Sky TV investors have been fretting for some time about the threat of new media competition. But two developments this week drew it into sharper focus.
The first – and this is a biggie; kudos, Matt Nippert – is the revelation that rugby body Sanzar is reportedly opening negotiations for post-2020 rights by April next year.
That's earlier than usual, and it's said to be so newcomers like Amazon could have time to organise infrastructure challenges (chiefly, how to film games given Sky TV bought the only independent outside broadcast operator).
As previously noted, Amazon has already been limbering up with sports coverage, joining Facebook, Google and Twitter in successfully bidding for some NFL rights in the US and tennis in the UK. As Sky reported its full-year result on August 23, its chief executive, John Fellet, told NBR that in per capita terms, Amazon's non-exclusive, limited NFL and tennis deals would equate to a bid for the Breakers rather than the All Blacks. But NBR's view is that Amazon is merely flexing its fingers with its minor sports deals. Once its warm-up is over, it will go after big deals.
Forsyth Barr shared that view in a recent research note. Six Forbar analysts predicted Amazon would establish a direct presence in New Zealand within five years, and look to push its Prime service (which offers everything from streaming music to video content to unlimited home deliveries for a set annual fee). Trade Me bases its planning on Amazon arriving as soon as next year. It's true that Amazon is about scale, so retailers can cling to a small but not totally-unrealistic hope that, although Amazon is now setting up a fulfilment centre in Melbourne, it will not bother with tiny New Zealand.
But with sports rights, Sky might not be so lucky. In Forsyth Barr's view, Amazon will not think in terms of five million rugby-mad Kiwis but rather about 120 million fans worldwide (based on estimated viewership of the last Rugby World Cup final). That might be goosing it a bit but there's no doubt Amazon will seek its desired scale through some kind of multi-territory deal (which would also put it in a stronger position to fight the growing problem of sports piracy, or at least people taking a virtual hop between regions as they seek out free-to-air coverage).
Amazon preceded its bid for NFL rights in the US with two documentary series, each following an NFL team (they will be available to New Zealand subscribers of Amazon Prime from September 6. The trailer for All or Nothing: A Season with the Los Angeles Rams is above. Amazon has now reportedly landed a deal for a documentary series that will follow the All Blacks.
An Amazon-friendly delivery platform
The second major development is the government's ramp up of its Ultrafast Broadband and Rural Broadband initiatives this week – with sealed commercial contracts, too, which would be problematic to break post-election.
The goal now – and it seems quite achievable with the $276 million thrown into the pot this week on top of $2 billion-plus already allocated, with matching private-sector funding and progress so far – is to provide at least 50 megabits per second speed to 99% of the population. In layman's terms, that is all the bandwidth you need to watch high-definition streaming video smoothly on a smart gadget or regular TV.
One objection to a new media player like Amazon (or Spark's Lightbox or Google Play or Facebook Video) gaining A-list sports rights is that many in the provinces and rural areas don't have good enough internet for streaming. That objection is melting away. (And regardless, there is the lower tech option of partnering with a free-to-air broadcaster for more traditional transmission in some areas, or for delayed coverage.)
Many of Sky's critics moan the current government has let it get away with a domination of sports content that hinders new market entrants. But, really, by building up our faster internet infrastructure, the government has done as much to enable new competitors than any rules around contracts could have done.
In a recent Sunday Business with Andrew Patterson interview, NZ Rugby boss Steve Tew did at the very least seem to have a bit of a sentimental bent toward Sky, and sticking with its long-time partner would be the course-of-east resistance for the union if it could sharpen up its online act (although it did not break out a number for Fanpass at its full-year result, a Sky insider recently told NBR it was less than 10,000).
But at the end of the day, money talks. And Amazon – one of the five biggest companies in the world by market capitalisation, and led by the man who on some stock market days is the richest human on the planet – has lots of it.
Regardless, Amazon is not the only threat. Spark, which has deeper pockets than Sky, could make a bold return to sports after its Lightbox dabble – possibly in partnership with TVNZ or MediaWorks.
And Coliseum Sports Media, 50% owned by $810 million NBR Rich Lister Peter Cooper, is still circling with its RugbyPass service, which is growing around Asia Pacific thanks to heavyweight investment from the US Discovery channel.
Sky can comfort that at least Netflix is showing no interest in sport but then again it has to compete with the US streaming giant for entertainment content, plus grabble with nascent interest from the likes of HBO in selling streamed contact direct to the consumer, cutting out middle men old (Sky TV) and new (aggregators like Netflix).
It's possible Sky will keep hold of all its content post-2020. But, boy, is it going to cost.
Just look across the Tasman to the fight over league rights, to the US where streaming apps are diluting the value of broadcast rights, or the UK, where the scrap between British Telecom and the more traditional Sky UK drove the price of English Premier League soccer rights to a nosebleed £5.14 billion for the three season from 2016/17. That's meant a huge financial windfall for Premiership clubs, to the extent that New Zealander Chris Wood's recent £50,000 pounds-a-week move to Burnley barely made the sports front pages.
At least you say Mr Fellet backs himself, and his company. Some see it as foundering without a plan B following the ComCom's decision to block its merger with Vodafone, and slim hopes for its stock. But last week the chief executive bought 50,100 Sky shares on market (that is, not part of an option or bonus plan). Sometimes, you've just got to believe.
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