As the AFL basks in the glow of another successful Grand Final and premiership season, the plaudits are still flowing. The Age’s Malcolm Maiden produced a glowing testimonial last week, noting that “the growth [in media rights revenue] has been impressive. But has it been good for footy? The answer must surely be yes.”
Maiden was referring to the AFL’s much vaunted television broadcasting deal, which is worth $780 million over a period of five years. The deal has been roundly praised by the press. On its face, the payments are jaw-dropping. Twenty years ago, AFL rights sold for only $850,000 per year. Now, they are worth $156 million annually.
However, the past two decades has seen massive media rights inflation globally, largely spurred by Rupert Murdoch, initially in Premier League soccer, and later in Major League Baseball and Rugby League. Also, as with most sporting deals, it is difficult to fully assess their success or failure, largely because the clubs and the AFL don’t fully disclose their results in the same sense way that public companies do.
One important sacrifice made which was made by the AFL in compelling Seven and Ten to come up with the headline $780 million figure was to provide higher quality matches to Foxtel (as well as an additional game each week). Some claim that the reason the average audience watching Channel 10’s Saturday afternoon and Saturday night matches actually fell by 5.7% and 4.5% respective in 2007 was due to the station broadcasting lower quality matches. In addition, Channel Seven was only able to show one match each Sunday afternoon (as opposed to two or three as was the case in previous years).
Therefore, while the headline $780 million figure sounds like a boon for AFL clubs that is to ignore the hidden costs associated with the deal. Many lower profile Victorian clubs, such as the Kangaroos and Western Bulldogs, already struggling financially, have far less broadcast exposure. For example, the Kangaroos only had five games on free-to-air television in 2007. Less exposure means less sponsorship.
Interestingly, St.Kilda, one of the relatively higher profile Victorian clubs, recently ran a full page advertisement in the Australian Financial Review, seeking sponsors. The key selling points to potential backers were that the club has “16 million TV viewers nationally” and “free to air games average 900,000 viewers nationally.”
The question needs to be asked: is the windfall gain to the clubs from the broadcasting deal greater than any potential loss of sponsorship?
Following the broadcasting deal, the AFL committed to provide a “bonus” distribution to clubs of $96 million five years. This is equivalent to $1.2 million per club (although struggling clubs will also receive “special distributions”). The rest of the money goes towards increased player payments, more money to the Players’ Association, running the competition and a “future fund”.
Under the deal supporters get fewer free-to-air matches and clubs get less exposure for sponsors – all this for a net gain of $1.2 million per club per year. If clubs like St.Kilda or Hawthorn lose a major sponsor due to reduced exposure, it is even possible that they are “worse off” despite the broadcasting deal being so lucrative. But don’t expect to read that in the Herald Sun.