Sky Television goes international, buying 'world's largest' rugby streaming provider

Friday, 16 August 2019

Purchase will be paid for in cash and shares.

Sky Television is expanding its sports business internationally, agreeing to buy Dublin-based RugbyPass, which it described as the 'world's largest digital rugby platform', for US$40m (NZ$62m).

Sky said RugbyPass' live streaming service held SANZAAR rugby rights in 62 countries, including exclusive rights in 39 countries, and was the 'premier online destination for global rugby fans' with customers across Asia, Australia and Europe.

Chief executive Martin Stewart said the acquisition would let Sky 'reach beyond New Zealand borders and open up significant opportunities for the company and its partners'.

But he confirmed the purchase would not result in any new rugby content being available to Sky viewers in New Zealand, or directly change its business here.

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'It is an overseas-focused business. It is important for Sky in the medium and longer term for us to expand beyond New Zealand and this we think is the most sensible way for us to start by leveraging our deep knowledge and involvement in rugby.'

RugbyPass was reaching more than 40 million people a month and was growing quickly, he said.

'It has the ability to reach rugby fans in markets that are not currently well-served with rugby content and a strong growth plan for more markets.'

Sky was valued at $475m on the NZX based on its closing share price on Thursday, making the acquisition a material one for the company.

There was speculation in May that Sky might decide to expand its business within New Zealand by entering the telecommunications market as an internet provider.

Its move into the international sports-streaming market could suggest that any such plan may have a taken a back seat.

Stewart would not say whether a move into the internet-provider market was under consideration, but said he would not see a link.

'RugbyPass stands on its own merits. We are looking at a range of different ways we can grow our business.

'You shouldn't see this as something that says we are 'one and done' because we are most definitely not.'

Jarden analyst Arie Dekker suggested the deal could have an impact on Sky's ability to re-sign SANZAAR rugby rights for New Zealand 'at the very margins', but said it had already expected that it would win those local rights.

'SANZAAR … will clearly take a commercial approach to rights in all the territories where they can sell them,' he said.

Sky's shares climbed 4 per cent to $1.27 in early trading on the NZX on Friday in the wake of the RugbyPass announcement.

Sky is buying RugbyPass from privately-owned US investment company Cooper and Company and will run it as a wholly-owned subsidiary of Sky.

It will pay US$10m cash and another $20m in the form of new shares in Sky, with the US$10m balance payable in cash 'during an agreed earn-out period'.

Stewart said Sky did not expect the purchase to have a material impact on Sky's earnings for the year to the end of June next year.

'As we start to grow the business in line with the ambitious targets that we will have for it, then in common with any streaming business – particularly a global one – people experience a period of investment, and that is not going to be any different with this one.'

Dekker believed RugbyPass was probably trading around break-even at the moment.

'These sorts of moves are consistent with our view that Sky will be bolder and invest in protecting its business – having headroom will be important over the next few years,' he said.

With key rugby rights coming up for negotiation, Jarden believed it was certain Sky would reduce its dividends to shareholders and 'quite likely' it would suspend them entirely, he said.

RugbyPass chief executive Tim Martin estimated there were 120 million rugby fans around the world, many of whom lived in parts of the world where accessing content could be difficult, and said Sky's involvement would enable it to reach more of them.