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Business

Foxtel set to lose Australian Rugby rights to Optus

7 Feb, 2020 12:18 AM4 minutes to read
The Waratahs' Mark Nawaqanitawase takes on the Crusaders defence during the two Super Rugby franchises' February 1 clash. Photo / Photosport

The Waratahs' Mark Nawaqanitawase takes on the Crusaders defence during the two Super Rugby franchises' February 1 clash. Photo / Photosport

Chris Keall
By
Chris Keall

Chris Keall is the technology editor and a senior business writer for the NZ Herald

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Sky might have renewed its deal for top-tier rugby in NZ, seeing off a challenge from Spark. But across the Tasman it's a different story.

Talks between incumbent rights-holder Foxtel and Rugby Australia broke down this week the Australian reports.

Rugby Australia will now take test match and Super Rugby rights to the market, the paper says - and says that there is only one serious bidder: Optus.

In 2015, Foxtel agreed to pay A$285 million ($296m) (or A$57m per season) over five years to Rugby Australia, a 148 per cent increase on the previous deal.

However, the pay-TV broadcaster was only willing to bid in the mid-A$30m per year for a renewed deal - thanks to a slump in Super Rugby ratings for the season just kicked off (the audience for the first round of games involving Australian teams was down 35 per cent) Optus is said to be willing to top that.

Spark will no doubt be watching events closely - particularly the way Optus (the second-largest telecommunications company in Australia) has managed to turn around its fortunes in streaming.

READ MORE:
• NZ Rugby down $5.8m as Sky shares hit new low
• Eden Park narrows loss, reveals attendance numbers
• UK sports streaming/gambling stoush will be watched closely by Sky and Spark

Optus won rights to the Fifa World Cup in 2018, only for its stream to crash during early games - forcing it to hand over coverage to the free-to-air SBS.

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Yet the Aussie telco kept banging away at sports streaming, and by October last year it had gained more than 700,000 subscribers to its Optus Sports service - which was credited with it helping to gain 51,000 contract mobile customers and 151,000 new broadband customers during the quarter as it clocked a A$105m profit on revenue that increased 3 per cent year-on-year to A$2.2 billion.

In its current form, Optus Sports is based heavily around English Premier League and European football.

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Optus paid a stonking A$187 million over three years to wrest the EPL from Foxtel in 2015, then an undisclosed amount to renew its rights.

Like Spark here (which has an $8.6b market cap to Sky's $285m), Optus has vastly larger financial resources than its traditional pay-TV rival. So it basically comes down to an in-house debate: Is streaming an area where it wants to spend more money? And if so, is rugby the sport to punt for? (Of course, across the ditch, the top dogs are the NRL and AFL.)

Similarly, Spark has the wherewithal to easily outbid Sky next time Sanzar rights roll around.

Jarden recently offered a note of home to Sky investors. The wealth manager said in a note to clients that Spark's recent sale of its Lightbox entertainment service (to Sky) was "a likely precursor to its eventual exit from Sport as well".

So far, new Spark CEO Jolie Hodson hasn't given any indication of throwing in the towel, however. The telco added domestic cricket to its roster post-RWC, and recently tacked on NFL.

The possibility remains that Spark didn't want to push too hard for 2020-2025 Sanzar rights (which the Herald understands went to Sky for $400m). It would have politically unsaleable after its RWC stumbles.

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But when All Blacks and Super Rugby rights next roll round, the urban and rural broadband rollouts will have wrapped up, providing nearly every corner of the country with ultrafast internet - and nearly everyone will be acclimatised to streaming.

Sky's new boss Martin Stewart has proved wily, offering NZ Rugby a 5 per cent stake in his company as part of its Sanzar deal to intertwine their fortunes.

Yet if Sky's stock market fortunes don't pick up, the union might exercise its right to dump its shares after two years, and Spark could come sniffing around again.

And even if Spark does ultimately decide to refocus on its core business, others such as Amazon could enter the fray.

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