Seven West Media happy with $900m AFL rights deal

Seven West Media chief executive Tim Worner felt no buyer’s remorse after paying $900 million to retain the AFL TV rights.

Seven FY Result

Seven West Media chief executive Tim Worner felt no buyer’s remorse the morning after signing an eye-watering $900 million cheque to retain the Australian Football League’s TV rights, declaring “I’ve got no post-purchase dissonance at all” as Australia’s No 1 football code cheered the ­record deal.

Speaking to The Australian less than 24 hours after putting pen to paper on the contract at AFL House in Melbourne with Seven chairman Kerry Stokes, Mr Worner said the hottest commodity in sports broadcasting provided the most valuable “screen real estate” in the advertising market.

“I would much rather have the AFL than have it against us,” Mr Worner said after he unveiled better-than-expected underlying full-year results. After stripping out hefty writedowns, underlying profits were down 11.5 per cent at $209.1m amid tepid conditions in the advertising market.

“It’s a very important part of the fabric of Seven,” he said of the AFL rights. “That’s not why we went out and bought it.

“The AFL is a long game with more advertising opportunities than other codes, including 30 second stoppages. The 30 seconds after a goal is the most valuable screen real estate on television.”

The No 1-placed free-to-air network has agreed to pay $840m in cash and $60m in contra advertising to secure what averages out to 3.5 AFL matches per round, including public holiday games, under a six-year deal that kicks off in 2017. For Seven, the new contract represents a 50 per cent lift in price. Under the terms of the agreement, News Corp (publisher of The Australian) is estimated to be paying up to $1.3 billion of the record $2.508bn deal with the AFL, with Telstra stumping up as much as $350m for digital rights.

“You’ve got to meet the market and that’s where the market was,” Mr Worner said. “I do feel that with all these rights in the future we look back at them and go, ‘that was a very good deal’.”

Positive comments on trading conditions in the advertising market helped lift Seven’s shares 0.61 per cent, or 5c, to 82c, as the wider sharemarket gained 1.45 per cent.

While the performance highlighted the structural challenges of a fast-changing media landscape amid an overall year-on-year revenue slide of 5 per cent, earnings and revenue declines at the newspaper and magazine divisions moderated as circulation reductions bottom out and Seven opens up new sources of revenue.

His comments came as Seven posted a net loss of $1.89bn for the year ended June 27, compared with last year’s profit of $149.2m. It was weighed down by the previously flagged $2.12bn worth of writedowns — an all too common trend in the media sector as the main players adjust to a tough ­operating environment.

While earnings before interest and tax fell back 13 per cent to $356.3m in line with weaker demand for advertising across the media sector, Seven reduced TV costs by 1 per cent, or $10m, and lessened its debt pile by a significant amount — down 36.7 per cent to $732m.

Mr Worner said Seven would undertake a strategic review to find further cost savings and ­efficiency measures as he looks to better integrate the company’s TV business, magazines, news­papers and digital media assets, which include a joint venture with US internet company Yahoo.

“The strategy we announced in May 2013 has served us exceptionally well to get us where we’ve got to,” he said.

“But we’re asking ourselves, ‘is that the right strategy for the next part of the journey?’

“I think the answer to that is probably not. We do need to make some modifications and that’s what we’re going to do.”

Seven West will pay a final fully franked dividend of 4c on October 9, down from last year’s 6c final payout. Seven West shares ended steady at 82c.