MCN says sports rights inflation ‘almost untenable’

MCN says sports rights inflation ‘almost untenable’

Foxtel’s $500 million advertising business MCN has warned that sports rights costs are “almost becoming untenable for broadcasters and advertisers” as the pay television giant’s shareholder Telstra said there will be “no open chequebook” in forthcoming negotiations with the NRL and AFL.

But free-to-air network owner Nine Entertainment Co said it expects all broadcasters to take a “fairly big hit” on any successful bids for the rights to screen the codes because the properties are so critical. The NRL is said to be looking for more than its current $1.2 billion broadcast deal with Nine, Fox Sports and Telstra.

Live sport is considered one of the most valuable assets for broadcasters as they are able to deliver consistent and engaged audiences, create a so-called “halo effect” for other parts of the schedule and offer cross promotion opportunities even if the networks don’t break-even in terms of direct costs.

But Anthony Fitzgerald, the chief executive of Multi-Channel Network, which is a joint-venture between Foxtel and Fox Sports, told the AdNews Media Summit in Sydney on Friday: “Sports rights, not just here, but globally, are increasing at such a rate that it’s almost becoming untenable for broadcasters and for the advertisers.”

In her first public appearance since taking the role of Telstra’s managing director of media and marketing, former Nine director Joe Pollard concurred, warning that the telco – which owns Foxtel with News Corp – did not view any sport as a “must-have”.

“We see sport as an important part of our strategy, but there needs to be a mutually beneficial relationship between the rights holder and the rights exploiter,” Ms Pollard told the summit. “There isn’t an open chequebook and not any media property is a must have property as far as we’re concerned.”

The AFL has told TV networks it values its broadcast rights at $1.75 billion, up from $1.25 billion – meaning more than $3 billion could be spent on rights to Australia’s two largest sporting codes.

Sport key

Nine group sales and marketing director Peter Wiltshire said sport remained key to the schedule. “We’re about to go into two sports rights negotiations, the AFL is up as well, we’re all going to take a fairly big hit on that, we know that right, we have to have live sport,” he told the conference.

Nine’s rival Seven West Media, which has the free-to-air rights for AFL, said it does not expect to see the same levels of inflation as in markets like the UK, where rivals Sky and telco BT Group recently retained rights to the English Premier League soccer over the next three seasons for a record £5.14 billion ($10.17 billion).

Seven’s new chief digital officer Clive Dickens said the combination of live and sport, two sought after qualities in programming, created rights inflation. “The difference in the Australian market though is we have quite a lot of codes that are not international. We don’t believe that we will see the type of inflation we’ve seen in other markets,” Mr Dickens said. “We firmly believe that a free and live audience is very important to the code owner itself.”

Outgoing chief executive of TV production giant Shine Entertainment Mark Fennessy said that while certain sports may not break-even in terms of direct costs the halo effect created on the rest of the TV schedule has in the past justified the price.

IPG Mediabrands global chief executive Henry Tajer who told The Australian Financial Reviewearlier in May that if the AFL, NRL and Cricket Australia didn’t moderate the aggressive increased valuations they would implode said that “sports costs are making life harder for independent content producers and independent content creation.”

“The market is just not big enough,” Mr Tajer said.

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Note: The accepted formula that Auxiliary Mode Inc. uses to calculate the CPM range is $0.45 USD - $25.00 USD.

The range fluctuates this much because many factors come into play when calculating a CPM. Quality of traffic, source country, niche type of video, price of specific ads, adblock, the actual click rate, watch time and etc.

Cost per thousand (CPM) is a marketing term used to denote the price of 1,000 advertisement impressions on one webpage. If a website publisher charges $2.00CPM, that means an advertiser must pay $2.00 for every 1,000 impressions of its ad. The "M" in CPM represents the Roman numeral for 1,000.

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