Spark’s sports strategy becomes clearer
The Rugby World Cup is looming for the company that will live-stream the event to hundreds of thousands of local rugby fans. Spark Sport outbid SKY TV for the rights but as Mark Jennings reports, its payoff seems to depend on what happens after the event is finished.
ANALYSIS: Spark has a lot riding on the Rugby World Cup to be played in Japan in 10 weeks' time. It is throwing millions of dollars and a lot of its people at trying to get it right.
This will be the first time an event of this magnitude and importance comes to Kiwi homes via the internet instead of primarily through the dishes and aerials of SKY, or the free-to-air networks.
Overseas experience with live streaming big sporting events shows that things can go wrong and when they do, they go badly wrong.
Yesterday, two of Spark’s key executives, Jeff Latch and Rob Berrill, carefully walked journalists through the company’s extensive and expensive preparations for live-streaming the Rugby World Cup (RWC).
The live pictures and commentary will come down from Japan by fibre and satellite to TVNZ in Auckland (TVNZ is handling all the production for Spark), then up to the West Coast of the USA to be turned into a 'stream' before being sent back to New Zealand.
The whole process will take approximately 26 seconds.
There are backups at just about every step and a “situation room” will be staffed throughout the six-week tournament to respond to the slightest incident.
Spark has upgraded hundreds of its mobile sites, boosted its core network infrastructure and engaged with its competitors to make the most of what it sees as an “opportunity” for the telco industry to push more people into using the internet rather than the airwaves to receive video content. Sixty-two percent of people use IP (internet protocol) to view streaming services like Netflix but there’s still a large chunk of the population that hasn't moved with the times.
“The timing is right to bring the late adopters and laggards into the stream world,” Latch, Spark’s head of sport, told reporters.
Spark’s grand gesture on behalf of the industry might come at a bigger cost than some were expecting.
Halfway through the briefing, Latch, made an admission that will surprise and possibly worry some Spark shareholders.
Previously, Spark said its aim was to make a profit out covering the Cup. Latch all but conceded this won’t be the case and the payoff for Spark will be determined by how many subscribers it can hold on to after the RWC is finished.
“It will depend on the tail at the other end because the reason we are doing this is to bring a whole lot of people into Spark Sport so they can use the platform and see it in all its glory and then we clearly expect and hope that a whole lot of those people stay with us,” said Latch.
He indicated Spark will be reaching for its cheque book again in the near future.
“What really drives subscriptions is long-running competitions ... what we are interested in is acquiring competitions that will run for a long period of time and therefore be useful for us to build subscriptions ... a lot of the biggies (competitions) are starting to come onto the table later this year, that includes cricket and rugby."
This will be causing angst around the board table at SKY TV’s Mt Wellington headquarters.
New CEO, Martin Stewart, who is already angry that SKY lost the RWC to Spark has basically declared that losing further rugby rights will likely be over his dead body.
War is on its way.
While conceding "there is no doubt that it is leading to an escalation in rights cost”, Latch claimed that big sporting codes were concerned about more than just money.
“If you talk to CEOs of major local sports the challenge they’re facing is that they have taken the big cheques, all of them pretty much now and they are sitting behind the paywall at SKY but they’ve seen some pretty distressing things happen to their sport over the last 15 years as a consequence of that.”
Latch didn’t elaborate on what those “distressing things” were but went on to suggest that he would be making a reasonable amount of content available “free” on the Spark sport platform.
This is strategy is likely to be meet head on by SKY which has been planning a major refresh of its free-to-air channel, Prime.
Rumours have been circulating that Prime might become a full-time sports channel but this is unlikely. It will, almost certainly though, carry significantly more sport.
SKY and Spark will be looking over their shoulders at each other from now on but there will plenty of pats on the back going on at TVNZ.
As more details emerge from Spark about the RWC coverage, the bigger the winner TVNZ looks.
TVNZ 1 will broadcast the semi-final and final live and all other games involving the All Blacks on a one-hour delay.
Latch agreed that the delay of just one hour, as opposed to two hours that has been the norm on Prime, was favourable to TVNZ.
“It has been a balancing act wanting to drive Spark forward and get people on the platform and the delay on free-to-air and we think we have got the balance right,” said Latch.
The danger for Spark is the delay is short enough that people, especially technology challenged ones, won’t bother signing up to Spark Sport.
What will have played a big part in Spark’s thinking is TVNZ will probably host a live preview show in the hour before its delayed broadcast and if anything goes wrong with the live stream it will allow TVNZ to cut live to the match and bail out Spark. A two-hour delay would have meant TVNZ doing a much longer programme that would not have been viable.
Latch also confirmed that if something happens to the live stream in one particular part of the country, TVNZ would take the match live to the whole country and not try to separate out that region.
Given the demand from advertisers for this premium event, the RWC will be at least a mini-bonanza for TVNZ. If Spark has a serious failure it could turn into a major windfall for the state broadcaster.