Sky reveals cost of Covid-19
There is some good news for sport in New Zealand from Sky’s latest presentation to investors but a sting in the tail as well.
In a presentation before Sky successfully raised $157 million, the pay-TV broadcaster lifted up the bonnet to its entire operation, revealing an 8 per cent ‘downgrade’ to Sky Sport packages since Covid-19 hit and that it was in cost-cutting mode.
That decrease is a solid result given the complete absence of live sport, and Sky’s crucial average monthly revenue per subscriber figure dipped only slightly to $82 a month for each of its 585, 815 satellite customers.
But the bad news is contained in the risks Sky outlined to investors: in layman’s terms it could not guarantee whether the content served up when sport returns would be as appealing, or valuable.
These are testing times for the whole system. Sky confirmed it is ‘‘currently withholding certain payments whilst negotiating with affected sports bodies’’ and anticipated savings would follow those discussions.
Sky also identified a pool of up to $135-million-$155 million in savings in the event of no sport going ahead in the next year.
However, Sky’s Chris Major told Stuff: ‘‘This scenario is highly unlikely with live sport returning around the world and locally with NRL this week, rugby and netball in the next few weeks.
‘‘The ‘up to $135m to $155m’ range represented the costs that could be avoided in this scenario and represent a mix of costs that wouldn’t arise [i.e. sport production costs], costs that we would negotiate [such as sports rights], and costs that we can control [like our level of marketing and the level of our capital expenditure].’’
And Sky’s overall figures in the detailed presentation were robust under the circumstances: it reported a 68 per cent decline in commercial revenue in April from one year earlier as it suspended charges to Covid-19 hotels, pubs and clubs, but that is likely to be reversed once sport begins again.
But there is a note of caution throughout the presentation.
Sky pointed out that its financial assumptions it made for the coming year were based on re-negotiating existing sports contracts it had in place and warned investors there were doubts whether sports codes ‘‘will remain financially viable’’ even if Sky works through the crisis with them.
‘‘It remains unclear when a full schedule of live sport will resume and the impact of what any modified format on resumption might have on the appeal or value of that content to Sky and its current or potential subscribers,’’ it said.
In other words, there will be some fingers crossed at the pay-TV broadcasters that New Zealanders have a healthy appetite for sport when later.
A lot of positivity will accompany their return, and justifiably so.
Super Rugby Aotearoa, in particular, has the potential to be world class, but no one can truly anticipate what affect those empty stadia will have on the product, or whether a meaningful test rugby programme will return this year.
Clearly, investors were happy to take on board the risks and climb into the equity raising anyway.
They might have noted that Sky’s overall subscriptions were up and saw potential of its move into broadband. Maybe they just liked the heavily discounted price.
But for sports, the message was clear: Sky will back you all the way but even then there are still some clouds overhead.