Aaron Smith leads the All Black haka at the 2023 Rugby World Cup in France. Photo / Andrew Cornaga, Photosport
Investment firm Forsyth Barr says Sky TV is a leading candidate for a takeover this year. It comes on the eve of a likely new deal for its “Golden Goose” – All Blacks rugby rights – and amid huge upheaval in the global sports rights market. Shayne Currie reports.
Sky TV appears to be in the box seat to secure top-level rugby rights, including the All Blacks, for another five years – at a drastically reduced rate – but fans could yet find some games on a free-to-air channel such as TVNZ or New Zealand Rugby’s own digital platform.
The likely new broadcast deal, as well as Sky being fit for a takeover bid, has been commended by investment firm Forsyth Barr, which has upgraded its rating for the publicly listed company from “neutral” to “outperform”. Sky TV shares closed at $2.65 on Tuesday; Forsyth Barr has set a target price of $3.20.
New Zealand Rugby (NZR) is using international consultancy firm IMG in its efforts to secure a new broadcast deal – sports rights have become a fast-moving battleground globally, with the likes of Netflix and Amazon Prime scooping up live rights to events such as selected NFL and European football matches.
In this part of the world, British-owned streamer DAZN has just announced an audacious $A3.4 billion ($3.75b) deal to buy Rupert Murdoch’s Foxtel in Australia – it has the rights to Australian cricket, AFL and rugby league (including the NRL).
That acquisition has led to intriguing industry speculation that DAZN might be keen to enter the New Zealand market just as forcefully.
As NZ Herald rugby analyst Gregor Paul revealed in December, Sky TV is understood to be offering $85 million a year for the 2026-2030 domestic rugby rights, including All Blacks tests and Super Rugby Pacific matches.
That is well below the existing $111m annual deal, which expires at the end of this year. Sky TV paid well over the odds for the 2020-25 rights, amid a backdrop of intense competition with Spark Sport. That platform has now closed.
The exclusive negotiating period for NZR and Sky TV for the new set of rights has now expired, but the parties are still in discussions, and it is understood that Sky remains in the box seat to forge a deal.
Publicly listed Sky told the stock exchange in December that discussions “remain ongoing and confidential”, and that it was not willing to comment on media speculation about pricing. It told Media Insider in a statement yesterday that the negotiations were “constructive”.
But with the expiry of the exclusive negotiation period comes the opportunity for other parties to open talks with NZR.
It is understood there have been informal, early discussions between NZR and other potential partners, including international streamers, though at this stage Sky is considered the most realistic option.
If Sky’s drastic cutback in pricing is confirmed, as expected, there are heavy implications for the likes of player salaries and other costs.
NZR would need to bridge the gap as much as possible with other broadcasters, here and internationally, for matches not covered by the Sky deal.
Sky, which needs to reduce production costs, seems set to agree to a deal whereby it screens, for example, only three NPC games each weekend, leaving the opportunity open to another broadcaster or media company, such as TVNZ, to screen other NPC games. Or NZR might decide it can further build up its own NZR+ digital platform and audience base by screening those other games itself.
It appears that one of the questions still unanswered is whether the rights would cover rugby’s bold new global competition, the 12-country Nations Championship. Sky is very likely wanting to ensure that its rights deal covers the biennial competition - proposed to include the Six Nations countries, New Zealand, Australia, South Africa, Argentina, Japan and Fiji, with a grand final at the end of each year.
At this stage, it is questionable whether there is a realistic second party interested in full New Zealand rugby rights, and therefore willing to enter a bidding war with Sky.
While Netflix has moved into live rights – with the likes of WWE wrestling, one-off “boxing” bouts such as Jake Paul v Mike Tyson and Christmas Day NFL games – it also has relatively strong penetration in the New Zealand market. Forking out millions for a sport with questionable global appeal is unlikely.
“Sky certainly believes that rugby has no other option,” said one source.
Another said: “While rugby is very, very important to you and I as New Zealanders, it doesn’t even work in Australia. Rugby is the third sport in winter [behind AFL and league], and the fourth when you count cricket during the summer.”
Nevertheless, NZR – with the help of IMG – might still find some interest internationally.
DAZN is likely to be near the top of any list, given its recent deal to buy for Australia’s Foxtel. It is owned by Ukrainian-born, UK-based billionaire Sir Len Blavatnik.
“[New Zealand rugby rights] would be pocket change for them,” said one source.
It announced last August that it had secured the New Zealand rights for UEFA club football matches, including the Champions League for the next three years. It also screened the recent boxing bout between Tyson Fury and Oleksandr Usyk although coverage was marred by poor streaming quality for many customers.
DAZN growth markets chief executive Pete Oliver said in August: “DAZN is dedicated to bringing the best in sports entertainment to our customers in New Zealand.”
He did not respond to questions overnight.
DAZN said it was unable to comment on “potential and active rights opportunities and negotiations”.
A more intriguing possibility could be whether DAZN might acquire some or all of Sky TV itself.
Forsyth Barr regards the company “as one of our top five M&A [merger and acquisitions] candidates for 2025″.
In a research note published on December 19 – titled “approaching the tryline” – Forsyth Barr marked Sky TV (SKT) with an “outperform” rating.
“A significant unknown for SKT is whether an international sports streaming platform enters NZ and acquires the NZ rugby rights,” said the research note, by Aaron Ibbotson and Benjamin Crozier.
“The two potential outcomes for SKT are unlikely to initially benefit its investment case: (1) if SKT is forced to raise its bid for the rights to around or above the current NZ$110m it pays, growing ebitda will be challenging — though we believe SKT is unlikely to overpay for the rights this time. (2) If it loses the rights, investor uncertainty about the size of subscriber losses will be significant and likely weigh on the share price in the near term.
“We see a very possible path here where SKT would lose less in revenue than the cost of rights and production for NZ Rugby, but it would likely take time for the market to gain confidence that the loss of rights is positive for free cashflow.”
On the potential for a takeover bid, the analysts said: “We forecast that SKT will generate ~NZ$60m of free cashflow per year from FY26, putting it on a ~15% free cashflow yield.
“That level of cashflow should be able to support a meaningful level of debt in a private setting. 2x ebitda, less lease expenses but adding back cash, is over 80% of its current market cap (~NZ$350m). We believe these metrics are likely to attract bargain hunters, as it did just over a year ago.”
In October 2023, Sky revealed it had received “a highly conditional, non-binding preliminary expression of interest [NBIO] from a third party to acquire all of the shares in Sky”.
It said the proposed transaction “falls short of the board’s view of the fair intrinsic value of Sky and, based on recent unsolicited feedback, the view of a number of Sky’s institutional shareholders. The board has advised the third party accordingly, and has ended discussions in respect of the NBIO.”
In a statement yesterday, in response to questions about the rugby rights, a spokeswoman said: “As we shared at our ASM in November, the exclusive negotiating period has concluded, and we remain in confidential, constructive negotiations with NZR.
“We continue to bring a future-focused mindset to negotiations as we look to achieve an outcome that reflects the value that our customers and shareholders place on this partnership.
“As we have said previously, we’ve had a strong partnership with NZR over many years – and look forward to this continuing for many to come – as we share the same goal to engage with as many fans as possible and grow the game of rugby in Aotearoa New Zealand and beyond.”
Editor-at-Large Shayne Currie is one of New Zealand’s most experienced senior journalists and media leaders. He has held executive and senior editorial roles at NZME including Managing Editor, NZ Herald Editor and Herald on Sunday Editor and has a small shareholding in NZME.
Ad agencies take aim at global merger; Untimely deaths of three respected NZ journalists.