Australian Football League signs $2.5 billion broadcast deal

Tuesday, Aug 18, 2015

Rupert Murdoch has directly intervened and pushed the value of Australian Football League broadcast rights to unprecedented heights, agreeing for News Corporation to pay about $1.3 billion of a record $2.508 billion six-year deal the league has struck.

News Corp has joined with Seven West Media and Telstra to sign the biggest sports rights deal in Australian television history, securing vital pay-TV rights for Foxtel.

Seven will telecast an average of 3.5 matches per round on free-to-air TV in a deal that will begin in 2017, while Foxtel will maintain its rights for all nine matches and Telstra the digital rights.

Telstra will pay about $300 million of the record deal over the six years, and broadcast AFL matches over its planned Telstra TV service and to handsets and digital devices, while Seven will pay $840 million in cash and $60 million in contra.

News Corp will also have the right to sub-license a Saturday afternoon game which is believed to be worth around $30 million per season, which will almost certainly go to Network Ten should the Australian Competition and Consumer Commission sign off on a mooted deal for Foxtel to take a 15 per cent stake in the struggling network.

Mr Murdoch has been in Australia for more than a week, a time during which talks with the AFL accelerated rapid speed after the NRL moved on Monday last week to sign a $925 million free-to-air deal with Nine Entertainment Co.

That move meant NRL chief executive Dave Smith still needs to directly negotiate with News Corp's Fox Sports for pay-TV rights. Mr Murdoch said News would engage with the NRL in due course but signalled it was likely the global giant would pay more for AFL than NRL.

"We've always preferred Aussie rules and we've always believed this is the premium code in Australia," he said, while adding he would not personally take part in the NRL talks. "I guess we will engage with the NRL in time."

News Corp CEO Robert Thomson, also present for the announcement on Tuesday in Melbourne, said his company would consider the sub-licence option, for a match beginning at 320pm each Saturday, shortly. "We've got the option to do that and we will do what it's in the best interest of the AFL and News Corporation."

The News Corp duo were joined by Seven chairman Kerry Stokes and CEO Tim Worner, Seven Group CEO Ryan Stokes, Telstra CEO Andy Penn and AFL CEO Gillon McLachlan and his chairman Mike Fitzpatrick to announce the monumental deal.

Mr Stokes said the Seven move showed its "commitment to the future of broadcast television", while Mr Worner said the new agreement for the 2017-2022 seasons "makes strong business and financial sense for us."

The record breaking agreement is a defining moment for Mr McLachlan, who took up the top job at the AFL just over 15 months ago and has been at the AFL since 2000, succeeding the respected Andrew Demetriou.

"I said when I became CEO that it is my job to deliver for four masters, supporters, clubs, players and community, Mr Mclachlan said. "I am really delighted that this agreement delivers for those four pillars of our game."

The Australian Financial Review's Street Talk column earlier revealed that Telstra was poised to hold onto the digital rights.

The current deal, which expires at the end of next season, is worth $1.25 billion over the five years between 2012 and 2016.

Mr McLachlan and the AFL stepped up negotiations last week after the NRL surprised many when it announced a deal for its free-to-air broadcast rights in what was seen as a snub to Foxtel.

Nine had been in the running for the AFL Saturday afternoon game. However, it is understood that a $30 million price tag per annum the AFL placed upon the match was more than it wanted to pay for a game not considered marquee.

He said it was vital the AFL shared the proceeds of the deal with clubs, players and other parts of the game, but would not be drawn on whether the league would now move to buy Etihad Stadium in Melbourne from its ownership consortium of superannuation and investment funds.