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Opinion

Can the media survive the shutdown?

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Roar Guru
25th March, 2020
7

Fox Sports and the free-to-air networks have significant fixed costs running their businesses, meaning that regardless of revenue, expenses are guaranteed.

Interest and leasing costs are two simple examples of ongoing expenses regardless of programming.

Fox Sports relies on subscriptions, while free-to-air TV needs advertising. Obviously without games, revenue streams dry up.

Both Fox Sports and free-to-air TV have a number of channels and need content. These channels cost money to maintain.

Equally, key sponsors, like betting companies or travel companies, will be less inclined to support either TV format without matches.

Netflix, Stan and other streaming networks are buying movies, TV shows et cetera, thereby adding much more competition to the non-sport marketplace.

Sport will not die. It may lose is governance structures, but if, say, the Parramatta Eels went broke, the fans would regroup under a new brand with a new management team. The same goes for most sides. We have regrouped many times before.

Simply, the CEO and senior management positions may go, but fans will establish new teams under new structures.

The telecommunications companies that can add sport with few fixed costs are in a great position.

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Let’s say a phone plan with an internet plan and sport plan costs combined $90 per month. If you assume one million subscribers, 750,000 are full customers and 250,000 buy the sport only.

At $90 each for 750,000 subscribers, monthly income would be $67.5 million and $810 million annually. Then add $20 sport subscriptions for the remaining 250,000 subscribers and you’re looking at an additional $5 million per month and $60 million annually. Combined that $870 million.

Whereas Fox Sports and free-to-air sport broadcasters may have a difficult time during and after the shutdown, telcos could be in reasonable condition.

The telcos and streaming giants have also created a new dynamic in viewing. The traditional TV model relies on ratings. Eyeballs are an essential part of the mix, and because in the past the cost was so high, many buyers of TV subscriptions were multi-watchers. Many fans watched a number of games each weekend.

Research coming out of the US and the experience of Optus in Australia with the EPL indicates with a low entry price people are happy to have sport available to watch when they like, often in the form of highlights, mini-matches et cetera. Telcos don’t care about ratings; they simply want phone contract numbers.

Fox Sports have suggested they want neither rugby nor football. How genuine these noises are is yet to be determined, but there is also talk of Optus wanting both. Equally, Telstra has strong links to the AFL and NRL.

In closing, the lack of matches will affect the revenue streams of traditional sports broadcasters, and my guess is they will experience losses. Traditional media companies will be far more hurt than sports.

But sport will survive; it’s the traditional governance models that may fall by the wayside.

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