Page 27 - AdNews Magazine Jul-Aug 2020

Sport: A money pit or cash machine?
Sports rights have hit a turning point, with the dizzy mounds of money thrown into the ring peaking and sliding down the other side — for the moment.
had been building long before the pandemic.
In May 2019, Morgan Stanley ana- lysts, in a note to clients: “TV sports rights may have peaked — what will that mean for the AFL/NRL/cricket?”
The investment bank has a data- base to track the inflation in TV sports rights in Australia. This data shows a compound annual growth rate of 15 per cent in fees paid for rights by cable TV, and 10 per cent by free-to-air (FTA) during the past 20 years.
More than a year ago, analysts at Morgan Stanley questioned whether this steady year-after-year rise in the cash paid was sustainable.
At issue is the declining profitabil- ity of media players. “The implication is that these media companies sim- ply will not be able to afford further cost increases for the AFL, NRL and cricket ... and we may see declines in sports TV rights if this is the case,” wrote the analysts.
“If so, this would have profoundly negative implications for the sport- ing codes — AFL, NRL and cricket — as they rely heavily on TV rights to invest in their sports. If these rights were to fall significantly, so, too, would player salaries and funding for sports facilities.”
Investment bank Jefferies, in December 2019: “Outside of news, it is sports and reality content that drives FTA viewing. In Australia, sports rights are sold every five years to the highest bidder and the cost has been increasing.”
And a warning: “Securing sports rights has always been important but we do not think the quantum of these cost increases in the past are sustainable as all broadcasters are under pressure.”
The COVID-19 shutdown this year was just a catalyst to bring down the cost of sports rights. For some time the media players had been saying fees were too high.
Seven West Media’s revised broad- cast rights deal with the AFL will save it $87 million in media rights reduction, production savings and other benefits from now until 2022.
In a record deal made in 2015, the AFL was to get an eye-watering $2.508 billion during the years to 2022. The AFL says the revised five-year deal with Seven for 2020-2024 was for $730 million, or an average of $146 million per year, for free-to-air rights.
WORDS BY
CHRIS PASH
Sports fans are the type of consum- ers brands want. They are fanatics, followers so welded to teams that their attention never waivers.
This is not lost on media players who like to serve up sport to their audi- ences at regular times and then serve those watchers, or readers, or listeners to advertisers.
The value of a fast-moving sport- ing code to a media player is all in the content. The key issues are exclusivity and cost, and they have a deep relation- ship. If you are the only place to go for exposure to a popular sport, the price of advertising goes up.
Buying rights to broadcast sport can make a lot of economic sense, as long as the overheads can be held on a tight leash.
An hour of television drama in Australia can cost anywhere between $800,000 and $2.3 million, according to federal government agency Screen Australia. An hour of first-class sport can be a lot less than that and, some argue, more exciting and fun and with greater scope to bring in adver- tising revenue.
An hour of AFL costs around $350,000, according to calculations made five years ago by Heath McDon- ald, now the head of the School of Eco- nomics, Finance and Marketing at RMIT University. Production costs go on top of that, but at first glance the numbers appear to work commercially.
In June this year, eased restrictions on COVID-19 social distancing allowed the return of live sport. The NRL and AFL had to accept lower fees in the face of a reduced season because the broad- casters, who had paid up big for the pleasure, wouldn’t pay the same for fewer games.
But pressure to reduce fees paid to sporting codes for the right to broadcast
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