New SKY NZ CEO Martin Stewart
New SKY NZ CEO Martin Stewart

MediaApril 9, 2019

Sky TV has a wild new strategy: stop doing things its customers hate

New SKY NZ CEO Martin Stewart
New SKY NZ CEO Martin Stewart

New Sky CEO Martin Stewart has had a huge first month in the job, burning down the house of his famed predecessor John Fellet, writes Trevor McKewen.

Less than a month into his new job as the CEO of one of New Zealand’s most disliked brands (and that really is a feat when you’re in the entertainment business), expat Briton Martin Stewart has unexpectedly done the following:

Axed long-serving director of sport Richard Last, implying his failure to secure this year’s RWC rights was a key reason for him being shown the door.

Ended the influence of previous CEO John Fellet who resigned last week from Sky’s board.

Bagged his own product, the unloved FanPass.

Signalled he is up for the fight with Spark, started and led by Simon Moutter until a week ago, by indicating Sky would get with the real digital world in upping its effort around streaming.

“I’m determined that Sky Sport will be seen as the home of sport,” Stewart told the Herald. “And that means retaining and building on the key rights that we have – not letting them go. It’s a question of understanding the brand promise that you’re trying to live up to. So if we are the home of sports, that means retaining sports rights. In that case, [the World Cup], it’s about doing what you have to do.”

Those words – and his actions in taking Last and Fellet out of the mix – has meant that Stewart has almost immediately banished the market and consumer scepticism that he would make bugger all difference in the wake of Fellet’s long hold on the direction of Sky.

That scepticism had its roots in what had been an apparent agreement from Stewart that Fellet would migrate from the CEO chair to a position on Sky’s board.

Allowing an influential CEO to move onto a board where he can continue to have oversight and influence is generally not regarded as smart business if you are flaming out and need to change. Market commentators greeted news of the so-called agreement negatively, with one suggesting it confirmed his suspicion Sky was now a “sunset business”.

The first sign that all might not be what it seems came early in the piece, with Last departing Sky’s nondescript Mount Wellington offices on just about the same day Stewart walked in.

John Fellet, former CEO Sky TV. (image: supplied)

Last and Stewart are both Chelsea fans, but it seems that’s all they had in common. The pair clearly didn’t have a connection on the philosophy of where Sky needs to be – and particularly on how hard it should have fought for appropriate sports rights, and also on how its platforms and products should broadcast those rights.

Fellet and Last had a close working relationship. Fellet can be very engaging and is a generous host. But his disarming and self-deprecating demeanour often concealed a steel fist – a fist that was often deployed by Last.

Originally promoted from within the sales ranks, Last did not always display an overwhelming love of sport during his tenure. He also seemed to revel in being a hardarse, creating frustration among sports organisations and unnecessary enemies within the wider industry, including potential content partners.

Outside of the big three of rugby, league and cricket, for more than a decade other national sports organisations (NSOs) have bemoaned Sky’s attitude towards them. Not only were many of them consistently told they would not be getting a rights fee for their content and that their product was of little value, but the news also often came with a further sting in the tail. If the NSO wanted its events broadcast it would need to foot the bill for the outside broadcasting services (which Sky just happened to have a near monopoly on via its OSB company).

The failure to consider anything innovative or outside the square has grated with the NSO community, several of whom have eagerly grabbed new opportunities presented by Spark’s entry into the locally produced sports market in consort with a new international outside broadcasting company in US giant NEP.

NEP’s emergence means the likes of Spark and sports event organisers now have another option to Sky’s OSB service. In other words, Sky’s monopoly is over and it will now have to work doubly hard to convince rights holders that it is an invested content partner.

Last was also zealous in “protecting” Sky’s rights despite the fact many of those purchased rights were “warehoused” (an industry euphemism for “not used”) during the term of the contract. This often included rights varying from radio, to mobile and streaming rights. Sky’s market technique under Fellet and Last was to use their leverage to scoop up all rights, sublet those it didn’t fear (eg radio) and park the rest so that sports consumers were limited to what device and platform they could use to see live sport valuable to them.

This is where many feel Fellet lost his way with Sky after an impressive tenure up till that time. While he was holding on to a previously successful business model, the rest of the world was moving on. The bottom line is that for close to 10 years, New Zealanders have not had the same access and variety of products around sport that other nations regard as standard fare. The viewing advances sports consumers are being offered in other countries are vastly superior to Sky’s restricted menu.

Then there was Sky’s legal attack on New Zealand news media’s right to use “fair dealing” footage in its news media reporting – an attack that was sustained and concentrated. Sky ultimately prevailed in wearing down the will of pure news providers such as Fairfax (now Stuff), NZME, TVNZ and MediaWorks (a couple of whom were taking the piss on fair dealing and did deserve a slap) when all four tired of the incessant legal battle and worked out there were more important things to spend time and money on. Three of those four (TVNZ being the exception) have largely walked away from adequately resourcing traditional sports coverage or chasing the sort of sports rights Sky was interested in.

The ultimate loser in these Sky-driven battles has been the consumer, who now sees less quality sports coverage in traditional media – and certainly far less than Aussie, European and American sports audiences.

Over various supply contracts (where again their leverage was very powerful), Sky has also kept at bay for years ambitious and potentially capable providers like Vodafone and Spark well away from the sports play-pen. Ditto for sports rights holders themselves. For example, unlike their Australian NRL club rivals, the Warriors are not permitted to use any match footage in the same way teams across the Tasman do, because Sky hold internet rights and won’t bend.

Sky’s failure to invest consistently in any wider sports content such as documentary story-telling (think ESPN’s outstanding 30 for 30 series), intelligent magazine and panel shows (think the informative and entertaining Fox Sports shows featuring former stars like Matt Johns) and sports news reporting and coverage (think etc) has left hardcore sports fans further frustrated.

The sporadic nature of rights that were purchased added further irritation. One year EPL would be there, the next it wasn’t. Then the same for Formula 1. Most could live with it but when the likes of a RWC was being dismissed because it was “only a six week tournament”, the excuse-making started to wear thin.

It clearly didn’t sit well with Stewart, who presumably did a lot of his own personal analysis on how the company he was about to head up had found itself in its current predicament.

Stewart has arrived at an interesting time in our sports media and rights industry. He also seems to have arrived with a clear plan. Intriguingly, since getting his feet under the table, Stewart has publicly criticised the previous Sky strategy under Fellet and Last of limiting how consumers can see sports content and on what platforms, while also acknowledging its attitude had often frustrated potential content partners.

It’s a signal that Stewart, whose background as a CFO means he has a deep appreciation of the numbers, also thinks strategically. Fellet and Last made and saved Sky a lot of money over the hardarse years. But that period also saw major damage to the brand and left it with a persona – particularly for younger audiences – of being a digital dinosaur.

Stewart has made it clear he wants to be in the streaming business and is probably privately alarmed that Sky has let Spark, now freed of past contractual restraints, jump away to such a significant position in the sports streaming business.

Already I am hearing Sky is reflecting a changed demeanour in its interaction with sports promoters and bodies. Led by the capable interim head of sport Tex Teixeira, whose ideas have now been allowed to flourish, Sky has a chance to claw back lost ground with a genuine change of approach with should including embracing content providers and partnerships instead of lording it over them.

Some commentators have dismissed Spark as an immediate real player due to historical stuff-ups internationally in the transition to streaming as the preferred option to access live sport. Think Optus Sport in Australia and last year’s football World Cup.

There have already been some inevitable hiccups. An initial run around the Australian F1 Grand Prix went well, even drawing polite but refreshing acknowledgment from Stewart. But there were further gremlins during the Bahrain Grand Prix while other experts are emphatic that recent history demonstrates there will be failures during the RWC no matter how hard Spark try.

Stewart’s unexpectedly strong first impression is not the only thing that has tipped the scales back towards a potential Sky fightback of significance. Spark CEO Simon Moutter’s sudden resignation this week surprised the market. It has not only robbed us of an interesting personal battle with Stewart but has more importantly raised the question of whether Spark will be as committed towards a sports play under Moutter’s successor Jolie Hodson.

Moutter had sensed blood in the water around Sky. His ability to work with partners shunned by Sky like TVNZ (RWC and America’s Cup) and NZME (bringing valuable and supportive digital, print and radio platforms) strengthened his hand and he has pursued a sports play with a missionary enthusiasm.

The timing of Moutter departing right as Spark unveils its newly launched Spark Sport app is interesting. Sky might have a battle on its hands but Stewart is signalling he is up for it – and, most importantly, that he has shed the old thinking which has held Sky back over the waning years of the Fellet regime.

Keep going!