A unique deal saw Sky buy the rugby rights and sell some of itself to NZ Rugby. Trevor McKewen breaks down what it all means.
The news came thick and fast over a remarkable five-day corporate slugfest, starting last Thursday. First, Spark Sport struck, gobbling up New Zealand Cricket’s domestic broadcasting rights for the next six years. It looked like a king hit to Sky – and a godsend to New Zealand Rugby, who had a tasty Dutch auction looming around its future domestic partner.
But a little over 24 hours later, a sudden twist. News leaked out that Sky might have convinced New Zealand Rugby to not even engage with Spark and instead pledge an extension of its prized Sanzaar rights through to the end of 2025. By Monday, Sky boss Martin Stewart and NZ Rugby chairman Brent Impey had announced exactly that – but with another twist. NZ Rugby would also get a 5% shareholding in Sky as part of the deal.
So many questions. How did this happen so quickly? Who’s in front now in the bitter war for our sporting wallets? And what does it all mean for those who just want their All Blacks and Blacks Caps fix, without complications or having to give up our first born as payment?
Here’s an attempt to answer some of those questions. But first…
A temporary truce is likely
You can gather your breath for a moment. The rugby and cricket rights are gone, divided one apiece between combatants who now have their stake in the ground in terms of core product they will build their future sports business around.
There will be minor rights diversions here and there. For example, expect Spark Sport to bomb the overseas national rugby unions hosting future All Blacks tests for the likes of the end-of-season European and Asian tour rights. Those rights don’t sit with NZ Rugby. But the next significant rights deal of high interest to Kiwi sports fans isn’t until the end of 2022 when the current NRL deal expires.
Spark might be down, but it’s far from out
It might be one-all but Spark is behind in the overall battle. The rugby rights were the more strategically important of the two big prizes. We love our Black Caps. But we love our All Blacks significantly more. And primetime night rugby rates far more highly than daytime cricket.
Spark’s commitment to its sports platform was questioned when Sky CEO Martin Stewart aggressively fought back with a series of strategic moves. And Monday’s news will have hurt.
But speculation Spark might blink was swept away with one swoop of a pen through the cricket deal, making it clear it would do whatever it took to eat Sky’s lunch, including over-paying. Independent sources tell me that Sky had offered a 50% mark-up on its previous cricket deal and that didn’t even get close to what Spark put on the table. That might explain why Cricket NZ didn’t tell its 25-year partner of the deal until the morning it was announced (hurriedly and ahead of time because the NZ Herald was onto it).
Spark’s cricket announcement was also designed to send an overt message to NZ Rugby. The union was still contractually obliged to negotiate solely with Sky for a period of time that hadn’t yet elapsed. But in terms of sending NZ Rugby a message that it would move heaven and earth to secure them, the cricket bombshell surely couldn’t have been more effective.
How Sky rallied to fight back and secure the rugby
When news of Spark’s cricket deal broke, Sky’s Martin Stewart was blindsided, and admitted as much.
But instead of the blow flooring him and his executive team, it clearly galvanised them. By Sunday night, Stewart had persuaded rugby chairman Brent Impey and other decision-makers that Sky was their horse.
He did it several ways. He lifted the previous fee Sky was paying by around 30% – a significant hike. The new deal is rumoured to be $400m over five years.
Beyond cash, Stewart had already played another hand with the $60m acquisition of international rugby streaming business RugbyPass (read here about the strategic opportunity this presented Sky and NZ Rugby). That appears to have not gone unnoticed at rugby HQ.
But then came the big play which, ironically, didn’t come from Stewart and which nobody saw coming. NZ Rugby asked for a shareholding in Sky. A broadcaster giving free shares to a sports body is virtually unheard of. But it was a masterstroke by NZ Rugby and has a massive upside for the union (while also raising some legitimate concerns for other sports and around objective coverage).
NZ Rugby chairman Brent Impey explained that it was acutely aware of the business impact gaining the rugby rights would have on either Sky or Spark’s business, so wanted in on the action. Fair enough. It made perfect business sense and Sky bought it on the condition NZ Rugby inked the deal without going to Spark.
The shareholding gave NZ Rugby an immediate windfall with Sky’s shares climbing on the news. Sky’s market capitalisation is now close to $450m, making NZ Rugby’s 5% worth around $23m which is a nice sweetener on top of the rights cheque – and a shareholding that will persist beyond the current rights deal.
Working directly with Sky makes sense for NZ Rugby, which has skilfully built up an international money-spinning machine in the All Blacks, but lacks the infrastructure and platforms to build content brands beyond New Zealand.
RugbyPass gives NZ Rugby and its All Black-centric brand a marketing entrée into 64 countries, including Japan, and a chance to develop and distribute its non-match content with a committed partner and also use it on its own platforms.
There remain some concerning questions over the shareholding deal for both parties, including how it influences Sky’s relationships with rival sports. Spark will also be worried about NZ Rugby’s influence on other sports deals it chases. But for now, it seems an inspired move that has made Spark’s task tougher than ever.
So who’s made the better decision – rugby or cricket?
NZ Rugby. Not that NZ Cricket has necessarily lost – how can you when you bank a truckload of money? It has a tougher PR battle to front than its rugby counterparts though.
Rugby appears to be willing to play the long game in developing opportunities via Sky. For example, future broadcasting initiatives such as this Canon-inspired recreation of key World Cup tries, including the George Bridge strike against the Springboks, could become a coaching aid for NZ Rugby and an edge for the All Blacks, as well as a broadcasting innovation for viewers.
Impey has said that Spark’s World Cup streaming problems did not influence their decision but the outcry from rural New Zealand, a conveyor belt of future All Blacks, over the cricket announcement will surely have influenced it. Sky’s satellite delivery, moves into streaming and having a free-to-air channel in Prime was clearly more alluring than Spark’s singular streaming platform.
Spark or Sky: Who’s in front?
Sky at this stage. It has a superior long-term sporting menu now bolstered by the rugby deal, and after a sorry history, is improving its streaming offering (although not without hiccups, similar to Spark). It has the next two Olympic Games, netball, rugby sevens, Australian cricket (including when the Black Caps tour) and the next Cricket World Cup on its books.
Yet Spark’s huge chequebook remains poised. It will delve into local content production next year, and keep sniping away around whatever rights it believes can drive an audience.
What can we expect next?
The next race will be around innovation and partnership. Both companies know streaming is the sports future despite the current hiccups. That is because, as outlined here, streaming allows interactivity and engagement one-way delivery systems like cable and satellite can’t provide.
Spark needs content services to drive its coming 5G rollout. By providing new and cut-through coverage of domestic cricket, including potential second screen services via mobile devices, it can make a statement on the future of sports broadcasting in this country.
Sky will be thinking similarly. It will want to exploit its relationship with rugby, Olympians and other leading athletes in the technology space to show it is transitioning successfully into a digital multimedia platform.
Selecting strategic partners will be vital. Spark and TVNZ have sashayed alongside each other. But what of NZME, Stuff and MediaWorks? There are potential deals still to be done by both parties.
Where does this all leave viewers?
In limbo – although it’s not as bad as it seems. What used to cost $100 plus a month for Sky (if you were only interested in sport) now can cost as little as $50. Spark’s $20 a month for its subscription app is hardly a budget-buster either, although we don’t know their pricing for the cricket yet.
If you’re a rabid Black Caps fan, you’re just going to have to live with having two subscriptions. However, you can limit that to our summer instead of all year. Spark’s challenge is finding content other than the English Premier League and Formula 1 to lure New Zealanders away from Sky, or to remain with them during a barren winter during which Sky has all the big prizes.
There may still be the chance of Sky and Spark Sport getting together in a similar fashion to the BSkyB and British Telecom alliance of this year, which ended six years of bruising rights battle over English and European football.
It remains a sensible outcome – because the only real winners at the moment seem to be the sports bodies.
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