Spark looks to make majority of Rugby World Cup revenue from paid subs

Spark managing director Simon Moutter: "This is an expensive tournament to buy and we need to monetise it."

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Spark [NZX:SPK] confirms it has won rights to the 2019 Rugby World Cup.

Some games will screen free on support partner TVNZ, Spark managing director Simon Moutter says.

However, the managing director will not at say at this point which games will be live and free-to-air beyond the opening game and the final.

Nor will Spark say how much the cup will cost for people who are willing to pay to see all games, although on RNZ Mr Moutter said a tournament pass might cost in the region of $100. 

"This is an expensive tournament to buy and we need to monetise it."

He elaborated to NBR that "The challenge here is that these rights cost a lot of money, so you have to have a model that gets a little bit of funding from advertising with a free-to-air component. But the vast majority of revenue has to be earned from pay subscriptions."

The Spark boss says market research will be used to set the final charges for games.

He added, “So if we have too much free-to-air, then the chances of earning back our investment reduces.

Live games will not be interrupted by ads, he says.

The NZX-listed telco has also yet to reveal to shareholders what it paid for Cup rights.

Mr Moutter has said Spark bought the rights, finalising a deal with World Rugby over the weekend. TVNZ is a support partner.

Another potential pain-point is that not all of the country has good enough broadband for streaming games to a PC, phone, iPad or (via wi-fi and a gadget like Apple TV or Google Chromecast) a regular TV.

Spark says it is aware UFB fibre and broadband rolled out under the Rural Broadband initiative does not reach all New Zealanders. "We want to do our best to give as many New Zealanders as possible to watch – so we are looking at a range of options. We’re not able to give any details right now," the company says.

Mr Moutter says the number of people who can't get good enough broadband now is down to "single digits" and that his company has 18 months to solve the rest. Satellite broadband is one option, he says.

Tens of thousands of households can't get good enough quality for internet streaming, versus hundreds of thousands of homes that don't have a Sky decoder, he says.

He acknowledges a wider issue is households that have good enough broadband but are unfamiliar with content streaming services.

Mr Moutter can confirm people won't have to be a Spark customer to buy games.

Packages will include a tournament pass and passes for individual matches, he says.

Sevens incoming
While Mr Moutter says Spark has 18 months to prepare for the 2019 Rugby World Cup, a memo at a rival broadcaster notes the package Spark brought also includes the Women’s Rugby World Cup 2021, the Rugby World Cup Sevens 2018, and the World Rugby U20 Championships 2018 and 2019.

The 2018 Sevens World Cup starts in just weeks. What's Spark's plan?

Mr Moutter brushes off that question, saying partner TVNZ will screen the Sevens and U20 World Cup tournaments in conventional fashion.

NZ First threat
It seems most or all of the money from the bid came from Spark. Speaking to NBR on March 29, Communications and Broadcasting Minister Clare Curran said TVNZ had not asked the government for any money to fund a World Cup bid, and she indicated she expected the state-owned broadcaster to fund any bid from commercial operations.

A potential complication for Spark is that during the last parliament, NZ First MP Clayton Mitchell put forward a private member's bill calling for games of "national significance" to be screened free-to-air.

The bill died at its first reading after Labour joined National in voting against it. And Ms Curran recently confirmed to NBR that free-to-air sport is not part of the coalition agreement. However, if Spark does decide to charge for the final, that could re-focus and perhaps even change Beehive minds.

The appeal of Mr Mitchell's bill was diminished by the fact that Sky — no doubt mindful of political pressures — screened all the major World Cup 2014 games through its free-to-air channel Prime.

Sky: tournaments don't appeal
Sky TV [NZX:SKT] shares slumped (again) after the pay-TV broadcaster revealed on March 28 that it was not the preferred bidder for the 2019 Rugby World Cup, which will be held in Japan (three hours behind New Zealand).

Speaking to NBR on March 27, departing chief executive John Fellet emphasised that Sky has a dozen rugby contracts.

And on April 5, Sky head of Sport Richard Last said Sky would not pay over the odds for a tournament that lasted just a few weeks, with attendant political heat to show games involving the All Blacks for free. The broadcaster's focus was on season-long rights. 

Mr Last also reeled off statistics he said proved people preferred to watch big games through a regular TV.  February's Super Bowl was the most streamed even in US sports history but still only had 3.1 million people watch the game over broadband vs of a total viewing audience of 103 million.


Source: BBC

Looking north
For its part, Spark will be looking to the UK, where British Telecom has spent billions of pounds to secure rights to top-flight soccer (the equivalent to bagging All Blacks and Super Rugby rights here). Since 2013, the English Premier League has been able to play BT and Sky TV UK against each other to drive up rights revenue. At times, BT has offered games free to customers on its own network.

The strategy has presumably worked for BT going by the fact the telco has just secured its third three-season deal, running through until 2022 (in each of the two previous three-season deals, rights have been split with Sky TV UK, with each company getting a package of exclusive games; on a side-note it is notable that the bidding frenzy cooled somewhat with the 2019 to 2022 deal, with Sky and BT able to spend 16% less than they did for the last three-season package).

This morning, Mr Moutter said Spark would offer its own customers "a few advantages" but stressed single games or the whole tournament would be available to everyone.

Expanding portfolio, and at what cost?
When Lightbox Sport folded, Mr Moutter said one lesson Spark learned was that you need a portfolio of A-list sports to gain momentum.

The amount Spark must be spending on this exercise indicates future plans, but Mr Moutter was playing his cards close to his chest this morning in terms of whether his company will shoot for more rugby, more top sports.

For shareholders, the appeal will depend on how much Spark paid for World Cup rights.

The MD says that won't be revealed until the end of the financial year containing the World Cup. That is, probably not until around August 2019.

Pay-per-view upgrade for Lightbox
As Spark announced its interim result in February, Mr Moutter revealed the telco's streaming service, Lightbox, is due for a major upgrade this month.

Movies and kids' features will be added. But most germane to the World Cup, a re-platforming from Xtream to Brightcove will support streaming of live sports and pay-per-view events. And although the Spark MD did not include the feature in his presentation, Brightcove also supports the insertion of advertisements into a livestream.

Been there before
Spark has been in the sports broadcasting game before.

In 2014, Spark's Lightbox formed a 50:50 joint venture with NBR Rich Lister Peter Cooper's Coliseum Sports Media, called Lightbox Sport,

All of Coliseum's media properties (English Premier League soccer, US golf, European golf and French rugby) shifting to the JV, and TVNZ came on as a partner, screening some content free-to-air.

But Lightbox Sport spluttered in 2015, and the joint venture ended in 2016 as Coliseum split off again to found its RugbyPass service.

This time around, streaming technology has become a lot more reliable, and New Zealand broadband has come along leaps and bounds, with many households now acclimatised to it through Netflix and other services.

But will it still be too jarring to have some World Cup games available via internet streaming options only? It's likely they'll be long, deep talkback radio howl this morning saying "no."

Spark has not helped its cause by releasing so little information so far.


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54 Comments & Questions

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People can criticise Sky TV all they like but a bedrock of their success has been a simple and largely effortless user interface combined with world class sports production. TV One has demonstrated through the Commonwealth Games just how challenging it is to get the latter right and Spark are really bad at anything to do with making life easy for customers. Sky have basically one piece of hardware that makes it all work effortlessly. Spark will have to try and figure out how to seamlessly deliver this same outcome (en masse) via dozens of different devices, operating systems and TVs over an internet network they don't control.

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You're correct that Spark faces a daunting logistical challenge.

It's important to note that the streaming challenge does have to be faced by Spark and Sky though (and Sky has just spruced up its Go app and promised a new, low-cost mobile-only sports service).

Sky does do traditional couch potato sports coverage well. But lately it has been losing subscribers and its payout to shareholders has been decimated. It also has to reach a new generation of sports fans who're watching content in different ways. 

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Added to that, many of the younger generations emphatically do not like Sky...an additional challenge they need to navigate.

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You're probably not referring to Sky Go but work effortlessly and Sky Go can never be used in the same sentence.

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Perhaps you are missing that Sky stremaing products have always had problems, buuut thats ususally because of processing bandwidth. SKY TV has never or will never have the broadband capacities to compete with Spark. SKY TV will simply become a sports producer.

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Bandwidth should not have a lot to do with reliability or performance of these types of products, that is unless you do not use a reliable CDN.

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There are issues that are not related to bandwidth. Every time I exit full screen viewing I lose picture but sound continues. The constant stream concurrency issues when no one else is watching. The fact you continuously have to log in.

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Many more of their issues have been caused by overly aggressive DRM (digital rights management) technologies that cannot protect IP but can and do disrupt customer experience.

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They have different functions, streaming you may want to watch CNBC at the office, where as the Super Rugby tonight you want the guarantee it wont drop out so its the box for that, old school i know. Good luck Spark

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So the 10,000 plus rural homes, clubs etc. may not have access due to unstable broadband and there is no guarantee that the AB games will be free to air on a delayed service.

Joke, once again fans are being held to ransom.

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I'd also refute his comment that the number of people that can't get good enough broadband is down to single digits. There are still some areas of Auckland in that boat & with no resolution planned for even the medium term (5 years+) horizon

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And bear in mind that even in areas with good internet access, there's a good broadband and then there's broadband when thousands of your neighbours are all trying to access the same livestream at the same time.

We're all aware of Sky Go's historic stuffups with live sports -- although Sky does claim that incremental upgrades have meant it's now more than a year since it last choked on a major live sports event.

Another encouraging sign: Chorus says TVNZ's Commonwealth Games streaming went smoothly at relatively high volume:

It's release on Friday:

Commonwealth Games leads to record use on Chorus network
Data use on Chorus’ network has reached record levels, a trend attributed to New Zealanders streaming the Commonwealth Games online in enormous numbers.

Data use has been tracking much higher than usual since the Commonwealth Games started last week, as people take advantage of TVNZ’s decision to stream its coverage online.

The highest ever usage on the Chorus network was recorded on the night of the Opening Ceremony, with a peak of 1.599 Terabits per second being used. This is the equivalent of about 270,000 HD video streams being watched simultaneously.

The trend continued into the weekend and this week. At one stage the network peaked at about 14 per cent higher than normal, and the overall daily usage was 20 per cent higher.

Still, I think Spark is taking a bit of a gamble here, both on whether it can smoothly stream to most households, and on whether most households are psychologically ready for this development.

Simon Moutter says Spark might use multicasting to celtowers then "spray it out from there" to help with the Rugby World Cup stream performance.

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'Most households' have plenty of time to get their head around it. Like they have with Netflix, Lightbox and even Spotify for that matter

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I could get Netflix fine on plain old ADSL so I don't believe you know what you are talking about Steve!

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I bet most of the people now posting negative comments about Spark/TVNZ combo were many of the ones that jumped on the bandwagon bashing Sky last few weeks.

Given that Sky has shown zero or near zero innovation over the past 5 or so years and just focused on price gouging their own customers - now's a good time to bring in some different forms of competition, even if that competition might stuff their own operations up from time to time. Hopefully things should get better over time right? both in terms of quality AND price?

I'm not a huge Spark fan either, but hey, history has shown Sky to be as slow moving a dinosaur as Telecom of old - so why all of a sudden bat for Sky now? Consumers are clearly voting with their wallets for OTT and streaming propositions so get on with the times guys.

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I'd be delighted hand money to Spark for a 4K service via an app on Apple TV.

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In his NBR View interview, Moutter said Spark was open to multicasting -- and Chorus has a live 4K/8K content over fibre multicasting trial happening in February. So that will be an interesting one to watch. Sky and Freeview are also participating in the trial.

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Listened to Moutter taking about this on the radio this morning... lets face it, all that Spark are doing is taking all of the customer complaints from SKY and (many of them posted on NBR) and making a reall go at a valuable opportunity.

We all know the future is streaming, the one value proposition that SKY totally missed the boat on (and I have no idea how? or why a company of that size could miss it). Spark will be offering games ON DEMAND!!! Hoo ray as a (former) fan pass subscriber SKY TV could not even offer an on demand service for any games. I have young kids and seldom get an opportunity to watch anything when it is broadcast, so I watch it as I have the time. Spark have simply realised this and added this to their negotiable terms when purchasing rights.

SKY TV have literally dropped the rugby world cup ball on this one.

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Why not record the games you want to watch on your Sky box and then watch them when you like? We do this for a lot of content on Sky (TVNZ news included). That way we also avoid the ads by simply using fast forward on ad breaks.

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The fact that Sky charge for this feature really annoys me. People are accustomed to watching content on demand, to charge a premium for this function seems crazy.

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Any word on where Spark will stream the RWC from? As Spark don't peer with the major internet exchanges in NZ. If they self host the servers, data going to customers of other ISPs will have to dog leg via Sydney. meaning higher latency.

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Spark will likely be peered with Voda NZ and/or 2degrees and/or Vocus on a commercial basis so should capture most of NZ users - i.e. likely no Sydney round trips. The "major" internet exchanges in NZ capture the minnows of the industry so probably don't need to worry about that too much... No large telco in their right mind would connect to those exchanges and let small players free ride on their network

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This is dreadful news for rugby fans. Spark has zero sports broadcasting capability in-house which means New Zealanders will be getting the pass through stream as produced by whoever the official broadcaster is in Japan. No New Zealand commentary. Oh and it is really worrisome that Spark has not been able to indicate costs to consumers. Wait for it but everyone expecting $12 pay per view is going to be sorely disappointed.

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I suspect some of the current Sky commentators would jump ship for the RWC.

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Please no! Let the Sky commentators stay where they are thanks. Having different commentators would be a huge plus for Spark.

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As an old fart I have to say that my wife does not like Rugby, or sport in general, so I record it and watch it at my convenience later. I'm also too bloody old to stay up until all hours of the morning to watch anything any more (sounds like that policy worked out well with regards to the closing ceremony last night). So I record it and watch it at my convenience. Will they be providing anything like this? Easy as hell to do with Sky at the moment. Would it be totally inconceivable for them to reach a deal with sky to show the games as well - maybe on a delayed deal? If they are so confident their new platform will attract users then they should not be worried too much about us few dinosaurs still watching Sky.

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I don't love sky but as I already have it and find it easy to watch live or record and watch later. Speaking with as few friends who are the demographic RWC watchers, I'm afraid to say spark and tvnz have got this wrong and sky was right to let it go. Our group of mates concluded we will not be purchasing any packages from Spark / TVNZ for a one off tournament. Rather we will watch on delayed tv or go to Japan and watch live. Spark / tvnz will lose alot of money on this deal.

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"go to Japan and watch live". At $14k for the Semis and Finals - before flights - through AB tours, it doesn't seem to make sense that you wouldn't pay to watch the games live here. Granted you miss the whole Japan experience

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Sounds like some dude (who took the time to type his own name too) just wanted an opportunity to brag about his wallet size (and his maths skills)

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Sky says that people still prefer to watch through a regular TV. This shows how far behind technology they really are. You can stream onto your TV, which is what most people do, e.g. with Netflix. Does Sky seriously think that people are sitting around in their lounges watching Netflix on their phones?

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it's selection bias - of course people would prefer to a PPV that is available both on streaming or their sky box. There's still a large number of sky boxes out there (900k?), and given sky's past streaming performance is a bit of a no-brainier you would go for that option first.

it'll be interesting to see how spark approach this. is there a chance they may leverage their 4g network? they've kinda branched out in respect to this with their skinny internet options

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I think you may have misunderstood the statement. I think it was a comment on device usage - tv's are simply preferred regardless if its from a STB or smart tv app, apple tv etc... no shock there.

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So what was the point of the statement then? As you say, there is no shock.

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Do you know whether existing Spark (and therefore Lightbox) subscribers (which include me) will receive a discount on that tournament pass? Spark could also offer a discount to new subscribers. I'm sure they are way ahead of me on all that.

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That's wishful thinking. Spark have to make as much money as they can after outbidding Sky.

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I guess, to an extent, TVNZ will be a party to their own demise. Once people realise that streaming is easy and convenient we can expect much greater adoption of the streaming services. We are already into the early majority, this should galvanise the late majority and laggards!

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TVNZ already offer all of their shows streamed via Apple TV app & online web services.

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I am glad Spark got this, as i can view the tournament on numerous devices and not having to be tied to one screen and a stupid decoder.

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Spark is a Telco, they will probably charge you for each device, that will peeve you off even more. Don't expect any favours or loyalty from Spark.

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It will still be cheaper than paying for additional decoders and i still can't take decoders with me.

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If its anything like the Com Games where the coverage was interrupted for Adverts then people will go spare. What I wish to know is how much TVNZ ie he taxpayer, paid for this. In so much that as TVNZ are paying every All Blacks game should be live and free to air, why should we have to pay twice. My best is both the opening game and the final will be delay on TVNZ allowing both to rip as much out of the consumers as possible.
Never Trust a Telco!

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Spark has paid for it all. See main story. TVNZ will presumably get a share of ad revenue for providing the free-to-air platform required by World Rugby for 7 of the games. 

If you want ad-free coverage, then you'll have to shell out around $100 or so to watch the tournament via Lightbox. Nothing's free. You'll pay in annoying ads, or dollars.

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Don't bet on that Mr Keall.
Spark /TVNZ have the rights.
The Gov. own TVNZ
RWC 2019. + Election 2020 = We get the RWC free. Courtesy of long suffering taxpayer.
Like to bet a choc fish I'm wrong?

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Yes, Winston to the fore! He promised.

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Winston/NZ First didn't make any non-negotiable promises before MMP negotiations, and free-to-air broadcasting did not make the coalition agreement. 

Having said that, it seems safe to say there has always been political pressure around free World Cup coverage (which must have diminished the commercial appeal to Sky), and I don't expect 2019 will be any different.

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Correct and TVNZ/Spark will be the winners.
I can see it now. Winston and Shane taking the credit for all NZ getting the RWC "free"

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I'm not betting on anything, just relaying what Spark and Curran have said at this point.

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Who is this appealing to exactly? Who is the target market for RWC who
a) doesn't already have Sky Sport
b) will watch the free to air games and
c) wants to pay another $100+ for a streaming service to watch the other 40 games?

Anyone who's willing to pay the additional $100 is already a sky sports subscriber or into streaming rugby already - in which case they're just going to find a free stream

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I am happy to pay $100 for the tournament but refuse to have Sky TV in the house. $150 a month for a decent service and all I get are repeats and rubbish. No thanks. But $100 for a guaranteed ability to watch the games live or when I get to them... that makes sense.
I can watch on the TV or at work on my laptop, or on my iPad on the train.

That's the market they're going for. You should try it out.

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Currently costs me $55/month for Fanpass, not sure where you're getting $150/month from...

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Well the consumer doesnt win. Now someone else to pay if you want to watch more than just the free to air games on top of the sky sport costs. You do wonder why comcom didnt allow the Vodafone Sky merger to proceed. Great for sports bodies in the short term but long term for country NZ's size will result in less revenue when the bidding companies realise how much they were bidding is high risk low reward.

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Why not make live chargeable and the delayed free?

As the Government owns TVNZ why are they and Spark holding us to ransom?

WIll not be jumping from Sky as my broadband is not that flash and will not be dictated to.

If you are smart you will go around to your mates get in a few beers and watch the game.

Disgusted from the back blocks.

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I'll just do what I always do, watch it an hour latter for nothing. I know it's not very kiwi, but then again how much have I forked out over the last god knows how many years, a big fat 0.

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$100 for a tournament is too much. NZ broadcasting is in a sorry state of affairs....The future of TV is live sport on free to air which gets the maximum amount of people watching with strategically placed very expensive ads. Like they do with NRL on channel 9 and AFL on channel 7 in Australia. The Comm games and winter games were a huge turnoff because of the poorly thought out coverage and amount of ads. In the UK the BBC and ITV have had on demand sports events for around 10 years. During Wimbledon you can choose from several channels to watch games.

Spark were talking about the BT model and the fact they have taken Champions League and some Premier games off Sky. What they fail to mention is that with BT Broadband the cost of BT sports is 3.50 a month or around $7. Not the $100 the CEO is bandying about. If Spark had a sports channel with a few other cheap offerings (say UK rugby/ESPN/some football from anywhwere) and charged $15 bucks a month with broadband they might get a critical mass paying $200 over the year, but at $100 for 40 games I think a) baby boomers and oldies won't bother signing up b) gen xers and millenials will either find a free stream or won't bother. Its always free on the radio.

Price points are everything which is why Netflix and Spotify are so succesful. NZ broadcasters have no idea...

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