The $4.5 billion broadcast rights deal for the AFL is about continuing subscription growth for Foxtel and maintaining mass appeal for Seven.
For Seven, looking forward to seven seasons to 2031, there are revenue opportunities from more comprehensive digital rights for 7plus, including increasingly important live streaming via any device.
Foxtel says its sports streaming platform Kayo, with its 1.3 million subscribers, accounts for 47% of live AFL viewing.
Seven keeps the same numbers on free-to-air television -- 3 plus games a week -- plus exclusive finals and the grand final.
Assuming the rights costs are split 65/35 between News and Seven, they would represent 5% and 19% of the companies' current operating costs, respectively, according to Mornmingstar.
Brian Han, equities director at Morningstar, in a note to clients: “Within News' conglomerate, the impact is not material. In Seven's case, it is about 15% higher than our expectations.
“But this is before factoring the incremental revenue opportunities from securing more comprehensive digital rights for 7plus.
“The step-up in rights is a burden but the cost of not renewing would be even higher.
“News' subscription video services rely heavily on AFL as a subscription driver for Foxtel and Kayo.
“As Australia's premier sporting code, AFL's importance to Seven is even greater. It will help maintain the free-to-air network's mass appeal (albeit declining) and act as a key promotional platform, while also accelerating the growth of 7plus as part of Seven's digital strategy.”
Seven West Media CEO James Warburton: "This new combination of broadcast and digital means SWM will be ideally positioned to drive and capture a significant share of the growing total television market."
At $643 million per season, up 36% from $473 million, this is Australia’s biggest sports rights deal.
However, Seven West Media, in a statement to the ASX, says its costs will rise by only 14% from 2025.
Media analyst Steve Allen, Pearman media agency’s director of strategy and research: “So, as we thought … the bulk of the increase has been shouldered by Foxtel
“In our view Seven was also a winner because they secured streaming rights (in some respects, jointly with Foxtel and Telstra), for all matches live, playback, catchup.
“This is essentially a brand new channel, and given the way consumers are time shifting viewing and flocking to ctreaming, a really strong gain in both potential audience and revenue for Seven."
Analysts at investment bank UBS: “Strategically we see the deal as positive for both Seven and Foxtel.
“However, high levels of competition for premium sporting content such as the AFL continues to drive significant inflation in the cost of premium content globally, particularly as the barriers to entry for sports broadcasting are lower than history. In our view, this dynamic makes it difficult for platforms to derive excess returns on premium sporting content."
Here's how analysts at Goldman Sachs see the costs of the deal for Seven West Media:
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