Media buyers welcome $2.5bn AFL deal but warn of pressure price puts on media owners
Australia’s media buyers have warned the winners of the AFL’s $2.5bn sports rights deal that they will struggle to get advertisers and sponsors to spend more than they already do.
“The AFL deal is a massive amount of money and the code would be incredibly pleased,” said Ian Perrin, ZenithOptimedia CEO, whose clients include Reckitt Benckiser, Honda and Parmalat.
“The question will be how will the relative media companies amortise that and be sure they at least break even on what is a very large commitment.”
Horgan
Peter Horgan, CEO of Australia’s largest media agency OMD, said that Seven and News Corp’s Fox Sports would use games to bring in audiences for their wider offerings, rather than necessarily be profitable for them in its own right. Horgan said: “The reality is that TV is a cross funding model.”
Warning that the high costs would hit programming budgets elsewhere, he added: “This deal does cause some concerns about the pressure it will put on other areas of their business.”
Citi media analyst Justin Diddams said it was unlikely that Seven would be able to grow ad revenue on the back of the deal.
“Seven will struggle to write additional advertising revenue against that, while Foxtel will hope they can drive additional pay-TV subscriptions,” said Diddams.
“We knew Foxtel was going to pay more and their uplift was consistent, plus they got an extra game for their trouble.”
The deal will see games air on Fox Sports, which is 100% owned by News Corp. Foxtel, which carries Fox Sports, is owned jointly by News Corp and Telstra.
Diddams said he was not surprised by the higher price for AFL.
“Really it’s a $2bn deal (compared over five years) for the AFL,” he said. “Let’s be under no illusions the AFL does higher ratings, have better demographics of families, wives, better cross section demographics who follow the code and therefore the AFL rights are more valuable than the NRL rights.”
“The NRL got a pretty good deal out of Nine but I think overall the NRL did a reasonable job.”
Many have also noted media mogul Rupert Murdoch’s role in the AFL deal noting how he told a press conference yesterday that: “we have always preferred Aussie Rules”.
Murdoch at yesterday’s press conference
News Corp also vowed to use its mastheads and media properties to back the AFL in more NRL-centric states like NSW and Queensland.
The deal came a week after Nine signed a $925m deal for free-to-air NRL rights.
Perrin suggested Fox Sport would eventually get a deal with the NRL for some games.
“The NRL and AFL have both come out well of the negotiations and they are the unquestioned winners out of the situation,” said Perrin.
“Because the majority of the deals have now been done I have no doubt in my mind that an arrangement will be struck between the NRL and Foxtel.”
“It is just a matter what that price is.”
Pekish
Dentsu Aegis’s head of investment Alex Pekish said News Corp and Seven would have been motivated to do the deal to keep the rights out of the hands of rivals.
“While the talk of today will be centred around the premium AFL secured and who are the real winners out of this deal, the opportunity costs of not closing out this deal far outweigh the cost of the deal,” said Pekish.
Peter Horgan agreed saying: “Last night’s deal shows the strategic importance of the assets to the free-to-air model. The deal runs until 2018-22 – the landscape will be so markedly changed in ways that none of us can entirely predict.
“This is a win-at-all costs mentality that shows event television – particularly sports – is quite unique in free-to-air’s assets to attract viewers and generate disproportionate advertising share.”
Perrin also singled out the value of the digital rights for telco Telstra, saying: “The most interesting part of the AFL deal is the $300m that Telstra will pay over six years.
“That’s a fantastic deal – Telstra have been very smart about what they have acquired and if you think about digital now it’s a good deal but if you think about how it will be consumed in five years then I think they will be reaping huge benefits from that acquisition.”
Nic Christensen
Nine’s Melbourne managing director Ian Patterson and former NRL chief and current Repucom Australia joint MD Shane Mattiske will be among the panel looking at sports rights at Mumbrella’s Sports Marketing Summit at the MCG on September 9. Click the banner below for more details.
topics
AFL
Fox Sports
Ian Perrin
Justin Diddams
News Corp
NRL
Peter Horgan
Rupert Murdoch
sporting rights
Telstra
Ten
Seems like Nine and now Seven rushed into securing their respective codes (at a substantial premium) for fear a resurgent Ten would soon be able to co-fund a bid. If I were Ten, I’d adopt a Netflix-ish style model – put the funds they’ve saved into actual content creation. Quality drama and testing new reality formats.
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This is a massive fail. If the last two weeks have taught us anything, it’s that the best content on TV is from YouTube in the form of cat and dog videos.
If I were head of programming, I’d start my own league for LOLiest Cats & Dogs who go head to head over a winter season of 200 matches to see who can LOL the most LOL come grand final day.
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