Sky TV outsourcing deal could stop others competing for 'second tier sports'

Monday, 30 November 2020

Sky TV’s proposed deal with outside broadcasting company NEP does raise competition concerns with regard to sports rights, the Commerce Commission has warned.

Sky TV’s hopes of outsourcing the filming of sports events to United States-owned firm NEP have suffered a major setback after the Commerce Commission spelt out its competition concerns.

Sky announced in August that it planned to sell its outside broadcasting subsidiary OSB to NEP New Zealand which would then film events for Sky for the next 10 years.

But the Commerce Commission said in a “statement of issues” that the deal might mean NEP was the only company practically able to film at least some “lower profile” sports events.

That could have a knock-on effect on the ability for companies other than Sky to compete for broadcasting rights, it warned.

Sky TV chief executive Martin Stewart hopes the outsourcing deal could help Sky avoid a $50m investment.

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The commission singled out basketball, hockey and club football, events such as the Rugby Sevens in Hamilton, and Warriors rugby league and Wellington Phoenix football matches as being most likely to be impacted.

The proposed sale of OSB would see Sky transfer 38 OSB staff and ownership of its six outside broadcasting trucks to NEP New Zealand

Sky chief executive Martin Stewart has said the deal would avoid Sky having to fork out $50 million to upgrade its outside broadcasting trucks so they could film events in 4K.

But the commission said the sale and the proposed 10-year outsourcing deal were “very closely connected” and it needed to look at both when considering whether to clear the sale.

NEP would need to film events for Sky at pre-agreed prices during the 10-year duration of the proposed supply agreement.

“At this point we cannot rule out the prospect that the supply agreement could advantage Sky in the acquisition of broadcast rights and the broadcast of New Zealand premium live sports,” the commission said.

“The exclusivity provisions in the supply agreement could result in NEP having limited capacity or incentive to perform work for third parties.

“NEP is likely to be incentivised to maximise Sky’s share in the national markets for the acquisition of sports broadcasting rights and the broadcast of New Zealand premium live sports content.”

Broadcast deal could help tie up rights to events such as Wellington Phoenix football matches, watchdog warns.

Sky has kept the advice it has provided to the commission on what would happen if the watchdog declined to clear the sale confidential.

But it will still have an opportunity to turn the commission around.

The commission has invited further submissions and pushed back the expected date for its final decision until February.

Sky spokeswoman Chris Major said it was disappointed to be informed of the delay.

It was working through next the steps with the commission and NEP “as well as supporting our teams who are personally impacted by the delay”, she said.

Ironically, former Commerce Commission chairman Mark Berry has been acting for NEP in arguing the case for clearing the takeover.

Berry dealt a hammer blow to Sky in 2017 by announcing the block on its proposed takeover by Britain’s Vodafone.

Two parties have lodged anonymous submissions with the commission, objecting to the OSB transaction, both of which contained details indicating inside knowledge of the industry.

One warned that owners of “local New Zealand made productions and content” would lose out and the sale “would take New Zealand’s outside broadcasting market back to a monopoly”.

The second also argued “you cannot go from only two high-spec outside broadcasting suppliers in New Zealand to only one without it being a substantial lessening of competition”.

But Sky maintained in a cross-submission – despite the commission’s subsequent comments – that its proposed services agreement with NEP was “non-exclusive”.

“There are no terms in the agreement that prevent or restrict other buyers – including Spark Sport – from buying NEP’s services on the same or better terms as Sky,” it said.