Contract discounts cost AFL $150m

The AFL’s revamped broadcast deal will have Seven broadcast until 2024, but the league has not clinched a new contract with Fox Sports past 2022.

Chris Mayne of the Magpies is challenged Dustin Martin of the Tigers during the round 2 AFL match between the Collingwood Magpies and the Richmond Tigers at Melbourne Cricket Ground on June 11, 2020 in Melbourne, Australia. Picture: Getty Images

Foxtel and Seven West Media will save about $200m on their AFL coverage for the next three years after clinching revised broadcast deals just before the opening bounce of the restart of this year’s season on Thursday.

Under the deals, caused by the COVID-19 pandemic that shut down sport for three months and reset the value of sports broadcast rights in the process, Seven will extend its existing free-to-air contract through to 2024 in a contract worth $730m over five years.

But the AFL has failed to agree to an extension past 2022 with Foxtel, which has been paying the biggest share of the combined $2.508bn broadcast contract.

By contrast, the NRL agreed late last month to extend its deal with Foxtel to the end of 2027.

The AFL’s deals represent about 13 per cent less than the previous deal, for which it was receiving about $415m annually from Seven, Foxtel and Telstra, meaning it forgoes about $150m until 2022 in rights fees.

Seven told the ASX on Thursday evening that it had an extension to 2024, and expected to save about $87m over the next three seasons as a result of the discounted AFL contract. The Seven savings include a reduction in media rights, production savings and other benefits.

“The AFL and Seven are a core part of each other’s DNA, and we are delighted to have not only reached a revised agreement for the current contract term but to have extended our relationship for a further two seasons, taking the agreement through until the end of 2024,” Seven West Media chief executive James Warburton said.

“I’d like to thank AFL CEO Gillon McLachlan and the AFL Commission for their commitment, which gives certainty to both parties over the next five years.”

Under the previous terms of the current deal, struck in August 2015, News Corp Australia and Seven West Media were paying an average of about $415m per season over six years as part of a record $2.508bn contract that was to expire at the end of 2022.

Globa­l television rights bubble

Broadcasters have pushed for a discount to the contract for the 2020 season after the pandemic forced the AFL to cease play in March and caused an accelerat­ion to the end of a globa­l television rights bubble.

Television officials believe the rights are worth less than both previously, because of a cut in games this year — the AFL is playing 17 rounds rather than its usual 23 and has cut the length of matches — and also because of a perceived drop in quality of the broadcast, given there are no crowds at grounds.

The Collingwood-Richmond clash on Thursday came two weeks to the day since the NRL agreed to forgo at least $150m in broadcast revenue over the next three seasons, after rugby league executives also clinched a new contract with telecasters about an hour before kick-off to that competition’s first game back since the pandemic shutdown, played between Brisbane and Parra­matta on May 28.

Rugby league officials won an extension to their broadcast deal with Fox Sports and a recalibration of the contract with Nine Entertain­ment.

The NRL’s revamped $1bn-plus contract has Fox Sports extendin­g its deal to secure NRL rights for another eight seasons through to 2027, while Nine opted to not extend its deal past 2022 for now.

Nine is saving $27.5m next year and in 2022 on its rugby league rights compared with its original deal and $64m this year, though that figure includes some production costs.

The AFL’s first game back also came a day after Foxtel reached a short-term agreement with Rug­by Australia to broadcast new domestic competitions in Aust­ralia and New Zealand for what was understood to be a 30 per cent discount to the previous rights for Super Rugby.