Fox holds all the aces in new TV deal
ROY MASTERS
June 19, 2010
The announcement of changes to the federal government's list of sporting events is expected to be made after an anticipated August election, or earlier if News Ltd expresses support for the amendments, industry sources have told the Herald.
Based on a proposed new deal to Foxtel for AFL games and a renewal of Fox Sport's existing allocation of top NRL games, Prime Minister Kevin Rudd can expect improved coverage in News publications between now and an August poll.
News, which owns 25 per cent of Foxtel and 50 per cent of Fox Sports, as well as holding management rights to both, will be guaranteed better quality AFL games and will retain its high-rating Monday night NRL game, meaning Australia's top two winter sports will continue to drive lucrative pay-TV subscriptions.
Asked to comment on this scenario, a spokesperson from Senator Stephen Conroy's Department of Communications said: ''The government is considering its response to the review of the anti-siphoning scheme and will respond in due course.''
Although the migration of top AFL games to the subscription-TV industry with its greater capacity to pay can be expected to push the AFL's broadcasting rights past its existing $780 million five-year deal, the code may not win its expected $1 billion pot of broadcasting gold because the consortium of existing rights holders, Seven and Ten, is unlikely to pay more for a poorer allocation of games.
Furthermore, Channel Nine will play a nuisance role in the bidding process, reserving its funds for a better deal for NRL.
Conroy's office and the AFL are close to reaching accord on an arrangement where free-to-air TV will be allocated picks one, two, five and six of the eight games staged each week, leaving Foxtel picks three, four, seven and eight.
Free-to-air TV preferred a retention of the status quo of a top-four split where these games would continue to be quarantined on the anti-siphoning list for free-to-air TV. But the AFL argued this would devalue the bottom-four games, rendering them unattractive to the losing free-to-air TV bidder, leaving Foxtel as the sole buyer.
The AFL preferred a virtual abandonment of the government's anti-siphoning list, an even split where free-to-air and pay TV took alternate picks of games, allowing Foxtel and its record profits to enter the bidding process for the popular matches. However, Conroy maintained this would disadvantage too many fans, given pay TV's penetration to only 30 per cent of homes.
Channels Seven and Ten, which have an ironclad agreement both must bid for AFL rights together, are expected to win the free-to-air auction against Nine, with the wealthier Seven continuing to take the match of the round for Friday night and the second-best game for Sunday afternoon, leaving cash-challenged Ten with the fifth- and sixth-best games.
The AFL hopes Nine, as the losing free-to-air bidder, will enter the auction against Foxtel for the remaining four games each week, but given Nine's established reputation for screening only elite sport, it won't want second-tier games. Nor can Nine seriously compete with the resources and passion of Seven owner Kerry Stokes for the top tier.
Industry sources maintain the AFL has underestimated the venom in the free-to-air industry, with Nine's interest being to bid up the price Seven and Ten pays, leaving Ten with no money to launch a strike for the three free-to-air NRL games, which come on the block at the end of the 2012 season.
Nor will Nine be seriously concerned over Seven's bid for rugby league's State of Origin series, given its belief NRL chief executive David Gallop can't unbundle the rights and Seven hasn't TV slots to accommodate both NRL and AFL.
Nine will try to force Ten to pay more for lesser-quality AFL games than it now screens, further reducing its dismal ratings in Sydney and Brisbane.
The AFL is gambling on a bigger cheque from Foxtel for the better-quality games but Nine's disinterest in the lower tier of games will undermine the competitive process and Seven and Ten will be reluctant to pay more for a collective package of lesser games.
A ninth game in 2012, when Greater Western Sydney and a Gold Coast team enter the competition, is not expected to immediately ratchet up the value of the broadcasting contract, given the marginal value of, say, GWS versus Fremantle, or Gold Coast versus Port Adelaide.
This game may be sold to video streaming via the internet, drawing Telstra BigPond, or Fetch TV into the auction, delivering the dollars which brings the AFL deal close to $1 billion.
The anti-siphoning amendments are expected to endorse the NRL's existing arrangement where Nine has first choice of the top two games, flip-flopping them on Friday nights and using its fifth pick for Sunday afternoon.
Fox Sport's third pick is allocated to Monday night, while it distributes the fourth to eighth NRL picks over Saturday night and Sunday.
While pay TV has emerged the winner with Australia's two main winter sports, Fox may be forced to relinquish the Socceroos. Changes to the anti-siphoning list are expected to lead to the Socceroos matches being quarantined for free-to-air TV, but this will seriously diminish the value of Football Federation Australia's existing contract with Fox. It is highly unlikely Fox will pay the same rights fees for the A-League without games involving the national team.
Conroy believes soccer will not grow in Australia unless A-League highlights are shown on free-to-air TV, as well as Socceroos matches. However, FFA chairman Frank Lowy has set a high price on the Socceroos and must find a free-to-air network to pay his fee. More importantly, News must decide whether its pay-TV gains with AFL and NRL are more significant than its losses with the FFA before it finally decides what to do with Rudd over the next couple of months.
And then Rudd will know when to announce the changes to the anti-siphoning list.
sarcasm::lol:
