AFL rakes in the riches as McLachlan plays a blinder

The AFL’s new $4.5 billion broadcast agreement cements the league’s status as the financial juggernaut of Australian sport. And by securing a record windfall for the code, outgoing chief executive Gillon McLachlan has also enhanced his legacy as one of the country’s shrewdest sporting administrators.

Incumbent broadcasters Seven and Foxtel were always in the box seat to renew their longstanding agreements with the AFL. Yet despite this reality, the AFL has still managed to extract a record price for its rights, eclipsing the $600 million-a-year goal it set for itself, a goal many media executives hoped it would not achieve.

While rival bidders Nine, owner of The Age and Sydney Morning Herald, and Paramount, the US film studio giant that owns Channel Ten, were both serious about acquiring the AFL rights, each faced significant limitations in securing them.

Nine is in rude financial health, but it already has a flagship (and costly) sports rights agreement in place with the NRL. Paramount, meanwhile, is desperate to secure a marquee Australian sporting property, but lacks the ratings muscle and streaming subscriber base of its rivals.

This meant it was a higher risk proposition for the AFL, which places a premium on its long term commercial relationships. As such, Paramount needed to blow Seven and Foxtel out of the water to win the rights battle. Evidently, it did not.

Despite the advantages enjoyed by Seven and Foxtel, McLachlan and AFL commissioner Robin Bishop, a private equity dealmaker and former investment banker, were still able to create competitive tension in the process. This was achieved in part by playing the two incumbents off each other.

During the three-month process, significant tensions erupted between Seven and Foxtel over key aspects of the rights, including exclusivity windows, the carve-up of games and the ability to stream them online.

“We had a lot of rough and tumble in our negotiations,” McLachlan remarked during the press conference announcing the deal on Tuesday.

Streaming was a particularly important factor. Since the AFL last struck a long-term rights deal in 2015, streaming services, both subscription and advertising based, have proliferated. More consumers are watching more television online, including on smart televisions in their homes.