TVNZ calls foul over rights to relay rugby

By Karyn Scherer

TVNZ is considering legal action against Sky TV as its public battle with the rival broadcaster hots up.

The network's chief executive, Rick Ellis, confirmed yesterday that the State-owned enterprise was talking to its lawyers about Sky's decision to strike a deal with TV3 for the free-to-air rights to prime rugby games.

Mr Ellis said TVNZ was looking at whether Sky had breached "certain rights we believe were represented by the 1999 rugby contract".

He also confirmed TVNZ wanted to provoke public debate on whether anti-siphoning laws should be introduced to ensure the public would continue to get free access to certain sporting events.

Many overseas countries, including Australia, have introduced special laws to mollify public concerns over pay-TV operators' dominance of sports coverage.

However, Mr Ellis acknowledged the issue was fraught with difficulties - not the least of which is professional sports bodies' concerns that their income from selling TV rights to their games could be eroded by such legislation.

Another possibility it was exploring was whether Sky was operating as a monopoly under the Commerce Act.

Mr Ellis said TVNZ was deeply concerned it was forced to spend huge sums on sports coverage that could otherwise be spent on local programmes "in a market where a single player can effectively have a monopoly position on key sports properties".

Sky has cited TVNZ's plans to get into pay-TV as the reason it decided to snub the State-owned broadcaster over the rugby deal.

Its decision comes just a few weeks before Cabinet is due to consider whether TVNZ should be allowed to proceed with its plans.

It is understood the Government has commissioned an independent review of TVNZ's proposals, to decide for itself whether the venture makes financial sense.

Ironically, the public falling-out between TVNZ and Sky comes just a few weeks after TVNZ stressed the two players needed to stay on-side, for strategic reasons.

Its assurances followed criticism from a group of institutional investors who were furious that TVNZ agreed to sell its 12.6 per cent stake in Sky to three other shareholders at a discounted price.

The investors claimed they had offered TVNZ an extra $6.9 million for the shares, but their offer had not been seriously considered.

In Parliament, State-owned enterprises Minister Tony Ryall said TVNZ had told him it wanted to remain on good terms with Sky, as it had several commercial arrangements with the broadcaster.

These included the fact that Sky used its distribution arm, BCL; that it contracted TVNZ to film major events; and had other "commercially sensitive programming arrangements".

Mr Ellis conceded it now appeared unlikely it would be able to do a programming deal with Sky for its new digital channel.

However, he said TVNZ was confident it had done the right thing, given that Sky had since struck a deal with BCL to carry its analogue service until 2010.

He declined to say how much the deal was worth, but said TVNZ believed the amount involved justified the discount given to Sky's major shareholder, Murdoch-controlled media group Independent Newspapers, and two smaller shareholders, Craig Heatley and the Todd Corporation.