Record AFL broadcast deal went down to the wire, says chairman Goyder

The step-up in rights is a burden but the cost of not renewing would be even higher.

Morningstar analyst Brian Han

With the incumbents – Seven and Foxtel – clinching the deal, analysts said losing the broadcast rights simply wasn’t an option for either company, thereby delivering the hefty windfall for the AFL.

UBS media analyst Tom Beadle saw the $4.5 billion price of the deal as a necessary evil for Foxtel and Seven despite the price representing a 54 per cent premium to the original 2017-22 broadcast deal, and a 36 per cent premium to the recent 2023-24 deal.

“Strategically we see the deal as positive for both Seven and Foxtel. However, high levels of competition for premium sporting content such as the AFL continues to drive significant inflation in the cost of premium content globally, particularly as the barriers to entry for sports broadcasting are lower than history,” Beadle said.

“In our view, this dynamic makes it difficult for platforms to derive excess returns on premium sporting content,” he added.

While no breakdown was offered on the $4.5 billion headline figure, Morningstar’s Brian Han estimates that the current split for broadcast rights (and costs) at 65:35 Foxtel/Seven.

While expensive, he says losing the broadcast rights would have been bad for both Seven and Foxtel.

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“The step-up in rights is a burden but the cost of not renewing would be even higher. News Corp’s video subscription services rely heavily on AFL as a subscription driver for Foxtel and Kayo. As Australia’s premier sporting code, AFL’s importance to Seven is even greater,” he said.

“One only needs to look at Network Ten to see the consequences of losing AFL. Ten lost the rights at the end of 2011 and its metropolitan (television) revenue share fell from 28.1 per cent in fiscal 2011 to 20.9 per cent by fiscal 2014 and has not recovered since, showing the vulnerability of an undiversified TV network which Seven still mainly is.”

Foxtel’s Delany highlighted the role that sports like AFL will play as it looks to grow its audiences across Kayo and Foxtel Sport.

“The big product feature of Kayo and Foxtel is to have 50 sports in one place. And that’s quite unique in the world. And it means that all the big sports have got to be with us in order to grow,” he said.

It is part of a bigger strategy at Foxtel to be the home of all content.

“We think the era of aggregation is coming. That’s the next big thing that the Foxtel Group is working on – how we can aggregate all of our own streaming services, and those of others together with free to air TV, in a way that’s highly cost-effective for consumers and ourselves.”

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