Spark's 'ominous aggression' mustn't put broadband market at risk

Friday, 11 October 2019

Spark Sport have won the rights to broadcast New Zealand Cricket for six years, it was announced on Thursday in Auckland.

OPINION: Sky Television has promised to remain the 'home of sport', but that home is under siege.

Spark's decision to outbid Sky for domestic cricket rights may not be a knock-out blow.

But it is significant enough in its own right and, as analyst Morningstar observed in a research note, it highlights Spark's 'ominous aggression to continue acquiring key sports rights'.

It seems Spark has confounded the doubters – including myself – and decided to push on through in streaming sports, despite its All Blacks-Springbox failure and the millions of dollars it is likely to lose on the RWC.

That would suggest Spark will aim to put enough money on the table to attempt to secure at least the streaming rights to Super Rugby and All Blacks matches from the end of next year.

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The verdict of investors seems to be that both Sky and Spark are on a sticky wicket.

* Sky TV extends international cricket deal

* Spark Sport wins NZ cricket rights for six years

Investors reacted by knocking $90 million off the value of Sky TV and a larger figure, $245m, off the value of Spark, on Thursday.

Sky will of course feel that more.

In percentage terms, the scale of the impact on the two companies' share prices was reversed, with Sky's value diving 21 per cent to $365m and Spark's drifting down 3 per cent to $8.2b.

But so far, neither set of shareholders has anything to celebrate.

Spark could outspend Sky each and every time sports rights come up for grabs if it chose.

But Sky's announcement on Friday that it had secured international cricket rights up to 2023 shows that the two sports services are likely to coexist for several years, meaning two monthly bills instead of one for many sports fans.

In the longer term, it might make commercial sense for both companies if Spark sublicensed the exclusive sports rights it has won to Sky, so Spark provided the online option while Sky continued to cater for the rump of satellite customers who either can't or really don't want to switch to streaming.

Consumers would be the winners from such an arrangement.

But Spark and Sky might find it difficult to hammer out such an accommodation before Spark had the sports streaming market sewn up.

The possibility of regulators stepping in prior to that and putting their own stamp on the sports rights market shouldn't be ruled out.

Just three years ago, Spark successfully argued that the Commerce Commission should prevent Vodafone from taking over Sky.

Spark said in a submission to the watchdog that it was concerned the merged firm would bundle a 'competitive product' – by which it meant broadband and mobile plans – with its monopoly sports rights and in so doing reduce competition.

It was a perfectly valid worry.

Rival internet providers could be forgiven for wondering if the exact same situation may now arise, but with 'Spark' substituted for Vodafone.

The type of tactic that may cause concern includes Spark throwing-in 'must have' sports viewing as a freebie with broadband subscriptions.

Vodafone appears to still be hoping that it will be able to bundle Spark Sport on its Vodafone TV platform on reasonable terms.

'As an aggregator of content, we're always keen to partner with providers of great content to deliver the best possible experience for Kiwi viewers via Vodafone, as long as the commercial terms are right,' its spokesman Richard Llewellyn says.

2degrees spokesman Mat Bolland said it had no comment, but the company has already written to the commission this year to express frustration about what it felt was Spark's failure to wholesale RWC passes on terms it found viable.

This would be a sensible time for Spark to consider what reassurances it could provide to rival internet providers, consumers and regulators that it won't engage in the same behaviour that it feared from a merged Vodafone/Sky business.