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Fox Sports hands out the cash, but how many hands are grabbing?

Roar Guru
20th December, 2016
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Vince Lia of the Wellington Phoenix (C) reacts to scoring a goal during the round 10 Hyundai A-League football match between the Wellington Phoenix and Central Coast Mariners at Waikato Stadium in Hamilton, Saturday, December 10, 2016. (AAP Image/ David Rowland)
Roar Guru
20th December, 2016
141
1262 Reads

Yesterday, the Football Federation of Australia (FFA) announced a six-year broadcast deal with Fox Sports, Foxtel and News Corp Australia.

In Australia, Fox Sports also has broadcast deals with the AFL and NRL.

In total, Fox Sports will pay $470 million per year to the AFL, NRL and FFA as follows:

$217m p.a. to the AFL
$195m p.a. to the NRL
$58m p.a. to the FFA

While the broadcast rights owned by Fox Sports includes a wide portfolio of content from each sport (men’s competitions, women’s competitions, domestic cups, practice matches, internationals, etc.) it is indisputable that the TV rights value for each sporting body is driven by the professional men’s club competitions: AFL, NRL and A-League.

In Australian sport, it is inevitable that fans and media are never satisfied with any off-field achievement on its own merit. There is always a “measuring contest” with rival sports that precludes people from being satisfied with what they’ve got and the first reaction is always: “Mine is bigger than yours”.

To the casual observer the A-League revenue from Pay TV is insignificant compared to AFL and NRL.

But, when it comes to sport, I treat casual observers with contempt. Casual observation is only concerned with highlights, so the casual observer misses important parts of any story.

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So, what parts of the Pay TV story does the casual observer miss?

Let’s use a non-sporting example.

Suppose I own three businesses: Unit A, Unit B, Unit C.

Unit A: generates $400 per year and has 400 employees
Unit B: generates $300 per year and has 200 employees
Unit C: generates $100 per year and has 50 employees

The casual observer will only notice that Unit A generates the highest revenue and its revenue is 4x the revenue of Unit C.

The casual observer will shout: “Bravo Unit A. You are the biggest! Unit C, shame on you; you are small, worthless and insignificant.”

But, the more thoughtful observer will smile and look deeper.

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A thoughtful observer will notice that Unit A uses a lot more employees than Unit C.

A thoughtful observer will ask: “how much revenue does each employee generate?”

Well, when we analyse how much revenue is being generated by each employee, the story changes.

We now find Unit C’s employees are generating the most revenue per person ($2 per employee) and Unit A’s employees only generate $1 per employee.

Suddenly Unit A with its fat pay cheque is not looking so smug. It’s employees are not as productive as Unit C.

Now, let’s apply this analysis to the Pay TV deals for AFL, NRL and A-League.

Which competition generates the highest Pay TV revenue per player?

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The results are intriguing.

tv-rights-comparison

Even though AFL receives the most money from Fox Sports, AFL needs significantly more players to generate this big revenue.

As a result, it is the NRL that has the highest ‘Pay TV Revenue per Player’.

What we also find is A-League, whose annual Pay TV revenue from Fox Sports is miniscule compared to AFL, uses much fewer players to generate its revenue.

So, even though AFL receives nearly 4x the Pay TV revenue compared to the A-League, each AFL player only generates 12 per cent more revenue than each A-League player.

What does this all mean?

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Well, when assessing value always dig deeper. You may find gems and, more importantly, you could find dirt to throw around!

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