Pay TV strikes a deal on AFL
Mark Day
The Australian
February 01, 2007
AN end is in sight to the year-long tussle between pay-TV providers Foxtel and Austar and AFL rights holders the Seven and Ten networks. An announcement that Foxtel and Austar will show four live games each week is expected by the end of next week.
It is understood the parties have agreed on price, and all that remains before an announcement is some work to tidy up detailed and complex scheduling arrangements.
Both sides in the often acrimonious negotiations have come under mounting pressure in recent weeks to reach an agreement. The Ten network has been desperate to remove the overhang of substantial annual losses on its AFL contract from the information memorandum being circulated for its possible sale, and Foxtel has come under renewed pressure from the AFL not to desert the code it so enthusiastically adopted in 2001.
After 10 months of refusing to budge on its original offer of $45 million for four live games a week, Foxtel submitted an enhanced offer in December. This tipped in a $5 million extra contribution from regional pay-TV provider Austar, took over several million dollars worth of annual production costs, and offered $7.5 million in contra advertising.
Two weeks ago the Foxtel contra offer was increased to $10 million a year. This was seen as a way of satisfying the demands of Foxtel part-owner James Packer, in that Foxtel did not pay Seven more than it had offered to pay Nine in its bid for AFL rights.
Nine held AFL rights from 2001 to 2006, and bid $780 million - or $156 million a year - for the 2007 to 2011 rights. This included a Foxtel component of $45 million a year for four games, and a contra budget of $18 million a year.
Under a $20 million first and last rights option purchased by Seven in 1995, Seven was able to match the Nine offer and secure the rights on identical terms. But it had no agreement with Foxtel, which it was suing in the long-running C7 restrictive trades practices Federal Court case.
Under the Seven-Ten consortium's agreement with the AFL, it must show all eight games a week live on free-to-air TV if it failed to on-sell up to four games a week to pay-TV.
Seven demanded $60 million cash for the rights to four games, plus contra to take the total to $70 million a year. Its negotiating position was that it made greater economic sense to show all eight games a week, even though Seven and Ten would be programming against each other on Saturdays and Sundays, than to allow Foxtel access at bargain basement prices.
With the extra Austar money, plus the new contra offer, the Foxtel offer has reached Seven's demand. Seven and Ten now believe Foxtel and Austar's offer to shoulder $10 million a year in contra frees up enough air time for them to benefit from extra paid sales.
Seven is also absolved of a scheduling nightmare with AFL Friday night games. While these will give the network strength in the southern markets, it faced a rating disaster in the NRL markets of NSW, ACT and Queensland, where Nine will broadcast Friday night double-header matches.
Seven was negotiating with SBS and community station Channel 31 to offload the matches, but with Foxtel on board the scheduling problems disappear.
Observers believe Foxtel was under pressure to do a deal with the consortium. Austar was increasingly concerned that its subscribers would react strongly against the loss of AFL - a view shared by Foxtel co-owners News Limited (publisher of The Australian) and Telstra.
It is understood the AFL also told Foxtel that if it abandoned AFL, or sought to set a new, lower floor price for future rights, it would not be in a strong position to negotiate in 2010, when the next agreement will be on the table.
In 2010 there will be no first and last rights agreements in place, and pay-TV and free-to-air rights may be negotiated separately after a review of anti-siphoning laws due that year.
None of the parties involved in the negotiations would comment yesterday.
http://www.theaustralian.news.com.au/story/0,20867,21149551-2722,00.html
