With the acquisition of global rugby streaming leader RugbyPass, Sky might have just secured its future, writes Trevor McKewen.
For several months now, the war between Sky and Spark Sport for the peerless prize of All Blacks and New Zealand rugby rights from 2021 onwards has been escalating. Every week, one of the two corporate giants announces something in a bid to win the attention of sports bodies and affection of sports fans.
The blizzard of press releases has included a new sports streaming offer, 12 dedicated channels of sport and bonus payments to the World Cup-winning Silver Ferns (all Sky) through to free Rugby World Cup subscriptions to rural schools, and revealing commentary talent for Japan (Spark Sport). There’s even been public barbs thrown about, Steve Hansen/Michael Cheika-style, by both parties. Such are the high pressure stakes involved.
But today’s announcement that Sky has purchased the Auckland-founded, Dublin-based RugbyPass, described as the “world’s largest digital rugby platform”, is a game-changer that puts Spark firmly on the back foot in the rugby battle.
It is a strategic play by Sky every bit as bold as the Richie Mo’unga and Beauden Barrett dual playmaker ploy. But more on that later. Let’s quickly outline what’s at stake here because, quite frankly, there’s a lot.
SANZAAR, the international alliance of southern hemisphere rugby nations, is shortly to go to the market with its rights package from 2021 to 2025, which will include All Blacks tests in those countries and Super Rugby product. The New Zealand broadcasting rights have exclusively sat with Sky since the alliance was birthed along with professional rugby in 1995.
Having decided to take on Sky for the wallets of Kiwi sports fans, Spark’s strategy is to deliver a successful RWC viewing experience, breaking down the phobia about streaming sport that traditional rugby fans seem to have. Step two is to secure the next tranche of SANZAAR rights and eat massively into Sky’s profits.
For Sky, its future success, even its survival, is inextricably tied to New Zealand rugby. The bulk of its 750,000 or so subscribers join primarily for rugby and sports content. Importantly, a high percentage retain the entertainment channels, and use their MySky box to store content. For older consumers in particular, this convenience factor is a moat against the bite global giants like Netflix and Amazon is having on Sky in entertainment.
If the entertainment side of its business can continue to prop Sky up, it buys new CEO Martin Stewart the time he needs to ready the slumbering giant he inherited into a match-fit opponent ready to knock out Spark Sport – a mission he has been pursuing at breakneck speed so far.
But Stewart has needed something more to convince New Zealand Rugby that they should ignore Spark and remain loyal in the future.
Through its alliance with international outside broadcasting giant NEP, Spark Sport can now match Sky’s production capability for NZ-based matches. It also has a big chequebook that can easily match Sky’s.
Many believe the race to win over NZ Rugby’s heart is even among the two suitors. That changed yesterday with Sky’s $US40m ($NZ62M) move in buying a live streaming service which holds SANZAAR rugby rights in 62 countries. That includes exclusive rights in 39 countries. Sky described RugbyPass – with which Spark has tense business history – as the “premier online destination for global rugby fans” with customers across Asia, Australia and Europe.
Immediate commentary has focused on Stewart saying the acquisition would let Sky “reach beyond New Zealand borders and open up significant opportunities for the company and its partners”.
“It is an overseas-focused business. It is important for Sky in the medium and longer term for us to expand beyond New Zealand and this we think is the most sensible way for us to start by leveraging our deep knowledge and involvement in rugby.”
While that’s true, and there will be a bigger picture than just rugby, this is a rugby play and it will have immediately caught the attention of NZ Rugby headquarters in Wellington.
One of those powerbrokers is chairman Brent Impey, who comes from a television background, having been CEO of MediaWorks for a lengthy period. With longtime NZ Rugby CEO Steve Tew moving on at the end of this year, Impey will be a key figure in decision-making around the next broadcasting deal, along with Tew’s successor.
Impey knows where content is heading and is fully aware of emerging OTT (over-the-top) technology and the potential riches of international pay-per-view subscriptions from All Blacks matches.
For several years now, Impey has been nudging NZ Rugby toward further exploring this path. He’s not the lone ranger. The NRL and AFL across the ditch are rapidly developing their own media platforms. American sport is way ahead of everybody else. Witness NBA.com and the variety of broadcast options the basketball league offers.
These are not good developments for traditional broadcasters, whether they are free-to-air or pay TV companies like Sky. Or for that matter, telcos like Telstra across the ditch and Spark here. It is now possible for ruthless sports bodies to cut out the middleman (the broadcaster) and directly pocket subscribers’ money, though the NBA’s model uses local broadcasters feed to ensure that the critically important commentary and presentation retains a distance – Sky and other potential rights holders will strongly advocate for fans needing an independent broadcast layer to remain engaged with the product.
Very few sports can command as much power in our part of the world, of course. But rugby is one of them. A platform like allblacks.com and associated digital products like a streaming app has long had enormous potential.
Without rugby product, as we know, Sky is dead in the water. But with RugbyPass, Stewart now has something to offer NZ Rugby that Spark can’t – an entrée into a wider world beyond New Zealand’s borders with all of the benefit and none of the cost.
NZ Rugby will have undoubtedly investigated development of its own digital channels internationally. While the dollars at the end look alluring, the investment required is eye-watering. NZ Rugby could easily burn through a good slice of its $100m plus of equity in trying to build a subscription-based international streaming service.
Critically, it would also forfeit rights revenue from broadcasters like Sky, robbing the organisation of cash to run itself. So any decision to go directly to fans becomes a financial one, more than a strategic one.
Impey is likely to have reached a similarly sobering conclusion and therefore it’s more likely NZ Rugby will not make such a big strategic jump and would instead partner with somebody who can assist any international broadcasting aspirations.
That puts Sky, now it has RugbyPass, right in line as the perfect partner.
Stewart can now say he can not only serve all of NZ Rugby’s needs in New Zealand but he can now assist them with the All Blacks’ profile and development in Asia, Japan and Europe. There is opportunity for him to not only help NZ Rugby with the marketing and profile of the All Blacks overseas but also sell tickets and merchandise for them. Allblacks.com could conceivably collaborate with RugbyPass as a burgeoning content machine developing new revenues.
Sky’s smart move is also a vindication of the patience and belief of Kiwi entrepreneur Tim Martin, who started RugbyPass in New Zealand and was the first person to take on the pay TV network’s monopoly by buying English Premier League rights.
Martin was the first “disrupter” of how we view sport in New Zealand – a role that requires deep pockets and commitment to match. He and his investors have steered RugbyPass through to where it is now. “An overnight success story that has only taken seven years,” he says wryly.
“We’ve got an audience of 40 million people a month and growing, with half of them from the UK,” noted Martin. “So, yes, that is a big opportunity for New Zealand Rugby which Sky can now facilitate. And I agree I think it does change the landscape significantly.”
Martin will remain with RugbyPass who still have international plans and hold relationships with the likes of the English RFU and Six Nations. It is likely Sky will look to work those relationships to its benefit when it comes to NZ and SANZAAR rugby.
The battle for those prized NZ rugby rights just went to a whole new level.