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Home / Business / Companies / Media and marketing

Spark aims to be in Sky's league

John Drinnan
By John Drinnan
Columnist·NZ Herald·
18 Jun, 2015 09:21 PM6 mins to read

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Several players, including Coliseum, are keen to tackle the issue of streaming rights for the NRL. Photo / Getty Images

Several players, including Coliseum, are keen to tackle the issue of streaming rights for the NRL. Photo / Getty Images

John Drinnan
Opinion by John Drinnan
John Drinnan is the Media writer for the New Zealand Herald.
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The Spark-owned video-on-demand service Lightbox will be bidding for streaming rights for NRL games, forcing Sky to defend its stranglehold on mainstream TV sport.

Sport is what keeps New Zealanders wedded to Sky, and about 75 per cent of its subscribers pay extra for the sports package.

But Lightbox chief executive Kym Niblock makes no bones about it - Spark wants to get sporty.

"We made it clear at the start we wanted to be an alternative to Sky," she said.

Negotiations have now begun for the 2017 season. But how deep are Spark's pockets if Sky decides to shell out more money to keep Lightbox out of the picture?

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Sky has its own video-on-demand service, Neon, but is unlikely to offer live games there.

Sky chief executive John Fellet insists Sky does not have endless resources, even for important content like rugby league - something that was apparent back in 2013 when it risked losing league rights rather than meet NRL demands for a big increase in prices. Sky picked up the streaming rights to the NRL at that time, but only in a short-term deal.

Those rights were used for a "Fan Pass" internet TV package, where subscribers pay for a single competition. Sky will deny it, but in my opinion Fan Pass is an expensive package that seemed designed to keep the competition out, rather than offer consumers a choice.

Now those rights are up for renewal, and Sky is under pressure from a raft of newcomers such as Lightbox.

Back in 2013 Sky played brinkmanship and ignored the NRL demands. As a result, it secured the rights in a real nail-biter, right on the day the season began.

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Sky is still really the only player in New Zealand for broadcast rights, as used by traditional TV services.

But a lot of companies are now looking at streaming.

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Sky's competition this time looks to be coming from Lightbox Sport, which is a joint venture with Coliseum Sport, the company which made its name by winning streaming rights to the English Premier League soccer competition.

And it appears that Coliseum will also be seeking global rights to stream the NRL, making it a significant bidder in the negotiations. Coliseum would then sell off streaming rights to other countries to recoup its costs.

Niblock confirmed that Lightbox's sports joint venture with Coliseum would be pursuing streaming rights for the NRL, and for other codes as they come up.

"I can tell you we are talking to the codes and that the NRL is very attractive," she said, stressing that negotiations were still in their early stages.

But it is important for Lightbox to make its New Zealand subscription services more mainstream.

If it could offer a cheaper package for a streamed NRL than Sky's Fan Pass, that could help Lightbox break through.

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In Australia, the Age newspaper has reported that Google and the telco Optus will be seeking streaming rights to the NRL.

Sports rights negotiations have many permutations, but they are largely built around the sellers making as much money as they can. Some sports codes look to sell full packages of rights to consortiums of buyers. Sometimes rights are sold individually.

But with the entry of global players such as Google, the sports rights game is getting very complicated.

It may be that Google would seek to obtain rights beyond Australia, to screen games and highlights on YouTube.

Snakk attack

Corporate media and advertising companies are in the throes of change, as they battle to stay relevant at a time when people are changing the way they use media, causing fragmentation of the audience and widespread disruption to business plans.

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But even at the sharp edge of digital media - epitomised by the mobile phone advertising company Snakk Media - there are challenges in keeping up with technological changes that might wipe out a business plan overnight.

Snakk Media is the digital advertising firm founded by the New Zealand tech entrepreneur Derek Handley, which is now based in Sydney and listed on the NZAX secondary market.

It helps companies to get their advertising in front of smartphone and tablet users, largely through having ads inserted on to apps. Last week chief executive Mark Ryan announced Snakk had lifted annual sales 40 per cent as it pushed into Southeast Asia, and improved gross margins through the second half of the year, while its loss more than doubled.

Snakk reported a loss of $4.26 million in the 12 months ended March 31, from a loss of $1.89 million a year earlier. Gross revenue was up to $9.9 million from $7.1 million a year earlier. Gross margin widened to 51 per cent in the second half, from 32 per cent in the first half.

Snakk's future is based on the growing dominance of mobile phones as a communications and media device. While the mobile-focused company was developed early in that consumer shift, Ryan said there were still issues with technological change, not least the need to keep track of daily innovations and new apps.

Ryan said Snakk dealt with that ever-changing landscape by dividing its initiatives into three categories: "now, next and nascent".

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"Now is what we are doing this week, next in the three to four months and nascent in a year," he said. Some projects would fall away between nascent and next, but that approach put things into some order, he said.

The skill of the company was in identifying phone apps that would be used by a brand advertiser's target market, he said.

While that was largely done through established relationships with media buyers, there could also be direct relationships with brands.

Snakk pays for access to the apps, then clips the ticket each time the ad is accessed, while the advertiser pays for strategy.

Snakk was founded in this country by Handley, who is still a shareholder, but Ryan said the uptake of mobile advertising was relatively slow here.

Mobile advertising was a tiny percentage of total online spending - about 4.5 per cent of digital ad spending - but was 50 per cent in the United States, around 30 per cent in Britain and 15 to 20 per cent in Australia, he estimated.

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Ryan said Google and Facebook were still "the big gorillas" of the global market, with a combined share of 70 per cent, while companies such as Snakk fed off the remaining30 per cent.

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