Retail, Innovation and Manufacturing reporter for the NZ Herald

Sky TV hits out at Spark-Netflix deal

A shot from House of Cards available on Netflix. Photo/supplied
A shot from House of Cards available on Netflix. Photo/supplied

Sky Television chief executive John Fellet has hit out at Spark signing a deal with Netflix after it had played a part in "blocking" his company's merger with Vodafone.

Spark New Zealand today said it would be offering a free subscription to Netflix for a year when customers signed up to a 24-month unlimited data broadband plan, in a bid to become a major player in the entertainment space.

The deal comes after competitor Vodafone's proposed merger with Sky Television was declined by the Commerce Commission last week.

The regulator said a merger would stifle competition, especially with its premium sports content, however Fellet said this was not accurate.

"Sport is far from the only highly desirable content," Fellet said.

"Right now television series are the best we've ever seen, with premium drama attracting huge audiences and viewership worldwide. This is exactly the kind of move we anticipated in our dealings with the Commerce Commission."

"I would imagine Spark are feeling pretty chuffed at their part in blocking our merger and then being able to announce a deal like this," he said. "The irony is there for all to see."

A spokesperson for Spark said the commission was aware of its plans to partner with Netflix, and so made its decision on a "fully informed basis".

"In Thursday's ruling, the Commerce Commission highlighted that it was Sky's exclusive control of premium sports content rights that was problematic for New Zealand consumers - not general entertainment content," a spokesperson said.

"Spark's partnership with Netflix doesn't stop customers from accessing Netflix or other services directly," she said.

"We've put together a wholesale deal with a global content provider that makes economic sense for both parties - and as we've said before, we'd love the opportunity to do something similar with Sky in relation to sports content."

A Vodafone spokesperson said the deal was not unexpected, and Netflix worked with all telco providers.

It said Vodafone had previously offered customers a similar deal with Netflix, and currently offered deals with Sky TV.

Spark chief executive Simon Moutter said the move was consistent with the company's media strategy, and its branching out from being a traditional telco.

He said the company was growing its platform with a range of providers, including its own service Lightbox.

Forsyth Barr analyst Blair Galpin said partnering with Netflix was a good long-term move by the telco.

"It was always the view that Netflix long-term would have been the better option," Galpin said.

"Initially if the timing had worked, Spark may have considered doing a deal with them from day one rather than with Lightbox but the timing didn't work. The fact it's happened isn't a surprise but the exact timing of when this might happen was always a bit unclear."

Galpin said such deals were typically effective at reducing customer churn as well as offering a better proposition than competitors.

He said given the timing of the deal, it was likely that it had been set up in preparation for potential approval by the Commerce Commission.

"It is an advance for Spark over Vodafone but then it will be about how Vodafone responds to this, whether with a price discount or other offers," Galpin said.

Spark would be operating Netflix alongside its other video streaming service Lightbox, although Galpin said it was difficult to know what this would mean for Lightbox long-term.

Jason Paris, chief executive for Spark Home Mobile and Business, said by offering Netflix and its own streaming service Lightbox, it could offer customers a wider range.

"We know that our customers love Netflix and Lightbox," Paris said.

"We've just announced that Lightbox is now approaching 250,000 subscribers and we already see the popularity of Netflix in New Zealand.

Around a third of the data over our broadband network on an average evening is customers streaming Netflix and Lightbox."

Spark customers can get the Netflix Standard plan, which is usually $14.99 per month, for 12 months with any 24-month unlimited data broadband plan.

A Spark ADSL/VDSL/fibre unlimited plan costs $94.99 per month with no landline or $104.99 with a landline.

Sky TV's shares fell to their lowest level since mid-2009 last week, after the proposed merger with Vodafone's New Zealand business was rejected.

The announcement wiped almost $300 million off Sky TV's market value on February 23 and the shares closed last Friday at $3.77.

Spark shares ended trading last week at $3.56, the highest in almost two weeks.

- NZ Herald

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