Rights On

2021 AFL Grand Final action at Perth's Optus Stadium. Credit: VenuesLive.

Dr Hunter Fujak considers the sport broadcasting lessons from the AFL’s most recent rights negotiation

With the Australian Football League (AFL) recently announcing a record-breaking broadcast rights deal for the period 2025 to 2031, consistent with their longer-term track-record, it is worth reflecting upon what lessons can be derived from the AFL media strategy.

This has been a point of recent focus at Deakin University, the only Australian university to offer a dedicated postgraduate subject focussed upon sport broadcasting and its management.

Assessing the broader sport and media landscape The need to learn from the AFL’s success is apparent from a broader scan of the Australian sport landscape, which illustrates there to be a growing chasm between the country’s absolute largest leagues and previously adjacent competitors.

In rugby union’s second year of official professionalism (1996) for instance, the AFL’s central revenue ($85 million) was four times greater than Rugby Australia’s ($21 million). By 2019, the AFL’s revenue ($794 million) was seven times greater than Rugby Australia’s ($112 million).

With an approximate $650 million per annum media rights deal in place for 2025 and beyond, the AFL could well reach a revenue multiple of 10 times to previously adjacent competitors such as Rugby and Football Australia.

The second significant environmental factor to acknowledge is the rapidly involving media landscape, introducing new complexity into the planning and execution of sport media strategy. Prior to the fragmentation of free-to-air television (FTA) viewing and advent of digital over-the-top (OTT) platforms, our mainstream sports (and aspiring ones) could follow a relatively simple strategic formula.

Sport properties looking for fandom growth would ideally partner with a commercial FTA network to maximise reach, while properties more intent on maximising revenue could negotiate with Foxtel.

The historical success of the AFL and NRL has been to optimise the balance between these divergent platforms and their respective benefits, beyond the requirements of antisiphoning laws, to align with broader organisational strategy.

The entrance of new OTT media platforms and players have created opportunities, but so too new strategic considerations. For instance, the widely criticised user experience during the inaugural A-League season upon the Paramount+ platform undoubtedly counted against the media organisation during the recent bidding for AFL rights.

The introduction of new platforms also creates chicken-andegg tensions in rights partner alignment. Whereas emergent OTT platforms desire sport rights to drive prospective subscriptions, sport properties must be simultaneously weary of aligning to a partner whose limited subscriber base may retard their own reach. Whereas established sport media properties such as the AFL will benefit from the luxury of alternatives, aspiring properties may need to adopt a riskier partnership alignment profile in the pursuit of reach or revenue.

A simplified guide to generating large sport media rights fees Despite operational complexities, the process of generating large sport media rights fees is a conceptually simple one. The first, and hardest, step is to develop a highly popular product. The second step is to then execute an efficient rights negotiation strategy. The AFL provides an exemplar for both these steps.

Community football in Victoria benefi ts from the AFL’s extra investment in 2022. Credit: AFL Barwon

Step 1: Develop a highly popular product/offering Intrinsic to highly valuable sport media properties is that they are widely supported within the respective population, and hence central to the growth of any sport media property is fostering its underlying popularity. While this may seem self-evident, it is difficult to achieve in practice, particularly in highly competitive sport markets like Australia. Avenues to grow a sport property’s underling popularity will vary, contingent on the nature of the sport property, but general principles have emerged.

This includes fostering grassroots participation; optimising ‘the product’ for entertainment value; leveraging nostalgia and emphasising cultural salience; maximising accessibility while reducing barriers to engagement; and featuring the best athletes possible (by relative world standards).

While exploring such factors represents a semester of learning well beyond this discussion, it is noteworthy that the AFL largely excels across these principles, whereas most of their near competitors languish across at least one such dimension.

The purely domestic nature of the AFL competition represents a competitive advantage here in several respects. First, the AFL is attuned to the product’s entertainment value and can modify its rules in response with impunity. This most sharply contrasts with Rugby Australia, who despite widespread local criticism around the game’s entertainment value, are heavily constrained in influencing the code’s rules.

The AFL’s domestic nature also ensures the code intrinsically features the world’s best Australian rules athletes, providing an athletic legitimacy that contrasts with the A-League which suffers from diminished global comparisons.

Cricket Australia is beginning to suffer regarding this principle. The advent of rival T20 leagues in the UAE and South Africa is intensifying the competition for elite global talent during the BBL window, forming part of Channel Seven’s highly public criticism of Cricket Australia.

Among the remaining success factors, it is worth highlighting the significant gains the AFL has made with respect to grassroots community participation.

Such gains, particularly attributable to the enormous growth of women’s participation in conjunction with the launch of the AFLW, not only grows the base of the participation pyramid but nourishes the lifetime value of such individuals as future AFL fans and consumers.

As published in my recent book Code Wars, Sydney sport fans who participated in Auskick during childhood watch double as many annual AFL fixtures in adulthood as those who did not participate in Auskick.

Grassroots sport participation can thus convert into elevated lifetime customer value within that sport, with AFL exemplary in connecting the community game to commercial outcomes. Step 2: Execute an efficient rights negotiation strategy The second component of rights fee generation relates to practically embedding bidding and negotiation practices to maximise competitive tension among buyers in the media rights market. Structurally, economic theory universally advocates the adoption of various auction forms (English, sealed-bid) to foster competitive intensity among prospective bidders.

The National Rugby League’s (NRL) most recent media rights deal, in which the organisation directly re-signed with their existing partners rather than performing a competitive tender, provides an illustrative case study of how a sport property can undermine their commercial media value.

In the past two completed AFL and NRL media rights cycles (2013-2022), the two codes achieved comparable financial outcomes that reflect their broadly comparable capacity to achieve FTA ratings and drive Foxtel subscriptions. Yet, the two organisation’s most recent rights renewals diverged considerably in strategy, contributing to a record $250 million per annum divergence between the AFL ($643 million) and NRL ($400 million) in rights valuation for 2025 to 2027.

As aforementioned, the NRL re-signed with their existing partners on long term deals (five years) at the height of the pandemic without a competitive tender process.

By contrast, the AFL made two divergent operational decisions. First, they chose to extend their existing contracts by only two years, to navigate the immediate covid period. Second, and key to their ensuing record $4.5 billion five-year deal, they successfully fostered tension among bidders via their competitive tender process.

Central to this was a high-stakes silent auction process aimed at extracting the ‘best and last offer’ from each bidder.

The impact of such silent auctions cannot be understated, as a type of strategic game that can create perceived competitive intensity even where it may not tangibly exist. For instance, only insiders will know whether Nine’s alleged $500 million per annum AFL offer was genuine, or rather strategically announced to force rivals Seven/Foxtel to inflate their offer.

Concluding remarks With the AFL’s competitive tender process responsible for maximising its media rights deal, the League has achieved a considerable financial advantage over the NRL, despite similarly valuable underlying media properties.

The AFL’s success, both in propagating its underlying popularity and executing a media rights strategy, provide an exemplar of astute media rights management.

That the league continues to grow its media valuation also illustrates the significance of applied expertise and education in sport media management, which continues to become more complex as the broader media market evolves. Dr Hunter Fujak is a Lecturer in Sport Management at the Deakin Business School and the co-author of the recently published ‘Sport Broadcasting for Managers’. Routledge ISBN 9780367690182.