Packer's loss could be a bluff

Kerry Packer's last business deal, made the week before his death on Boxing Day, has not borne fruit - at least not on first appearances.

Packer's A$780 million ($847 million) bid for the Australian Rules football rights for his Nine Network has been matched by rival networks Seven and Ten, giving them the highly prized rights instead.

Packer had secured a deal for PBL's Nine Network just before Christmas, but Seven had the option to match the bid and did so on Wednesday, regaining the rights to televise Australia's most popular spectator sport.

But missing out on the rights may not be such a bad thing for PBL and new boss James Packer.

In fact, Kerry Packer's last business move may prove a shrewd bluff to stretch his rivals financially.

Shares in Seven fell 8Ac to A$8.35 at the close of trading yesterday, but shares of Publishing & Broadcasting fell just A4c to A$16.70.

The bid raises the fees for the rights to A$156 million a year from about A$100 million previously, according to George Colman, a media analyst at Citigroup in Sydney. It might be hard for the networks to turn a profit on that, he said.

"AFL rights are beginning to take on 'poison chalice' status," said Colman.

Lou Capparelli, an analyst at Goldman Sachs JBWere, agreed: "The new deal makes a previously marginally profitable product for free-to-air TV up to 2006 a substantial A$20 million loss-maker from 2007."

Seven and Ten originally bid A$615 million in cash - $165 million below their winning bid.

Kerry Stokes, Seven's executive chairman, has sued 21 parties, including PBL and Rupert Murdoch's News Corp, over the loss of the AFL and National Rugby League rights from 2002 to 2006, seeking A$1.1 billion in damages on claims that they conspired to win the rights in 2000 to hurt Seven and ruin its pay-TV business.

Seven had broadcast the sport for 43 years before losing the rights.

Under the new deal, Seven and Ten gain broadcast rights to all eight AFL games a week. They may be allowed to sell as many as four games a week to another commercial broadcaster or pay-TV network such as Foxtel Management to reduce their costs.

Foxtel is half-owned by Telstra Corp, with PBL and News Corp each owning 25 per cent, all of which Seven has sued in court.

Ten broadcast last year's Grand Final, won by the Sydney Swans.

In the shifting allegiances of Australian television, Ten spurned current broadcast partner Nine to bid for the rights with Seven, seeing better chances to retain the coverage of the final, which is worth about A$2.45 million in advertising dollars, according to estimates by Goldman Sachs JBWere.

Losing the event could have aggravated Ten's ratings slump, which sparked a 23 per cent decline in its share price last year.

Australian Rules is the country's most popular football code, with 16 teams in the five mainland states. In 2004, the league had an operating profit before interest and payments to teams of A$124 million.

Almost 6 million people attended games in 2004, and the four games shown weekly on free-to-air television attracted a total audience of about 4 million.

A further 150,000 watched games weekly on cable channel Fox Footy, according to the league's annual report.

- BLOOMBERG