Future Media

[midfielder]

Very interesting article on the future of media broadcasting....

http://www.smh.com.au/business/pay-television-faces-the-big-game-changer-20110322-1c59g.html

Pay television faces the big game changer

March 23, 2011

The deal that the AFL and NRL bosses strike over the next couple of weeks on the broadcasting rights of their respective codes will carbon date them.

To date the focus of attention has been the amount they will capture from the pay television provider Foxtel and the free-to-air networks.

But that is a very 2011 perspective - or a 2006 retrospective.

Advertisement: Story continues below
Sure, free-to-air television is the means by which most of us view sports programs, while 25 per cent of us access them via pay television.

But the world is moving on. Only this week Google said it was negotiating with the National Basketball Association in the US, other sporting codes, movie-makers and even celebrities to buy content directly.

It was a sign of the times. Internet providers are becoming first line program suppliers. They are cutting out the middleman and offering consumers the opportunity to access the programs they want - for a (smaller) fee.

Sure, Australia is behind the US, but not by a huge amount.

And the gap is closing quickly.

Even today there are numerous ways that the Australian consumer can watch whatever television or first-release movie they want.

For the early adopters there are Apple TV, TBox and a myriad of other ways. All one needs to do is pay.

But the consumer does not need to pay $100 a month for a Foxtel or Austar subscription.

Around the world the new wave of content providers is evident. Here some will offer a menu via the internet and others via the copper or fibre network.

This phenomenon is still in its infancy, but in five years or less it won't be. When the sports rights come up for renegotiation the media landscape will be very different.

Thus bundled pay television services are now under threat - be it in the US or in Australia.

If you don't believe me, call up YouTube or Sony Television. Everyone is a content provider.

In Australia the growth in alternative sources of content delivery is going to be further enabled once the national broadband network is built and provides us with almost unlimited bandwidth.

Internet television won't have to use Telstra to get access to the home.

But back to the sporting rights.

This is the real bastion of pay television, and why the likes of the NRL and AFL will demand a big price from pay television providers. The footy blokes have plenty of cards and should drive a hard bargain.

Without sport, pay television would find it hard to differentiate its service. Most of the reruns of US network television are now readily available on the 16 free-to-air stations available.

Among OECD countries our pay-TV is the second most expensive and is already finding subscription rates have reached a peak.

If consumers migrate to web-based devices to watch just the sport they want, it will be cheaper than having to fork out for the Foxtel service.

And it will be only a matter of time before they work this out.

Yet little is said about the price that the sport internet rights may fetch. Perhaps $50 million to

$70 million over five years.

That may look reasonable today, but in five years it is my pick that this will look like a bargain.

The only issue holding back internet suppliers of programming in Australia is the lack of bandwidth - so the current signal will not be as reliable. The broadband network will change this.

Telstra is in the sticky position of having a horse in each race. As the 50 per cent shareholder in Foxtel and a supplier of internet television it will be competing against itself.

Oddly enough the free-to-air networks are not under the same degree of pressure as pay television.

The new digital channels have enhanced their audience reach and are taking some of the audience away from pay TV.

In a more immediate sense, the AFL broadcasting rights are being worked on this week. In earlier years Seven has been the lead bidder for free-to-air rights alongside Ten as a junior partner.

But right now the two networks are engaged in a nasty legal dispute over chief executive poaching - leaving one to wonder whether these differences can be put aside in the interests of pitching a united bid for the AFL.

- The federal government has finally woken up and made an announcement about the future governance of the Future Fund. It has not so much addressed the issues as put them on hold.

The chairman, David Murray, has been given another year - which renders him no more than a caretaker.

A couple of other directors, including Trevor Rowe, have left and a few new appointments have been made.

The outcome is hardly ideal. But it will give the fund, under Murray, the chance to see through the broadband network approval process.

Telstra's largest shareholder is the Future Fund, and as its chairman, Murray has voiced his scepticism about the merits of the telco's proposed deal with NBN Co.

With another year in the role, Murray will be able to steer the Future Fund on the vote on whether Telstra will par

 

[elevated position]

How would that help Football here? From first glance at the story it would seem that all sports are likely to suffer from reduced fees. One light I can see though is that Pay TV will have to have a pay as you watch option instead of a cartoon package before you get sport.

 

[midfielder]

How would that help Football here? From first glance at the story it would seem that all sports are likely to suffer from reduced fees. One light I can see though is that Pay TV will have to have a pay as you watch option instead of a cartoon package before you get sport.

Not sure TBH but it seems the way things are headed .... one would assume Optus or Telstra have massive customer bases ... say $ 25.00 per month for football say 700, 000 take the offer ... meaning 17.5 million per month per month.... not sure ... but I think its large numbers by smaller amounts...

 

[MrCelery]

Anything that breaks the stranglehold on the mainstream media by AFL\NRL and will open up football to a wide audience will get my applause.

On a level playing field, football will ultimately show up the egg ball sports for what they are - minor provincial codes with limited appeal.

Already I reckon you will find that most football fans get their appetite whetted via the internet, rather than mainstream media. This applies mostly to the 'print' media at the moment. For example why would you bother to troll through 16 pages of NRL 'news' in the Terrograph to get a tiny article on football, when you have direct and instant access to a wealth of good news and opinion sites on the web?

In the longer term, with the availability of better broadband, I would expect the same outcome for the TV audience too.

 

[timmers]

I remember Matt Carroll talking about the difference between Aussies and yanks with regards to internet content. Americans are happy to pay for a lot of things - content, highlights, exclusive videos etc, Australians tend not to.

Bigpond spent huge money to buy the AFL and NRL websites and content and it turned out to be a huge failure for them. I don't think the internet will be too big a player in Australian TV for a while. The next AFL TV rights deals will be interesting (negotiated in 2017 or whatever)

 

[midfielder]

Another interesting article ... this time about the value of future FTA rights... is about the AFL but there are some goods points for discusssion...

http://www.theaustralian.com.au/business/citigroup-warns-1bn-rights-may-be-too-high/story-e6frg8zx-1226027693030


Citigroup warns $1bn rights may be too high
Simon Canning From: The Australian March 25, 2011


THE winning bidder for the AFL's broadcast rights could pay a price far higher than the $1 billion the code is seeking, with warnings there is no way broadcasters will be able to recoup the investment.

With rumours swirling that Seven chief executive David Leckie is poised to make a massive plunge on the rights, and with Foxtel agitating for better-quality games, the code is optimistic it will be able to add more than $200 million to the price it extracted for the rights in 2005.

All three commercial networks are finalising their bids to the AFL this week, while Foxtel is also angling for more live games.

But the continuing confusion over the mechanism the government will apply to the sports anti-siphoning list is clouding what the true value of the rights should be.

Austar chief executive John Porter this week lashed the government for again delaying legislation to finalise the list.

Citigroup global markets analyst Justin Diddams said in a report that on a combined basis, the AFL rights lost money for the free-to-air television broadcasters -- "generating $75m in ad revenue per year and costing $93m to acquire (plus production costs)" -- and that that scenario was unlikely to change with TV audiences continuing to fall.

"Any step up in the cost of the next AFL deal should drive earnings downgrades," Mr Diddams said. "The 'win at all costs' mantra for FTA on sports rights appears outdated, given the poor economic returns and less 'intrinsic' appeal."

The report suggested that Nine Entertainment was not a credible bidder despite the fact that with Seven and Ten committed to a joint bid it was the only player that could provide the process with competitive tension.

It said that if the AFL was successful in lifting the value of the rights, it would hit shares of Seven, Ten and Foxtel's owners.

"Live audiences are deteriorating (which is likely to concern potential bidders) and the ability of FTA broadcasters to justify the higher cost of premium sports rights remains questionable despite the growing importance," Mr Diddams said.

Despite the slipping audience numbers, Citigroup said the AFL had a right to raise the cost of rights, but warned that the suggested $1bn valuation may not be sustainable.

It said while the code was hoping to add at least $220m to the price extracted in 2005, it predicted the actual growth in value was about $123m, although with two new teams entering the competition there would be 11 per cent more football in 2012.

The report suggested that the value of premium sports rights was fading, in part because they could not pay their way in terms of advertising revenue, effectively becoming a "loss leader" but also because the halo effect of sports was weakening as viewers drifted away from a channel after a game finished.

With negotiations in progress, none of the networks were willing to comment on the Citigroup report.

 

[elevated position]

If it costs each club at least 6 mill(numbers displayed last year )and 20 mill to run the FFA that would be a min 80 mill a year needed . A four year deal of 280 to 300 mill should allow football to find its financial feet.