Market analysts are marvelling at Seven West Media’s magic trick of extending at a discount broadcast rights with Cricket Australia from the 2024-25 season to 2030-31.
The media group applied pressure on the cricket body, leaning to the dark arts side of negotiation rather than finesse, with court action, deadlines and demands for discounts due to disruption by the pandemic.
But did Cricket Australia have a lot of choice?
Brain Han, equities director at Morningstar, in a note to clients: “We commend management for renewing the cricket broadcast rights from the 2024-25 season, at a 13% discount to under the current deal − a rare feat amidst perennially escalating costs for mass-audience sports.
“Once it became clear that the Paramount-owned Ten Network was the only other serious bidder, it appears conservatism dictated Cricket Australia's decision to stick with Seven (and its partner Foxtel on the subscription TV side), notwithstanding all the well-documented acrimony and legal tussles.
“Indeed, it would have been a brave call by the cricketing body to take a chance with Ten, with its low-20% commercial free-to-air TV viewing share and limited recent track record in marquee sports coverage and production, even if that meant walking away from potentially more money on offer.”
Ben Willee, General Manager and Media Director, Spinach: “With $1.5 billion burning a hole in Cricket Australia's pocket, you would think they would be happier than a butcher’s dog.
“Not to mention the management and shareholders at Seven who are high-fiving after delivering a deal with an increase in content (in the all-important digital rights) and a reduction of approximately $50 million over the term of the contract.
“Not so fast. There’s still a couple of lingering doubts about this deal.
“Sports operate like brands, they are obliged to deliver messages and content at all levels of the connections funnel. So riddle me this, Batman? Why are One Day and T20 internationals, arguably the content that appeals to the broadest audience, behind the paywall?
“I’m not saying pay TV shouldn’t be included in the deal (just look at the excellent contribution they make to AFL and NRL.)
“However, if I’m a sponsor, I want to reach as many people as possible (so the love of the sport can be reflected on my brand) and it doesn’t make sense to put your most exciting content behind the paywall.”
Media analyst Steve Allen, Pearman’s director of strategy and research: “The new seven year deal is $1.5 billion but this is a maximum based on some elements of ratings performance on Seven’s side of the equation.
“It was reported that Paramount was interested but only if it could secure both the FTA and subscription rights.”
He says the Seven strategy had three elements:
- An ongoing dispute on what Cricket Australia supplied within the contract, in terms of calendar, tournaments, scheduling, popularity plus quality of players/competition, with particular reference to, but not confined to the Big Bash League.
- A legal case (now dropped)
- A pre-emptive deadline for formal acceptance OR rejection set by Seven for 5pm, December, 30, 2022.
Allen: “These various tactics clearly worked in the end as Seven have reportedly renewed the contract at a near 15% discount; $75 million per annum to $65 million. plus a 2% a year rise, plus $7 million a year contra.
“We understand there is also a Cricket Australia revenue enhancer, or discounter, based on FTA ratings performance.
“Seven will cover the Tests and the Big Bash League (BBL) while Foxtel retains the T20 and One Day Internationals exclusively. The Women's Big Bash League is included on both.
“This means Foxtel’s contribution and proportion has increased from $125 million p.a. to near $140 million p.a., or from 60% to 65% of the total cost.”
Is it worth it?
Allen: “What media coverage of these rights issues do not often get is both Context and Perspective. Very simply, TV ratings deliver revenue.
“Thus it is primarily the ratings potential which does and should determine the amount of risk in any bid. Within this the extra ingredients are scheduling and hours of play.
“Plus any production costs, although these have come down as a lot of sports today provide their own host feed as the sports (particularly domestic) want to retain the copyright over coverage, digital rights and replay.
“Olympics are pretty simple; approximately 224 hours (on the primary channel) of live telecasting, however with modern technology, Seven have used up to 45 digital streaming channels simultaneously, plus use of their 3 Digital Broadcast channels.
“Cricket is much more variable due to weather, standard of competition….but anywhere from 368 hours to 460 - 500 hours depending on the schedule. BBL will be cut back from 61 matches in recent years back to a previous calendar of a 43 match competition. Presently Tests are around 30%-43% of hours. Tests are 75-80% daytime and presently out-rate BBL by around 2 to 1 despite BBL being nearly all Peak night.”
Analysts at investment bank Goldman Sachs: “Cricket Sports rights extended to 2031 with the seven-year package worth $1.512 billion (A$216 million p.a. Vs 2019-24 cost of $197 million p.a.).
“Despite now securing the FTA + shared digital rights (previously just Kayo), SWM expects $65 million in FY25 cash costs, representing a -13% reduction vs. the current agreement, with similar contra as previous.
“However we do note the new terms include a shorter BBL season (c.30% fewer games), and do not include 10 ‘Super Saturday’ BBL games held exclusively by NWS.
“While we see the discount SWM achieved vs historical costs as a positive outcome from the negotiations, especially when compared to other recent sportscost negotiations (Tennis/AFL/NRL increasing) and noting the inclusion of digital
rights, we believe this is offset by the smaller BBL schedule, and revenue share model (lower upside).”
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