It’ll be an interesting meeting in Sydney today over coffee between the head of Ten, Grant Blackley and the head of the AFL, Andrew Demetriou.
It’s an informal chat arranged a couple of weeks ago because the AFL boss was going to be in Sydney and it was a chance to catch up. But now that a war of words has broken out between Foxtel and Seven and Ten over the 2007 Pay TV part in the new AFL contract it assumes new significance.
Foxtel attempted to put the pressure on Seven and Ten yesterday by closing its AFL Footy channel and trying to pin the blame on Ten, Seven and the anti-siphoning laws, and the AFL weighed in with a supporting statement that was distributed to the media.
So today’s coffee chat will be interesting to say the least.
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Ten has taken the lead in the AFL negotiations with Foxtel to try and get a deal done: Blackley and David White, Ten’s point man on all things AFL and sport, met Kim Williams of Foxtel in Sydney last week and put several offers to him regarding Foxtel coverage of the AFL under the new contract from the start of 2007.
These were three games and four games, with a twist of Foxtel taking the coverage clean from Seven and Ten and then putting its own logo and screen stats on it. Foxtel would save millions on the coverage it had been running through the Foxtel Footy Channel.
Around 50 people are involved in that channel which is run out of Melbourne. The coverage could still happen and the money saved from organising its own coverage, would be paid (or a large part) to Seven and Ten for the extra game (which includes a Sunday evening ‘twilight game’).
Ten and Seven want Foxtel to pay around $60 million for four games, an increase on what it now pays Nine and Ten for three games under a contract that was worth more than $200 million less than the new contract from 2007 (around $780 million).
Late last week Kim Williams wrote to Ten and Seven acknowledging the offers, then a week later Foxtel issues a statement closing down the AFL channel and blaming Seven and Ten because they wouldn’t strike a deal.
For whatever reason (I think pressure from the Nine Network and PBL), Foxtel will not even deal with Ten and Seven on the basis of the arrangement it struck with Nine to go it alone in its abortive $780 million offer for the contract which Seven matched and won late last year.
Williams and Foxtel also said the anti-siphoning laws meant it could not negotiate with the AFL direct.
At no stage from the start of the current contract with Ten and Nine, has Foxtel complained about not being able to negotiate directly with the AFL: they have not sought to and have been a party to the Ten and Nine deal via the three game contract.
Foxtel was always going to close the Fox Footy Channel: TV industry sources say that was decided a year ago because PBL and News and Telstra, who control Foxtel, consider it more efficient to put the coverage into Fox Sports (Premier Media, half owned by News and PBL).
Staff from the footy channel were always going to be employed by Fox Sports at any opportunity: that provides savings on the recruiting costs and skilled TV technicians and studio staff are in short supply for the miserable amount of money Fox Sports is offering at the moment.
For Fox Sports and its owner, Premier Media Group and its owners, PBL and News, the AFL Channel, will provide yet another revenue stream: Nine and News do not want to pay a large amount of money to Seven and Ten for the four games.
Foxtel said yesterday that if a deal was struck with Ten and Seven that the AFL coverage for 2007 would be offered on the new Fox Sports 3 channel starting in October.
That new channel and the 24 hours Fox Sports News channel were detailed in the new Foxtel pricing structure revealed in May.
The upshot of the arrangement is that instead of Foxtel paying Seven and Nine for the games and paying for the coverage and organising it as well, which is now the case, there will be significant cost savings and the costs of the coverage and the new contract will be shifted directly to subscribers through Fox Sports 3.
Fox Sports has the infrastructure and technical know-how to organise the coverage, the bill systems are in place: All Foxtel will be responsible for is the marketing of Fox Sports 3.
Subscribers will pay if they want Fox Sports 3 and its coverage in one of the various subscription packages now on offer, or they can choose to add Fox Sports three from October.
The cost savings to Foxtel will be significant: Telstra doesn’t want to put any more money into Foxtel and hasn’t since 2003, the Pay TV group is earning profits, which will grow to be around $250 million by June next year on an earnings before interest, tax, depreciation and amortisation.
It is also interesting that the anti-siphoning attack is not policy for PBL, just News and to a lesser extent Telstra.
Does this mean PBL will approve an approach by Foxtel to the NRL for Pay TV rights for Rugby League under the current or new TV contract with its Nine Network?
Is Foxtel saying it wants this right as well? And if it is, what will PBL’s reply be and can we print it?