New blood for old sports
Stephen Bartholomeusz
Published 3:48 PM, 22 Dec 2010
Stephen Conroy has produced a new ‘anti-siphoning’ list which makes a few changes to the existing list of sports reserved for free-to-air television. The new list, however, is just a holding device before more significant changes to the networks’ privileged position are made next year.
Conroy had to publish a new list because the old one expires on December 31. He described today’s list as "interim", pending the implementation of reforms to the anti-siphoning regime he announced last month. The British Open golf and French Open tennis are off the list, with Twenty20 cricket and the Socceroos’ World Cup qualifiers added.
Under the proposed permanent changes the list will be split into two tiers: one containing iconic events that the networks will have to broadcast and in full and the other containing everything else. The networks will be able to broadcast those ‘other’ events on their digital multi-channels but on a ‘use it or lose it’ basis.
However, the most significant change is the proposed de-listing of four AFL games and five NRL games from the list, enabling pay TV to bid for the rights to those games. At present – and until the new restructured list is in place – free-to-air have the first right to acquire and broadcast all AFL and NRL games.
Conroy confirmed today that he was still working with the codes and broadcasters for a regime that would maintain the two best AFL games (shown on Friday and Saturday evenings and selected by the AFL), along with the Anzac Day and Queen’s Birthday games on free-to-air, with a similar approach for the NRL. South Australian and West Australian viewers would also be guaranteed free-to-air coverage of teams from their state. Overall, four of the eight AFL games each week would remain protected.
Once that regime is in place Foxtel in particular will become a bigger direct player in the negotiations and bidding for rights to the two codes. At present it can only acquire what the free-to-air networks don’t want at prices that they can virtually dictate.
Assuming the two-tiered list is in place sometime early next year, it will be a major financial fillip for the football codes in particular.
Goldman Sachs has produced some timely research on sports rights which says that there are $2 billion of sports broadcast rights (using their current value) due for renewal by the end of 2014.
The AFL is first cab of the rank next year, when its current $780 million deal with the broadcasters expires at the end of the season. The NRL’s $500 million package ends in 2012, cricket’s $320 million deal in 2013 along with soccer’s $120 million contract and the Australian Open’s $100 million deal in 2014.
The big two football codes are the winners, given that there will be more broadly based competition for their rights, although they will be disappointed that new media (which probably means Telstra) aren’t allowed to gain exclusive access to sports rights and therefore won’t be an extra source of bidding tension.
If the value of the key sports rights goes up, so do the costs of the networks who need that programming to drive ratings and revenue and provide flow-on effects to their wider schedules.
Goldman says that sports programming currently represents about 25 per cent of all the network’s programming costs, which in turn represent about 70 per cent of the networks’ total operating costs.
That provides some insight into how important the networks think those rights are and probably supports the view that the partial de-regulation of the list is going to see the value of the football rights bid up, along with the networks’ costs.
There is going to be a fine line between winning the broadcast rights to AFL or NRL matches on terms that makes sense for the network and paying too much, although Goldman did note the collapse in Seven’s ratings when it lost the rights in 2002. Since regaining a share of the rights Seven has emerged as the dominant network, with a disproportionate revenue share.
The sporting bodies will also face some tricky dilemmas as they try to get their own balances right in maximising revenues, audiences and attending fans by optimising the mix and scheduling of free-to-air and pay TV broadcasts of their games.
Next year won’t quite be a brave new world for the networks, pay TV and sports administrators, but it should be somewhat more interesting and challenging than it has been under the expiring regime.
