$1 Billion for next TV rights - forget it!

[Ronin]

Whats Ronin doing in this thread. Its got nothing to do with NRL, unless he's jealous of $1billion dollars even being mentioned with AFL, and openly hoping it never happens.

Anyway, anyone of the many financial whizz kids here done any correlation analysis of AFL TV rights to inflation over the past umpteen years ?

I stated elsewhere that all Tv rights will be under pressure, not just AFL.

Always happy to discuss the issues with you grayham.

 

[A Living God]

Inflation and inflationary expectations have a strong influence on long term price contracts. There are still 3 years left on the current agreement. The global recession is happening now, high inflation will have a longer lasting effect.

 

[grayham]

I stated elsewhere that all Tv rights will be under pressure, not just AFL.

Always happy to discuss the issues with you grayham.

What have other sports got to do with this thread.

Didnt the last time the AFL rights went up significantly, EPL and S14 stagnated ?

 

[shacka]

Inflation and inflationary expectations have a strong influence on long term price contracts. There are still 3 years left on the current agreement. The global recession is happening now, high inflation will have a longer lasting effect.

yeah, but the value of broadcast rights is highly dependent upon the value of advertising space within those broadcasts...tv advertising revenue has been dropping for a few years now and an increase in inflation will result in less consumer spending, meaning advertising outlays will decline...as a result, AFL broadcasting rights will be worth less than they previously were.

the possibility of FOXtel not getting matches also removes the ability to on-sell certain rights above market value...again decreasing the value

don't forget the talks of 9 and 10 paying too much for them a few years back...this is why 10 joined up with 7 to get a bigger share of the finals slice...the rights would provide networks with a minimal profit margin...

 

[A Living God]

This has all gone far beyond my orginal point. High inflation could cause the TV rights to grow substainly in nominal terms without having any increase in real terms.

Really? I have heard of Inflation Linked Bonds, but never heard of Inflation Linked AFL Broadcast Rights.

Where did I mention anything about a 1:1 relatiohsip. All I'm referering to is a postive correlation.

 

[fairdinkum]

Packer quits PBL Media board

October 27, 2008 - 1:35PM

James Packer's Consolidated Media Holdings has effectively given up on PBL Media by refusing to put any more money in to the debt-laden joint venture.

ConsMedia this morning confirmed market rumours it would rebuff any attempts from PBL Media's majority owner, private equity group CVC Asia Pacific, for a capital injection.

''Consolidated Media Holdings announces today that . . . the ConsMedia board has resolved that ConsMedia does not intend to contribute any further funding to PBL Media,'' it said in a stock exchange announcement.

PBL Media's most well-known asset is Channel Nine, although it also owns ACP Magazines, Ticketek and stakes in carsales.com.au and ninemsn.

The announcement implicitly suggests that CVC or another investor will be required to make a substantial funding contribution to help cover PBL Media's onerous debt obligations, which would dilute ConsMedia's 25% stake.

Another article went into further detail today.

http://business.watoday.com.au/busi...sty-as-james-quits-20081027-59qt.html?page=-1

Private equity managers more skilled in financial engineering than boosting television ratings or magazine sales face a battle to turn around the businesses and assure their bankers they can meet their debt obligations.

The most pressing issue is rooted in the structure of Packer's private equity deal. It leaves CVC with a media company reeling under a debt load of $4.2 billion.

Earning just $463 million in pre-tax earnings last year, the business struggled to pay the interest on that debt amid an advertising downturn.

There are suggestions earnings from the media assets may not be able to pay back interest on the debt by the end of the year.

Packer decided to pull the plug at the weekend.

Not looking good for CVC...

 

[RussellEbertHandball]

Anyway, anyone of the many financial whizz kids here done any correlation analysis of AFL TV rights to inflation over the past umpteen years ?

I wrote this 11 months ago and given the TV deal wont be finalised until late 2010 I still hold these views. The only exception is I might replace the word TV rights to "media rights" to include the internet component which will become a bigger part of the overall negotiations.

http://www.bigfooty.com/forum/showpost.php?p=9706115&postcount=16

If you look at sports TV rights since the 1980's, ie Olympics, the US professional sports European soccer, FIFA world Cup, cricket in India, Asia TV sports rights etc, especially since the availability of pay TV in those markets, there is usually a massive increase in rights over the previous deal and then those rights grow by about 35% to 40% compounded for rights involving 4 or 5 year periods. Why?? Because 35% to 40% is usually the amount they can increase their advertising rates in that 4 or 5 year period by. The yearly value of TV rights has gone from $35mil/yr to $81mil/yr cash to $138/yr cash with the same 16 teams. Yes Sydney and Brisbane have done well so their market viewers has increased, but not by the same amount as the increase in the TV rights value.

The Olympics had their massive jump for US TV rights between the 1980 and 1984 Olympics and then within a few years other countries followed this pattern, US professional sports in the late 80's early 90's when pay TV providers got involved, EPL in 1992 because BSKYB bid for the rights and Aussie rules was the 2001 when 2002-06 rights were awarded and pay TV played a big role for the first time.

So as the cash component of the $780mil deal is $690, the next TV deal could be worth about $966mil cash component and 10 years after that about $1.9bil is reasonable estimate if you apply a 40% compound growth rate. The only thing that will stop this is if there is a sustained recesssion and negotiations are in the middle of that period.

The only exception I am aware were big sports rights have gone down was when the German Kirch Group that had several Euro league TV rights and a couple of World Cups rights went into receivership in about 2002. I think the Vivendi group was involved in this as well. But it wasn't for long as the rights were sold off and then renegotiated.

 

[RussellEbertHandball]

The following was found in the Sunday Mail in Adelaide...

" A few whispers beginning to circulate from across the border that a high-profile South Australian football identity is planning to challenge Eddie McGuire's Collingwood presidency.

Who the hell would that be? I can't think of a high profile SA footy identity who would fit that bill, that still lives in SA.

I can think of a high profile ex SA footballer who has lived 20 years in Melbourne who would fit that bill, Craig Kelly. But how many people would call Kelly a "South Australian football identity?"

 

[ozasismick]

The only exception I am aware were big sports rights have gone down was when the German Kirch Group that had several Euro league TV rights and a couple of World Cups rights went into receivership in about 2002. I think the Vivendi group was involved in this as well. But it wasn't for long as the rights were sold off and then renegotiated.

ITV Digital went belly up effecting TV money for English lower league football a few years back too.

 

[RussellEbertHandball]

ITV Digital went belly up effecting TV money for English lower league football a few years back too.

They went belly up at the same time that the Kirch group did. Yes they are different but as the deals went belly up at the same time I lumped their effect together. Also they had rights to effectively the old Division 2 ( ie pre the premier league days) football in England which is now called Football League or the Championships. They went into receivership which had a big impact on the lower leagues but didn't effect the EPL. That was more about the poor uptake of digital TV and the churn rate of pay tv subscribers.

 

[Spade]

Would'nt we love to see some of that go back to the community and really help some struggling local clubs and of course put more resources into umpiring.

Because if you keep doing what you've always done you'll always get what you've always got.

keep diggin

 

[fairdinkum]

Channel 7 being hit by the economic downturn.

Seven Network Ltd reiterated on Monday that its first half pre-tax profit is likely to fall by about 50 per cent from the prior corresponding period.

Seven chairman Kerry Stokes told shareholders at the broadcaster's annual general meeting that these are hard economic times.

"These are difficult times," he said.

"The sharemarket graphically shows how hard these times are economically.

"As we have previously advised, our profit before tax for this current half is likely to be down around 50 per cent on the prior corresponding half."

The guidance for the first half of 2008/09 is dependent on market conditions between now and the end of December.

Mr Stokes said Seven's balance sheet remained strong.

"The strong performance of Seven Media Group, the structure and balance sheet of Seven Network Ltd and the commitment of the best management team in media put us in an enviable position to counter and take advantage of the dramatic changes in global economies and their impact on Australia and the media sector," he said.

http://news.theage.com.au/business/pretax-profit-will-be-down-50-seven-20081110-5leo.html

 

[Doctor Jolly]

Listen, its all doom and gloom at the moment. But 12 months ago it was all gung ho. The media flips and flops from one extreme to another.

7's profit might be down, but its still a very healthy profit. Growth may drop to 2% but its still means the economy is growing. Banks may be writing off bad debts, but most have recorded record profits this past year.

In times of trouble the cream always rises to the top. AFL is sporting cream in Australia.

I am still very confident the next AFL rights will be $1b plus.

 

[morgoth]

You need competition to drive the price up.

Ten and 9 will not be fixed over-night, they have chronic problems. The biggest hope AFL has is for Foxtel to be allowed to bid in its own right but even they face a loss of subsribers and therefore revenue.

 

[Doctor Jolly]

You need competition to drive the price up.

Ten and 9 will not be fixed over-night, they have chronic problems. The biggest hope AFL has is for Foxtel to be allowed to bid in its own right but even they face a loss of subsribers and therefore revenue.

They'll be plenty of competition for the cream of TV programming.

Ten is doing it so tough, they are launching a new channel.
Nine is going through a long overdue restructure. and a good chance to be sold off before next rights are due.
Foxtel either buys more exlusive content, or folds.

 

[morgoth]

Ten's profitability is plummeting and their major share holder is rumoured be a seller due to a need to reduce debt. So tell me again how well they are doing.

Advertising revenue is going off a cliff and despite what you might want to believe, things are not going to be the same for some time.

Fox can't buy more exclusive content due to govt regulations over sport on FTA. You are obviously well versed on the subject.

 

[Ronin]

Yeah, things are going so well, that interest rates in Australia have gone from 7.00% to 5.25% in two months. You can add another 75 to 100bp in next month. Who wants to bet against me that rates don't hit 3.00% in 2009?

The RBA cuts our growth forecast for 2009 to be a measley 1.75%, which you can bet will be downgraded until it has a minus sign in front.

As hard as it is to foecast that far ahead, no one is expecting a booming 2010 either.

If a huge spike in TV rights was earmarked to pay for the expansion of teams, then I would suggest that they are running over the numbers as we speak.

 

[Doctor Jolly]

Ten's profitability is plummeting and their major share holder is rumoured be a seller due to a need to reduce debt. So tell me again how well they are doing.

Advertising revenue is going off a cliff and despite what you might want to believe, things are not going to be the same for some time.

Fox can't buy more exclusive content due to govt regulations over sport on FTA. You are obviously well versed on the subject.

Here's a tip Mogorth, profit of doom, dont listen to market rumours.

And for what its worth, foxtel already has a number of exclusive AFL games. They will want more like they have in RL.

 

[Doctor Jolly]

Yeah, things are going so well, that interest rates in Australia have gone from 7.00% to 5.25% in two months. You can add another 75 to 100bp in next month. Who wants to bet against me that rates don't hit 3.00% in 2009?

The RBA cuts our growth forecast for 2009 to be a measley 1.75%, which you can bet will be downgraded until it has a minus sign in front.

As hard as it is to foecast that far ahead, no one is expecting a booming 2010 either.

If a huge spike in TV rights was earmarked to pay for the expansion of teams, then I would suggest that they are running over the numbers as we speak.

Interest rates are still higher than they were a five years ago.

And like has been said before About 0.950 billion is not a spike. In fact its no increase at all in real terms. Knocking it up to 1b should be easy with a bit of restructuring.

 

[RussellEbertHandball]

The official cash rate or bank rates? Happened to be looking at this page, this morning.

http://www.rba.gov.au/Statistics/cashrate_target.html

 

[Doctor Jolly]

The official cash rate or bank rates? Happened to be looking at this page, this morning.

http://www.rba.gov.au/Statistics/cashrate_target.html

1992 must have been a shocking year. 5 x 100 basis point drops within a year.

Anyone know how that effected the AFL TV rights ??

 

[Ronin]

Interest rates are still higher than they were a couple of years ago.

And like has been said before About 0.950 billion is not a spike. In fact its no increase at all in real terms. Knocking it up to 1b should be easy with a bit of restructuring.

After September 11 rates troughed at 4.25%, and then for only a few months. That is only 100bp below where we are now.

You are correct that in a normal situation, reaching $1b was achieveable. We are not in a normal situation anymore. That the AFL has a bucketfull of cash should be seen as a good thing, but it is not the time to spend it now.

What will it hurt if they waited for 18 months and see how things pan out?

 

[morgoth]

Here's a tip Mogorth, profit of doom, dont listen to market rumours.

And for what its worth, foxtel already has a number of exclusive AFL games. They will want more like they have in RL.

Not rumours, facts. As I said mate, come back when you have done some research into the crap you are sprouting. Dont come to a gun fight armed with a pea shooter.



MELBOURNE (Dow Jones)--Australian media companies face the worst downturn in
advertising in 40 years amid a sharp drop off in demand as weakening global economic
conditions take hold, Citi analysts said in a note published Tuesday.
"In looking at the downturns of the early 1990s and early 2000s we have made one
simple assumption: the worst of history will repeat itself," Citi said. "We
forecast total advertising expenditure to decline 8.8% in 2009, which implies negative
revenue momentum in both FY09 and FY10.
Following Citi's bleak assessment of the outlook for the Australian advertising
market, the broker slashed its ratings on both Fairfax Media Ltd. (FXJ.AU) and APN News
& Media Ltd. (APN.AU) to Sell from Buy. Citi cut its target on Fairfax to A$1.41 a
share from A$2.50 and its target on APN to A$1.19 from A$2.88.
It also slashed its target on broadcaster Ten Network Holdings Ltd. (TEN.AU) to 44
cents from 90 cents, and reiterated its Sell rating, while cutting its target on Seven
Network Holdings Ltd. (SEV.AU) to A$5.81 from A$6.33 and on Western Australian Newspapers
Holdings to A$5.05 from A$5.89.
While many have been predicting a slowdown in the advertising market for some time,
Citi's assessment weighed heavily on investor sentiment.
At 0330 GMT, Fairfax was down 8.3% at A$1.715, Ten down 6% at A$1.335, Seven down 1.1%
at A$5.49 and APN down 2.7% at A$2.90. WA News was down 8% cents at A$5.98.
In recent weeks, APN, printing group PMP Ltd. (PMP.AU) and online employment
advertising group Seek Ltd. (SEK.AU) have warned on earnings, and implied that the
advertising outlook is deteriorating much faster than originally expected, Citi said.
On Monday, Seven Network Ltd. (SEV.AU) Chairman Kerry Stokes confirmed that the group
expects a 50% drop in pretax profit this financial year.
"We forecast Ten, PMP, Seven and PBL Media to trade at a loss through the cycle.
This could lead to structural changes in ownership or capital," Citi said.
With a backdrop of slowing advertising demand and tight credit markets, it may prove
difficult for Independent News & Media to find a buyer for its stake in APN News or
for CanWest to offload its stake in Ten, as has been speculated in the media.
"In the event of forced sales of media holdings, we believe a discount of at least
25% is appropriate, given we view the credit market as prohibitive for most potential
trade buyers, particularly considering existing gearing levels and trading outlook,"
Citi said.

-By Lyndal McFarland, Dow Jones Newswires; 61-3-9650-0637;
lyndal.mcfarland@dowjones.com

 

[Doctor Jolly]

Not rumours, facts. As I said mate, come back when you have done some research into the crap you are sprouting. Dont come to a gun fight armed with a pea shooter.

You're the one who said it was a rumour, and your quote above says "as speculated by the media". ie rumour. You were right first time!

Ten's profitability is plummeting and their major share holder is rumoured be a seller due to a need to reduce debt. So tell me again how well they are doing.

Your gun, it takes spuds not bullets.

 

[Doctor Jolly]

After September 11 rates troughed at 4.25%, and then for only a few months. That is only 100bp below where we are now.

You are correct that in a normal situation, reaching $1b was achieveable. We are not in a normal situation anymore. That the AFL has a bucketfull of cash should be seen as a good thing, but it is not the time to spend it now.

What will it hurt if they waited for 18 months and see how things pan out?

Why? This is the perfect time for a cashed up organisation (AFL) to raid into a cash-poor organisation (NRL).

At the moment Cash is king!