"If someone outbids us, they're going to go broke," Sky boss Martin Stewart told media and analysts at his company's full-year results on August 22.
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Stewart seemed to be drawing a line in the sand but, just weeks later, Spark grabbed domestic cricket rights.
And at Sky's annual meeting in Auckland today, Stewart - who had swapped August's black skivvy and jeans for a suit - struck a notably more subdued tone.
He said the pay-TV provider would continue to pursue sports rights that "matter to our customers, but make sense for our shareholders in the long term".
Stewart said Sky was "very disappointed" to lose domestic cricket rights.
"[But] we bid 50 per cent more than what we were paying before" and it was still not enough.
Spark's bid was too rich for the self-styled "home of sport" to match.
"We have to make sure we can generate an economic return for our shareholders," Stewart said, suddenly sounded more like his predecessor John Fellet than the persona he presented in August.
He emphasised Sky had managed to keep international cricket rights. He said Sky had to pay more than its last contract, but declined to say if it was as bruising a fight as the domestic cricket rights barney.
The first question from the floor was on the company's once-fat dividend, which in August was suspended.
A shareholder asked when the profit payout would resume.
New chairman Philip Bowman could not give a date.
He added that with new competitive threats, the rise of streaming and increasing content costs, profits needed to be "reinvested to reposition the company".
"Over the past few years, there's been relentless attrition of subscribers. We need to change the way this business operates," he said.
The second question was how Sky could compete with a company that had ancillary businesses that allowed it to subsidise losses in streaming (that is, Spark with its core telco business).
Stewart responded that Sky had two strategic challenges: how it could operate outside the small New Zealand market, and how it could diversify its revenue.
He said Sky's recent acquisition of global streaming operator RugbyPass - which holds Sanzaar rights in 60 countries - in a deal worth up to US$40m met both of those objectives. He underlined that Rugby Pass has an online audience of more than 40 million (however, most read its content rather than paying to watch its streams. Founder Tim Martin earlier told the Herald that 20,000 pay. He hoped to increase that to 40,000 by the New Year, and he ultimately saw up to two million people worldwide paying for RugbyPass's $15/month full service).
Stewart also hinted that Sky could move against Spark on its own turf, saying: "We look at competitors and look at the bundles they offer and wonder if there are opportunities for us in those areas."
After the AGM he told the Herald that Chorus offered an excellent service. Did that mean Sky was shaping up to offer its own broadband service, wholesaled from Chorus? Stewart said it was something that had been discussed at board level, along with other potential strategies, but "no decisions have been made at this point."
Asked if he thought the Commerce Commission would allow a Sky-Vodafone deal today, he said he thought the regulator's decision was flawed, but emphasised a push for broader wholesale deals and partnerships, with a range of partners, rather than a renewed attempt at a merger.
Stewart noted Sky's existing wholesale deal with Vodafone, which sees Sky's content delivered as a core component of Vodafone TV. He said Sky was also talking to Vocus (owner of Orcon and Slingshot) and 2degrees about possible partnerships and was showcasing its content through deals with Stuff and NZME (the publisher of the Herald).
Questions from the floor were almost exclusively hostile. Investor Coralie van Camp indicated she would vote for the Sanzaar and Rugby Pass resolutions (she say Sky in a "terminal" state if the rugby deal was not closed), but also complained about the attendant "double dilution" of Sky's stock. (Both transactions dilute existing shareholdings, with NZ Rugby getting 21.8 million shares and RugbyPass Investors 25.1 million shares.)
The key vote to effectively sign-off on the in-principle deal with New Zealand Rugby reached over the weekend passed with 99.9 percent support, and the equity component of Sky Rugby Pass acquisition also received a strong endorsement with 98.4 percent voting in favour.
But, notably, a chunky 25.6 per cent of shareholders voted against a resolution to issue Stewart with 800,000 share rights under a salary scheme.
NZ Rugby must hold shares for two years
Earlier, Sky revealed NZ Rugby must hold onto its Sky shares for a minimum two years.
Shareholders were asked to vote on a special resolution to approve a new five-year Sanzaar deal - covering All Blacks, Super Rugby and Mitre 10 Cup games.
As part of the deal, said to be worth a total $400m (Bowman would not give a figure when asked by a shareholder), NZ Rugby will take a 5 per cent stake in Sky.
If approved (update: it was), the shares will be issued on November 1.
The "yes" vote was regarded as a done-deal. Indeed Morningstar Research analyst Brian Han said earlier this week that it would be "fatal" for Sky to lose rugby.
Sky confirmed earlier that NZ Rugby is not paying cash for the shares; they are included as kind as part of the new Sanzaar package.
At yesterday's closing price, NZ Rugby's 5 per cent stake would be worth $22.1m.
This author earlier raised the concern that the stake conflicted NZ Rugby in future negotiations. Punting for Spark in 2026 would collapse the value of its investment in Sky.
However, the two-year provision would allow NZR to sell its shares before the next round of Sanzaar talks.
Stewart also refused to comment on the cost of the new Sanzaar deal but said rights were "keenly fought over so we have paid a materially increased sum but it is within our forecasts".
Shareholders were also asked to vote on $20m in new equity issued to cover part of the cost of the Ruby Pass deal (the balance is covered by a draw-down on Sky's new $200m credit line. There is also a US$10m earn-out clause).
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At Sky's annual result briefing, on August 22, Stewart delivered bad news to investors, including the suspension of the dividend, with no word on when the profit payout could return, and a massive write-down.
And the company's shares fell to a record low of 87c last week as Spark revealed it had won domestic cricket rights, then recovered most of the lost ground as Sky confirmed it had held rugby rights (though the stock is still off 51 per cent for the year, and its all-time high of $7 in 2015 now seems a long way off).
Investors could prove toey today, having seen Sky cancel its dividend and take on a $200m credit line to sure up its sports portfolio, but still lose domestic cricket rights.
Streaming gains offset satellite losses
On August 22, Sky reported a full-year net loss of $607.8m on revenue that fell 6.8 per cent to $795m. Its second-half dividend was axed but total subscriber numbers increased as streaming gains outweighed satellite customer losses - but with the company making less money per sub.
The net loss included a non-cash $670m impairment on goodwill assets.
Stewart said the write-down was based on a "more conservative estimate of our future average revenues" and the fact Sky could "no longer include increases in hybrid and satellite subscribers."
He also cited Disney's new Disney Plus streaming service, which will launch in NZ in November, ending Sky's monopoly on Disney content - and forming part of a wider trend for content makers using apps to reach their audiences directly online. Sky subsequently said it would pull its two Disney channels.
Sky also wrote-off $38m on the cancellation of a decoder upgrade in favour of a focus on apps and streaming, a $6m content write-off as some shows were deemed surplus to requirements in a more streaming-focused world, and a $5m charge for redundancies.
After allowing for various write-offs and the impairment, it made an adjusted net profit of $97m against the year-ago $119m.
Earnings before interest, tax, depreciation and amortisation were $230.1m against the year-ago $285.8m.
Total subscriber numbers increased 1 per cent to 779,000 from the year-ago 768,000 as numbers using Sky's Fanpass and Neon apps jumped 50 per cent.
A decrease in satellite customers from 661,000 to 618,000 was offset by an increase in streaming customers from 107,000 to 161,000.
It was the first time total subscriber numbers have increased since a highwater mark of 852,679 was reached in 2016.
But the fact the streaming apps are cheaper than satellite plans meant overall average revenue per user per month sunk from $77.73 to $74.84.