Could Spark’s Rugby World Cup streaming failure force a pragmatic alliance with Sky? Trevor McKewen asks what this would mean for each of the corporate giants – and NZ Rugby.
Spark Sport has just dumped incoming New Zealand Rugby chief executive Mark Robinson with his first serious challenge. The streaming platforms “abject disaster” – as described by deputy prime minister Winston Peters (back to him later) – creates a huge dilemma for NZ Rugby. Eyes lit up within NZ Rugby headquarters when Spark Sport suddenly loomed on the horizon with just two years left on the current broadcasting deal for Sanzaar product. A gilt-edged opportunity had just landed in the union’s lap to have true competitive bidding for the first time in years.
The sudden emergence of Spark Sport also served to shock Sky out of its long-time complacency. Incoming boss Martin Stewart didn’t so much sweep a new broom through the place as set fire to it before overseeing a dramatic overhaul of strategy executed at breakneck speed.
Stewart has taken the battle to Sky in a fashion that has probably shocked Spark. He has threatened to go broke before losing any future rights, reinvigorated the business, dramatically raised staff morale and already managed to persuade many major sports bodies that Sky is a better bet than Spark.
But NZ Rugby has been playing coy. It knows how desperately Sky needs All Blacks rugby to even survive as a company. It also knows there’s a new kid on the block who wants to show them their flash new machine.
Unlike other countries within the Sanzaar rugby alliance, NZ Rugby is not as far down the track with its rights deal for the 2021-2025 seasons (my sources tell me South Africa’s renewal is almost completed and will be “flat” and that Australia’s will be “down”) – but it has invited opening bids.
The rugby union’s timing will have been deliberate, but is almost certainly premised on Spark Sport successfully executing and gathering the confidence of New Zealand sports fans. More than anybody, NZ Rugby needed Spark to kick a goal with its World Cup ambitions to create the Dutch auction with Sky that it craves. That’s why the opening weekend, and particularly the All Blacks-Springboks match, was so critical. Even if Spark gets its act together for the rest of the current tournament, as they may well do, the damage is already done. New Zealand rugby fans are not to be toyed with.
With the Springbok match now behind us, and the realisation that the semis and final are live on TVNZ, any rugby fan tempted to give streaming a try is unlikely to bother now. The opportunity to convert more New Zealanders than those already signed up to sports streaming has been missed. The experience will surely have shaken Spark. Those who questioned the sports play may no longer be biting their tongue after the brutal savaging of the telco wiped $144 million in market value when markets opened on Monday morning.
Will the commitment to a sports rights strategy remain unwavering given the missed opportunity? Can Spark Sport survive the brutal PR hit? What rights do they now use to prove streaming and win customers? And how much will those rights cost, given Sky’s fighting words? The landscape has changed dramatically in the space of one weekend.
The decision about which direction NZ Rugby goes from the end of next year is not Robinson’s alone. His predecessor Steve Tew is still around until the end of the year. Chairman Brent Impey also has a big influence by virtue of his position and broadcasting background. The board will have its say. But this is the chance for Robinson to stamp his own mark, depending on how he responds.
He can do that by recognising that trying to gouge Sky and Spark Sport on future rights fees by exploiting a domestic broadcasting bunfight may no longer be such a wise strategy – and in fact is now downright risky if it upsets fans or results in an inferior viewing experience. Gaining the biggest possible rights cheque is not the biggest challenge facing New Zealand Rugby right now. Issues like concussion and player poaching won’t be solved by broadcasting dollars.
The risk-takers within NZ Rugby have been strongly urging a deal with Spark, reasoning they will write out the biggest cheque, especially off the back of a successful delivery of the World Cup. They will not be so sure now that the average rugby fan will be wary of engaging with the telco.
NZ Rugby also needs to acknowledge that Spark’s awakening of Sky is gaining cut-through with consumers and is to their benefit. Sky’s sports service has never been cheaper, there has been a welcome entry into the sports news business and there is more sports content on their free-to-air channel Prime than ever before. Sky seems to be genuine in its proclaimed reinvention as a friend of sport.
Stewart has also pivoted towards streaming with the new Sky Sports Now app. Interestingly, Sky has not encountered Spark’s technical problems in streaming live rugby. Almost 60,000 used the streaming app to watch this year’s Bledisloe Cup test at Eden Park without headlines. As a result, Sky is well poised to continue a slow but steady transition to streaming while retaining consumer confidence.
There is one further complication for Robinson. Had Spark not put TVNZ under the high wire as its safety net, imagine the uproar right now. The rescue act neatly positions TVNZ at a time where the government is assessing what to do with the troubled media company it owns.
NZ Rugby may think it’s in the box seat when it comes to Sky and Spark’s future, but Robinson needs to be wary of another veteran kingmaker, Winston Peters, whose weekend blasting of Spark was undoubtedly deliberate. The NZ First leader is a long-time advocate of anti-siphoning laws, like those of Australia, which would ensure the All Blacks and other major sport must be shown on free-to-air.
The argument is unpalatable to NZ Rugby because of the impact it would have on its finances and has largely been kept at bay in recent years. But Spark’s RWC failure and TVNZ’s repositioning of its future (now it no longer has to pay the Government a dividend) might re-inspire Winston to push for mandatory free-to-air in the 2020 election. Such a scenario is a nightmare for rugby officials, and one they need to be careful not to feed by appearing too money-hungry in the Sanzaar negotiations at the expense of fans.
Sky’s use of its Prime free-to-air channel, which screened this year’s cricket and netball World Cup finals and is increasingly showing more sport, is an antidote to any of Winston’s plans or TVNZ manoeuvring. If any evidence was needed of NZ Rugby’s hard-arsed attitude on broadcasting, it has already been exposed, although with scant analysis. Chris Keall at the NZ Herald has reported that Sky recently made the opening play of $400m for the Sanzaar rights over five years – an eye-watering $80m a year. But there are (pre-Yokohama) whispers NZ Rugby has made it clear to both parties that this is not a big enough increase.
If so, I’m incredulous. It comes at a time when most rights renewals are flat (South Africa) or down (Australia). The All Blacks are the gold in the broadcasting package. But Super Rugby is a dog. Only the local derbies draw viewer attention. Nobody watches NPC, but the broadcaster is required to screen the games at serious cost as part of the deal. And now Super Rugby is only going to get worse, as NZ Rugby barters off renewals of key All Blacks like Beauden Barrett, Brodie Retallick and Sam Whitelock with deals that allow them to skip the competition for a rest or an offshore stint in Japan when it suits.
Eighty million a year before you even fund more expensive outside broadcasting facilities and hire commentators, presenters and former All Blacks is challenging for any New Zealand company in the current climate.
This puts Sky and Spark in a similar scenario to BSkyB’s pitched battle with British Telecom (BT) for the past six years of football rights in the UK.
Like Spark with Sky, BT figured it would muscle in on BSkyB’s sports game. BSkyB fought back more strongly than anticipated. This year BT ran up the white flag. Executives from both sides conceded the costs had been higher than anticipated and that only sports bodies had benefited from the battle and that viewers and broadcasters hadn’t.
Perhaps Spark and Sky can even take all of this out of Robinson and the rugby union’s hands? A sensible outcome right now could be for Spark CEO Jolie Hudson to admit things haven’t gone to plan and pick up the phone to Stewart to do a deal to work together on future sports rights. That’s what BSkyB and BT have done. Given the market similarities, there’s no reason why it couldn’t happen here.