Why the Sky/Vodafone deal could hinge on sport content rights

Spark, TVNZ, Trustpower, 2Degrees, the Coalition for Better Broadcasting and others have all made submissions to the Commerce Commission on the proposed Sky Vodafone merger. And a common theme running through many arguments is that such a deal could lead to the newly formed company monopolising sport content broadcast rights.

One of the most vocal opponents, Spark has narrowed in on this topic almost exclusively, saying that it is likely to hurt consumers in the long run—a move which is particularly interesting given the telco no longer offers sport content as part of its SVOD offering.

Earlier this year, Spark pulled the plug on Lightbox Sport on account of poor subscriber numbers making the business unsustainable.

If anything, this experience would’ve illustrated to Spark how difficult it is to compete with the incumbent Sky, which has essentially locked up all the most popular Kiwi sports content.

Spark explains in its submission to the Commerce Commission that in order for a service to attract sufficient subscribers, content rights holders need access to the most popular sports—namely rugby, cricket, rugby league and football.

Through its financial clout, Sky has successfully managed to lock these sports into content deals for a number of years. And the concern expressed by Spark is that a merger between Vodafone and Sky will eventually lead to a monopoly of sports streaming rights.

Spark’s submission explains: “After the merger, Sky/Vodafone can be expected to engage in exclusionary conduct, including initial deep discounting of bundles and restrictive or uneconomic wholesale deals; and then ultimately, once smaller/newer RSPs have been squeezed from the market, to offer a lower quality/higher priced pay TV product.”

Spark then goes further by saying that the addition of Vodafone to Sky’s arsenal could potentially lead to the newly merged organisation locking up the digital and mobile sports streaming rights as well.

In a joint press conference held after the announcement of the proposed merger, executives from Sky and Vodafone said they would not be limiting Sky’s online content to Vodafone subscribers.

That said, it isn’t completely unfathomable for this to happen further down the line. As RNZ’s MediaWatch pointed out earlier this year, when Australian telco Optus won the rights for English Premier League Football, it provoked ire in fans by limiting the content to its subscribers. How tempting this might be for Vodafone as well.

As corollary of Vodafone and Sky having all the premium sport content locked down, this could also put Spark at a disadvantage when it comes to attracting new customers. As shown by the multitude of content partnerships and offerings across the telco market, bundled packages are playing a major role in differentiating the competitors—and few content deals could be as alluring as the All Blacks and the Black Caps.    

One thing that’s clear is that it will be difficult for any local player to wrestle premium sport content from a merged Sky and Vodafone.            

However, competition in media now extends beyond local borders.

As stressed in the merger proposal submitted by NZME and MediaWorks, the real competition now comes from international players.

This has already been in the video content market with the entry of Netflix into the local market, and live sports content is also becoming a more attractive proposition to the international media giants.

Last year, Twitter emerged victorious from a pitch with other media companies (including Facebook) for rights to stream NFL games and will be streaming its first game on 15 September.

The likes of Facebook, Twitter, Google and Netflix haven’t been quite as eager to get sports content in the local market, but the possibility is always there.  

Spark’s decision to focus on sports rights is also a clever strategic move, given the importance that Kiwis place on sports—particularly rugby.

Populist politician Winston Peters, the leader of New Zealand First, has long called for “sport of national significance” to be available on TV for free.

Peters isn’t alone in this belief, with our neighbours across the ditch introducing legislation that precludes broadcasters from locking up exclusive rights for the major sport codes.

Further afield, the Argentinean government intervened in 2009 to give the public free access to all domestic football, ending the 18-year hold of cable company Televisión Satelital Codificada (TSC) on the exclusive rights to broadcast games.

The move proved widely popular among the public, many of whom could not afford the cable subscription fees.

But professional sport is a lucrative industry, and in both Argentina and Australia sports bodies have started lobbying the government to put the rights back onto the free market.    

The point being that no matter how significant a sport might be on a national level, we don’t have an inalienable right to watch rugby, cricket or football. And besides, if we’re going attribute national significance to participation numbers, then walking is far and out our most prominent sport. Too bad it makes for terrible television.     


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