That’s Not Cricket!
It has taken 60 years, but the era of ubiquitous advertising supported premium sport content on Australian television is drawing to a close ….are you ready for it? Professional sport in Australia has enjoyed an unprecedented boom over the last 60 years, and particularly in the last 20 years. Content hungry broadcast networks have paid ever increasing amounts to sporting organisations in order to exploit Australia’s passion for sport, by delivering premium sport video content directly into our lounge rooms – largely for free.
Source : Arnhem Investement Management, Goldman Sachs
The introduction of subscription television in Australia with the launch of Foxtel in 1995 provided another avenue for sporting organisations to extract additional revenues from television viewers, but this time, viewers would be required to pay for their sports content. The sports anti-siphoning list, introduced in 1992, has successfully kept major sport on free-to-air television, but these days there is very little talk about the anti-siphoning list, because it has become largely irrelevant. The inflation of video content costs – most notably in premium sports, has combined with a fragmenting television audience base and flat to declining free-to-air television advertising revenue (~$3.8bn for the last 10 years). This has meant that premium sports video content can no longer count on FTA television broadcasters to deliver sports for free into Aussie homes.
Like the AFL and NRL, Cricket Australia is about to face some difficult decisions as it prepares to sign a new distribution agreement for cricket. In the last rights deal signed in 2013, Cricket Australia secured a five year agreement from the Nine Network for A$90m per annum for the test and ODI rights, and a further A$20m per annum for the Big Bash League from Network Ten. This agreement amounted to a ~120% price increase (to ~A$590m) on the previous agreement signed 5 years earlier. The leadership of Nine Entertainment Company (owner of the Nine Network), has made it quite clear that the company is not able to sustain a price increase for Australian international cricket, despite the fact that the AFL and NRL both secured a near 100% increase in rights revenue last year. To do this, both football codes were ultimately forced to use the subscription revenues of Foxtel as well as digital revenues from Telstra to secure their massive deals. Australia’s summer of cricket has never been hidden behind a subscription paywall in any meaningful sense. Sure, some Test series on foreign shores have been broadcast exclusively on Foxtel before, but a summer without free access to all the cricket you could have hoped for has not happened in Australia before. The proliferation (and success of the BBL) as well as the emergence of women’s cricket has placed increased pressure on Nine. It may now be the case that Test cricket in summer will migrate to the subscription television or streaming world… now that is not cricket!
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© Arnhem Investment Management, 2017