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MediaWorks joins queue of Igloo critics

Wednesday 16th May 2012

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A tie-up between pay-TV operator Sky Network Television and state-owned Television New Zealand will hamper competition in the pay-TV market and undermine free-to-air broadcasters, according to private equity-owned rival MediaWorks.

The Igloo joint venture, which offers a budget set-top box, was cleared by the Commerce Commission today, which approved the partnership between the nation’s biggest pay-TV and free-to-air media companies.

MediaWorks, which operates TV3 and Four and radio stations including the Rock and More FM, says the deal "will hamper any potential for competition in the pay market and undermine the strength and diversity of free-to-air television in New Zealand."

The JV will "further cement Sky's control of premium content and dominance of the pay sector of New Zealand television while at the same time creating a conflict for TVNZ regarding its role in Freeview," MediaWorks said in an emailed statement.

"New Zealanders are again being told that they must enter into contracts and be prepared to pay to watch premium content on television - even content (like that shown on TVNZ's Heartland) that has been taxpayer funded," it said.

Igloo will bundle TVNZ's free-to-air programming with Sky channels including BBC World News, UKTV, BBC Knowledge, Vibe, Kidzone24, MTV Hits, National Geographic, Animal Planet, Comedy Central, Food TV and TVNZ Heartland at a cheaper price than News Corp-controlled Sky's complete offering.

Sky invested $12.75 million for its 51 percent share in Igloo while TVNZ invested $12.25 million for its 49 percent share. The platform is forecast to attract 7,000 subscribers at June 30, 2012 and 50,000 subscribers at June 30, 2013. Sky’s shares fell 6.8 percent to $5.08 today.

The Commerce Commission investigated the deal after receiving several complaints about the joint venture, and decided the tier-up wouldn’t erode the level of competition in pay-TV.

The regulator's investigation showed TVNZ and MediaWorks took tentative steps toward setting up their own joint venture, but couldn't agree on the terms of the core proposal.

Details of a potential venture between TVNZ and MediaWorks were deleted from the public version of the commission's report, which says "the available evidence does not suggest that pay-TV formed a core part of this proposal."

The regulator considered it unlikely the rival broadcasters would cut a deal for video-on-demand or pay-TV in the next two years.

The Igloo investigation revealed concerns about Sky TV's content arrangements with internet service providers, and the regulator has subsequently launched an investigation into those deals.

"We are pleased that the Commerce Commission is beginning a more thorough investigation of Sky's content agreements, but surprised they have not recognised the harm inherent in the Igloo JV," MediaWorks said.

BusinessDesk.co.nz

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