Further thoughts on the commercial side too @MarsC...The media...

Further thoughts on the commercial side too @MarsC...

The media has touted that Sky agreed to a deal of $100M/year for the rugby over the next five years. That sounds about right in total when you consider the 5% equity that was given at the time of that deal. So let's run with $100M/year.

One school of thought is that NZR could cut Sky out and go direct to consumers as SL have this capability with their own proven technology.

Well, if this was the case...just to break even with the Sky deal they would probably need to generate at least $130M/year. That is because they would suddenly need to also pay for the actual production costs of the NZ matches as well as all of the commentary, fan engagement and marketing. I think $130M is me being generous, but let's go with it for now.

Currently, Sky have ~350K Sky Sport subscribers. Let's say SL could do well and increase that by 15% with a rugby-only offer (after all, fans just want to pay for the sport they watch right?!).

If we continue with our generous spirit and assume that fans of the new rugby service will pay for 12 months of the year (and they won't - you would be lucky to get them to pay for 10 months of the year as NZ rugby goes on a break over the summer months...)

Then, using our assumptions of:

• NZR/SL can attract 400K fans willing to pay for their service (a very big number in NZ); and
• They need $130M revenue just to break even with what they currently have with Sky; and
• Fans will pay for 12 months

Then we can see that $130M/400K/12 = $27/month to break even. They would have to charge north of $30/month to start being better off...

If we are super generous and say the new service is so successful that they get 500K subs...they still need $22/month...just to break even with the current Sky deal. So they would still need to charge $25+/month to be better off....

But hang on a minute! Right now I can buy a sport bundle from Sky (which includes the ruggers, NRL, football, boxing, tennis, netball, basketball, super cars and more!) for $31.69/month!

In what universe do the fans end up better off in a deal that cuts Sky out? This is where NZR have to be so damn careful.

I could make the same argument for Spark Sport. For Spark to get the rugby off Sky they would have to pay an eye-watering sum of money because the relationship with NZR is that important to Sky. Spark is a large company and could fork out $130M+ if they wanted to, sure.
But it would be a pyrrhic victory as there is absolutely no way in Hell they could recoup the cost by gaining additional broadband/mobile connections (and they would have to be damn careful here too as holding kiwis hostage by saying you can only get a decent deal on your beloved rugby if you sign up to one of our other services would raise a lot of eyebrows in the Comcom I think).