“Live audiences are deteriorating (which is likely to concern potential bidders) and the ability of free-to-air broadcasters to justify the higher cost of premium sports rights remains questionable despite the growing importance,” Citigroup said. “Any step up in the cost of the next AFL deal should drive earnings downgrades. The ‘win at all costs’ mantra for free-to-air on sports rights appears out-dated, given the poor economic returns and less ‘intrinsic’ appeal.”
Citigroup said that in the current contract, free-to-air networks Seven and 10 recoup around A$75 million a year from advertising against A$93 million annual acquisition costs. Increased production costs and falling audiences are likely to exacerbate the negative impact.
The league currently brings in A$780 million over five years. It hopes that changes from 2012 – such as the expansion of the competition from 17 to 18 teams – will help to add the A$220 million needed to hit the A$1 billion mark. Citigroup predicts that the growth will be closer to half that figure.