Sky a grinner if coverage of All Blacks maintained
SKY TV’s share price has been sold off heavily over the past three and ahalf years, hitting an alltime high of $6.95 per share in 2014 and sitting at $2.65 at the time of writing.
People are concerned about households moving to alternatives such as Netflix.
It is worth pointing out: through 201213 the analogue television signal was switched off in New Zealand, this sent marginal buyers of Sky TV’s service kicking and screaming into the digital world. These are now looking for a cheaper alternative.
Sky’s revenue is still above where it was in 2013 and subscriber numbers above where they were in 2012.
Yes, Sky’s current business model is under threat and it will need to adapt to this changing environment.
For me, the shortterm catalyst is going to be the rights for All Black Rugby. If Sky were to lose these rights, many households would cancel their contract (including me).
I feel given the complexity of the contracts with Sanzaar and the wider rugby content distribution obligations, Sky is still the likely candidate. The material headwinds look challenging for Sky in the longer term. Short term, the catalyst could get the shares rerated.
Negotiations are expected to begin in April 2018. A win here for Sky will put its share price back where it was trading before Amazon began sniffing around with its documentary on the All Blacks, that Sky helped with.
Will they be $7 per share again? Unlikely. If Spark, TVNZ, Amazon or Deputy Prime Minister Winston Peters want All Black Rugby, who is going to produce it? Be easier to take Sky over, it is cheap enough.
A