Rugby’s Sky TV deal is ‘revolutionary’
Spark effectively locked out of All Blacks and Super Rugby match rights by ground-breaking shareholding
New Zealand Rugby has denied any conflict of interest arising from its move to take an equity stake in Sky TV as analysts assess what the deal means for the struggling media company.
Sky yesterday confirmed it had acquired the rights to show All Blacks and Super Rugby matches until 2025 as part of a “revolutionary” new rugby deal that will see NZ Rugby take a 5 per cent stake, pending shareholder approval.
NZ Rugby chairman Brent Impey said NZR would not stand in the way of Sky bidding for other rugby rights and that his organisation remained committed to doing what was best for the game and for viewers.
He did, however, acknowledge that this was possibly the first time in the world that a sport has become a shareholder in the broadcaster.
“We’ve broken new ground here,” he said.
Asked whether Spark’s problems in streaming the Rugby World Cup had any impact on the decision, Impey said the “so-called technical glitches” of Spark had nothing to do with awarding its rugby rights to Sky.
Impey did, however, acknowledge that reaching rural New Zealand was a “critical part” of the discussions.
He said the technology wasn’t there yet when it came to delivering its services to rural sections of society and that Sky has proven itself a capable broadcast partner.
Sky has served as New Zealand Rugby’s partner for the past 25 years.
Spark was not given an opportunity to bid for the rugby rights, with NZR coming to a decision within the timeframe of the exclusive renegotiation agreement it had with Sky.
Impey said the deal was really struck at the 11th hour, with that exclusive period coming to a close on Sunday night.
Neither Impey nor Sky chief executive Martin Stewart would comment on the value of the deal, which sources have estimated to be worth as much as $400 million.
As NZR did not take the rights to market, it was not able to benefit from a potential bidding war between Sky and Spark Sport.
Impey said he was not concerned by this, because his team had done extensive research on what the rights were valued at and were comfortable that they got a fair price.
Sky TV shares shot up 20 per cent, lifting the company’s total market capitalisation by about $74m to $447m and regaining the ground lost after last week’s revelation that it had lost domestic cricket broadcasting rights to Spark.
At yesterday’s closing price of $1.06, a 5 per cent stake would be worth about $22m.
Adrian Allbon, a senior analyst at Craigs Investment Partners, said the new rugby rights deal was a good alignment for Sky shareholders.
He said it would also make it harder for rivals to take the rugby rights off Sky in the future.
“Spark Sport is effectively locked out of rugby.”
While the 5 per cent stake would dilute other shareholders, Allbon said he expected it to get the seal of approval from shareholders.
“When you are in a situation when you are fighting for your survival, it is better than the counterfactual.”
Shane Solly, a portfolio manager at Close=$1.06 Harbour Asset Management, said the deal was positive news for Sky shareholders and was an innovative transaction.
But he said the big question was the price.
“What this transaction has done is rebooted Sky TV.
“The risk was without rugby it would lose its existing subscriber base. But at what cost?”
Solly said it could pave the way for other sporting codes to buy stakes in Sky in the future.
He expected the cost of the rugby right transaction to be spread over the next five years but that detail had yet to be confirmed.
It was also unclear if the 5 per cent stake was part of the payment.
Sky said the agreement with the New Zealand, Australian, South African and Argentinian Rugby Unions was reached on Sunday evening.
In its statement to the stock exchange, Sky said the deeper partnership between NZR and Sky cemented the shared commitment to nurture and grow the game in New Zealand at all levels.
“The 5 per cent equity stake to be taken by NZR recognises the increased alignment and strengthened the relationship between Sky and NZR, their mutual support for one another and shared a commitment to develop and promote the game.”
Sky will seek shareholder approval at its annual general meeting on Thursday with the shares issued on November 1.