Sky TV bombshell: not preferred bidder for RWC 2019

In an annoucement that has sent shockwaves through the industry, pay-TV company Sky Network Television looks likely to miss out on the broadcast rights for next year's Rugby World Cup. It told the stock exchange this morning it isn't the preferred bidder for RWC Japan 2019. Instead, other reports suggest a joint bid by Spark New Zealand and TVNZ is the front-runner.

The bombshell for Sky TV, our dominant pay-TV company, comes just two days after the company's long-term boss John Fellet said he's leaving the company this year. And it's less than a month since Sky announced a 50 percent cut in its interim dividend, with commentators speculating the company needs a war chest for future Rugby World Cup rights battles.

In a statement to the Stock Exchange this morning, Sky said: "We were informed overnight that we are not the preferred bidder for the New Zealand broadcast rights for Rugby World Cup 2019... Negotiations are underway with the preferred party, and our bid remains in play should those negotiations fail."

Using a similar tactic to that of other pay-TV companies around the world, Sky has gained a foothold in the New Zealand market by chasing the rights to the country's most popular sport. It's done well, counting almost half of New Zealand households as customers. But the company is facing increased rivalry from local and overseas internet-based services (YouTube, Netflix, Amazon etc), weakening its hold on movies, drama and children's television content. Speculation emerged last year that US internet giant Amazon was moving into sports broadcasting and may start competing for rugby rights, although in this case, if other reports are correct, it looks like it is Spark New Zealand and TVNZ lead in the bidding war.

Grant Williamson, investment advisor at Hamilton Hindin Greene, said he was expecting to see some panic-selling this morning following the shock announcement. And, as forecast, the shares dropped 7 percent to $2.25 in the first 15 minutes of trading. This means they're down 41 percent from this time a year ago, when they closed the day's trading at $3.80.

"It doesn't seem to get any better for the company, and it's going to have quite an impact," Williamson said. "The indication was that they would be the preferred bidder, so it has come as a bit of a surprise to the market. It just seems to have so much against it at the moment."

Sky TV wouldn't comment on which company is the preferred bidder for the Rugby World Cup but said "sport broadcasting is a competitive business, and while we are disappointed not to be the preferred bidder, it’s an economic reality that we can’t have every match of every sport that New Zealanders like to watch. While the Rugby World Cup is great content and we put forward a strong bid for it, it is an incredibly expensive event that plays once every four years for six weeks."

Rugby World Cup rights are sold by IMG Media on behalf of Rugby World Cup Ltd. Sky noted it continues to have SANZAAR rights through to 2020, which covers All Blacks tests, Super Rugby and the Mitre 10 Cup. Its other sports offerings include the Warriors and the NRL, cricket, netball, supercars, golf, cycling, football, basketball, Moto GP and boxing.


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