Sky shares plunge 7 per cent following rugby rights news

The rugby broadcasting rights announcement is expected to have an impact on Sky's shares. Photo/File.

Sky shares plunged 7 per cent as the market opened the morning.

The broadcaster current price is at $2.25, down from $2.43 at the close of the market yesterday.

Before the market opened, an investment expert said there was likely to be panic-selling of Sky shares this morning following the shock announcement that the company was not the preferred bidder for the 2019 Rugby World Cup rights.

"It doesn't seem to get any better for the company, and it's going to have quite an impact," said Grant Williamson, an investment advisor at Hamilton Hindin Greene.

"The indication was that they would be the preferred bidder, so it has come as a bit of a surprise to the market. It just seems to have so much against it at the moment."

Sky was informed overnight that it was not the preferred bidder for the broadcast rights for the upcoming Rugby World Cup.

"We have been informed that negotiations are underway with the preferred party, and our bid remains in play should those negotiations fail," Sky said in its NZX statement.

Like other pay-TV companies around the world, Sky has gained a foothold in the New Zealand market by chasing the rights to the country's most popular sport and counts almost half of New Zealand households as customers. The company is facing increased rivalry from local and overseas internet-based services, weakening its hold on movies, drama and children's television content. Speculation emerged last year that US internet giant Amazon was moving into sports broadcasting and may start competing for rugby rights, while it has been reported this morning that Spark New Zealand and TVNZ have made a joint bid and are the preferred bidder.

"While we are disappointed not to be the preferred bidder, it's an economic reality that we can't have every match of every sport that New Zealanders like to watch," said Sky.

"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."

Rugby World Cup rights are sold by IMG Media on behalf of Rugby World Cup Ltd. Sky noted it continues to have SANZAAR rights through to 2020, which covers All Blacks tests, Super Rugby and the Mitre 10 Cup. Its other sports offerings include the Warriors and the NRL, cricket, netball, supercars, golf, cycling, football, basketball, Moto GP and boxing.