last rights deal with the AFL.
The AFL is demanding $1 billion for its 2012-16 contract but negotiations have stalled while the football codes and TV networks await the announcement of changes to the Federal Government's anti-siphoning laws. The NRL is also seeking $1b, based on superior viewer numbers.
However, the comment made by the TV executive to Gallop could also be interpreted as a message the NRL should temper its own expectations, insofar as a leap from the existing payment of $90m a year to $200m is a significant jump.
Yet advertising revenue figures obtained by the
Herald from Sydney sources indicate both codes generate about the same amount of money from commercials shown during games, which means - assuming broadcasting costs are similar - both codes should receive approximately the same rights fees.
Three Sydney experts calculate the AFL's eight games a week yield $100m from free-to-air TV, with pay TV adding a further $15m.
They estimate NRL matches shown in Sydney and Brisbane write $70m of commercials on Nine and a further $15m in the regional networks but admit these figures could be higher because of uncertainty over advertising revenue written on Nine's second Friday night game.
The second match (Nine typically beams a Queensland club game into Sydney and a NSW club game into Brisbane) is on delay, and therefore allows the network to slot multiple advertisements into its telecast. Nine's Sunday afternoon game is also on one-hour delay, allowing the network to load up with commercials.
According to Sydney media buyers, rugby league also generates $15m in advertising from pay TV, the same as AFL, a surprising figure considering Foxtel shows five NRL games a week, and AFL three.
Barry O'Brien, the chief executive of PHD Network, said of the AFL's total of $115m and NRL's $100m in advertising: ''These figures seem to be a true reflection of what each of the networks write in advertising revenues for both of the nation's major winter sports.''
However, there are agendas being played in this exercise, with a Melbourne media buyer saying the amount of advertising written was heavily skewed to the AFL.
Based on 13 minutes of commercials per hour in every AFL game, the advertising revenue raised on Seven and Ten in the six metropolitan capitals was cited as $220m and $45m in the regional networks. Pay TV wrote $20m, for an AFL total of $285m.
NRL games, according to the source, generated only $60m on Nine in metropolitan areas; $20m in the regionals and $20m on pay TV.
The wide gap between an AFL total of $285m and an NRL total of $100m is at odds with an observation the nation's leading media buyer, Harold Mitchell, made in a recent Fairfax column when he said he expected the AFL to win $1b at its next rights deal, and the NRL possibly the same.
It also contradicts the main reason given by AFL chief Andrew Demetriou when explaining why the AFL has been so desperate to set up teams on the Gold Coast and Western Sydney.
Demetriou has regularly justified the northern expansion on the basis that nearly 60 per cent of advertising is written in NSW and Queensland.
Given the fact the NRL, which is essentially a game followed in these two states, has eclipsed AFL with a cumulative national audience of 120m this year, compared with the AFL's approximate 115m, it can be safely assumed NRL games attract a significant share of advertising in NSW and Queensland.
The AFL Gold Coast Suns, which enter the competition next season, and the Western Sydney Giants, which begin the following year, will not attract advertising dollars in the north for some time.
For this reason, the AFL is looking to pay TV to provide most of the increase in its hoped for $1b broadcasting contract beginning in 2012. But Foxtel will want better quality AFL games from the anticipated changes. While pay TV is installed in 30 per cent of homes nationally, it is in only in 26 per cent of Melbourne homes, compared with 34 per cent of Sydney homes.
Whereas the NRL's third-best game each week is allocated to Foxtel on Monday nights - generating the highest ratings on pay TV - Seven and Ten effectively on-sell to Foxtel the AFL's fifth-, sixth-, seventh- and eighth-best games.
The
Herald revealed this year the AFL and Communications Minister Stephen Conroy were close to agreement on the AFL allocating the third- and fourth-best game to pay TV but this has been denied by the AFL. In any case, who decides what are the best games each round? The AFL? The broadcasters? The government?
The NRL allows Nine and Fox Sports to select their games, where Nine picks one, two and five, with Fox taking picks three, five, six, seven and eight.
Gallop said the choices made by the networks did not necessarily mirror the positions of the competing teams on the premiership ladder.
''It's a very subjective judgment what constitutes the best games when seeking to maximise ratings, as well as showing the best performing teams,'' he said. ''Clearly, there are teams that rate well, irrespective of their position on the ladder. The Broncos [are] a prime example.''
The greatest fear of the football codes and pay TV is the possibility Senator Conroy allows free-to-air TV to buy all games and divert all but the best to the new digital channels.
This is unlikely since it would kill off the Packer-Murdoch-owned Fox Sports but with the anti-siphoning list expiring at the end of the year, and the Greens and independents threatening the new legislation, there might be no list.
No prohibitions of any kind would suit subscription TV. While this would deliver NRL and AFL great riches, the sports are not so short-sighted.
Gallop said: ''Pay TV provides fans with live games, and they pay for it, but free-to-air TV is in every home in Australia, and you need to be there with your high-quality games.''
http://www.smh.com.au/rugby-league/league-news/no-easy-answer-to-the-1b-question-20101119-180wm.html
