The Main Reason Why Television Networks Love Sports

Free-to-air TV networks find it more challenging than ever to make money since the competition from subscription services and pay TV are extensive and audiences are tumbling, while revenue from advertising is dropping. But, despite financial warnings, networks continue to spend fasts amount of money on live sport.

Chief executive, Tim Worner of Seven West Media says that the sports rights in the past year reached the point where price increases were not sustainable. He was also involved with the new deal between Seven’s and Cricket Australia. The networks will show the summer cricket combined over the period of six years for an amount of $A1.2 billion. This follows after the UBS financial analyst urged Nine Network to rid of the cricket coverage as it haemorrhages money from it every summer.

How Cash is Spend by Free-to-Air Networks

Figures published by IBIS world indicates how the free-to-air networks spend their money, 26% equal to $497.9 million is spent on Australian sport, 20% equal to $384.20 on Australian news as well as current affairs and 15.7% on overseas drama. 12.7% which is $243.5 million is spent on Australian light entertainment, 11.5% or $220 on Australian light entertainment and on overseas entertainment $113.40 million. Australian’s children’s programmes 0.7% equal to $13.1 million and the lowest is Australian documentaries at 0.5% equal to $8.7 million.

Why Sports Spending Remains the Highest

The reason why sports spending is huge is that in the everchanging world of consumers habits and tastes differentiating from one year to the next, the only thing that remains consistent is sports and therefore networks invest in long-term sports contracts. They are the safest and remain at the top of the list since it is never clear or certain what other shows will rate in future. Sports offer certainty even across a period of five years or more and even at a time that TV audiences are dividing, certainty is offered by sports.

Over the previous period of four years, the average TV viewer in metro areas declined by an estimated 16%, some completely abandoned watching TV and is now using online streaming services while others watch TV via mobile devices. One thing that remains constant is that audiences want to watch sports live, which guarantees networks of huge audiences for all major sports events. The revenue for free-to-air TV broadcasting comes from advertising. It decreased to $A4.7 billion last year from being $A7.3 billion in 2006.

Real Cost of Deals on Major Sports

Ch7, Telstra and Foxtel’s deal expires in 2022, and the cost of AFL is $418 million per year, while Ch9 and Foxtel’s deal with NRL costing $360 million per year also expire in 2022. The Cricket Australia deal costs Ch7 and Foxtel $160 million per year and expires in 2024. Optus EPL broadcasting expires in 2020 and the cost per year is $67 million, while CH9’s Tennis Australia broadcasting contract ends in 2024 and the cost per year is $60 million. Olympics works out to $50 million per game.