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NZ Rugby not ready for a seat at Sky board table

Tuesday 15th October 2019

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New Zealand Rugby didn't want a seat at Sky Network Television's board table in its deeper relationship with the pay-TV operator. 

NZ Rugby chief executive Steve says Sky has made a significant investment in rugby over the years, and in return, the union has taken a stake in Sky with a view that both parties will benefit from what they're describing as a partnership. 

Speaking from Japan, where the All Blacks are into the world cup quarter-finals, Tew said the idea of taking an equity stake was mooted among NZ Rugby's leadership early on, but wasn't finalised until the negotiations. 

"We've got some real skin in the game and we've got a real incentive to help Sky and vice versa," Tew told BusinessDesk. 

He said NZ Rugby didn't ask for a seat at the Sky board table because that took the relationship a little bit further and would mean they would be involved in decisions when Sky was dealing with other sporting codes. 

The national sporting body and the satellite broadcaster reached a deal on Sunday night, granting Sky rights to broadcast rugby in New Zealand from 2021 to 2025, covering domestic and international competitions. 

No price was disclosed, but Tew said it was a step up on the existing contract - which runs until the end of next year - and was the best possible deal the union could achieve. 

Sky's 6,487 shareholders will have to ratify the deal at Thursday's annual meeting in Auckland. While the deal hadn't been cut when the notice of meeting was issued, Sky's board sought approval for management to "take all actions and do all things including negotiating terms and executing all documents and agreements necessary or desirable" to secure the rights. 

The company hasn't needed shareholder approval in the past, but because Sky's share price has more than halved in value this year, the deal would cross the 50 percent major transaction threshold that triggers a vote by shareholders. 

The market welcomed the deal, with Sky's shares up 19.1 percent at $1.06, recovering some of last week's savaging when Spark New Zealand secured the domestic broadcasting rights from NZ Cricket. 

Greg Smith, head of research at Fat Prophets, said the deal was a great one for Sky and should get approval at the annual meeting. 

"No doubt the bid was strong in terms of price, but the strategic element of having NZR taking a stake is very innovative, and may have proved the masterstroke," he said. 

"It will help on the cashflow side for Sky, and will cement the relationship with NZR on a number of levels. The RugbyPass element will also have helped SANZAAR, I imagine, and Sky can get to work leveraging this content on a global scale."

Sky put dividend payments on hold this year to help build a war chest to outbid increasingly competitive rivals for premium sports rights. Chief executive Martin Stewart's new management team see rugby as a lynchpin in preserving its future and this year bought online rugby platform RugbyPass for up to US$40 million in cash and shares.

Tew said NZ Rugby and Sky will announce a number of initiatives that they plan to roll out, adding that Sky showed an interest in the community game, ensuring New Zealand has a buoyant participation base, and that it sees opportunity in the enormous growth in women's rugby. 

NZ Rugby received $73.3 million in broadcasting rights revenue in calendar 2018, down from $104.6 million a year earlier, when the British & Irish Lions tour bolstered its income. 

Tew said the contract will give the union some financial security, but wasn't a silver bullet. 

"We are still going to have to be very careful around how we grow additional revenue and how we manage costs going forward," he said. 

Brad Gordon, an investment advisor at Hobson Wealth Management, said Sky had to win the rugby rights, and that the long-term business model looks likely to be set around the sporting code. 

"It's an intriguing development that: NZR taking equity in the business. It's obviously some sort of partnership going forward that will be worthwhile, but from a long-term perspective, it's very hard to see where this platform goes."


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