Why these sports rights are set to shape the future of Australian broadcast media

With the AFL rights race at its final hurdle and the NRL's future tied up, Mumbrella's Calum Jaspan explores how upcoming tier one sports rights look set to reshape the future of Australian broadcast media.

With the AFL broadcasting rights to be settled imminently in the midst of an already exhilarating finals series, the media sections of The Australian and AFR are reporting its incumbents Seven and Foxtel are set to retain Australia’s most popular sports league.

After early talk of international streamer Amazon Prime looking to crash the party, or a total package deal from Ten and its owners Paramount tried to disrupt the status quo, just this morning Nine mastheads the Sydney Morning Herald/The Age report the network has lodged a $500 million per year bid to take the entirety of the rights across free-to-air and on Stan.

For media onlookers, the nuts and bolts of the deal could set the lay of the land for the Australian industry for several years to come.

If reports are to be believed, the AFL is looking for a figure somewhere near $3 billion for five years. Whether they can get near there is the question.

Kerry Stokes sitting with AFL chief executive Gill McLachlan at Optus Stadium on Saturday

With sports rights proving one of the only guaranteed ratings vessels at the moment, should broadcasters be taking an ‘at-all-costs’ approach to securing them, or should they proceed with caution in a seller’s market?

Four rights to rule them all

Australia’s two largest free-to-air networks, Nine and Seven have traditionally looked to balance the year with a ‘tier one’ code across the summer period, and one that runs for an extended period across winter.

This allows them to spruik their slate of content to kick off the ratings year, before the winter codes in the NRL and AFL provide consistent ratings at weekends when the days are shorter and evening entertainment increasingly stays indoors. Then every couple of years there is a joker in the pack in the form of the Olympics too.

“We’ve got to remind ourselves that the TV networks of their own biggest clients,” says Spinach general manager and media director, Ben Willee. “If you have a high profile property, it gives you the perfect platform to promote other properties, and all ships float on a rising tide. It’s fair to say that sports rights are an absolutely essential component of modern broadcasting.”

Barty and the AO kicked off the year for Nine

In a blockbuster move, the pair swapped out summer sports in 2018, with Nine taking the tennis from Seven, and the latter less than a month later getting into bed with Foxtel and pinching the long and short forms of cricket from its competitors in Nine and Ten, securing a full summer of content and guaranteed eyeballs.

The two deals have seen different fates since they kicked in though, with Nine’s $60 million per year deal appearing more of a steal each time the Australian Open comes around, and Seven so unhappy in its marriage that it has looked to the courts for a divorce.

Adding to the pain, Seven’s cricket deal alongside Foxtel only saw the linear rights go its way, with Foxtel nabbing digital too, just in time for it to launch its streaming service Kayo in 2019.

In response to criticism over a lack of forward-thinking in tying up tennis, Nine’s approach to only buying the multi-platform rights showed it was a good four years ahead of Seven in this domain, as head of sports sales Tom Malone wrote: “Nine views this as a landmark deal because we have secured exclusive live rights across all platforms – mobile, digital and social – and we intend to exploit them all with a view to driving greater engagement through an anytime, anywhere, any platform approach, while also maximising the commercial return.”

Some good news for Seven as it has finally decided purchasing the digital rights for live sports is a good idea overall, with its current AFL deal meaning the network can only air fixtures on linear television too.

The Sydney Morning Herald reported last month that Foxtel conceded Seven would be able to stream its games on its streaming app, 7Plus after it looked to have exclusive digital rights once again.

With the new deal set to run from 2025 to anywhere between the 2029-31 seasons, linear-only coverage could be as good as worthless for the network.

Week one of finals footy showed its value to Seven

A report from Deloitte Access Economics, commissioned by lobby group Free TV found almost 60% of the Australians are concerned about the cost of subscriptions, and 50% are not willing to pay for sport at all. With linear TV increasingly on the way out, not securing the digital rights would all but screw the Seven Network.

Foxtel has been keen to take more and more behind its paywall, and it looks as though it might be successful in its attempts to secure a ‘Super Saturday’, with all the day’s games exclusive to Foxtel and Kayo, if reports are to be believed.

“Free-to-air television is ­universally available and accessible, and it is an important source of ­information, education and entertainment for all Australians, ­regardless of their means or ­location,” said new communications minister Michelle Rowland recently, as she unusually opted to weigh into the ongoing negotiations.

“I encourage the AFL Commission and its broadcast and streaming partners to ensure there is no diminution in the availability of AFL matches on free-to-air television under the new deal.”

Introduced in 1992 following the launch of Foxtel, the anti-siphoning legislation has not been properly updated to account for the recent growth of streaming services, which Foxtel CEO, Patrick Delaney has lamented, calling it unfair and that it stands only to “protect free-to-air TV”.

Rowland and the government have committed to reviewing the laws within the next 12 months.

With Nine already securing the future of the NRL in December last year, and it looking like the AFL is set to stay where it is, attention swings again to the summer codes.

Seven bowled over

Seven boss James Warburton said the network would “absolutely” pursue tennis once again earlier this year, as he put Cricket Australia on notice over the Big Bash component of its deal.

James Warburton could be tempted by the tennis, but would TA go back?

“It’s no secret that we’re extremely pleased with Test match cricket… but Cricket Australia haven’t delivered on their contract with the Big Bash. We’ve got a much better relationship these days… but they have to make fundamental changes to the Big Bash League. They’re finally making the right noises.”

A senior media buyer asked whether Seven is regretting the deal it signed in 2018 as it has found itself tied to the contract because of its large dollar amount ($450 million) compared to the tennis, pondering whether “it is a bit of a millstone around their neck?”

“They might be less interested in cricket because of the sheer amount of money compared to the tennis, especially as it is a smaller amount for a more concentrated period of time. And they just view it as a good compliment for the AFL.”

And while Warburton may want tennis back, it will be a tough one to pry away from Nine which has since gone all in on the sport.

Nine now has the rights for all four slams, bolstered by its adjacent since-launched streaming platform Stan, which added Stan Sport two years ago.

Head of sports sales, Matt Granger told Mumbrella last month that adding the US Open makes “it clear for audiences across all touch points that Nine is the home of tennis”.

Judging by appearances, things are going well for Nine and Tennis Australia together, aided by Aussie success at this year’s event at Melbourne Park, with Ash Barty’s win still remaining the most watched TV event of the year. It couldn’t have asked for a better year to launch its all-year package too, with Nick Kyrgios making his maiden singles slam final at Wimbledon, and yesterday once again proving he is the man to beat, knocking out number one seed Daniil Medvedev to book a last-eight spot at the US Open.

Kyrgios has proven to be blockbuster tennis this year

“It seems like Nine have moved on from the cricket”, says the media buyer. “I haven’t heard any executive ruing that they lost the cricket at all.”

So is it realistic that Seven could win it back right away?

“At the end of the day, money talks. It would need to be a compelling proposition from Seven, just in commercial terms. But I am not sure Seven would be in the position to do that.”

“Nine are in such a strong position relatively. Basically, Nine will get whatever Nine wants. So you have to believe them when they say they don’t want the cricket back, and if they don’t want it back, why would they ever give up the tennis?”

While the buyer says Nine don’t want the cricket back, its chief executive Sneesby did say at the start of the year it “could afford” to air both across the summer. In reality, the move doesn’t appear too feasible in order to maximise both.

Rejoining the party, and who wants cricket?

With Paramount and Network Ten’s public play for the AFL rights, and Nine’s late play for the whole deal too, could both have accidentally (or intentionally) made Seven’s deal with Cricket Australia unsustainable for the network?

While the AFL was publicly angling for a near-$600 million per year deal, this week has seen all parties asked to lodge “their best and final offer”. While it may not get exactly what it was after, the AFL is sure to secure the biggest ever sports rights deal in Australia, and at least a sizeable increase on the current two-year extension deal which values the rights at $473 million per year.

Since its launch in 2019, Kayo’s subscriber reporting per quarter usually sees figures stagnate over the summer months while its headline sports are in the off-season.

Right now, Test cricket is wholly available on Channel Seven. While its deal in 2018 saw it agree to all other forms of international cricket, ODI and T20 leave free-to-air, Foxtel has to differentiate its coverage in order to lure the average Australian away from paying nothing to watch the most popular format of the game. A tough ask.

News Corp CEO Robert Thompson has said cricket is not as compelling as AFL or NRL

Even News Corp CEO Robert Thompson stuck the blame on cricket in 2020, as subscribers took a dip in the platform’s early, pre-pandemic days.

“As you know, we are very much in the low sports season in Australia. Cricket, fascinating, sometimes antediluvian as it can be is not as compelling for crowds in Australia as Aussie rules and rugby league.”

“But cricket has certainly made a positive difference to audience retention, but the winter sports in Australia are about congregation and audience aggregation and we’re on the cusp of that selling season.”

So with both test and Big Bash on FTA, is exclusive short format international cricket enough to keep Kayo customers paying, and attract new ones over the summer months?

Quoted by a buyer as having been “bereft of live sporting rights of any magnitude”, Paramount and Ten could be well placed to become the official and exclusive home of cricket across both free-to-air and streaming.

A summer of cricket across Ten and Paramount+ could prove to be a very nice consolation prize for its American owners, one likely to drive more subscribers than its A-Leagues partnership has so far, and with a souring relationship between Seven and CA, could come at a cut price too.

Cricket, while inconsistent, could be a big pickup for Ten, which is without a ‘tier one’ sport

“If Seven were still happy with it, they wouldn’t be doing all this stuff in court,” the buyer adds.

While the buyer noted earlier that the price of cricket is weighing on Seven, the networks know what they are getting into.

A year before it penned its $450 million deal with CA, then-Seven CEO, Tim Worner said: “these sports codes have to start to recognise the power of what we bring to them,” adding that the days of big rights deals are over.

He highlighted the growth the Big Bash League saw after moving from behind a paywall to Ten.

The BBL has disappointed Seven, but industry figures suspect Ten would gladly take it back

Osborne, Willee and the other senior media buyer all agree that value exchange between the top tier sports and the networks has now changed.

While having a component return to FTA last year, a stuttering A-League could be owed to a product that spent years hidden away from most Australians on Foxtel.

“The value of highly engaged sports audiences will only grow as traditional TV audiences continue to decline or fragment,” says Sue-Ellen Osborn, head of investment at Spark Foundry Sydney. “For many clients, the cultural relevance and attention that a Sport environment contributes to a campaign is fundamental to how they connect with consumers or create an impactful campaign.”

Questions about value and the price of sports rights make for interesting discussion, in what one industry onlooker calls a “seller’s market for tier one sports, and a buyer’s for tier two”.

The mega deals for the AFL and NRL are balanced with the millions of advertising dollars that come through the doors thanks to a half a year of content covered, and the cache that comes with it.

“No broadcaster has got their money back on the top tier sports events for years now, and that’s not the point,” says Willee. “I think the real point is if you don’t have something to replace it with, you’re in the shit.”

“At some point shareholders are saying, you can’t invest anymore in those sorts of things, and that’s why, the real danger is the global streaming services, and I think it’s been really clever the way especially both Nine and Ten are experimenting with having sports rights on streaming services and also free to air. It gives them a lot of flexibility.”

The A-leagues, seen to be in the ‘tier two’ category, was still an expensive move for Paramount at $200 million over five years. It is also one that is yet to pay off as its international owners look to grow its subscription service Paramount+ locally, and establish it as a player in live sports streaming.

Paramount/Ten’s A-Leagues deal shows it can handle a multi-platform deal

While there have been teething problems, the move has shown that the company has the ambition, and is capable of delivering the product, potentially setting itself up for any other sport that may arise and capitalising on both the paid and free component of the deal.

Adding another loss-maker may be a tricky task though, with the reported $20 million per year deal to air the Melbourne Cup looking a heavy burden, largely for a race that attracts eyeballs for no more than 15 minutes as casual race fans look to see if their sweepstake came in. Ten paid what could be seen as over the mark in 2018, with the previous deal costing Seven a max of $5 million per year. That deal is set to run out after next year’s Spring Carnival.

A Games at the end of the tunnel?

Add to the pile the Olympics, which while another big loss-maker, proved to be a hit for Seven in 2021 as it aired the delayed Tokyo games.

Seven made back a large chunk of its sunken costs in advertising dollars in the back half of the year as it claimed a total ratings win over rivals Nine for the first time since 2018.

The network is yet to secure a deal for the next Games (and those that follow), and if they are able to do so, the crowning jewel may be a local Games in 2032, set to be hosted in sunny Brisbane.

With a roughly $170 million price tag on the rights for the London, Rio and Tokyo games, negotiating two sets of games in unfavourable time zones next up in Paris and Los Angeles will likely have to be shouldered in order to get Brisbane, which is likely to be a massive event.

The Olympics are returning to Australia

It is predicted to exceed $200 million, this time, and while there is interest across the board, Seven is pipped to continue its Olympics relationship.

“The value equation of sport is always going to be complex,” says Osborne, as she adds its value can’t be measured through a CPM alone.

“Content integration, talent endorsement, cultural connection all add value to a sports partnership. The benefit of a partnership needs to be measured not only through reach or awareness but also through how it delivers against campaign objectives such as brand perception and ultimately its impact on business outcomes.”

Willee says: “Overpaying is really interesting because it’s not about whether you’re overpaying. It’s about what happens when you don’t have it. And we’ve all seen what happens when you don’t have it to the 10 Network.”

Its all about eyeballs he continues. “If you’ve got eyeballs, you’ve got opportunities to do stuff with it. It is no surprise everyone wants more games, and that is what’s been reported about Foxtel, but Seven want to be able to stream some of those games on Seven Plus. So it really doesn’t matter where you catch those eyeballs, as long as you capture them.”

It is not just eyeballs though. Now, digital viewing comes with the added bonus of data from the signed in individual.

Willee says this has become incredibly powerful, and a massive benefit for Nine, which has “so much data”, not just from 9Now and Stan, but also from running its Fairfax titles.

“If data is the new oil, then being able to collect that on top of eyeballs and ratings is just a massive bonanza.”

Nine and Paramount/Ten are setting themselves up for what rights come next, with the ability to bid for each set of rights. This round of the winter formats with NRL and AFL looking like it will remain split across the networks and Foxtel shows the pendulum has not swung the streamer’s way just yet, but Nine’s tennis model shows what can work.

Stan Sport now positions itself as the home of tennis and rugby

While a sport like tennis only comes in punches, the punches it packs such as the Australian Open hit hard, and as platforms like Stan and Paramount+ continue to deliver knock-out entertainment year round, and add-in a steady supply of original content, there is not an over-reliance on a sporting code that can easily pull the plug should a tastier offer come about.

In the meantime can Aussies afford it though?

“I’ve got no doubt there’s going to be consolidation in the sector,” says Willee, adding that the “ludicrous prices people are paying are going to have to settle down a bit”.

Ad-supported tiers will “save the day” says an expert in the sector, agreeing “Australians are almost at capacity at to what they can pay”.

As with the anti-siphoning laws, the streamers have largely gone unchecked until this point, in what has been a “wild-ride” of “growth, at all costs”, continues Willee.

“Those halcyon days are long gone now, and markets are expecting a bit of common sense out of these businesses, in terms of return on investment.”

While it has been all growth until now, it does appear growth is slowing down, as seen in both Stan and Binge’s recent figures.

With Netflix and Disney’s imminent ad platforms set to launch within the next six months, details regarding Netflix’s inventory emerged in the Wall Street Journal last week.

Willee adds: “what’s most interesting is that we will get a much better read on what people are actually watching”, and if that is the case, we may start to get a much better read on the value of digital sporting rights as they continue to move off linear channels.

Where these sports rights go, and who is willing to pay what will give us another idea of where each network is trying to head for the next five to ten years.

But for those that tell you what the market will look like in that timeframe, don’t believe them Willee says.

“Anybody who tells you they can is full of shit.”


Update: Seven and Foxtel retained the AFL rights in a record seven-year $4.5 billion deal later on on the day of publishing. 


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