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Media

Sep 9, 2015

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Nine Melbourne boss Ian Paterson says it’s unlikely the network will bid for the last remaining AFL game, currently up for grabs through Foxtel’s resale rights.

When the $2.5 million AFL broadcast rights deal was negotiated last month, Foxtel had the rights to resell one of its weekly games to a free-to-air broadcaster (or air it itself). Paterson today all but ruled out Nine as a bidder.

“We can’t be romanced by the idea of being in something we haven’t been in before,” he said. “Of course I’d love to be in AFL … but it’s not as simple as that. You’ve got to find an angle that’s relevant to our business.

“There wasn’t an opportunity to secure something we were satisfied with, and that’s where it started and finished.”

This year’s negotiations for both the AFL (won by Foxtel and Seven) and the NRL (won by Nine) resulted in TV stations paying more than ever before to the sporting codes for broadcast rights. Speaking at the Mumbrella Sports Marketing Summit in Melbourne this morning, Paterson acknowledged that the cost of this, for the most part, couldn’t be recouped through advertising on the free-to-air broadcasters. Nonetheless, he said sports rights were likely to remain a crucial part of the business and could well be worth even more the next time negotiations come around, as the networks had a declining number of shows capable of commanding large audiences and introducing them to other, more profitable parts of the lineup.

“[Through sport broadcasts] we attract advertisers and people, and are able to present to them the rest of what we do,” Paterson said.

There are benefits to the networks of being on free-to-air TV, too, pointed out former NRL exec and Repucom managing director Shane Mattiske, who has, in recent weeks, helped negotiate the recent NBL Foxtel deal. “From the sport point of view, it helps to get the game out to as many people as possible. For the foreseeable future, sports want to be on free-to-air. It supports their commercial programs, and it supports their plans in terms of development.

“Talk of shifts in a different direction [like through digital distribution on streaming sites] often fail to take that into account.”

Fergus Watts, the former AFL footballer who now heads up sports marketing consultancy the Bastian Group, said sports deals were “maxed out at the moment”.

“But the reality is, next time these deals are up, if participation in a sport has grown, if there’s broader interest nationally, then the broadcast rights will probably grow.”

The key for the networks, Paterson said, was to remain a destination for people to invest their viewing time. “In free-to-air television, we see a decline around audiences, particularly around movies, comedies and drama. We’re not even so much competing with each other anymore — as we are with subscription video-on-demand.”

Crucial to remaining a viewing destination, he said, was news programming, Australian drama, large-format reality entertainment, and sports broadcasting.

“We’re under no illusion — in the future, the cost of acquiring rights will probably go up.”

Media

Aug 25, 2015

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Well, isn’t 24 hours a long time in the so-called NRL television wars?

As Crikey noted yesterday, The Australian’s Darren Davidson has been making all sorts of doom and gloom allegations about the NRL’s $925 million TV rights deal with Nine Entertainment Company.

Alas, Telstra awoke from its slumber yesterday to declare Davidson’s claims — namely that Telstra was about to terminate its NRL naming-rights sponsorship — were “false”, as Fairfax duly reported in today’s papers.

Similarly, allegations of a breakaway competition or clubs boycotting the Nine deal were scuppered yesterday as the clubs put on a unified face, but Davidson was nowhere to be seen, and The Australian ran that story in its sport section.

The Weekend Australian took the vituperative overreaction by the Murdoch empire to a whole new level, sparking an across-the-board response on Monday. The Australian Financial Review produced this feature today focusing on the erratic News Corp behaviour, and Media Watch also neatly summarised the issues last night.

Ultimately, it is hard to see how Foxtel and Fox Sports won’t come to terms with the NRL given the demographics and economics of the situation.

The four markets for rugby league are Sydney, regional NSW, south-east Queensland (including Brisbane) and the rest of Queensland.

The regions are very important, and the NRL grand final out-rates the AFL grand final across all of regional Australia. Together the two rugby league states (Queensland and New South Wales) have a combined population of more than 12.3 million, or slightly more than half the number of people in Australia.

About 500,000 of Foxtel’s 2.7 million individuals with access to a subscription are believed to watch the NRL every weekend. They are the heart of Fox Sports/Foxtel’s revenue base because each subscriber pays around $92 a month, down from $95 a year ago. You can’t get Fox Sports without taking other Foxtel channels such as LifeStyle, Fox8, BBC First or Sky News. Many of Foxtel’s premium packages are priced at $120 or more a month and are held by NRL watchers who have been with Foxtel for years. So without NRL coverage, many of those half a million subscribers would vanish and cut Foxtel’s roughly US$3 billion in annual revenues by hundreds of millions of dollars.

There is no way increased coverage of the AFL can cover the hole of having no or substantially reduced NRL coverage. In fact, the extra NRL game on Nine is a real danger to Foxtel and Fox Sports in that many subscribers might choose to cut the cord and save themselves more than $1000 a year.

That cost and slow drift was why Foxtel restructured its packages by halving the entry cost to $25 a month from $50 and getting rid of existing restrictions. The streaming rights held by Nine to its four games are a big threat to Foxtel and Telstra in that they will almost certainly be streamed from the Stan site owned jointly with Fairfax. But this is years away and there is a lot of pain to be endured for the Murdochs and News/Foxtel before we get to the mega contract.

This is why all that bombastic talk from Rupert Murdoch and his minions about promoting AFL in NSW and Queensland should be taken with a grain of salt. Almost 20 years of Herald Sun support for the Melbourne Storm hasn’t exactly hurt the AFL in Melbourne, and News Corp was forced to offer long-term subsidies of $26 million to the club’s new owners when it sold down last year.

Similarly, it is not clear just how many Daily Telegraph readers soaked up the eight-page lift-out ahead of the Swans-Giants game last weekend?

The simple fact is that over half the Foxtel and Fox Sports subscribers are in NSW and Queensland, and Foxtel’s highest penetration is in the Sydney area. They need the NRL more than NRL needs Foxtel and Fox Sports. Both have to come to a deal with the NRL, to the NRL’s satisfaction, otherwise their business model is mortally wounded and hundreds of thousands of subscribers would either leave or churn for a lower-cost package.

In fact the NRL has left the way open for a competitor to Foxtel and Fox Sports to grab the pay TV rights and build a rival operation to that of the Murdoch clan. For example, if Disney’s ESPN could be induced to bid, it would trigger a financial crisis at Foxtel and Fox Sports and blow the News Corp share price out of the water.

The Murdochs also know that newspaper sales are in structural decline. Subsidising excessive AFL coverage in The Courier-Mail and Daily Telegraph won’t help a bit because they depend on their rugby league readers.

So far this year, 49 of the top 100 programs on Foxtel have been NRL games. Usually it’s 65%, but this year there’s been the cricket World Cup and Asian Cup, which generated big audiences on Fox Sports. AFL games are usually around 35% of the top 100. Foxtel subscribers vote with their remotes and vote in favour of the NRL, not the AFL.

More attacks on the NRL will just bring financial pain to News Corp, and it already seems there are too many scars from the Super League wars for other players in the industry to be prepared to go along for the ride on what looks like a commercially driven vendetta.

No one at News Corp has yet pontificated on how the extra $500 million to the AFL will be paid for. The answer, of course, is by screwing more money out of subscribers, especially those with Fox Footy/Fox Sports packages. This could be an extra $100 to $200 a year, something with which the AFL board and management is presumably comfortable.

The ACCC is no doubt watching all of this with interest. Given concerns that Foxtel’s proposed 15% stake in Ten Network Holdings could make the market for sports rights uncompetitive, it is surprising the Murdoch attack dogs are being so unsubtle in their campaigning.

Davidson has long been regarded as a Lachlan Murdoch man, and it is also instructive that Lachlan has been largely invisible over the past month.

Many people blame Lachlan for much of the Super League wars, and he certainly was to blame for Ten’s failure to bid for the AFL rights last time around.

Colleagues say that Lachlan doesn’t particularly like Melbourne or the AFL, yet the LA-based co-chairman of News Corp is now fully signed up to promote Melbourne’s signature sport to the detriment of what people love in his former home town of Sydney.

All of this is just a sad reflection on Australia’s media ownership laws where metropolitan newspapers are largely not controlled by people who are aligned with the city in question.

As far as patriotism and national alignment is concerned, it is also instructive to note that 21st Century Fox has ditched its listing on the ASX, and News Corp, despite having the majority of its value in Australia, only has one Australia-based director in Peter Barnes.

Given former immigration minister Scott Morrison’s tough line with foreign interlopers, here’s hoping he made that point to Rupert Murdoch when they had lunch last Friday.

SPORT

Jul 30, 2012

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Wondering why some of the television news coverage of Olympic competition looks more like a slideshow?

Australian networks — like other non-rights broadcasters around the world — are strategically programming the scraps of footage they’re allowed to play each day. Many programs over the weekend and today have resorted to using still images to illustrate their reports.

Crikey has been told the International Olympic Committee polices its news access rules with force, lawyering up to tackle any broadcast which breaches the strict rules. The IOC states:

“The broadcast of Olympic Material may be used only as a part of regularly scheduled daily news programs of which the actual news element constitutes the main feature (‘News Programs’). News Programs shall not be positioned or promoted as Olympic or London 2012 programs and Olympic Material cannot be used in any promotion for any News Program or any other program whatsoever.”

So how much do Seven, Ten, the ABC, SBS and cable news have to play with? Just six minutes per day — across all programs and platforms. Further:

a) Olympic Material may appear in no more than three (3) News Programs per day; and
b) No more than two (2) minutes of Olympic Material may be used in any one News Program; and
c) These News Programs must be separated by a period of at least three (3) hours; and
d) No more than one third of any individual event may be used in any one News Programs or 30 seconds, whichever is the lesser time. However, if the duration of an individual Olympic event is less than 15 seconds the whole of the event can be shown in a News Program.

Sky News and ABC News 24 are particularly hard hit with their rolling coverage; ABC news presenters were making a point yesterday of informing viewers their hands were tied. For “all-news or all-sports networks” the rules state footage can be used:

“… in no more than six (6) news programs per day and does not exceed a total of one (1) minute in any one program. These bulletins must be separated by a period of at least two (2) hours.”

Plus, networks have to sit on footage for at least three hours after the host broadcaster has shown the event. If the rights-holding network doesn’t air the footage, non-rights holders must wait until the end of the broadcast day. And the footage that is aired must carry an on-screen credit to the local rights holder — no covering up those prominent watermarks in the top of the screen.

Don’t like it? You can always seek “specific written agreement of the local rights holding broadcaster”. We’re guessing Australian broadcasters Nine and Foxtel won’t be considering such requests kindly …

Markets

Feb 13, 2012

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Eventually it had to come down to the kiddies, didn’t it? Roy Masters invoked the threat Optus’ TV Now posed to junior football in passing last week, before being buried under an avalanche of online criticism. Yesterday Mark Arbib, who for reasons clear only to Julia Gillard is Assistant Treasurer and Minister for Sport, went further and practically had Optus executives shutting down kids’ footy across the nation.

“As a sports minister the reason I am concerned about that is, when it plays itself out, that the big losers will be those kids out on the sporting playing fields.”

The internet of course is responsible for many crimes against humanity — p-dophilia, terrorism, organised crime, most of my articles — but stopping kiddies from having a kick about and a run around is about the lowest yet. It’s probably part of a plot to get more kids to sit at home and surf the internet.

What is slightly problematic, however, is that even in the unlikely event of the complete loss of the $153 million the AFL was earning from Telstra for its online rights, it’s a fraction of the amount sports rights holders have lost to the commercial free-to-air television cartel due to the anti-siphoning scheme, which “celebrates” its 20th anniversary this year.

The anti-siphoning scheme works by eliminating competition for the rights to televise sports, ensuring the free-to-air TV cartel are the only bidders. This accordingly reduces the revenue sports rights holders can get for their product. It’s a vast, state-sanctioned transfer of wealth from sports clubs and organisations to the networks.

And while it may not be so bad for the big sports AFL, NRL and Cricket Australia, it was savage in its effects on lower-tier sports such as soccer and netball, which are various stages found themselves entangled in the anti-siphoning net.

Stephen Conroy made some commonsense changes to anti-siphoning in December 2010. If Mark Arbib (a name made to be yelled by a league commentator) is really that concerned about ensuring sports rights holders have the maximum amount of money to direct to junior development, he should urge cabinet to go further and let sports rights holders get full value for their rights.

Of course, the world doesn’t work that way. Well, at least Australia, a land where getting sports coverage free is considered one of the natural rights of mankind (with the emphasis on man), doesn’t.

TV Now of course is the exact opposite of anti-siphoning. Anti-siphoning reflects a 20th century way of thinking, in its desire to perpetuate existing analog-era information hierarchies against innovation and competition. That of course has been how media policy in Australia has been historically run — for the benefit of the incumbents, against the threat of new entrants, such as Foxtel, which under Kim Williams became Australia’s most innovative big media company despite the restrictions the FTA cartel locked it into.

But the internet — in this case via cloud computing — flattens information hierarchies, and makes their maintenance much harder, because once information is created, its control is now far more difficult. It will spread through a network and leak through to users at whatever point is porous enough to make it easily accessible. Live sport is a special case — its value is time-limited. There’s no market for mass consumption of live sports more than a few hours after the event is completed. But the same forces are at work, the push of easily distributed content and the pull of consumer demand at the lowest price and the greatest convenience. It’s all just zeroes and ones, platform agnostic, user agnostic, distributor agnostic, owner agnostic.

Indeed, Optus is to be commended for establishing a business model that brings together supply and demand like this. It’s the same story repeated time and again — analog-era gatekeepers struggle to work out how to develop a business model for online distribution, while a digital native comes in and creates one for them, resulting in the gatekeepers running to government to fix the “problem”.

In fact, the “problem” is a solution, just one seen from the point of view of someone who didn’t think of it.

One should have some sympathy for the big sports, however: having been ripped off by the FTA cartel for years, they doubtless have zero tolerance for additional threats to their revenue.

But if the government decides to take legislative action, it will be a form of whack-a-mole, albeit at the glacial pace of legislation, in the manner of a statue trying to brush away a defecating pigeon. Then again, this sort of game is the emerging tradition in online sports content — the US government, via the Departments of Justice and Homeland Security, furiously tried to close dozens of illegal sports-streaming websites before the Super Bowl. Since American football players themselves admit to using such sites, their control looks a forlorn hope.

The issue has yet to emerge in a serious way in Australia, but the England and Wales Cricket board recently declared internet streaming the biggest threat to the game.

As we see time and again, if content is being provided cheaply, conveniently and wherever and whenever users want it, people will pay for it. That’s the solution, not yet another attempt to regulate the internet.

*Disclosure: Bernard Keane played for Maroubra Lions junior rugby league club 1975-76, 1978

Companies

Feb 2, 2012

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Won’t someone think of the footballers?

The end of sports and sport broadcasting is nigh. Or rather, Justice Rares in the Federal Court yesterday cut a large chunk out of the value of sports broadcasting rights in new media by ruling that Optus is allowed to offer its TV Now Service. TV Now lets Optus customers use all kinds of devices (tablets, smartphones, computers) to record broadcast television in “the cloud” (i.e. Optus servers) and play it back any time within 30 days. The privileged Apple-owning classes can even watch the recording nearly live — only two minutes after the broadcast starts.

Much gnashing of teeth has ensued, with the News Limited-owned Australian claiming the decision “puts at risk the ability of every sport to sell their new media broadcast rights”, the AFL and the (also News Ltd part-owned) NRL expressing their disappointment (and intention to appeal) and Telstra claiming the decision will “destroy enormous value”.

It’s easy to understand why the sports bodies are upset: if you can get your AFL on your Optus phone (or any other telecom provider that decides to offer a similar service), new media rights aren’t nearly as valuable. But disaster for Telstra? Yes, in the very short term it’s not ideal: it agreed to pay over $150 million for exclusive new media rights in AFL matches. But in the longer term, it could avoid paying for exclusive rights — and do something such as TV Now itself. I guess competing on services and technology isn’t quite as attractive to Telstra as using its insider status, sheer size and ability to pay for exclusivity.

Sometimes it feels like, unlike their early-adopting customers, the broadcasters and their various commercial partners never met a new technology they didn’t hate (let’s not forget that online access to television shows has been a long time coming in Australia too). The TV Now case is just one of a long string of similar fights. We’ve had the Ice TV case about ownership of electronic program guides, in order to control the functions of digital video recorders in the home. We’ve also had The Panel case (about re-use of clips from television in a comedy show) and Telstra verses the Premier Media Group (about re-use of sporting clips in sports highlights packages).

The quest, in all these cases, is for total control over broadcasts, so that maximum dollar can be extracted via licensing and advertising.

This quest crashes up against two cold, hard facts: that access to sports broadcasts is practically a right in Australia, and that people — including politicians — are pretty accustomed to recording television to watch later. The right to sport is enshrined in anti-siphoning laws; people’s right to record is recognised in an exception in the Copyright Act in 2006.

I’m sure we can expect more litigation (an appeal has already been flagged) and lobbying. But we’d better hope the courts and the government can resist the pressure, because the risk of unintended consequences is high.

You see, there are two key legal issues involved. The first is fundamental: when a customer clicks the “record” button on their iPad, is the copy made on the Optus server made by the customer, or by Optus (and similarly, when they later click “play”, is it the customer, or Optus, that is responsible for the streaming of the show to their device)? It was a relief to see Justice Rares decide — like US and Singaporean courts before him — that it’s the customers, and not Optus, who make the copies and play the recordings back later. Any other holding on this fundamental question in copyright would have put at risk the large and growing industries in cloud computing as well as a host of other activities and services in the digital environment.

The second legal issue is whether, if the customers are doing the recording and playing, their actions fall within the detailed drafting of the home recording exception in s111 of the act. Certainly government could confine the home recording exception; so could a court through a narrower reading than that of Justice Rares. This would, of course, mean overcoming the natural hesitation of politicians and judges to curtail Australians’ rights to sport and television, ruling against the cloud in home recording, and slamming down a service that Optus offers that people clearly want.

And you have to ask whether saving one of many revenue streams for live sports is worth the cost to consumers, and to the ability of companies such as Optus to offer innovative (and clearly appreciated) new services to its customers. No government should jump lightly into protecting this one revenue stream given all the various revenue streams open to the AFL and NRL, and all the other government rules that impact on revenues — like anti-siphoning rules, or the various rules that protect the exclusivity of big events such as the Olympics or the Rugby World Cup. This copyright rule is only a very small part of a very big picture when it comes to money in sport.

One more irony in all this is worth noting. In 2006, Australia flirted with introducing a general fair use exception into copyright law. Copyright owners opposed such a move, and instead more specific and purportedly narrow exceptions were introduced instead, like the home recording exception. But a fair use defence would have required the court to consider the impact of any exception on the copyright owner’s market. And so I wonder whether, if we had fair use, Optus would have got away with playback on a two-minute delay, which undermines any market for exclusive rights to live broadcast of sports online?

Food for thought as the Australian Law Reform Commission takes on a new inquiry into copyright exceptions in 2012.

Federal

Mar 25, 2010

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In The Australian today, Senator Conroy has had a moan about why the critical Collingwood-Bulldogs match from the last round of the AFL in 2009 wasn’t on Free To Air TV, but on Pay.

“Why, asked Conroy, was such an important game consigned to a medium that reaches only 34 per cent of Australians? What is the point of an anti-siphoning list  that prevents pay-TV from bidding directly for mainstream sport if the match of the round is not shown live on free-to-air?”

Most Communications Ministers manage to resist the temptation to use their position as a sort of super program scheduler, offering the networks advice on what they should and shouldn’t be airing. But when it comes to sport, Conroy, who never misses an opportunity to remind people of his passion for soccer (Chelsea) and AFL (Collingwood), is different.

Tonight’s opening game between Richmond and Carlton is on the Ten Network. Ten will show it live in Melbourne, Victoria, Adelaide and Perth markets and on delay in northern (rugby league markets), where a live broadcast would be ratings death on the main channel.

Ten has been inundated by queries from viewers wanting to know why it can’t be shown nationally on ONE, the network’s digital sports-only channel.

Viewers apparently are unaware that FTA networks are legislatively prohibited from showing an event on the anti-siphoning list live on their  digital channels when they are showing something else on their main channels.  ONE could show tonight’s match in the southern states, but not in the northern states if it wasn’t on the main channel.

That ban was the one bone pay-TV came out the 2006 media reforms with, and they won’t give it up without a savage fight, because FTA digital sports coverage would significantly increase competition for the sports channels on pay-TV. It would also enable the FTAs to end the one thing that could undermine their hold on sporting events – viewer resentment that they can’t see events the networks have decided wouldn’t rate well enough.

Ten has asked the Government to remove the ban and allow them to show sport like tonight’s game on ONE when they are broadcasting other programming on the main channel.  Seven and Nine would like to be able to do likewise.

The multichannelling ban makes no sense – particularly for a Government that wants to encourage digital take-up – but its removal would rightly send the pay-TV sector into meltdown, given how comprehensively this and previous governments have favoured the FTAs.  It’s a classic example of how a mogul-based media policy that tries to placate the major players undermines good outcomes for viewers.

But let’s be a little mischievous: Conroy in fact could let Ten show tonight’s match on ONE in the northern states. Removing the multichannelling ban requires legislation, but the anti-siphoning list itself is purely a ministerial creation. If Conroy wants to play the role of super program scheduler, he could, with a few taps on his laptop, amend the list this afternoon to remove any AFL matches held today, email it to the Attorney-General’s Department and have a Special Gazettal done and dusted before the first bounce.

That’s assuming the Prime Minister would permit it. It has been the micro-managerial hand of Kevin Rudd that has delayed the Government’s response to the anti-siphoning review thus far, annoying the AFL, which wants to get cracking on its rights negotiations for the 2012 season and beyond.

Broadcasting policy is complex enough at the best of times. With Conroy now flagging the Government wants to start considering all of media policy, including diversity protections and local content, the mind boggles at how much more difficult our control freak of a Prime Minister will make it.