Aug 16 2016
On 5 August, the 2016 Summer Olympics kicked off in Rio de Janeiro, Brazil, with Channel Seven reportedly paying around $150 million for the Australian broadcasting rights. Big-ticket sporting events like the Rio Olympics are becoming increasingly important to Australian television broadcasters, as changing viewership patterns and declining advertising revenue force them to rethink their broadcasting strategies. Unlike other TV staples, such as sitcoms and dramas, sporting events are typically watched live. This provides scope for networks to shore up advertising sales, with Channel Seven expected to generate more than $100 million from its Rio Olympics coverage.
Australian free-to-air television broadcasters have struggled over the past five years, with industry revenue expected to have fallen at an annualised 2.5% over the five years through 2015-16, to total $4.9 billion. The fragmentation of the media landscape has progressively lowered network ratings, as viewers consume media on a growing array of devices, such as phones, tablets and laptops. This trend has reduced television viewership numbers, with Rio’s opening ceremony watched by just 1.6 million viewers in Australia, the lowest free-to-air Olympics opening ceremony audience since the OzTAM ratings synstem began.
The expansion of digital mediums has created an oversupply of advertising space, pushing down per-unit television advertising revenue. Digital firms like Google allow advertising firms to directly target consumers based on quantifiable characteristics such as their search history. Television broadcasters have also faced growing competition from IPTV providers, such as Netflix, and from illegal downloads, which circumnavigate the need for broadcasters altogether. Although the pay television industry has managed to grow at an estimated 1.2% over the past five years, as its subscription revenue has offset declining advertising revenue, the low growth rate reflects the industry’s exposure to many of the same issues facing free-to-air broadcasters.
In response, many free-to-air and pay television networks have focused on obtaining sports broadcasting deals. High profile sporting events like the AFL Grand Final or the Olympics can provide a major boost to network ratings, and the emphasis on watching these events live allows networks to charge a premium for advertising slots. Live sports can also provide a halo effect for television networks, as the higher viewership during sports events allows the network to cross-promote other upcoming shows, helping them gain a larger audience across other timeslots. Sporting events are also more difficult to broadcast online than other television programs, due to the emphasis on watching them live. Although Channel Seven has offered both free and subscription-based streaming coverage of the Rio Olympics, its issues have plagued its online services for the first few days of the games, with many users taking to social media to complain about slow download speeds and errors. Limitations in Australian internet speeds and quality mean that demand can quickly overwhelm online platforms like Channel Seven’s. This means that many viewers end up watching live sports on traditional television networks, boosting ratings.
However, as Australian internet infrastructure improves with the rollout of the NBN over the next four years, the streaming of sports coverage is expected to become more important to network revenue. Subscription-based streaming, such as Channel Seven’s Rio Olympics coverage, is likely to become the norm as both free-to-air and pay television networks attempt to use the appeal of live sports to shore up revenue streams.