Seven will receive a discount of about 19 per cent and an $87 million net benefit between 2020 and 2022 based on reduced production and rights fees. It has also secured a two-year extension on “improved terms”, a statement on the ASX said. AFL industry sources said Seven’s reduction, excluding production costs, was about $70 million over three years.
The AFL will now receive $730 million from Seven over the next five years, an average annual payment of $147 million each year. Seven was expected to pay about $150 million this year, with production costs of about $20 million.
Industry sources indicated Foxtel, which is owned by Rupert Murdoch’s News Corp and Telstra, will save almost $30 million a year under the existing deal, which will alleviate some of the financial pain caused by the pandemic. However, the broadcaster has not secured an extension.
Telstra, which is the mobile rights provider, will continue to pay $50 million per year.
The AFL had been in negotiations on the terms of its existing $2.5 billion six-year contract, which was secured by Foxtel, Seven and mobile rights partner Telstra and set to expire in 2022, after the coronavirus pandemic shut down the season and caused losses in advertising and subscription revenue for the broadcasters.
The Age reported last week that the AFL was on the verge of securing a two-year extension of its television rights deal with Seven in exchange for a cost reduction, but that Foxtel was holding out on an extension for a larger discount.
Chief executive James Warburton thanked Mr McLachlan for the AFL’s commitment to its broadcasters.
“The AFL and Seven are a core part of each other’s DNA, and we are delighted to have not only reached a revised agreement for the current contract term, but to have extended our relationship for a further two seasons taking the agreement through until the end of 2024,” Mr Warburton said.
Seven’s revised arrangement will provide further financial relief to the broadcaster, which has been cutting costs to offset the severe decline in advertising revenue caused by the pandemic. The company, which is trying to reduce its $541.5 million net debt pile, recently sold its magazines arm for $40 million, its West Australian headquarters for $75 million and axed a large number of roles.
Foxtel has lost a large number of subscribers due to the suspension of sport and had been trying to renegotiate to receive compensation for the loss of sponsors and subscribers. The company has stood down more than 200 staff and axed more than 300 jobs in the last few months.
Media executives have previously stated that they overpaid for sport, which is considered a loss-making content due to the production costs they incur in addition to rights fees.
Foxtel, which contributed about $1.3 billion to the AFL deal in 2015, believes it overpaid, sources previously said.
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Zoe Samios is a media and telecommunications reporter at The Sydney Morning Herald and The Age.
Jake Niall is a Walkley award-winning sports journalist and chief AFL writer for The Age.