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How the NRL can match the AFL’s TV rights deal

8th August, 2011
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8th August, 2011
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Can the NRL capitalise on AFL's Free-to-Air arrangements?

Can NRL CEO David Gallop and the other sporting codes capitalise on the AFL's Free-to-Air exclusivity with Channel Seven? (AAP Image/Dean Lewins)

The NRL quite rightfully compares itself to the AFL, and is therefore using the AFL television rights deal as a benchmark for its own broadcast rights negotiations. But it’s not quite as simple as thinking “the AFL’s deal was $1.25 billion, so we deserve at least that.”

A couple of weeks ago, Channel 9 boss David Gyngell boldly declared that if the NRL wanted to receive anywhere near their desired $1.4 billion TV deal, the sport would need to look at altering their product to make it more commercially viable for whomever owns the broadcast rights.

Gyngell wasn’t inferring that the game isn’t attractive or appealing. He was merely insisting that rugby league needed to allow for more advertising space during the coverage of its games in order to generate more revenue for the broadcaster that holds the rights to the NRL.

The outcry from rugby league fans, and rugby league detractors alike, was as predictable as it was ill-informed. The general sentiment was, “Gyngell wants more ad breaks? Greedy. He just wants to make more money.”

Let’s make one thing abundantly clear: Channel 9 is a television station in the business of making money via entertainment. It’s not a government funded network. It is not a charity. It exists to make a profit, and every decision is geared towards that objective.

Yet even allowing for those facts, Gyngell’s comments did not come from a place of greed, but of sound business principles.

I’m not defending Channel 9, but I am fully aware and appreciative of the fact that if Channel 9 is to fork out a lot of money to purchase the NRL rights, it will want to see a return on that investment.

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Fans that reacted to Gyngell’s comments by saying that Channel 9 should lose the rights, and that they be given to a network that will treat the game with respect, are living in fantasy land.

Rest assured, any broadcaster that purchases the rights to a program is doing so to generate revenue via advertising. The ‘product’ needs to be commercially viable. As such, it doesn’t matter which network buys the NRL rights, they’ll be singing from the same hymn sheet as Gyngell.

There is an additional chorus of people that argue that Foxtel’s coverage of sport is ad-free, so Channel 9’s should be as well. But that is simply not an apples-for-apples comparison. Foxtel is a pay-TV service, which means once they have you as a subscriber, they’re earning money; ad revenue is just a bonus. Conversely, free-to-air networks generate revenue from advertisers.

In other words, Foxtel can afford to have no ads, Channel 9 (or whoever) cannot.

If you, as a fan, want to watch live sport, you need to pay a ‘price’. And you either do that though paying for a Foxtel subscription, or by watching ads on free-to-air.

Which gets us back to Gyngell’s comments about rugby league making some modifications, specifically involving ad-conducive rule changes. It’s a concession the NRL may have to make if it wants to drive up the price for its broadcast rights, and match, or beat, the AFL’s deal.

But the NRL needs to be realistic and understand that the AFL is currently more appealing to networks.

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For the purposes of this argument I’ll disregard intangibles like TV ratings, Channel 7 on-selling games, and the true national reach of the AFL, and highlight one tangible reason why the AFL is currently a more attractive proposition for networks: because of the advertising opportunities it affords the broadcaster.

Consider these three key facts when comparing the AFL to the NRL:

– The actual game time is longer.
– It’s played in four quarters, providing three natural ad break opportunities.
– It can also squeeze in an ad after each goal is scored.

And importantly for fans, it can accommodate all this whilst remaining a live broadcast.

That makes it attractive for networks, advertisers and fans. Or in other words, nirvana.

Contrast that with a live broadcast of rugby league, which really only provides an advertising slot at half time, or when a try is scored. Quite simply, rugby league doesn’t have a lot of ‘dead time’, and therefore it doesn’t have a lot of ad breaks, consequently making it harder to generate higher levels of advertising revenue.

Channel’s 9 current solution to this issue is to broadcast most of their games on a delayed telecast, which allows for more ad breaks. However, this alienates fans because it’s virtually impossible to avoid the score in the age of texts, Facebook, Twitter, or a drunk mate’s phone call.

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Though I hasten to add that Channel 9 are not alone with the delayed telecast strategy. The result of Saturday night’s AFL game between the Sydney Swans and Essendon Bombers was ruined for me when a friend who was at the game texted me the result of the ‘live’ broadcast that I was watching. It seems Channel 10’s coverage was slightly delayed, no doubt because it was squeezing in a few more ads.

Returning to rugby league, it’s evident that all the stakeholders involved have different motivations and objectives from the next NRL TV rights deal.

The NRL want the cost of the deal to be as high as possible for obvious rational reasons. But they also want to provide the perception, real or not, that the NRL is on par with the AFL.

The broadcaster that wins the rights wants to generate as much revenue as possible from the advertising during coverage of NRL games.

Brands want as many opportunities as possible to advertise their products and services during a high rating TV show (ie: NRL games).

And finally, fans want to watch live, high quality coverage of rugby league.

Is there a way to placate all four stake holders? Is it possible to fit more advertising into the broadcasting of a live rugby league match without interrupting the appealing natural flow of the game?

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Gyngell himself suggested some changes, including a 15 second break before every scrum feed, and/or before play recommences on a line drop-out. Another suggestion that has been mooted is switching the game to four by 20 minutes quarters, with a two minute break at quarter and three quarter time.

An extra couple of minutes of ad time could be worth upwards of $50,000 per game. With 26 rounds, and a free-to-air broadcaster showing three games per round, that’s an extra $39 million in advertising revenue available to the host network, on top of whatever is generated pre-game, post-game and at half-time.

And that figure doesn’t even include State of Origin, Internationals, or finals games, all of which advertisers pay a hefty premium for, significantly increasing the advertising revenue.

Clearly there is an opportunity for rugby league to make itself significantly more appealing for networks and advertisers, driving the price of its TV rights deal up, and therefore generating considerably more money for the NRL. Which, if utilised wisely by the Independent Commission, will drastically help the game overall.

David Gyngell is a rugby league man with a lot of a passion for the game. He wants rugby league to prosper. But he’s also savvy enough to know that his passion for the game should not blind him from making a poor business decision and overpaying for the rights to rugby league.

Gyngell was clearly on to something when he suggested that rugby league needs to become more appealing for networks from an advertising point of view. Gyngell’s honest assessment was refreshing, but more importantly than that, he was providing the NRL with a blueprint for significant growth.

The question is, will the NRL listen?

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You can follow Ryan O’Connell on Twitter @RyanOak.

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