Why pay television is a lot like smoking

By Mark Young / Roar Guru

There is a high stakes game being played between rugby league and Foxtel, based largely on how similar pay television is to smoking cigarettes.

Yesterday the NRL released a bullish state of game where the rude health of the sport was proudly proclaimed, including the news that they are responsible for almost all the top-rating programs on pay TV.

That fact makes the disparity between what is being paid to the NRL and the AFL rather baffling, even more so as noises are being made by Foxtel that they have no intention to pay any more for league in the new deal. It suggests that the network is being run by fools.

Which is of course a long way from the truth. Rupert Murdoch did not become rich and powerful by making silly decisions and employing dumb people. The man has the midas touch, especially in terms of sport, and there is some compelling logic behind the decisions being made.

The company is very aware that there are only two ways they can make money in the subscription TV business. There are the subscription fees coming in from the viewers, and the money paid by companies to advertise to them, with the relative value of the two slowly shifting towards the latter.

So it follows that when they try and make more money, they can either find more people to sign up, or charge more to advertise.

Foxtel have looked at their wonderful league ratings and asked two pretty good questions. Firstly, why are the ratings for league so much higher than AFL when in every other measurement AFL is stronger or at least a lot closer? And secondly, are there any league fans out there who don’t have pay TV, and might sign up?

The network is gambling on the answer to both. The blockbuster ratings for the NRL don’t suggest that they should be paying more for league, it suggests to them that they have done a good job with league, and a rubbish job with AFL.

Why else would the ratings for the southern code be so much worse when the network TV ratings are so similar and the crowds are so much stronger?

This explains their enthusiasm to shell out big dollars to the AFL in order to show every game live. They are expecting the suburban homes across Melbourne, Adelaide and Perth to start signing up like the western suburbs of Sydney have, and for the ratings to explode with lots of opportunities to charge big money for plum advertising spots.

In terms of the NRL, they are very happy with the ratings, and even happier to be charging for them when finding advertisers. But they are also well aware that everyone who is going to subscribe to watch league has already done it. The remaining fans are quite happy to watch it free to air and get the occasional game at the pub.

The field of potential new subscribers is dwarfed by the opportunities down south.

They are also not scared by the noises being made from NRL headquarters that the game could be taken from them if they don’t up the ante on the new deal. The most likely outcome is that they will shell out a little more to keep the league, but not the enormous sums being bandied around.

But what if it did happen? What if the league wasn’t on Foxtel anymore? Surely the network would be worried about killing the goose that lays the golden egg of top rating broadcasts and thousands of subscriptions in Sydney and Brisbane.

Well when you talk to someone who has Foxtel, you are struck with how much it has become part of their life. Whether it be the kids watching the cartoon channels, the docos, movies or just the convenience of recording and replaying live TV, that cable into the TV is very hard to give up.

They know this very well, and when you try and cancel, a better deal is made which keeps the cable on and the monthly direct debit current. A lack of league would certainly hurt, but it would in now way be terminal.

Because pay TV is like smoking. Easy to get started, eighty bucks a month, and pretty hard to stop.

The Crowd Says:

2011-09-13T04:42:21+00:00

Crosscoder

Roar Guru


Cattery The question of value is directly related to ratings. ATM the NRL is not getting money for value.That value appears to be around $1b,as kerry o'Brien noted last night on the ABC ,as to the code's expectations.

2011-09-12T22:38:06+00:00

The Cattery

Roar Guru


Crosscoder The question of value is a different issue again.

2011-09-12T22:34:50+00:00

Crosscoder

Roar Guru


Commo You can compare ratings in toto,as they are either FTA or Pay TV.The eventual Tv deal is based on a combination of both mediums. Well based on your analogy and all the top ratings AFLs are on FTA ,and the resultant FTA ratings are behind the NRL (when regionals are taken into account),it suggests the FTA deal for rugby league last time was well under.Because only the top 2 and no 4 are on FTA in 2 cap cities. As far as Pay Tv is concerned they get supposedly the 3rd best pick for mondays,ch9 get 1 and 2 for fridays and 4 for sunday afternoon.Meaning Pay Tv gets 3 and 5-8th in the pecking order,yet still creams the opposition. So conversely one can argue if picks 1,2 and 4 were on pay Tv the NRL Tv ratings would be higher still,on an already big viewing base. If the pay TV has maxed out as you say,then how in God's name have the ratings increased dramatically for the Super Saturday and monday night offerings.If you are maxed,you can't grow.It has grown,stuffing your theory. You like many AFLers completely ignore NRl expansion in the next TV deal time period.Have you bothered to consider SkyNZ as part of the deal.Have you considered the Toyota cup as part of the deal. Monday evening was not a consideration when the last Tv deal was struck for the NRL.It is a ratings winner.The SOO series has reached record levels in ratings.Plus the test and All stars matches record over 1 million each time. I was watching Kerry O'Brien on the ABC last night,introducing a segment on his show about the soccer world cup and the bidding deals to get Australia to host the event.As an introduction he noted the AFL got $1,25b on their TV deal and the NRL is expecting a figure of $1b plus on theirs.O'Brien is not a rl journo,not an employee of the NRL,just another public commentator/journalist who is of that view. All this nonsense that it is just a couple of rl journos and a few desperate rl fans sprouting off about $1b deal,is negated by comments made by O'Brien.

2011-09-12T11:18:30+00:00

Commo

Guest


You cannot compare AFL ratings on Pay TV compared o the NRL ratings. This is because all the top rating AFL is shown on free to air. Only the games that do not draw much support in a particular state are shown on Pay TV in that state. If 90% of AFL games were on pay TV the ratings for Pay would be much higher. That is why Pay TV has payed so much money for the next AFL rights. The potential is worth billions, where the potential for League is pretty well maxed out for Pay TV.

2011-09-11T11:19:41+00:00

Mike

Guest


It would be possible for the NRL to get $1b on the next rights deal. But it would involve Foxtel getting live rights to all Premiership matches, and a single FTA getting the rights to SOO/Tests/Finals and replays. Whether or not that means better coverage for fans is another thing.

2011-09-10T03:25:55+00:00

John Ryan

Roar Pro


You would not want to bet on that would you if there is no League on Pay it will be gone from my house and I pay 100 a month how many 100 a month do you think they can afford to lose old son,if the NBN does what it says Pay has a limited life span anyway. Also in the West I dont think many will pay its still on FTA so why would they

2011-09-09T23:09:14+00:00

Ian Whitchurch

Guest


Regrettably, Fox Sports both has no competition in Pay TV, and has a contract that gives it the right to match any other bidder for rugby league. Either the NRL is prepared to get no nada nil revenue from pay TV for long enough to make Fox Sports cry uncle - and remember, Fox Sports is part owned by Telstra, a major NRL sponsor, or they do a deal with Fox Sports on their terms. Personally, I'd guts it up, take the five hard years and set up NRL TV for the long term health of the code ... but this will involve *maybe* two million a year per team going from NRL HQ to the clubs, and that will mean a continued bleed of talent to more cashed-up competitions.

2011-09-09T23:06:11+00:00

Crosscoder

Roar Guru


clipper. If it bears relevance of course and the AFL had a SL type war involving a private media co,but it doesn't end of story. We are discussing PAY TV .How it originated and the effects on subscriptions with the demise of teams(TV ratings if you will) ,is part and parcel of the whole Pay TV issue. Because your mate Cattery brings in incidents(not by an outside media empire) that happened 100 years ago and have nothing to do with a media empire ,trying to buy up a code,for the simple reason of securing content for it Pay TV. QED I would suggest to any rational thinker, it bears no relevance to a SL war (fought over Television).Just as, and you brought it up, Vichy has no relevance to the SL War and Pay TV subscription take up. We are not talking about the growth of the game overseas,or even in this country. I am fully aware of the events of 41,and will not hold back, should you wish to debate that subject.But that should be left to rest.

2011-09-09T22:52:27+00:00

Crosscoder

Roar Guru


RedB Many factors have to be taken into account with pay TV. Yes the 74 of the top 100 is a great starting point and it has been consistently so.In fact a very powerful argument. Fox can only go on the figures before it,as do the advertisers and sponsors. But so is the growth in Pay Tv viewing numbers for the NRL.So is the fact that one of the fastest growing areas Queensland (the real regionalised state)where rugby league is the major viewing code,and where pay Tv numbers have an effect.No doubt affected by the recent cyclones and flood,and once the full effects of these have worn off,there may well be further take up. It is a virtual lay down that expansion of rugby league will happen ineither 2014/5.it is fair to say Perth and indeed either a 2nd brisbane side or C.C. will enter the fray.That is an extra slot for pay,that is an extra enticing slot for advertisers in the nthn markets and indeed for sponsors. It is also reasonable as just about everyone involved in rl acknowledges,based on the huge Tv ratings for both FTA and pay,the last deal was unders. Then one the other side of the equation,the impact of 3 FTA stations(on Pay TV bids) wanting a slice of the action.Ch9 all the FTA.ch10interested in MNF as a start,and ch7 certainly the SOO and who knows what else. Finally how many NRL games will be available live on Foxtel. I am suggesting that rl fans,using the above criterea,are expecting a figure around the $1b mark(with 18 teams)..Even that figure is 20% less than the AFL. You amaze me with your concern as to how much the NRL will get in the next deal.It will have little if any impact on the AFL regardless of the final figure.

2011-09-09T22:50:41+00:00

clipper

Guest


Crosscoder, what you're saying is that The Cattery can't bring up this facet and the impact it had, yet people can rabbit on about Vichy France and the impact it had on RL - that was eons ago as well.

2011-09-09T22:38:33+00:00

Boomshanka

Guest


Last time I looked the Australian league tests were on the anti siphoning list, so Channel Nine still have first dibs there.

2011-09-09T22:21:45+00:00

Crosscoder

Roar Guru


And there is no iron clad guarantee that will change greatly.

2011-09-09T22:20:46+00:00

Crosscoder

Roar Guru


RedB Where did I state it was?.Do I need to get a translator.Shooting from the hip once again !The AFL is shown in the 5 cap cities,at either prime time or decent hours.The NRL is shown in 2 cap cities at prime and decent hours. Read the FTA ratings ,funny for the NRL you see only figures for sydney and Brisbane. You obviously have never heard of sat afternoons,nights,and sunday afternoons in Sydney for AFL.

2011-09-09T22:15:45+00:00

Crosscoder

Roar Guru


For crying out loud Cattery. There was civil war in America almost that long ago. Your out of left field argument,has zilch to do with Pay TV,a late 20/21st century phenomenen. There was no Pay Tv available til the mid 90s,that is less than 20 years ago.Call it less than a generation,it directly relates to the war,where people either left the game,followed the two comps,many certainly did not take up Pay Tv as a result. It has got nothing to d with a city,but individuals (fans) who were directly affected in RECENT times with the loss of their favourite teams by the interference of an outside media n organisation.Not by internal politics or internal decisions.. Why take it up(Pay TV) if your team has been eradicated Norths,Souths,and in some cases mergers.?When you lose your team my friend,you may understand the nitty gritty of the occasion. I used to believe some of you guys had little knowledge of the effects even to this day of the SL war,after reading your comments I am convinced of the fact.

2011-09-09T22:06:11+00:00

Crosscoder

Roar Guru


And others in the media (not rl types and even Gallop indirectly hinted) have consistently stated with 18 teams,a growing and strong Tv ratings history on both FTA and Pay,and 3 FTA stations also involved,that $1b over 5 years is close to the mark. So in effect two sides of the equation are being consistent with their argument.

2011-09-09T18:57:32+00:00

Pete

Guest


They probably wouldn't lose many subscribers straight away. Too many housewives hooked on shows about housewives for that to happen. They would hurt very, very badly on advertising dollars though, which is now a huge part of their revenue Keeping NRL exclusive also ensures Internet TV can't get a decent foothold. The last 20 years have shown League is the proven commodity for growing new mediums and if Foxtel wants to stop Internet TV from taking off then they will want to keep League to themselves.

2011-09-09T06:14:04+00:00

The Cattery

Roar Guru


How can you not see the parallels? The VFL was established after 8 renegade clubs left the VFA in 1897. For the next 98 years they represented two semi-professional leagues in direct competition with each other: competing for supporters, for sponsors and for media attention. In 1995 the VFA was subsumed into the AFL (as the reserve grade competition for the Victorian clubs). 114 years on, and it's fair to say that as a city, we have finally come to terms with it, there is now closure.

2011-09-09T06:10:11+00:00

Crosscoder

Roar Guru


Then Cattery be a good laddie and tell Fox and the FTA stations who may be haunting these sites,to pay true value .

2011-09-09T06:09:47+00:00

JVGO

Guest


Chicken and the egg argument is ludicrous. News fought the Super League war to get control of the central product in the key market in Australia and by doing so destroyed its competitor Optus who had control and exclusive rights to the AFL. Why didn't Optus do a chicken and the egg with AFL if it is that simple?

2011-09-09T06:08:03+00:00

Crosscoder

Roar Guru


Well Cattery I am still waiting to find the relevance of that ,with the SL war that started in 95 and the directs effects felt for over a decade in teh code.because quite simply it bears none.

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