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

By Nemesis / Roar Guru

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.

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.

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?

The results are intriguing.

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?

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

The Crowd Says:

2016-12-28T12:41:53+00:00

pacman

Guest


Sorry Caltex, I have been away for a few days. I was looking at club football in Sydney, not school football, and particularly not Catholic school football which, in the grand scheme of things, would have been more than irrelevant. In 1958 I played for Padstow United U/16's in the Bankstown Junior Association. Other teams were Bankstown Celtic, North Bankstown, East Bankstown, Yagoona, Riverwood, Revesby Rovers, Panania Wanderers, East Hills Migrant Camp, and at least one other (no byes), possibly more. Canterbury had it's own junior association, with a similar spread of teams, such that it was not necessary for it to join forces with Bankstown. Sydney had a proliferation of vibrant junior soccer associations, necessitated by the sheer volume of players. There was a similar proliferation of soccer fields (just about every suburb had at least one), whilst RL fields were few and scattered, and RU fields even more so. Catholic schools definitely promoted RL, but they accounted for a small proportion of the student population. The rest were served by the state school system, where soccer enjoyed a strong following. Stronger than RL? Can't say, but quite possibly yes. Certainly, soccer was described as the "sleeping giant" of Australian sport by the Sydney press before I left school.

2016-12-24T08:24:57+00:00

northerner

Guest


@Sydneysider - of course. That's business for you. I'm certainly not saying that the AFL is going to take over NSW anytime soon, or that the NRL is going to control Vic, but I think they both have to try. I'm not totally convinced about the strategy for where the A League should expand, but expand it must and will. Personally, I think Wollongong is the place to go - that would be extending a solid existing market rather than striking out into the unknown, and it wouldn't be cannibalizing Sydney teams either. But, that's just my opinion and nothing more. I just think folks need to recognize that times change, populations change, and "that's the way it's always been" isn't a good business model.

2016-12-24T06:13:30+00:00

Sydneysider

Guest


" I do not understand why you seem to think that those market shares are immutable and unchanging, fixed in stone for ever more. The whole point, for both codes, is to expand into areas where they are weak," Fair enough, and that is what football is trying to do as well, but of course the AFL posters on here deride the FFA and basically dismiss any notion that the A League could become more popular across the country and get bigger crowds and ratings. For me, I believe the GWS Giants are a massive waste of money and will fail, but the afl are entitled to expand. An A League team in Tasmania or Wollongong could work. Anyway, merry Xmas to all.

2016-12-23T13:10:33+00:00

Nemesis

Guest


Wouldn't expect revenue metrics to be included in any Annual Report. Revenue metrics are internal measurements used to benchmark efficency & productivity. Revenue per FTE, is one of the most fundamental metrics clients will request when they're asked to slash costs.

2016-12-23T12:47:56+00:00

The_Wookie

Roar Guru


Ill be honest. Read many an annual report in my day, and ive NEVER seen revenue per worker listed as a metric.

AUTHOR

2016-12-23T11:21:09+00:00

Nemesis

Roar Guru


Optus only delivers EPL using online streaming, mobile digital signals & satellite signals in rare cases. Optus does not provide any signals via Cable TV. Foxtel offered Optus the opportunity to deliver broadcasts via its cable network. Optus said NO. From what has been reported on previous TV deals, TV rights are sold separately depending on the type of signal > Cable > Satellite > Online/mobile digital > FTA The online/mobile digital rights are still being sold. It is reported Telstra is likely to be involved with bidding for these rights, so I'm sure Optus will also be involved in the bidding. But this is not for Cable TV. This is of online streaming/mobile digital broadcasting. I'm interested to know which other Subscription TV or Cable TV companies bid for the AFL rights?

2016-12-23T09:09:24+00:00

The_Wookie

Roar Guru


Optus does have the capacity to broadcast subscription tv. I think its even doing it now with something called the EPL. What would have killed other providers is the production cost.

AUTHOR

2016-12-23T08:43:17+00:00

Nemesis

Roar Guru


Does Optus, twitter, facebook and youtube have the capability to broadcast LIVE sport via Subscription TV? If "no" then they wouldn't have bid for Subscription TV rights. This is basic stuff. If you want to have a sensible discussion, I'll oblige; otherwise can you please go away.

2016-12-23T08:35:03+00:00

Mister Football

Roar Guru


Casper In terms of total annual revenue, it's more like a billion dollar differential.

2016-12-23T08:31:06+00:00

Mister Football

Roar Guru


You mean Optus, twitter, facebook and youtube had no interest?

2016-12-23T08:29:16+00:00

Mister Football

Roar Guru


Hey Rick, c'mon mate, it's the University of Sofia, the oldest higher education institution in Bulgaria.

AUTHOR

2016-12-23T08:19:29+00:00

Nemesis

Roar Guru


I don't know about the AFL, NRL, ARU but you're kidding yourself if you think the W-League & FFA Cup competitions add anything significant to the FFA's TV deal. Ask yourself: If FFA didn't have ALeague, how much would Foxtel pay for W-League &/or FFA Cup?

2016-12-23T08:14:40+00:00

The_Wookie

Roar Guru


You could have also added that the list size you are using for the AFL is wrong. Its 38 on the primary list + a maximum of 9 rookies. A team can have up to 47 players on a list. I dont think 30 is correct for NRL list sizes either. Some teams list up to 40 players in their full squads. In any case, Foxsports are paying for content. Not players. Which is why this article is a little off the beaten path. And we arent just talking about games shown in the main leagues home and away season. Which is also why people measuring by the hour should have a very strong rethink. The FFA deal isnt just for the FFA, but also the FFA Cup and W-league. Not just the mens competiton. The AFL deal is for the AFL and its preseason. (And now includes AFL Womens) The NRL deal is for the NRL, Nines, NSW Cup/NSW Schoolboys,. The ARU deal is for Superrugby, the NRC and tests.

AUTHOR

2016-12-23T08:14:14+00:00

Nemesis

Roar Guru


According to Roy Masters "Foxtel was the only bidder in the subscription TV market" Seems reasonable to me. Unless I'm missing something, who else in Australia has the capability to broadcast LIVE sport via Subscription TV? Did anyone besides FoxSports bid to broadcast AFL via Subscription TV?

2016-12-23T07:54:16+00:00

The_Wookie

Roar Guru


has it in fact been confirmed there was no other interested party?

2016-12-23T06:49:31+00:00

BigAl

Guest


My question also... The whole piece reminds me of playground discussions I remember from primary school where it was opined that ants were the mightiest critters in the ... whole werlllttt ! - because they could lump around weights 40(?) times their own !!!!!!!!!

AUTHOR

2016-12-23T06:35:28+00:00

Nemesis

Roar Guru


That explains why Foxtel doesn't pay a premium for AFL. Why are they paying a premium for ALeague? There's no other buyer. Why not simply say to the FFA: we'll give you the same unit price for your content that we give AFL. Take it or leave it?

2016-12-23T05:48:43+00:00

Nemesis

Guest


Fair enough. For me it's nothing to with following codes. I like football because i enjoy the sport. It could be 2 teams playing in a park. I enjoy the contest that football provides. I'm also watch a fair bit of Field Hockey, European Handball & Water Polo during the Summer Olympics. If AFL, tennis are on the TV at a friend's house I'm happy to stay involved & watch. By contrast, I simply don't get any enjoyment from cricket, golf, rugby, RL, baseball & a whole range of other sports. If they're on TV, I'll actively leave the room & go talk to someone else who is not watching.

2016-12-23T05:40:21+00:00

The_Wookie

Roar Guru


I think you under-rate people that follow actual teams, not codes. For instance during the winter I follow Carlton in the AFl religiously, but unless theres a particularly engrossing AFL match on, Ill almost always watch my Reds in their Super fixture, or even the Broncos (Im a Queenslander).

AUTHOR

2016-12-23T05:05:02+00:00

Nemesis

Roar Guru


"You’d be surprised at the number of AFL supporters who also follow other codes during the winter." So, let me ask you. I'd say you're a staunch AFL fan. How often each season do you choose to watch an NRL match instead of an AFL match? 10 times per season? More than 10 times per season? Less than 10? Less than 5? Note: We're talking about choosing to watch the NRL instead of AFL. That's the essence of competition - you have 2 or more choices & you're happy to pick any of the choices. I will NEVER choose any other sport on TV in preference to an ALeague match. I don't watch every ALeague match but that's not due to substituting an alternative sporting product.

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