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Why sports rights have passed their peak

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7,899
Why sports rights have passed their peak
It's increasingly obvious that sports broadcast rights have become unsustainable but, to truly illustrate the point it's important to take a brief history lesson and let the numbers do the talking.

Max Mason Senior reporter
May 18, 2020 – 12.00am

Getting the NRL and AFL seasons back on track amid the COVID-19 pandemic has lots of tricky and intricate steps and one of the most significant issues is money.

To say that sports broadcast rights have become unsustainable wouldn't be going out on a limb. But, to truly illustrate the point it's important to take a brief history lesson and let the numbers do the talking.

Since 2001, rugby league broadcast rights have enjoyed a compound annual growth rate (CAGR) of 9.8 per cent to the first year of the most recent deal in 2018.

From 2001 to 2006 it had a six-year $400 million deal, roughly $66.6 million per season in cash and contra (largely free advertising), with Nine and Fox Sports (which at the time was owned by News Corp and Nine's owner at the time Publishing and Broadcasting Limited).

It is now in the midst of a five-year $1.8 billion deal, which began in 2018, on average $360 million per year in cash and contra with Nine, Foxtel (via News Corp) and Telstra.

That's a 440 per cent difference between what the National Rugby League received for rights in 2001 versus 2019. Nine, Foxtel and Telstra pay each year, what the whole six-year rights deal was worth in the early 2000s.

Since 2002, The Australian Football League has had a CAGR of nearly 10 per cent up to the first year of its current agreement; 2017. Between 2002 and 2006, Nine, Ten and Fox Sports paid $600 million in cash and contra. Compare that to the current $2.5 billion six-year deal between 2017 and 2022 between Seven, Foxtel (via News Corp) and Telstra.

That's a 440 per cent difference between what the National Rugby League received for rights in 2001 versus 2019. Nine, Foxtel and Telstra pay each year, what the whole six-year rights deal was worth in the early 2000s.

Since 2002, The Australian Football League has had a CAGR of nearly 10 per cent up to the first year of its current agreement; 2017. Between 2002 and 2006, Nine, Ten and Fox Sports paid $600 million in cash and contra. Compare that to the current $2.5 billion six-year deal between 2017 and 2022 between Seven, Foxtel (via News Corp) and Telstra.

That's a 250 per cent increase in the yearly value of cash and contra between the 2002 season and the current deal of $416.66 million per season in cash and contra.
Clearly, television networks' profits in Australia haven't followed the same trajectory as the value of sports broadcast rights. It is the No. 1 reason Nine chief executive Hugh Marks, Foxtel chief executive Patrick Delany and Seven West Media chief executive James Warburton are pushing for lower fees. They need to create long-term sustainable models for each of their businesses.

In 2000, Netflix was just three years old and hadn't launched streaming services (it would in 2007), Google was a two-year-old search engine and was six-years away from buying YouTube, and Facebook was four years away from launching.
While these massive US giants don't compete with Australian broadcasters for sports rights, it's important to understand the broader landscape and how they changed media consumption.
The second set of agreements from the NRL and AFL of the millennia saw modest increases in contract value by comparison of what was to come.

Nine and Fox Sports held NRL rights between 2007 and 2012 for a value of around $500 million in cash and contra over the period of the contract.

Similarly, Seven and Ten had AFL rights between 2007 and 2011 for around $780 million in cash and contra over the life of the agreement.

At the beginning of the next rights deals, 2012 for the AFL, and 2013 for the NRL, those US tech giants were creeping into Australian culture. Google, YouTube and Facebook began exploding, taking advertising dollars and eyeballs away from traditional forms of media.

Live sport was one of the few properties that could guarantee large audiences for advertisers and networks paid big markups to secure the NRL and AFL as loss leaders where it could promote other programming to keep viewers on their channels, known as the so-called halo effect.

Those deals exploded to $1.25 billion in cash and contra for the AFL between 2012 and 2016 from Seven, Foxtel and Telstra, while the NRL locked in $1.025 billion from Nine, Fox Sports and Telstra.

At the beginning of 2015, Netflix launched in Australia, along with Nine's own streaming service Stan. Later that year, the AFL and NRL would lock in new and bigger deals with the same partners for $2.5 billion and $1.8 billion over six and five years respectively.

Now in 2020, it could be argued the halo effect no longer exists, or at the very least is just a shadow of what it once was.

Netflix, Stan, Disney+, Amazon Prime, 10 All Access and Apple TV+, not to mention the range of smaller subscription video-on-demand services and the free-to-air networks' own free streaming services, offer an endless catalogue of on-demand content. That means an AFL or NRL viewer is unlikely to stick around and watch another hour of comparatively cheaper content on a network after a game to watch other programming, they're going to go watch what they want when they want.

Sport remains a major audience aggregator for TV, but the world has changed for broadcasters since 2000. Now sport faces that same brave new world.

Max Mason covers courts, insolvency, regulation, financial crime, cybercrime and corporate wrongdoing. He joined the masthead in 2013 and has held a number of roles, including media editor and telecommunications reporter. He is based in Sydney. Connect with Max on Twitter. Email Max at max.mason@afr.com

How much longer can the networks pay exorbitant fees for the NRL and AwFuL when they're not recouping their money from subscribers and advertising?

Expect Kayo to increase its price over the next few years and shed more low-tier sports.

How much we are offered by Foxtel in 2027 will depend on how much money they recoup between now and then for spending big on AwFuL. I wouldn't be surprised to see Kayo's price rise to $40 per month within the next year or two.
 
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13,196
Here's an extreme hypothetical question:
How much would ch 9 pay to have every game in the NRL played live on free to air, and with no Fox/Kayo along for the ride?
Imagine the ratings, and advertising revenue...
 

Perth Red

Post Whore
Messages
53,921
People said exactly the same thing after the tv last deal in 2015. They scoffed at afl claiming they were getting $473mill in 23/24, they then totally mocked the suggestion that afl where aiming for $600mill a year. Guess what! $416mill to $600 millish.

I actually think the shift in viewing habits is going to make sports rights even more valauble. Creating new content in Films and tv shows is time consuming and very expensive, yet we know it’s new content that keeps people subscribing. Sport literally produces new content every week for 9 months of the year for not much i. production costs.

not to mention advertising revenue went up 7% last year across media.

I think we may see some merging and rationalising of streaming services, though being global helps them. We’ve already seen spark pull the plug in nz on sports after missing out on major sports rights.

there’s a good chance the next deals will be big bidding wars as it may be the difference between surviving or closing for local streaming services.if fox lost afl and nrl they’d be gone. That’s how important the rights are. That will continue to drive the price up. At least for another deal Imo.
 

Perth Red

Post Whore
Messages
53,921
Here's an extreme hypothetical question:
How much would ch 9 pay to have every game in the NRL played live on free to air, and with no Fox/Kayo along for the ride?
Imagine the ratings, and advertising revenue...
Doubt they could pay more than $250-300mill. Advertising doesn’t generate the same level of revenue as subscriptions with advertising.
 

Iamback

First Grade
Messages
9,487
Here's an extreme hypothetical question:
How much would ch 9 pay to have every game in the NRL played live on free to air, and with no Fox/Kayo along for the ride?
Imagine the ratings, and advertising revenue...

Thursday night is really the only night a week that ch9 has any chance to make a profit.

Round it to $400m for the rights currently and a week of NRL is worth $13m. Would they get that back?
 
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Perth Red

Post Whore
Messages
53,921
Thursday night is really the only night a week that ch9 has any chance to make a profit.

Round it to $400m for the rights currently and a week of NRL is worth $13m. Would they get that back?
For regular season ch9 are currently only paying around $80mill cash a year for 3 games a week and finals. (Rest is $5mill. Radio, $15mill contra, $30mill origin).
That’s just under $3mill cash a week not inc finals. so no it’s not likely they would be able to stump up $13mill a week!
 
Messages
91
The EPL`s standing as the most watched Soccer league in the world accounts for a large percentage of their revenues. Their current wealth would have been unimaginable in the days of the old first division when prosperity in the domestic market was the extent of their ambition.

The NRL would be by far the best placed competition to profit from any growth in RL`s popularity. It would be on nothing like the same scale in absolute terms, but if RL enjoyed a fraction of Soccer`s global pull the rewards would be substantial relative to those earned from Oz media deals.

Social media presence is a good guide to which NRL franchises have the most potential to be global brands. Broncos, Storm, Warriors, Rabbitohs have the most followers. In addition, others like the Bulldogs and the Dragons would have various demographic and historical factors in their favour if they sought to emulate Liverpool and Man Utd in worldwide reach.

Sadly, the leadership at League Central seem to concentrate solely on fighting their insular binary code war with AFL and show little interest in growing a global viewership. The gambling industry in the U.S. is the only option touched on by PVL as a possible source of overseas income.
 
Messages
7,899
Here's an extreme hypothetical question:
How much would ch 9 pay to have every game in the NRL played live on free to air, and with no Fox/Kayo along for the ride?
Imagine the ratings, and advertising revenue...
They could bid for everything now that they have Stan Sport. They did put in a $500m per annum bid for AwFuL last year.

What makes me worried is the NRL, AwFuL and Cricket Australia refuse to take the punt and go with Ch10/Paramount+. Part of that is because Ch9 and News Ltd run a duopoly over the print media and would shun our game if we weren't with them.

Ch7 won't bid in 2027 as they've got AwFuL.

Ch10 draws shit ratings and hardly anyone is subscribed to Paramount+. Ch9 might be happy to just pay $115m per annum in cash for three games and let Foxtel screen everything bar Origin and the GF.
 

Pneuma

Juniors
Messages
1,432
Three year old article. I wonder how far back we should go to assess future sports media rights value?

Fact is the market is changing quickly.

FTA is dying a deserved death and smart sports administrators are adjusting accordingly. This article is pretty much useless for any real analysis of future value.

Being a local sport in a small market isn’t going to get you far in the future and that’s where the afl’s problem and also ours to a lesser extent lies.

At least we can, theoretically, expand our comp and get a larger international profile and game to sell and at least we have one major comp elsewhere we can feed into.

The afl for all its bulldust and bluster has nowhere to go.
 
Messages
15,317
Three year old article. I wonder how far back we should go to assess future sports media rights value?

Fact is the market is changing quickly.

FTA is dying a deserved death and smart sports administrators are adjusting accordingly. This article is pretty much useless for any real analysis of future value.

Being a local sport in a small market isn’t going to get you far in the future and that’s where the afl’s problem and also ours to a lesser extent lies.

At least we can, theoretically, expand our comp and get a larger international profile and game to sell and at least we have one major comp elsewhere we can feed into.

The afl for all its bulldust and bluster has nowhere to go.
Yep ..it changes constantly yet this Spud continually posts articles that are years old to back up his bizarro rants .
 

Pneuma

Juniors
Messages
1,432
Yep ..it changes constantly yet this Spud continually posts articles that are years old to back up his bizarro rants .
He trawls the internet for articles that might lend some credibility to his lunatic views and forgets to check the dates. And then his friend with benefits from Perth comes dashing in and agrees with him. I hope they will be happy together.
 
Messages
7,899
People said exactly the same thing after the tv last deal in 2015. They scoffed at afl claiming they were getting $473mill in 23/24, they then totally mocked the suggestion that afl where aiming for $600mill a year. Guess what! $416mill to $600 millish.

I actually think the shift in viewing habits is going to make sports rights even more valauble. Creating new content in Films and tv shows is time consuming and very expensive, yet we know it’s new content that keeps people subscribing. Sport literally produces new content every week for 9 months of the year for not much i. production costs.

not to mention advertising revenue went up 7% last year across media.

I think we may see some merging and rationalising of streaming services, though being global helps them. We’ve already seen spark pull the plug in nz on sports after missing out on major sports rights.

there’s a good chance the next deals will be big bidding wars as it may be the difference between surviving or closing for local streaming services.if fox lost afl and nrl they’d be gone. That’s how important the rights are. That will continue to drive the price up. At least for another deal Imo.

FTA and Foxtel rely on sport more than ever, that's for sure. All of the premium drama from overseas is now tied up with streaming services and it costs too much to produce Aussie drama, so they're cutting back on that and wouldn't have any at all if the legislation didn't make them air it.

I think we'll see Foxtel shed more lower tier sports from their programming. ESPN might pick up some of them, like they did with the NBL. This will free up money to spend on NRL, AwFuL and cricket. But after that the well will run dry and it'll be hard to pay more than they currently do. God knows what happens with Foxtel when Murdoch is gone.

FTA wouldn't have anything without the anti-siphoning laws.
 

flippikat

Bench
Messages
3,476
FTA wouldn't have anything without the anti-siphoning laws.

If you wanna see what FTA sport looks like without anti-siphoning laws, just look at what we have here in NZ.

Currently the only live FTA sport we get is the cricket that Spark offloaded to TVNZ (as they're closing "Spark Sport", they have no use for the rest of their contract), and whatever Sky permit to be simulcast on Prime (FTA network that they own).. which is some NBL basketball, some tennis majors, and not much else.
 

Perth Red

Post Whore
Messages
53,921
If you wanna see what FTA sport looks like without anti-siphoning laws, just look at what we have here in NZ.

Currently the only live FTA sport we get is the cricket that Spark offloaded to TVNZ (as they're closing "Spark Sport", they have no use for the rest of their contract), and whatever Sky permit to be simulcast on Prime (FTA network that they own).. which is some NBL basketball, some tennis majors, and not much else.
Isn’t there nrl games every week on prime from this season, or was it just origin?
 

flippikat

Bench
Messages
3,476
Isn’t there nrl games every week on prime from this season, or was it just origin?
I think it was 1 or 2 games per week, delayed, with ads scattered in.

I recall they screened the first Origin game live, but the others were on delay.

The thing is, timezones work against us - for an 8pm Sydney kickoff, once you add the 2 hour time difference and an hour delay for FTA then that's an 11pm local kickoff on FTA TV.

Sure, the equation changes for earlier games - but when the jewels in the crown (Origin, test matches in Australia, playoffs, the Grand Final) have 7.30 or 8pm Sydney kickoffs, it puts up a huge barrier to FTA viewership.
 
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