Foxtel cost-cutting puts rugby, football on edge Media Man Int

Foxtel cost-cutting puts rugby, football on edge - 13th May 2019

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Locked in: The A-League has a six-year deal with Foxtel, but ratings have plummeted. CREDIT: AAP

By Georgina Robinson and Dominic Bossi

Australia's rugby and football administrators were on high alert on Monday night after news pay television broadcaster Foxtel was poised to take a razor to its overburdened sports rights budget.

In a statement to the ASX on Monday morning, Foxtel's controlling shareholder News Corp flagged cuts to the broadcaster's spending on "non-marquee sporting content" and another price rise for customers after a financial loss of $417 million in 2018.

The market bombshell did not filter through to Rugby Australia and Football Federation Australia until late in the day, but industry insiders were in broad agreement they were the two sports most threatened by any cost-cutting at Fox Sports or its streaming product Kayo.

Rugby has just kicked off negotiations with Fox on the next cycle of Super Rugby and Test-match schedules – a spokesperson described them as "constructive discussions".

FFA is less vulnerable in the immediate future, being only a third of the way through its six-year A-League deal with the pay broadcaster, but the news is worrying for the domestic game's long-term future.

A-League ratings have plummeted in recent years, casting some doubt on the wisdom of the $346m six-year deal the broadcaster signed in 2016.

However, any potential break-up won't happen for another four years with an iron-clad agreement binding the A-League and the bulk of Socceroos' fixtures to Fox Sports until the end of 2022/23 season.

It's understood there is no wiggle room for Fox Sports to end that agreement prematurely.

For the remainder of that deal, Fox is set to remain committed to the domestic league and has already begun planning for next season's schedule and broadcasting with FFA.

The A-League is on course to become independent of FFA as early as June and even then, any potential split will only be done so long as existing sponsorship and commercial agreements remain intact and carry over to the new governing body.

"We have a six-year contract with Fox and we are not concerned about the security of the contract but are focused on providing value under the current deal," FFA chief executive David Gallop said.

FFA has entered negotiations with major networks for the free-to-air component of the deal with Network Ten understood to be the front-runner to broadcast at least one A-League game each weekend. The Australian Financial Review reported that Foxtel could look to on-sell some extra games to Ten, relieving some pressure.

News Corp was forced to disclose the information to the ASX on Monday morning because it had provided the information to potential lenders as it seeks refinancing for Foxtel debt totalling $US1.68 billion ($2.41 billion). It did not clarify what sports it considers "non-marquee sporting content".

Foxtel's appetite for sport has driven record deals for top-tier sports including rugby ($285m in 2016), football, NRL, AFL and, most recently, the $1.2 billion joint deal with Seven West Media for cricket.

That deal, which has left outgoing broadcaster Nine with the Ashes, the World Cup and next year's men's and women's Twenty20 World Cups in Australia, is fast emerging as an underperformer. The Herald understands it has failed to deliver the hoped-for subscriber uplift to either Fox Sports or Kayo, with the former bleeding subscribers as streaming providers eat into market share.

Foxtel also has myriad minor league sports deals from across the world, including events such as the Caribbean Premier League cricket competition, Champions League of Darts, and various NASCAR series, as well as UFC and some tennis.

However, the the costs of these competitions would likely be much smaller than the A-League and rugby deals, leaving the latter, in particular, vulnerable.

(Sydney Morning Herald)