Welcome to a midweek edition of Unmade.

Yesterday the AFL finally signed a deal to renew Foxtel and Seven West Media’s broadcast rights for another seven years. The biggest deal in Australian television history, it’s worth $4.5bn over that period, made up of more than $4bn in cash and the rest in contra advertising inventory.

Below, we’ll explore the justification for that number, and what its means for marketing budgets.

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What on earth makes Seven West Media and Foxtel Group believe it’s worth paying $40,000 per minute for the right to broadcast live coverage of 36 players chasing a lump of cow hide around an oval?

Much of the logic can be captured in three screen shots.

First, take a look at last week’s free to air audience share of the three commercial broadcasters:

After Nine’s reality show The Block dominated the first half of the week, Seven’s coverage of AFL finals seasons was the must-see TV of the weekend.

Then there’s Oztam’s table of live broadcast viewing on Saturday night for subscription television:

And although we don’t get live ratings data for viewing via Foxtel’s subscription sports streaming platform Kayo, we do know exactly how important it is to the group:

AFL is what’s driving a significant proportion of Kayo’s 1.3m paying subscribers.

This new deal, which begins in 2025 and runs all the way until the end of the 2031 AFL season, will be a central pillar of the television landscape for the next decade.

The equivalent rights to NRL, held by Nine and Foxtel, are locked down until the end of 2027.

Sports rights are among the most expensive. Along with the cost of the rights comes the enormous costs of live production.

However, sports also offer TV and streaming companies the greatest opportunities to monetise. Reality TV, overseas content and drama go in and out of fashion with TV viewers, and ratings fluctuate wildly based on individual shows. By contrast, sport rates consistently, particularly the big winter sports of AFL and NRL.

With certainty, comes the ability to lock in long term sponsorship and advertising deals with brands. The Seven and Foxtel sales teams led by Kurt Burnette and Mark Frain will be expected to deliver bigger advertising revenues given the nine years of certainty ahead of them.

AFL has an extra selling point when it comes to advertising. Each quarter may only last 20 minutes, but because every stoppage also stops the clock, each eighty minute game is spread over two-and-a-half hours, giving the broadcasters the opportunity to drop in a high advertising load.

Additionally, it offers precisely the type of audience craved by the booming advertising segment of sports betting. The people watching the game are the most likely to waste their money on betting. Ultimately, problem gamblers will be helping pay for everybody else to continue to see much of the AFL on free to air television.

Although the headline is one of status quo, with Foxtel and Seven staying as the main partners, there are some key changes.

For Seven, one of the biggest weaknesses of its current deal has been overcome. It will be allowed to stream its free to air coverage and also offer replays on 7plus. Previously, Telstra, and then Kayo, held all the streaming rights.

And Foxtel’s biggest win is Super Saturday. For the first eight rounds of each 23-round season, Foxtel will have exclusive rights to air all four games on the Fox Footy channel and on Kayo.

That will be a major part of the sales pitch to retain Foxtel broadcast subscribers and to bring in new Kayo subscribers. Pubs showing the games will also likely see a price rise. The licensed venues will likely be asked to pay more for the boost in custom.

Despite the Saturday arrangement, Seven will receive the same number of games overall, which will help to neutralise issues around the ongoing review of the anti-siphoning laws.

And the anti-siphoning law has once again created an uneven playing field. The proportions are yet to be revealed, but it’s likely that subscription player Foxtel is paying most of the costs, perhaps three-quarters.

The fact that Seven’s share price nudged upwards slightly on a day when most media and marketing stocks fell, suggests that most investors preferred Seven to take on what will still be its biggest annual cost, ahead of the ratings and revenue hit that would have come if it had missed out.

Similarly, for Foxtel - owned by News Corp and Telstra - the price was worth paying to avoid the alternative of losing its growth story. When the global IPO market reopens, the organisation still hopes it may get to float the business as a way of refinancing its hefty debts. It will be fascinating to know whether the AFL insisted on parent company guarantees, and if so whether that was provided solely by News Corp, or by Telstra too.

It’s still a lot of cost - about $642m per year between them - for the two debt-laden organisations to take on. It was noticeable that in the live video stream in the moments before the press conference began, Seven West Media’s James Warburton and Foxtel’s Patrick Delaney both looked downcast. There were none of the smiles you’d expect on a day like that. Or perhaps it was exhaustion - everyone had been up most of the night.

It’s a thought for another day, but with Seven West Media, Foxtel and News Corp once again on parallel rather than competitive tracks, the logic for some kind of merger of at least some of the assets arises again. Seven still lacks a paid streaming play, while Foxtel lacks a free to air partner; Seven’s WA newspaper assets would sit much more naturally within News Corp.

In the end it was the long term relationship between the AFL and its two partner broadcasters that got the deal across the line. It sounds as though Paramount, owner of Ten and streaming platform Paramount+, ran things close. It’s possible that Paramount even bid slightly more cash.

The additional contra would have given the AFL a justification for sticking with its original partners. By the time the victors used the phrase “fair and transparent process” for a third time during yesterday’s press conference, the phrase “doth protest too much” was beginning to come to mind.

I wonder too how serious Nine really was about winning the rights for broadcast, plus streaming on Stan. Reportedly it only became a big bidder late in the process. While that did not deliver Nine a win for the rights, it helped force up the price. In the zero sum game of network budgets, that leaves Seven as a less fierce competitor in forthcoming deals.

Having gone so hard on AFL, will Seven be in a position to retain the Olympics or will we see Paris 2024, Los Angeles 2028 and - the big one - Brisbane 2032 land on Nine or Ten instead?

And one other question for another day. With the size of this deal, it’s now impossible for AFL to justify continuing to deny Tasmania a club. If it happens (go Thylacines?) how will those rights be best monetised in Tassie? Seven Regional’s Tasmanian operation is actually owned by Southern Cross Austereo. At some point before SCA renegotiates its main Ten affiliation which expires in 11 months from now, could there be another attempt to sell its regional TV operations?

Unmade Index: Seven moves

In a subdued day of trading thanks to yesterday’s new interest rate rise, the Unmade Index of media and marketing companies was narrowly in positive territory, up less than 0.1%.

Seven West Media was the best performer on the day, with shares initially rising more than 5% with the announcement of the AFL deal, before settling on a more modest 3.16% rise.

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Time to let you enjoy your Wednesday. They’ll be more from Unmade later in the week.

Toodlepip…

Tim Burrowes

tim@unmade.media