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TV Sport the biggest cost, the biggest drawcard.

AFL, NRL & Cricket may top the price tag list, but Live Sport is still must-have and must-see TV.

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Networks recently spent up big to secure future Sports rights at a time when audiences are fragmenting and advertising revenue has declined.

But their Live “must-see” status and ability to bring viewers to other content makes them essential, despite their increased costs.

Revenue for Free to Air television has fallen from $7.3 billion 2005-06 to a projected $4.7 billion in 2017-18.

Profitability for FTA broadcasters has also been in steady decline, with business analysts IBISWorld forecasting a slim operating profit of 3.1% in 2017-18.

IBISWorld Senior Industry Analyst Nick Tarrant says Live sports represents the way forward to stem falling revenue.

“Sporting events remain one of the last must-watch-live TV programs, and broadcasters are using that to cash in on advertising revenue and sponsorship deals,” he said.

“As sports broadcasts are generally exclusive, they are ratings winners and therefore attractive for advertisers. The halo effect, which allows for cross promotion of other programs, is also a large draw for TV networks. For example, Seven Network promotes its upcoming programs such as My Kitchen Rules during its tennis broadcasts.”,” said Tarrant.

Similarly, many sporting events are increasingly timed to fit into the broadcast schedule of TV networks. AFL sometimes runs directly into nightly news programs and NRL has expanded to Thursday broadcasts.

But the cost of acquiring sports broadcast rights has also increased significantly over the past five years.

“The AFL deal is currently the most lucrative in Australia. The deal for 2017-2022 brings in $418 million annually to the AFL. This is a 66.8% increase compared with the 2012-2016 rights, which were for $250.9 million per annum,” he said.

Free-to-air TV networks spent $497 million on sports broadcasting in 2015-16, representing 26.0% of total spending. Sports expenditure now outstrips news and current affairs programs (at $384 million) and overseas dramas (at $300 million). Sports expenditure is forecast to rise in coming years as sports broadcasting rights become increasingly expensive.

 

New media players, such as Optus, have also entered the market.

“Optus successfully outbid Foxtel for the streaming rights for the European Premiership League in 2016. This reflects trends in overseas markets, where other digital companies such as Twitter have bid on sports streaming rights. It’s an ever-changing and fascinating market to watch,” Tarrant said.

9 Responses

  1. Interesting story, i like it. In reality Networks are just chasing their tales. The audience has already in large numbers migrated across to Netflix and Stan. FTA in its current platform/format is on borrowed time. Sport is a loss leader, sure they may get audiences through sport via popular sports but they are facing increasingly diminishing returns. i would suggest that they buy rights to sports they can add value and make more money on because they are cheaper. In business, a business buys something for cheap and put a mark up it. FTA tv industry is increasingly finding it hard to do so, because their outlays are so large. Foxtel are in a slightly better off but only because of Patrick Delany’s plan to turn foxtel into a OTT streaming service to compete with Stan and Netflix. FTA will have to go in that form too. We know where the future will be. tv networks are being dragged…

  2. At $50mil. The olympics seem like an absolute bargain. It offers so much high rating content to a wide demographic. Wouldn’t be surprised to see that double next time they are up.

  3. FTA has nobody to blame but themselves.Shows that never start on time or finish on time,ad breaks at the wrong time,hideous watermarks spoiling the picture ( e.g. Blue Planet ) I can remember during the Tennis not long ago, no words were spoken during play,gee now its a talk show ( Jim Courier )

  4. Very interesting article! Was reading on “Business Insider “ that Seven West Media shares are in free fall after the cricket deal. Most analysts believe that 7,s cost base for content will far exceed its ablity to recoup thru adversting revenue. I sense that there will be alot of people on edge at SWM. I am assuming that the same csn be said for Foxtel!

    1. Nine was losing $40m (some says as much as $50m in poor years) on the cricket. The @l^mp!cs make a loss. What major sports do is suck viewers away from competitors and allow you to promote your following lineups. Without the ability to do so you quickly become Ten. The only one that was highly profitable was Seven chipping in $32m (when it was worth about $50m) for the Tennis broadcast and streaming rights and TA did all the production (since they sell that globally for over $300m). Nine was prepared to pay $60m to make sure of beating Seven out of that and will still lose much less than they did with the Cricket. Foxtel will fund most of the production for the cricket, in exchange for Seven giving them exclusive rights to the ODIs and T20 internationals. Foxtel with simulcast and stream the games in competition with Seven though.

  6. Nick Tarrant said: “Optus successfully outbid Foxtel for the streaming rights for the European Premiership League in 2016.” There is no such thing as European Premiership League. Optus bought the rights to English Premier League in November 2015 and the contract expires at the end of 2018/19 season.

    1. Optus forced people to switch Telcos to get the EPL though, which meant anyone with an existing phone contract elsewhere wasn’t going to switch. With the high rates of churn for the subscribers anyway, it is estimated they barely made a profit out of it. It also annoyed many EPL fans and also the big EPL clubs who sell merchandise into Australia because there was a large overall drop in EPL viewing in this country. A lot of people will be hoping Optus doesn’t renew the deal.

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