Hamish Fletcher: Cracks appearing in Sky TV's rugby fortress

Sports, particularly rugby, are seen as a keystone to the long-term viability of the country's dominant pay-TV company. Picture / NZ Herald.

Sky TV is worried a major crack has appeared in its fortress around its all-important rugby broadcast rights.

The company told investors this morning that it was not the preferred bidder for the New Zealand broadcast rights for Rugby World Cup 2019.

Negotiations are underway with the preferred party - which the Herald understands to be Spark and TVNZ - and Sky says its bid would remain live should that fail.

Sports, particularly rugby, are seen as a keystone to the long-term viability of the country's dominant pay-TV company, which lost 28,000 customers in the 2017 financial year.

Sky is already facing fierce international competition in the entertainment space from streaming giants like Netflix.

Live sports broadcasting is a much more expensive and complicated game - although players like beIN Sports (part of a Middle Eastern conglomerate) already offers New Zealand football fans online streaming subscriptions to the English Premier League competition.

Sky told the market this morning that while it was "disappointed not to be the preferred bidder" for the Rugby World Cup, it was "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," the company said.

"Sky Sport's business is built on offering sports fans their favourite matches on a week in, week out basis, over multiple years," the firm said.

It last month confirmed it was cutting its prices and that sports fans could save $25 a month by switching to a new stripped back basic option.

The company specifically pointed out this morning that the Rugby World Cup rights were unrelated to SANZAAR rights, which it holds until to 2020 and include All Blacks tests, Super Rugby and the Mitre 10 Cup.

But it is widely speculated that US juggernaut Amazon could vie for All Blacks broadcast rights in upcoming negotiations.

Australian pay-TV firm Fetch is also considering bidding for these and while Sky will likely be in the box seat during bidding, there's no guarantee it will emerge victorious.

Investors have been delivered a sharp reminder of that this morning.