SKT - Sky Network Television

[mistaTea]

Seriously tho, it's probably not even worth buying unless they give it away like Lightbox. There might be some competition this time, like DNAZ.

Oh I agree 100%. We don't need their platform (like we did need Lightbox) so I wouldn't want to pay any money for that. It would just be negotiating an agreement so that Sky take the rights they currently hold off their hands. A bail out with a wholesale deal for SSN to keep Spark's sports fans happy.

As Spark overpayed for essentially all of the rights they won, Sky clearly don't want to foot that bill. So I see a deal where Spark gift Spark Sport, and agree to eat a portion of the rights costs so that Sky will take it off their hands.

Effectively paying Sky TV to take Spark Sport off their hands so that they can put this sorry saga (their third attempt to enter live sport!) behind them.

Either way, Sky will inherit more rights costs not previously allowed for...so that will eat into the cash pile a bit.

Probably end up with a $30M buyback and a $30M dividend. Hopefully more, maybe a special divvy of $15M to take us up to 50% of projected cash in the bank.

[mistaTea]

https://www.stuff.co.nz/business/129321437/sky-tv-could-sell-rugbypass-to-world-rugby

[Mysterion]

Probably end up with a $30M buyback and a $30M dividend. Hopefully more, maybe a special divvy of $15M to take us up to 50% of projected cash in the bank.

Buyback could be higher @ $40m-$50m but it will be extended over a long period of time.

Dividend will be small, like $10m, but they might put a special divy of $5m on top.

On paper it will look like a big $65m cash return but in reality it's only 5% yield.

Maybe enough to lift the share price back to $3 over the next year but any new investor coming in would have to be brave.

Buyback program could be paused half way through and mediaworks comes back on table. Buyback could also eat into next years return and put cash pressure on company.

[Mysterion]

https://www.stuff.co.nz/business/129321437/sky-tv-could-sell-rugbypass-to-world-rugby

O yeah, I forgot they sold the streaming business as it was buried in one of their reports and they never mentioned it. Another user here picked found out about it last year.

Is RugbyPass worth anything? Seems like Sky just want to offload it as the now has a negative value if more payouts is required.

[Plata]

Do they actually have the imputation credits for a dividend though? Would have thought they would have quite a lot of tax losses to go through from write downs?

[mistaTea]

Do they actually have the imputation credits for a dividend though? Would have thought they would have quite a lot of tax losses to go through from write downs?

They do. The GAAP losses they showed were from goodwill write downs (the actual operations of the business have remained profitable throuhout).

So we have always attracted a tax liability and accumulated imputation credits.

The amount are in the notes of the financials.

[mistaTea]

Buyback could be higher @ $40m-$50m but it will be extended over a long period of time.

Dividend will be small, like $10m, but they might put a special divy of $5m on top.

On paper it will look like a big $65m cash return but in reality it's only 5% yield.

Maybe enough to lift the share price back to $3 over the next year but any new investor coming in would have to be brave.

Buyback program could be paused half way through and mediaworks comes back on table. Buyback could also eat into next years return and put cash pressure on company.

There is no way in Hell Sky are going back to MW any time soon, and nor do shareholders want them to.

You are wrong about the dividend too - they have affirmed the 50-80% of FCF payout range. All we are waiting to find out is which end of guidance are they closest to.

The dividend will be at least $30M, and they might do a smaller buyback but include a special dividend.

Hence something like a $30M buyback (which on current volumes will take ages) and maybe a $15M specal divvy to thank us for being such good sports.

So total capital return of $45M with a $30M or so dividend seems about all we can expect.

Maybe ends up using a total of $75M-$80M of cash, which would still leave them with $70M+ cash in the bank to do what they need to do to help Sky grow.

I would be surprised if WR physically paid Sky any cash for RP. I would think it would be more a case of Sky pay them less than they normally would for an expanded multi-year deal, and RP is given away. I could be wrong on that, I am not familiar with how these kinds of deals are executed.

[mistaTea]

https://www.newstalkzb.co.nz/news/business/sky-tv-says-its-in-advanced-talks-to-take-back-the-rugby-world-cup/

Jarden research head Arie Dekker told the Herald it was time for Spark to follow BT in the UK and exit sports streaming, which he sees as high-risk compared to the telco's core business - where he sees it performing well.

Even Arie Duh-duh-dekker is saying Spark need to find an exit.

[Mysterion]

There is no way in Hell Sky are going back to MW any time soon, and nor do shareholders want them to.

You are wrong about the dividend too - they have affirmed the 50-80% of FCF payout range. All we are waiting to find out is which end of guidance are they closest to.

The dividend will be at least $30M, and they might do a smaller buyback but include a special dividend.

Hence something like a $30M buyback (which on current volumes will take ages) and maybe a $15M specal divvy to thank us for being such good sports.

So total capital return of $45M with a $30M or so dividend seems about all we can expect.

Maybe ends up using a total of $75M-$80M of cash, which would still leave them with $70M+ cash in the bank to do what they need to do to help Sky grow.

I would be surprised if WR physically paid Sky any cash for RP. I would think it would be more a case of Sky pay them less than they normally would for an expanded multi-year deal, and RP is given away. I could be wrong on that, I am not familiar with how these kinds of deals are executed.

I doubt an $80m cash return is coming. Lucky if it's even half that.

The board know that costs are going through the roof!

They will met guidance, more likely low end but investors will be looking for future earnings. They'll be warnings that revenue will be flat going forward because broadband and Neon will underperform. Pandinic is over and people are spending cash elsewhere. They'll also be more chord cutting after this rugby season. People are under pressure and will be looking to cut costs. Sky are also doing more promotional and offering customers more discounts to stay. Average revenue per user probably dropping.

The mediaworks pivot was a red flag as it shows they want to get out of their business and into something else. They know there are more headwinds and their revenue growth story isn't materializing.

The newsletter was going on about reinvesting for organic growth. To me this just reads that it's costing more to keep the lights on. Rugby renewal costs going forward will be high. The fact that RP is on the table is in indication of the squeeze that's happneing

Last year it seemed like they were indicating there was "revenue growth" and they were "cutting costs" thanks to that ex-Foxtel executive. This is why they called it an inflection point. However, in my opinion the narrative has changed over the last few months as it's now more likely that revenue will be flat and costs of doing business will increase because of inflation. For example, fixing the customer service will costs millions over the next few years and program rights will keep going up as production cost are increasing.

[Plata]

I don't understand how rights costs can be assumed to always inflate. Are they not set by bidding processes most of the time? If all the bidders are experiencing worsening conditions why would they pay more money? Or are many rights just fixed price contracts?

[mistaTea]

They will met guidance, more likely low end but investors will be looking for future earnings. They'll be warnings that revenue will be flat going forward because broadband and Neon will underperform. Pandinic is over and people are spending cash elsewhere. They'll also be more chord cutting after this rugby season. People are under pressure and will be looking to cut costs. Sky are also doing more promotional and offering customers more discounts to stay. Average revenue per user probably dropping.

You are contradicting yourself here mate.

Which is it? People are flooding back to restaurants, pubs and spending their cash on retail (and therefore will be watching TV much less)...or prople are under pressure financially due to inflation (in which case they are more likely to be cutting back on restaurants, pubs, retail spending etc and will be at home more. If they are at home more often, at a minimum they want good TV to watch.)

I think Sky TV, NEON, SSN will be the last thing to go in households feeling financial pressure. They will be more likely to drive much less to save on gas (and that means being home much more).

I do believe we will be happy with the results - both in that they have met guidance, and guidance for future earnings will be quite strong (though there will be impact to those if Sky are indeed in negotiations to take the Spark Sport content).

[Mysterion]

I don't understand how rights costs can be assumed to always inflate. Are they not set by bidding processes most of the time? If all the bidders are experiencing worsening conditions why would they pay more money? Or are many rights just fixed price contracts?

Sky Sport price hike: Broadcaster blames 'rights inflation'

https://www.newstalkzb.co.nz/news/business/sky-sport-price-increase-rights-inflation-blamed-as-customers-to-pay-more/

"There has obviously been rights-inflation in sport content, including the step-up in rights costs [to NZ Rugby]."


Not sure how the bidding works, but I would assume the price is higher now than it was 6 months ago when this article was written

[Mysterion]

You are contradicting yourself here mate.

Which is it? People are flooding back to restaurants, pubs and spending their cash on retail (and therefore will be watching TV much less)...or prople are under pressure financially due to inflation (in which case they are more likely to be cutting back on restaurants, pubs, retail spending etc and will be at home more. If they are at home more often, at a minimum they want good TV to watch.)

I think Sky TV, NEON, SSN will be the last thing to go in households feeling financial pressure. They will be more likely to drive much less to save on gas (and that means being home much more).

I do believe we will be happy with the results - both in that they have met guidance, and guidance for future earnings will be quite strong (though there will be impact to those if Sky are indeed in negotiations to take the Spark Sport content).

Bro, nobody cares about results as we all know they have met guidance.

But forward guidance will likely be revenue flat and costs skyrocketing!

There will be loads of people canceling Neon and SSN lately (especially post price increase and current rugby season). And there will be some satellite chord cutting, not heaps but enough to keep pressure on.

Cash return will help but medium term outlook looks hazy at best! Longer term outlook even more questionable when NZRU renews. Cash return then won't help. Short term maybe stock bounces back to $3 but then takeover less likely. Catch 22.

[mistaTea]

Bro, nobody cares about results as we all know they have met guidance.

But forward guidance will likely be revenue flat and costs skyrocketing!

There will be loads of people canceling Neon and SSN lately (especially post price increase and current rugby season). And there will be some satellite chord cutting, not heaps but enough to keep pressure on.

Cash return will help but medium term outlook looks hazy at best! Longer term outlook even more questionable when NZRU renews. Cash return then won't help. Short term maybe stock bounces back to $3 but then takeover less likely. Catch 22.

Well, I don't think the future outlook is as bleak as you make out.

But, there is a bit going on and we do have to reset expecations in terms of how much cash is returned as they will want to hold onto a bunch.

So my $100M total is a pipe dream.

Probably in the $70M-$80M range total payment (buyback, divvy + special divvy). Still a sizeable divvy.

And probably pay $25M divvy thereafter.

I don't think NZR is anything to worry about - the reality is Sky TV and NZR have a symbiotic relationship. They really do need each other, and neither wins long term if the other suffers too much.

Martin Stewart didn't understand this and panicked. NZR like to come in and play 'hard ball' when negotiations begin, but at the end of the day they would not have seriously considered going to Spark. What a massive risk to switch from a reliable partner who offers a great product, to an unknown...especially given it would exclude a lot of provinsial NZ (the beating heart of rugby).

So Sky will renew rugby, and it will be on more favorable terms (to Sky) than the current deal.

In the meantime they will cut more costs and continue to see growth in streaming with earnings supported by a stable satellite base.

We have no real reason to think otherwise.

I agree with you 100% that the best thing for shareholders is a takeover. And the right buyer would also be great for Sky in terms of removing key risks about her long term future.

But a takeover seems very unlikely - if the Board were not resistent to that idea they would have got the investment bankers together long before now to get a sale.

It would be a very nice suprise if a deal like that was announced, but low probability I think.

[Plata]

the reality is Sky TV and NZR have a symbiotic relationship. They really do need each other, and neither wins long term if the other suffers too much.

While I am not certain of this I think it is a good point to consider. NZR will probably be pretty cautious about any potential provider change given rugby is starting to struggle at a grassroots level with the popularity of soccer/football , basketball etc taking off.