Martin Stewart has managed to turnaround Sky TV's fortunes during his first year as chief executive - at least to the degree that he has turned around what seemed a relentless decline in subscribers.
He's managed to hold onto Sanzaar rights and institute a sweeping restructure to redouble efforts on streaming, which has got positive notices from most analysts.
Under his reign, Sky has gone on the front foot, buying Lightbox from Spark for $6m, and global streaming player Rugby Pass in a deal worth up to $63m. It's grabbed naming rights to the cake tin in Wellington.
But Sky's stock has kept tumbling. The shares closed down 3.8 per cent to 60c following the company's half-year result, adding to a cumulative fall of nearly 70 per cent over the past 12 months.
Does he feel like he's not getting the love from investors for various moves he's made so far?
"I think in common with every chief executive, you go through periods of dissatisfaction with your share price. I'd probably add a healthy dose of bafflement to my position.
"I came in here with a belief of what needed to be done. And I had plenty of advice given to me from all quarters about what needs to be done. And I'm very pleased to say that we did it. We did it all in the first 12 months, did everything that people asked us to do.
"So I think it's just a question of us working through whatever the skepticism or whatever the doubts are, that people have been showing them that, you know, we have the [Sanzaar] rights for the next five and a half years.
"There's no way that we're going anywhere in five and a half years, and yet we're valued on a couple of times [operating earnings] multiple. It just makes no sense."
Sky rejects Sanzaar exit rumours as shares hit new low
One of those who has given Stewart little love is Forsyth Barr analyst Matt Henry, who had an underperform rating ahead of Sky's result today. Afterward, he indicated he's seen no upside surprises to change his mind.
Yet Stewart was able to deliver a positive headline result: a jump in total subscriber numbers in the first-half from 779,000 (or the year-ago 750,000) to 795,000, driven by a 74 per cent increase in subs to its various streaming services.
For the second period in a row, streaming subscriber numbers (which jumped from 113,000 first half of 2019 to 196,000) grew faster than satellite numbers fell.
Henry had expected as much, however, and was left cold.
"The success in one doesn't come close to offsetting the attrition in the other," he told the Herald.
Satellite customers spent an average $83 per month with Sky in the six months to December, while the company's streaming services are far lower yielding (Neon costs $13.95 per month, RugbyPass $US14.99 per month and Sky Sport Now from $38.99 per month).
Henry doesn't like that downward pressure on overall arpu (average revenue per user per month) as the percentage of customers on streaming plans increases.
He's also been put off by increasing costs. He concedes some are one-offs related to restructuring, but he also sees ongoing upward pressure on programming and marketing costs thanks to new online competition.
He noted that Sky was actually cashflow negative for six months to December 31, if costs associated with the RugbyPass acquisition were included.
"They're trying hard to turn around the aircraft carrier. They're trying to revolutionise the business," Henry said. But everything has just got a lot harder. "It's not like the old days when they have a monopoly."
• Outside broadcast sale: Sky losing its third moat
• Disney+ has already forced changes to NZ's entertainment landscape
• Streaming wars: How Disney+ and Apple TV+ stack up against Netflix, Lightbox & more
Stewart could brag that, this month, total customer numbers have swelled to 925,000 thanks to customers who have come onboard with Sky's acquisition of Spark's Lightbox for $6m (Lightbox will be merged with Neon later this year). The Sky boss would not say how many of those were individuals who paid for Lightbox, and how many would continue to get "Lightbox on us" under a commercial deal between the two companies.
Stewart would not comment on the commercial terms of Sky's ongoing deal with Spark, so that the telco can continue to provide free access to Lightbox to qualifying broadband customers.
But whatever the sum involved in the wholesale deal, it was not enough to change Sky's guidance (originally issued on November 18) for lower revenue (between $750m and $770m) and lower operating earnings (between $170m between $190m) for full-year 2020. The dividend remains suspended.
In a note earlier this month, Jarden (which has a neutral rating and $1.01 target) questioned if Sky is generating enough cash to support the business and said it may struggle to access additional finance as its $200 million bank facility, which is already drawn to $90 million, shrinks to $150 million in July 2021.
Yesterday's accounts showed the board is reviewing the company's funding structure, given the banking facility step-down, plus a $100 million bond maturing in March next year.
Stewart only addressed that point in broad terms, saying "Our results need to be looked at by third parties and one of the things they look at is our ability to finance ourselves into the future. We have a clean bill of health. We're in good shape for working our way through what we have to do."
He remains optimistic overall. He dismisses recent reports of South Africa decamping from Sanzaar to join the Six Nations and create a new seven-team tournament (notwithstanding that one of the reports emerged from the Sky-owned RugbyPass). Sanzaar contracts are solid, he said.
But while the CEO flatly rejected stories of any defections before 2025, he added, "What happens after that is obviously very much up for grabs. And that's one of the reasons we bought Rugby Pass - because there is an inevitable feeling of change, in the long term, around global rugby.
"We want to see rugby remain healthy in those countries where it's been the other main sport - and in places like France, and the United Kingdom, where obviously football is still the dominant sport but rugby is strong. We want to protect that, but also see ground global basis. And that means being open to new relationships. So we at Sky bought Rugby Pass to allow ourselves to have that global position for whatever develops in the future."
Stewart said that world-wide, there are now around four million people who access RugbyPass articles or video every month. He sees the global streaming service as central to Sky's future.
Close to the time of the acquisition, Rugby Pass founder Tim Martin told the Herald the service had around 20,000 paying subscribers. Stewart would not give a figure, but the total streaming service revenue figures indicate Rugby Pass has yet to catch fire.
First-half revenue fell 5 per cent to $384.5m. Within that, residential satellite customers' contribution fell from $322m to $299m; "other subscriptions" (including Neon, Sky Sport Now and Rugby Pass) chipped in $52m from the year-ago $46m, and advertising revenue fell from $27m to $26m.
That is, streaming customers accounted for 24.7 per cent of total subs for the period, but just 13.5 per cent of total revenue.
Stewart's key problem remains that cost pressure is rising at a time when new services are bringing in much less money than those they replace.