It's been a big week as far as sports broadcast and digital rights go in Australia, and it's been particularly interesting to watch from a research perspective for a number of reasons.
Firstly, my recollection of events:
Cricket Australia and Tennis Australia both put their rights into the market at around the same time - a few weeks before Easter. The ball-tampering scandal hits Australian cricket, and Cricket Australia loses a $20 million sponsorship deal. Channel 9 appears to balk at cricket as a result, and takes up the rights to the tennis. However, while the ball tampering was an ugly affair, Channel 9's move to the tennis was probably more because Channel 9 were said to be losing up to $30 million a year on their current cricket deal.
The networks then put their offers in to Cricket Australia, who knock back all initial bids. Foxtel is said to be in, then out. Ten and Nine partner up, then go alone. Ten offer about $980 million over 6 years for the whole of the rights, and is reported to have a handshake agreement with CA. Foxtel and Seven team up and come in over the top, offering more cash and total revenue over 6 years - roughly $1.2 billion. A summary of the situation can be seen here:
http://www.afr.com/business/sport/the-gold-coast-war-room-that-helped-clinch-the-record-118b-cricket-rights-deal-20180415-h0ys8m
Foxtel, Seven and Cricket Australia announce the deal on Friday the 13th... Haha!!
In the deal, it breaks down that Foxtel gets the lions share of content. Seven will broadcast the Tests and Women's Internationals, and 43 Big Bash games. In addition to simulcasting Seven's content, Foxtel will exclusively have the ODI's, T20 Internationals, and the remainder of the Big Bash, 16 games. Foxtel also gets all streaming rights, taking that content away from the CA app and their website. Seven says, despite losing the tennis and despite the fact Channel 9 were losing money on the cricket, this deal makes more sense for them financially - it gives them more hours of sport over the summer, and on a cost-per-hour of coverage basis, it's a bigger earner than tennis.
On first glance, it would seem this deal breaks the law, because the ODI's and T20 internationals are on the anti-siphoning list. Minister of Communication Mitch Fifield spoke about this after the announcement, but it was explained that the anti-siphoning regulation was not contravened in at least two ways:
1) The legislation only mandates that a FTA network must first be involved in the negotiations, not that the rights to listed events must go to FTA networks. By having at some point all of the commercial FTA's involved in the negotiations, it would appear the legislation was not contravened.
2) The legislation does not prevent a FTA from first acquiring the rights to a listed event, and then on-selling those rights, provided the initial rights holder agrees to that part of the deal. So even if Foxtel paid most of the money in the deal, there could theoretically be a handshake agreement between Seven and Foxtel, whereby Seven would notionally purchase all the rights, and then on-sell them to Foxtel, provided Cricket Australia was happy with that type of a deal. This would also not contravene the legislation.
Basically, in spite of the legislation, rights holders can sell their rights to whoever they want, provided they agree to the terms of the deal. So for instance, if any FTA network indicated their interest, but didn't put forward a reasonable offer, then the rights holder is under no obligation to sell their rights to them. And provided a FTA network had the first opportunity to be involved in the negotiations, then no laws have been broken. The rights can then go to the higher bidder, and in this case, that was the Foxtel-Seven partnership.
The anti-siphoning legislation is proving to be an increasingly obsolete article of legislation. It only applies to Pay TV and FTA, and even where it would seem to be applied, it has no teeth. For the time being, the whole ideology behind the legislation - to prevent culturally significant sports from being siphoned off and placed behind a paywall - appears to not be a priority of the ruling authorities. So for the first time in 40 years, ODI's will not be on FTA television. I think people will get more upset about this as summer rolls around next year and the year after that.
There are some other points of interest here.
Firstly, it appears CA has taken revenue over exposure. Ten offered a deal, which was near the asking price, that would see all content on FTA. Seven and Foxtel offered a deal with slightly more cash and revenue, but would see some significant games going behind a paywall. CA took the latter deal in spite of the increased exposure the deal from Ten would seem to offer. We won't know for many years if this loss of free-to-air exposure negatively impacts the awareness and participation of cricket in Australia. CA and Seven's way of justifying this was to argue there will be more overall cricket on FTA television, once women's and other forms of cricket is factored into the deal, and that they can use the additional revenue to reinvest into cricket participation and infrastructure.
Secondly, it puts Foxtel in a strong position in terms of their year-round schedule. Exclusive cricket content on the Pay TV provider would seem to be an incentive for subscribers to stay on after the glow of the major football codes wears off. Also, as Foxtel will simulcast most content, it may be an attraction to some fans who don't want to watch commercials after every over, as the FTA broadcaster likely will.
Thirdly, Seven showed apparently little interest in the streaming rights, leaving them to Foxtel. It's been reported that less than 2% of Seven's audience is on their streaming platforms, hence their apparent lack of interest. But for Foxtel, this could be part of their next skinny-bundle OTT strategy. It's already been slated that Foxtel will have a standalone cricket channel over the summer, but Foxtel are also rumoured to be considering offering paired down streaming packages on a sport-by-sport basis. Perhaps they're hedging their bets in two ways - in their existing business model of satellite subscriptions, and in their new business model of OTT subscriptions, either through Foxtel Now, or a skinny bundle, Project Martian-type offering.
It's also perhaps not surprising that Foxtel went so hard in the deal, given that former CEO of Fox Sports Patrick Delany is in charge of the newly merged Foxtel-Fox Sports business. It's a big job to try and get Foxtel's penetration rate above 30%, and this is a big risk to try and address that.
What can we expect? Promos for Channel 7 shows during the cricket, and Promos for Channel 9 shows during the tennis. New voices and faces behind the mics and on the screen for both sports. And little in the way of major sport on Ten at all. I can also expect a price hike in my monthly Foxtel Now subscription. But content doesn't come for free and someone has to pay for it. I could endure a comparative price-hike if it meant I could look forward to ODI's, T20, the Big Bash, all ad-free, over the summer.
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