Investors have cheered the news that Sky TV is buying Discovery NZ Ltd, whose business centres on free-to-air television channel Three, for $1 in a debt-free deal.
Sky shares were up 5.14% to $3.07 in midday trading – bucking a fall in the broader market that saw the NZX50 down 0.55%.
Asked for the primary reason for the deal, first tipped by Media Insider on June 12, Sky chief executive Sophie Moloney focused heavily on ThreeNow.
“The one thing we’ve been really missing is a BVOD [broadcast video on demand] platform,” Moloney said.
The deal will deliver just such a free-to-air streaming platform, ThreeNow, without Sky going to the risk and cost of building one itself, she said.
TVNZ, which had no comment on today’s developments, is preparing an upgrade that will give its streaming platform wider capabilities, including paid content.
In more traditional or “linear” TV terms, pundits see Three’s greater audience reach than Sky’s free-to-air channel, Sky Open, as a key element in securing the next round of rugby rights, expected to be finalised in the coming weeks.
An insider said that despite proliferating digital options, many viewers remain fixated on the first three buttons on their remote.
“The rugby discussions continue to be really constructive,” Moloney said.
“I don’t think that this changes the nature of those discussions, but we’re really excited about the diversity of reach that we’ll get through Three and ThreeNow.”
The transaction will close on August 1, but Moloney told the Herald the merger of the two broadcasters’ operations would take 12 to 18 months.
“Detailed planning starts from now,” she said.
Over the next few months, Moloney said viewers will see “no change to Sky Open or Three channels and content”.
Sky is committed to Three being part of Freeview, she said.
![“[It's] not the fact that it’s one dollar, but the fact we’re having an investment in TV Three, and we have a good, sound Sky," - Media and Communications Minister Paul Goldsmith.](https://www.nzherald.co.nz/resizer/v2/ZMXLZJ5JN5GHTC4ZOD5USH7L6U.JPG?auth=2644a7a56a33371dfe5256947a082cfadfb9f9bb27427e2be46b8ea93dd62db2&width=16&height=11&quality=70&smart=true)
The Stuff-produced 6pm news bulletin, ThreeNews, will remain. There were no plans to extend news to Sky Open (formerly Prime), which has had no local bulletin since its 5.30pm news, produced by Three, was dropped last year at the same time Warner Bros Discovery outsourced its news to Stuff.
“There is no discussion about any layoffs or anything at this stage,” Warner Bros Discovery Australia-New Zealand managing director Michael Brooks said.
In a few days’ time, some 130 Discovery NZ staff will still move from Three’s long-time home at Flower St, Eden Terrace to a building in Freeman’s Bay, where Warner Bros International Television Production New Zealand also has an office.
But Brooks now frames the shift as transitional. The plan is for them to move in with Sky, which maintains a corporate office in the CBD and its main operations in light-industrial Mt Wellington, “in a few months’ time, once details are worked out”.
There aren’t any immediate plans to merge any Sky or Three online services. There will be no change to the location of any Warner Bros Discovery content, Brooks said.
A key lure for investors in recent times – Sky’s 2023 promise to double its dividend to 30c per share by 2026 – remains firmly in place, Moloney said.
Sky says the transaction will add to free cashflow immediately and add “at least $10m” to operating earnings by 2028.
The deal got a regulatory green light, or at least an assurance of no investigation, after it was confidentially shared with the market regulator before the announcement.
“The Commerce Commission was made aware of this merger from the parties involved and doesn’t currently intend to consider it further,” Commerce Commission general manager, competition Vanessa Horne told the Herald.
How did the deal get the okay from the same regulator that raked the proposed Sky-Vodafone NZ and NZME-Stuff mergers over the coals, ultimately incinerating both?
The Herald understands that Warner Bros Discovery (WBD) told the regulator that it would fold its tent in New Zealand if the Sky deal was not approved – lessening competition.
But Brooks said that was “not at all” the case. Sky and WBD had begun talks late last year then “leaned into” the process after they realised it was mutually advantageous.
The Commerce Commission had no comment specific to the Sky-WBD deal. The spokeswoman, Horne said every merger was assessed on the basis of whether there would be substantial lessening of competition.
Brooks said the deal was not tied to Warner Bros and Discovery’s decision to unwind their 3-year-old mega-merger. Sky-WBD New Zealand talks had pre-dated the announcement of that conscious uncoupling by months.
The state of Warner Bros Discovery’s New Zealand finances was laid bare last July – a massive $138 million loss in 2023, including a $79.5m impairment.
Its 2024 financials are due to be released in the coming weeks.
The New Zealand media landscape has been extremely dynamic in recent months, highlighted by the board changes at NZME and Trade Me buying 50% of Stuff Digital.
Across the Tasman, global streaming giant DAZN is buying Foxtel in an A$3.4 billion ($3.7b)) deal.
Paul Goldsmith, Minister for Arts, Culture and Heritage, said he saw the deal as encouraging and an investment in New Zealand media.
“Not the fact that it’s one dollar, but the fact we’re having an investment in TV Three, and we have a good, sound Sky. I think it’s quite exciting. It will make Three stronger and more sustainable.”
In a statement to the NZX, Sky said the deal to buy 100% of shares in Discovery NZ for $1 was expected to be:
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.