Citigroup warns broadcasters over rise in AFL rights fees

Multinational financial services company Citigroup has warned that broadcasters may struggle to recoup their investment if TV rights fees in the current Australian Football League (AFL) tender reach the $1 billion threshold being sought by the code.

The AFL is optimistic it will be able to add more than $200 million to the price it generated through the previous round of rights, which were awarded in 2005. Australian broadcasters are finalising their bids this week, but there has been continued confusion over how the country's new anti-siphoning rules will be applied.

Citigroup Global Markets Analyst Justin Diddams said in a report that on a combined basis the AFL rights lost money for the free-to-air (FTA) television broadcasters, "generating $75 million in advertising revenue per year and costing $93 million to acquire (plus production costs)."

According to The Australian newspaper, Diddams added "any step up in the cost of the next AFL deal should drive earnings downgrades. The 'win at all costs' mantra for FTA on sports rights appears outdated, given the poor economic returns and less 'intrinsic' appeal."

The report added that if the value of the AFL rights does increase in the tender, the development would hit shares of Seven, Ten and Foxtel's owners.

Diddams concluded "live audiences are deteriorating (which is likely to concern potential bidders) and the ability of FTA broadcasters to justify the higher cost of premium sports rights remains questionable despite the growing importance."

7th April 2009 - AFL PUSHING FOR BILLION-DOLLAR TV DEAL