Some positives seen for Sky despite loss of Rugby World Cup

SKY Network Television’s loss of preferred bidder status for the Rugby World Cup 2019 broadcasting rights in New Zealand is not all bad news, Australian analyst Brian Han says.

Mr Han, from Morningstar, said the decision not to ‘‘blow the bank’’ to retain the rights showed financial discipline, especially for a oneoff event lasting just six weeks.

Importantly, every dollar saved was a dollar retained in the war chest for the crucial Sanzaar rugby rights — an exclusive con tent linchpin expiring at the end of 2020 and covering All Black tests and the Super Rugby competition every year.

‘‘We are somewhat comforted the preferred bidding consortium for the Rugby World Cup rights consists of TVNZ and Spark.

‘‘ Had it involved a digital disrupter such as Amazon Prime, our concerns would have been much higher.’’

However, Mr Han was concerned about Sky TV’s ability to move from a traditional linear, settop boxbased payTV company to a digital, ondemand multiplatform company.

The investor day held recently was designed to illustrate Sky’s capability to successfully make the transition, having just cut the basic tier pricing to stem the recent subscriber losses.

Morningstar was ‘‘somewhat underwhelmed’’ and came away with a sense of too little too late in regards to the group’s response to digital videoondemand competition, fuelled by the fibre broadband rollout in New Zealand, Mr Han said.

Morningstar had cut its fair value estimate of Sky TV by 9% to $2.50 a share.

The downgrade reflected an average 6% reduction in profit estimates as lower prices were not likely to slow core payTV subscriber loss to the extent previously thought, he said.

Shares in Sky remained at a 10% discount to Morningstar’s revised assessment.

Uncertainties regarding the impact of lower prices had been exacerbated by the sentiment hit from the likely loss of the rights to the Rugby World Cup.

However, missing those rights gave Sky even more financial flexibility to aggressively bid to retain the critical Sanzaar right rights beyond 2020, Mr Han said.