While the Australian media industry is still in the throes of battle over media reform that are struggling to pass the Senate, a new battleground looms on the horizon: sports broadcasting rights and their value in the world of Netflix and Amazon. It is a battleground Australian TV companies have opened up to possible new rivals all on their own through their greedy bidding up of the costs of these rights.

Yesterday Seven West Media CEO Tim Worner fired a shot by proclaiming that sports rights were at a “tipping point”. His comments came after Seven cut the value of its media assets by $988 million (taking the total cuts in value in three years to more than $3 billion). But he is not alone. This year News Corp wrote down US$537 million in the value of News Corp Australia’s long life assets and in Foxtel, of which it owns 50%. Worner told a telebriefing yesterday that “given changes in the market, price rises are not sustainable.”

“We have to reach a position where the economics stack up for all parties and where the power and reach that free-to-air television brings to these sports are properly recognised.”

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Worner used Big Bash cricket, which has been hugely popular for the Ten Network and was a steal at $100 million for five years, to make the point that TV networks should be rewarded by the sports. “These sports codes have to start to recognise the power of what we bring to them,” Worner said.

The comments come not long after Amazon dipped its toe into the water with international tennis in the UK and 10 Thursday NFL games in the US starting next month. Now suddenly Amazon and Netflix are the new threat to the established duopolies in NRL, AFL and cricket.

But the sporting codes didn’t create the problem. It is Seven, Nine, Foxtel and Fox Sports, and News Corp that are responsible for the escalation in sports rights costs. If anything Rupert Murdoch is to blame for the rapid escalation in the AFL costs back in 2015 when in a fit of pique he flew to Australia, berated the NRL and Nine for doing a deal that excluded Fox Sports (it later had to pay more than expected to join Nine in the broadcast deal) and bid up the AFL rights to a record $2.5 billion.

“We have always preferred Australian rules but, I guess, we will engage with the NRL in time,” Murdoch said at the time. “However it ends up, this will be a much bigger investment. We have always believed this is the premium code in Australia. It is the national game and we are putting our money where we believe but we are also committing all our platforms’ support in AFL everywhere in every state.”

News Corp has now finally set up a stand alone Rugby League channel on Fox Sports to match Fox Footy (the AFL Channel) because the NRL games each week draw bigger average audiences on pay TV than do the AFL games. AFL games last longer so the audiences watch for longer, but the average audience size for the NRL games are higher. The financial viability of Fox Sports and Foxtel depend on these two sports and nothing else. Without them both businesses would collapse.

Seven was dragged into paying more for the new AFL contract — it had a co-broadcast arrangement with Fox Sports and didn’t want to lose that position. The last time it did, Ten and Nine and Fox Sports had the broadcast rights and Seven suffered financially and in ratings. So Seven had to pay more to keep in the game and the culprit was Rupert Murdoch.

And now the TV market has changed, revenues are weak or falling, and digital is rising (streaming especially). And while Netflix has made inroads into Australia, it is Telstra (the other Foxtel co-owner) that controls the digital rights to both major football codes and won’t be letting them go.

While two decades ago the free-to-air networks had sport to themselves, Foxtel and Fox Sports have slowly developed clout and elbowed their way into broadcast deals for AFL and NRL, by offering sports groups more money following the example set in the UK by BSkyB, which News Corp has a 39% stake in. BSkyB had grabbed exclusive soccer rights for itself in 1992-93 and used that to become a broadcast giant. That’s why the sport anti-siphoning list was developed in Australia to avoid following the UK’s example where many sports vanished from free-to-air TV. That helped halt the run of Foxtel and Fox Sports, but with rising subscription numbers and fees, they had more money to bid up the cost of their share of the TV rights to AFL and Rugby League, which they did, forcing Nine and Seven (and Ten previously) to pay more to stay in the game.

Amazon, Netflix or any other streaming video company are merely the latest companies to threaten to use their financial power and surplus cash to buy sporting rights. There is nothing new in that and they will be merely following the script written and developed by News Corp, Rupert Murdoch and others in his camp. But don’t tell Tim Worner, Seven, Kerry Stokes, Michael Miller, Peter Tonagh at Foxtel, Patrick Delaney at Fox Sports, Hugh Marks at Nine or the Murdochs. They have all used the same approach to break into a market they coveted and then tried at all costs to protect.

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Australia has spoken. We want more from the people in power and deserve a media that keeps them on their toes. And thank you, because it’s been made abundantly clear that at Crikey we’re on the right track.

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Peter Fray
Peter Fray
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