Giving broadcasters a sporting chance
Olympics shows key role sport plays in broadcasting globally — so what’s happening locally?
The brains trust at Sky Network Television’s Mount Wellington headquarters is probably sparing a thought for the US cable network giants, which reported some pretty savage writedowns last week.
After all, New Zealand’s dominant pay-TV operator went through its own painful bloodletting a few years back, the most savage of which was a $1 billion writedown in the June 2019 year — when its grip on sporting rights was feeling decidedly loose.
That figure might pale in comparison to the US$6b ($9.9b) impairment charge booked by Paramount’s cable channels, such as MTV, Nickelodeon and Comedy Central, or the US$9b written from Warner Bros Discovery’s networks, which includes CNN, but it was more existential for the Kiwi company.
Sky was used to sitting pretty with a seemingly unassailable content library until Spark NZ started raiding the kitty, the most audacious being when the telco secured the 2019 Rugby World Cup rights.
Sifting through the headlines, there were some silver linings for Sky as the US majors broadcast their results. The chief one is the importance of sport, which Sky knows well, given that it charges $49.99 a month for its streaming Sky Sport Now service compared to the $19.99 monthly fee for entertainment service Neon.
There’s a bitter battle going on for the US NBA TV rights, where Warner was left on the sidelines when the league struck a US$77b, 11-year deal with Amazon, Disney and NBC.
Warner Bros Discovery’s (WBD) TNT network — a long-standing broadcaster of the game — is suing, claiming the league has breached its contract. Sky knows all about that, given the price rugby extracted in 2019, which included a chunky equity stake before the Covid meltdown and sharply discounted equity-raising diluted the rugby union to below the 5% substantial shareholder level.
Similarly, NBC parent Comcast talked up the importance of its Olympics coverage when reporting just as the Summer Games were kicking off, and its use of Snoop Dogg was an absolute banger, while Disney’s ESPN remains a powerhouse as it underpinned the first profitable quarter for its streaming division.
Even the New York Times sports section, The Athletic, which it bought for US$550 million in 2022, is nearing the break-even mark with 5.3 million digital-only subscribers supporting rapid revenue growth. Local publisher and radio station operator NZME has very much followed the News Corp playbook in pursuing its premium offering, such as buying the BusinessDesk masthead a few years back and channelling the likes of Trade Me, REA Group and Domain in building its OneRoof real estate listings business. Yet its sports pursuits unsurprisingly play more to the talent-driven radio and podcast side of the business, with the likes of the Alternative Commentary Collective and Gold Sport, rather than the Moneyball-type focus on stats that often appears in The Athletic.
Sky will be enjoying the golden glow of the Olympics and New Zealand’s biggest haul of 10 gold medals, though as chief executive Sophie Moloney recently told the NZ Herald, the economics of the Games are a far cry from when the company bought them 10 years ago.
And the question becomes one of how to secure broadcasting rights at a price that’s profitable. Spark NZ may have dropped out of driving hard bargains under the stewardship of Jolie Hodson, but TVNZ has rediscovered an appetite for sports as it adjusts to a government shareholder seemingly more interested in its financial performance than its cultural impact, while Stuff is ratcheting up its efforts, such as teaming with WBD to cover the upcoming America’s Cup.
With New Zealand Cricket’s chief Scott Weenik opining this year that the benefits of a broader audience from free-to-air coverage could be worth a smaller fee, some of our media players might want to cast an eye over the unloved TV3, which still trumps TV2 in the audience stakes as the second-most watched free-toair player. WBD is coming under increasing pressure to sell assets or split the business, and New Zealand’s TV3 is a rounding error for the media giant, which can probably be picked up for a song given the $20m-odd price tag Discovery paid back in 2020.
Stuff has already picked up the production contract for the dumped 6pm news and would probably prefer the $114m of advertising revenue TV3 generated in calendar 2023 to the contract fee it’s receiving. Buying an ailing network at a discount wouldn’t be the worst reason to raise money.
Sky might have a different reason to run the rule over TV3. Sure, it wants to beef up its ad revenue, which hit $48m in the June 2023 year, but giving a chunkier viewership a taste of its subscriber products isn’t a bad way to build the sales pipeline, especially if it can also dangle that audience to sporting bodies when pressing for cheaper broadcast rights.
Similarly, NZME might muse over adding free-to-air television to its bundle of print, online, outdoor and radio advertising, which brought in $243m in the 2023 year.
Plus, clipping a fee from rival Stuff to produce the 6pm news provides the lolz factor. In saying that, staunching the perennial losses seems a very high mountain for anyone to climb and much easier for a player that has an existing library to limit those hefty broadcasting rights. TV3’s programming expense was $35.5m in 2023, of which $18.7m was from WBD entities and $11.9m from its Bravo TV joint venture.
And the 800-pound gorilla in the room remains how New Zealand Rugby and its Sanzaar partners decide to carve up the rights for the game, with question marks hanging over the domestic competition and the professional players’ association at odds with the provincial unions. Moloney has said it’s not a given that Sky will sweep up all the rights like it did last time, and it has shown a willingness to partner up in an environment where exclusivity does not hold the same sway it used to.
The big boys in America reminded us that sports remain a clincher in attracting eyeballs to the screen, but how you carve that up and try to extract the gains of broader distribution isn’t as simple as it used to be.