Is NZ cricket loss Sky’s death rattle?
When Sky TV’s new chief executive Martin Stewart took the top job in February, he said the company had ‘‘dropped the ball’’ for allowing Spark Sport to snap up the rights to the Rugby World Cup.
It needed, he said, to reaffirm its position as the home of sport in New Zealand.
It is a significant blow, then, that less than a year later, Sky lost the rights to New Zealand cricket, too.
On Thursday it was announced that when Sky’s deal ends in 2020, Spark Sport will be the official rights partner for all cricket matches played in New Zealand.
The sharemarket quickly showed what it thought that meant for the pay-TV broadcaster. Its shares closed the week out at 89c.
Thursday was the first time Sky shares had traded below $1 in its two-decade history.
Grant Davies, an investment adviser with Hamilton Hindin Greene, described the cricket loss as ‘‘death by a thousand cuts’’ as Spark Sport came out swinging.
He said things had changed for Sky – its business model was now much easier to replicate by new market entrants.
But is it the beginning of the end for a broadcaster that has increasingly seemed to be struggling in recent years?
When it reported its half-year result to the end of December last year – a profit drop of 20 per cent – it predicted it would lose another 93,000 subscribers by June 2023.
In August, it suspended its dividend to shareholders and wrote $670 million off its goodwill, resulting in a $608m net loss for the year to the end of June.
The one bright spot is that Sky is believed to be on the verge of claiming the rights for the All Blacks, Rugby Championship and Super Rugby matches until 2025.
Sources told Stuff the deal is for six years and is said to be worth $400 million – although neither Sky nor New Zealand Rugby would confirm it on Friday.
Sky TV spokeswoman Kristy Martin denied that it had ‘‘sacrificed’’ the cricket rights to allow it the resources to pursue that deal.
Davies said scoring that deal was vital for the broadcaster.
It still needs to get shareholder approval to go ahead because it is worth more than half the value of the company.
Craig Stent, head of equities at Harbour Asset Management, agreed that it was a vital part of the broadcaster’s strategy. ‘‘If they don’t manage to do that it puts the business proposition a bit more at risk.’’
Mint Asset Management portfolio manager David Fyfe said the competitive tension that Spark had thrown in the market was not going to go away.
‘‘They’ve got a larger balance sheet to support.’’
Spark wanted to create a wider platform and bundle its content offers into broadband and mobile packages, he said.
Media commentator Gavin Ellis said it was the most significant challenge Sky had faced since it began broadcasting.
‘‘For so long they’ve had it all their own way. The arrival of streaming services like Netflix had an effect on them but sport is their premium service, their point of differentiation and that’s been significantly eroded.’’
He said the only thing that would help significantly would be if it became apparent that Spark could not deliver.
Some customers have complained about the quality of the streaming service.
He said it was possible that, if there was enough customer pushback, there could be a movement towards laws requiring games of national significance to be played free-to-air.
He said the battle would come down to who had the deeper pockets and willingness to pay for the broadcast rights. ‘‘These things are really expensive.’’
Customers were increasingly reluctant to pay for multiple subscriptions, he said. ‘‘The cost of two is greater than the sum of their parts – it’s more than half and half, the incremental cost is very real.’’
Kristy Martin said retaining key sports rights was a priority for Sky. It still had greater depth and breadth of sports than other providers, she said.
It still has its ICC partnership covering the Cricket World Cups and the HSBC World Rugby Sevens Series.
‘‘The strength of the Sky offer is the depth and breadth of our sport that we deliver through our streaming services, Sky Sport Now and Sky Go, and over our satellite and free-to-air channel, Prime. All of our sport is delivered to viewers in HD.
‘‘We will continue to offer Sky customers the best range of sport in New Zealand in ways that work for all New Zealanders no matter where they live.
‘‘There is much more that supports our vision to deliver what we call the ‘Whole Game’ for New Zealand sport including supporting women’s sport, producing Gavin Ellis media commentator
‘‘For so long they’ve had it all their own way. The arrival of streaming services like Netflix had an effect on them but sport is their premium service, their point of differentiation and that’s been significantly eroded.’’
outstanding sports coverage, giving athletes career opportunities outside the sport, and helping to grow grassroots sports.
‘‘Sport aside, we’re also a fantastic entertainment business. Our entertainment app NEON offers the biggest range of TV shows and movies of any NZbased service.’’
Fyfe said, while things were likely to get tougher for Sky TV, it was not the end.
Consumers could expect to see more streaming options offered by Sky and pressure to keep prices down. There would probably be extra sweeteners offered to existing subscribers, he said.