SKT - Sky Network Television

[mistaTea]

YouTube in secret talks to own TV home screens

https://www.afr.com/technology/youtube-in-secret-talks-to-own-tv-home-screens-20220930-p5bme4

YOUTUBE TAKEOVER???

I think Foxtel, Nine, Sky TV etc will have to go for this deal with YOUTUBE.

ARPU per streaming sub will go down as they give YOUTUBE sweet rates...but could help push growth again (I suspect streaming growth is starting to drop off now for NEON/SSN.

[mistaTea]

If you look past all the fancy slides showing smaller churn for the satellite base and big growth rates for streaming...

The reality is that in the last 5 years Sky TV has only actually grown their customer base by 3.7% a year (They had 824,782 customers in 2017 and 990,761 in the last report).

THAT IS DESPITE DROPPING ARPU to $18/month for a big segement of their customers.

If you do the analysis from when they had peak customers in 2014 (before NETFLIX and streaming became a big thing, all revenue high ARPU satellite subs) then the growth rate for customers over the last 8 years has been 1.7% a year despite effectively giving consumers massive price decreases.

It's a tough gig, and as soon as the growth stops in streaming and the tide goes back out- Management are going to get caught swimming with no underwear.

[Mysterion]

If you do the analysis

Nobody cares about the numbers!

IT'S ALL ABOUT MARKET POSITION!

When Discovery bought TV3 they didn't look at the numbers! They saw the value in an asset that was built up over 30 years and intrenched in NZ culture and identity that could not be easily replicated.

This is why Comcast bought Sky UK )and the CEO still stands by that decision) and also why the AFL renewed with Foxtel.

Sky NZ is still the king of TV and will be over the medium term.

There's growth in SSN streaming. International Cricket, rugby, and EPL will keep the viewer numbers strong.

NZRU will likely renew again, just like AFL renewed with Foxtel it will be at a higher price.

Sky will still be around.

Dividend yield or what ever you want to call it will be suppressed but still likely to be near or above peers after further reduced costs.

Sky should have purchased MW with the cash. That was the right play. It would have made a takeover of them more appealing down the road. In the meantime they just have to keep relevant and absorb the higher programming costs and eventually a merger or takeover will happen at a premium.

As an investment though, it does look sh*t and not worth the risk. For a large institutional holder with deep inside knowledge of the industry it could be a very good investment. For the average retail investor/scum bag, they're better off at the TAB!!

[mistaTea]

Sky NZ is still the king of TV and will be over the medium term.

bwahahaha. Yes, that is why the market has priced Sky with an EV of $250M - because SNT is the king of tv in NZ.

j**** chr*** mate, you are better than that.

Disney and Amazon Prime subs are absolutely booming along. That is where the eyeballs are going.

2D even sh1tcanned the NEON/SSN deal because it wasn't popular. They are getting better growth by expanding their AP deal.

[Shareguy]

https://www.nzherald.co.nz/sport/rugby-sky-to-reveal-mega-tv-rights-deal-but-commentators-snubbed/GZDQO4ABEDCNO4OAEHFIJ2XZFQ/

4 world cups. 👌

[mistaTea]

https://www.nzherald.co.nz/sport/rugby-sky-to-reveal-mega-tv-rights-deal-but-commentators-snubbed/GZDQO4ABEDCNO4OAEHFIJ2XZFQ/

4 world cups. 👌

Will be interesting to see what is released in terms of finalised deal, terms etc.

Winning the RWC is a 'good news' story from the perspective of the brand Sky are trying to promote - Home of Sport. You can't promote that message as easy if your competitors have high profile tournaments. And within Home of Sport, in particular Sky want to remain Home of Rugby. In the process they have managed to offload an expensive investment they made which is now largely worthless to Sky as a going concern. Very good.

Now for the bad news. I remember discussing world cup tournaments with John some time ago - he was certainly never keen on the tournament because it never passed his Cost/Value matrix. The only time Sky won the RWC under his stewardship was back in 2011 when it was in NZ. By then he owned OSB (so could control the entire production) and he could maximise advertising revenue because all matches were played during sociable hours. Apart from that though he took a pass because the value just wasn't there.

This deal certainly sounds expensive - and if Sky have locked themselves into the next four tournaments that is a big call I think.

The majority of rugby fans will already have a Sky Sport or Sky Sport NOW sub. For the much smaller cohort that don't currently sub to Sky but would like to pay to watch the RWC (bearing in mind a number of the key matches will be FTA, a requirement of WR) then they are likely to pay Sky $39.99 for a month of Sky Sport NOW and then cancel. Depending on how the FTA games are stacked, you might only need to pay Sky $19.99 for one week if you are savvy to fill in the gap of good matches between the Opening Ceremony and Quarter Finals to Finals which will largely be FTA anyway.

In that light, this becomes a 'bad news' story for shareholders hoping to get a ROI. Winning the RWC becomes a pyrric victory. It is a very expensive tournament (both in terms of the cash component paid to WR plus all of the marketing and production cost worn by Sky) and revenue either doesn't increase at all as a direct result of having the rights to the tournament or only increases a small amount (and doesn't cover the tournament cost let along produce earnings).

[Mysterion]

This deal would be mega expensive!

So expensive that they had to ditch the commentary team!

Rugbypass gone, another cost savings achieved lol!!

Just need to hack off an arm and leg to secure the 2025 NZRU deal and things will be fine for a little longer yet!!

Sky = STILL RELEVANT = TAKEOVER STILL ON THE TABLE!

[LoungeLizard]

Too much negativity here - justified most of the time - but in securing Rugby rights SKY have secured their survival in the medium term whilst they - hopefully court some suitors.
If Sky hadn't got the rights no doubt (some) people would have seized on that as proof that SKY is dead. Now they switch tack and say - oh but they paid too much. Make up your minds. Rugby is SKY's ace in the hole - it has to have the rights, other wise it is dead in the water. Like SKY in the UK that pays a phenomenal price for Premiership football - the high price is justified for the punters it brings in.
Objectively, this is a good news story for SKY. Will be interesting to see how the market reacts.

[mistaTea]

Too much negativity here - justified most of the time - but in securing Rugby rights SKY have secured their survival in the medium term whilst they - hopefully court some suitors.
If Sky hadn't got the rights no doubt (some) people would have seized on that as proof that SKY is dead. Now they switch tack and say - oh but they paid too much. Make up your minds. Rugby is SKY's ace in the hole - it has to have the rights, other wise it is dead in the water. Like SKY in the UK that pays a phenomenal price for Premiership football - the high price is justified for the punters it brings in.
Objectively, this is a good news story for SKY. Will be interesting to see how the market reacts.

That's the whole point of why SNT are screwed either way.

If they lose key content it is bad news because they might lose a significant amount of subs (and therefore revenue).

If they win the key content in this competitive environment they they have most likely overpaid for it. So shareholders suffer with reduced returns over time.

Like Putin, Sky have no good options from here.

[mistaTea]

Spark still sniffing around for ruggers...

[LoungeLizard]

That's the whole point of why SNT are screwed either way.

If they lose key content it is bad news because they might lose a significant amount of subs (and therefore revenue).

If they win the key content in this competitive environment they they have most likely overpaid for it. So shareholders suffer with reduced returns over time.

Like Putin, Sky have no good options from here.

I agree with you on most things MistaTea, but not here. In the medium term SKY have ensued that they will be the go-to place to watch sport.That is crucial to retain their base.
It doesn't really matter what SKY pay for the Rugby - I believe if they had to increase the price of SKY SPORT, people would grumble but would pay. Is it worth it to pay $100-$200 for a ticket to watch All Blacks live - probably not, but the stands are packed anyway.

In the case of other sports I would agree that SKY need to be careful not to overpay - as Spark did for the cricket, which SKY, wisely, decided to let go. But rugby is such a core element to SKY - and so much of their base will pay whatever it takes to watch it live - that I do think this news will be received favourably by the market.

SKY may in fact be screwed in the long term, but this is allows them to stay in the game a bit longer. I actually think they are undervalued at the moment if you look at P/E, balance sheet, EPS, profitability etc. It's the Boards behaviour that has sent the SP into a nosedive (it was around $2.70 before the MW fiasco). And with the share buyback there will be 1/6th less shares around, so I don't see why dividends won't be able to be maintained in the near future. If the Board can just play with a straight bat for a while instead of going for wild swings (MediaWorks, staff SKY subscriptions) the SP may just start to creep back up again.

Disc. keeping the faith

[Mysterion]

I agree with you on most things MistaTea, but not here. In the medium term SKY have ensued that they will be the go-to place to watch sport.That is crucial to retain their base.
It doesn't really matter what SKY pay for the Rugby - I believe if they had to increase the price of SKY SPORT, people would grumble but would pay. Is it worth it to pay $100-$200 for a ticket to watch All Blacks live - probably not, but the stands are packed anyway.

In the case of other sports I would agree that SKY need to be careful not to overpay - as Spark did for the cricket, which SKY, wisely, decided to let go. But rugby is such a core element to SKY - and so much of their base will pay whatever it takes to watch it live - that I do think this news will be received favourably by the market.

SKY may in fact be screwed in the long term, but this is allows them to stay in the game a bit longer. I actually think they are undervalued at the moment if you look at P/E, balance sheet, EPS, profitability etc. It's the Boards behaviour that has sent the SP into a nosedive (it was around $2.70 before the MW fiasco). And with the share buyback there will be 1/6th less shares around, so I don't see why dividends won't be able to be maintained in the near future. If the Board can just play with a straight bat for a while instead of going for wild swings (MediaWorks, staff SKY subscriptions) the SP may just start to creep back up again.

Disc. keeping the faith

Stayin' alive until the takeover.

[mistaTea]

I agree with you on most things MistaTea, but not here. In the medium term SKY have ensued that they will be the go-to place to watch sport.That is crucial to retain their base.
It doesn't really matter what SKY pay for the Rugby - I believe if they had to increase the price of SKY SPORT, people would grumble but would pay. Is it worth it to pay $100-$200 for a ticket to watch All Blacks live - probably not, but the stands are packed anyway.

Well, only natural for us to not quite see eye to eye on everything.

Some points from me though, for what little it's worth:

• I don't believe the RWC is going to make one jot of difference to Sky Sport subs. As mentioned previously, rugby fans already sub to Sky Sport. Even if they  50,000 additional people (who aren't hardcore rugby fans but want to watch the RWC) to sign up to SSN for the month to watch the tournament that would be an additional $2M revenue. Not great, and I doubt they get anywhere near 50K non-subs to pay them fourty bucks for the month. $2M wouldn't even cover the production and marketing costs - let alone the many millions of dollars paid to WR
• "It doesn't really matter what Sky pay for the rugby" - I mean, I just fundamentally disagree with that. No content is worth an infinite price, so whatever is paid to get the rights to distribute has to ultimately generate earnings. If you just pay 'whatever' to get content so that you can hold onto subs, but reduce EPS in the meantime, you can't be surprised that Mr Market is only prepared to pay a lower PE for your business
• I don't envy Sky for the pickle it has (largely)gotten itself into. Right now they are in a phase of picking the 'least bad' option. If, in an effort not to overpay for content, their competitors start picking up rights then that is obviously bad. If they win all (or most) of the key sporting rights to reinforce their brand as the Home of Sport then by definition they must have paid a premium which will squeeze FCF in the short-medium term and kill the company altogether in the long term
• They should have purchased Vocus NZ 2 years ago. Leveraged buyout. By now Sky-Vocus would be finalising a merger with 2D. Everything would be so different (in the best way possible). I did tell them (numerous times), but we now know that their heads were too far up their arses dreaming about Billboards to be receptive to anything I had to say

[LoungeLizard]

Well, only natural for us to not quite see eye to eye on everything.

Some points from me though, for what little it's worth:

• I don't believe the RWC is going to make one jot of difference to Sky Sport subs. As mentioned previously, rugby fans already sub to Sky Sport. Even if they  50,000 additional people (who aren't hardcore rugby fans but want to watch the RWC) to sign up to SSN for the month to watch the tournament that would be an additional $2M revenue. Not great, and I doubt they get anywhere near 50K non-subs to pay them fourty bucks for the month. $2M wouldn't even cover the production and marketing costs - let alone the many millions of dollars paid to WR
• "It doesn't really matter what Sky pay for the rugby" - I mean, I just fundamentally disagree with that. No content is worth an infinite price, so whatever is paid to get the rights to distribute has to ultimately generate earnings. If you just pay 'whatever' to get content so that you can hold onto subs, but reduce EPS in the meantime, you can't be surprised that Mr Market is only prepared to pay a lower PE for your business
• I don't envy Sky for the pickle it has (largely)gotten itself into. Right now they are in a phase of picking the 'least bad' option. If, in an effort not to overpay for content, their competitors start picking up rights then that is obviously bad. If they win all (or most) of the key sporting rights to reinforce their brand as the Home of Sport then by definition they must have paid a premium which will squeeze FCF in the short-medium term and kill the company altogether in the long term
• They should have purchased Vocus NZ 2 years ago. Leveraged buyout. By now Sky-Vocus would be finalising a merger with 2D. Everything would be so different (in the best way possible). I did tell them (numerous times), but we now know that their heads were too far up their arses dreaming about Billboards to be receptive to anything I had to say

1.The RWC will increase the sports subs to some degree, but it's more about protecting the brand and continuing to be relevant. Without Rugby SKY would lose it's main attraction - it would be game over.
2.We don't yet have the detail on what SKY paid, so lets hold fire on saying they overpaid until we see the detail, although we may never know for sure.
And as far as EPS is concerned - is 36c per share not good enough? And going well over 40c after the share buyback. Plenty of headroom there to pay a reasonable divvy and grow business.
3. FCF was $105m last year, well up on the two previous years and getting back to pre-covid levels. Content costs will go up, but operating costs are going down significantly.
4. No argument from me about what SKY should have done regarding a telco. That would have been a great way to expand the business with huge synergies. But the SKY board have feet of clay - past and present.

[mistaTea]

1.The RWC will increase the sports subs to some degree, but it's more about protecting the brand and continuing to be relevant. Without Rugby SKY would lose it's main attraction - it would be game over.
2.We don't yet have the detail on what SKY paid, so lets hold fire on saying they overpaid until we see the detail, although we may never know for sure.
And as far as EPS is concerned - is 36c per share not good enough? And going well over 40c after the share buyback. Plenty of headroom there to pay a reasonable divvy and grow business.
3. FCF was $105m last year, well up on the two previous years and getting back to pre-covid levels. Content costs will go up, but operating costs are going down significantly.
4. No argument from me about what SKY should have done regarding a telco. That would have been a great way to expand the business with huge synergies. But the SKY board have feet of clay - past and present.

1. I really don't see how RWC increases sports subs by a material amounnt. It is a short tournament and, as I have said, rugby fans already subscribe to Sky Sport. The much smaller pool of people who aren't year-round rugby fans but would pay to watch RWC (even though it is during unsociable hours) are unlikely to start subbing for the long term. Maybe a month of SSN and then most will cancel. As for your comment "Without rugby Sky would lose it's main attraction" - yes, agreed...without rugby...as in the NZR contract which has Super Rugby, NPC and the AB tests etc. We aren't discussing whether or not Sky should make a concerted effort to remain the dominant player in rugby...we are talking about whether the RWC is likely to meet Cost/Value. When Spark won the RWC last time I don't recall Sky TV losing any subs. In fact, our sport subs (from our streaming platform) grew. Clearly Sky need to maintain their position as the biggest aggregator of sport...but in this environment, having a clear sense of Cost/Value is even more critical than before. Sophie may have a different idea to me on what 'value' is, and that is fine.

2. Well, sure - and they will never officially release the numbers. But if Spark paid $12 or $13 million last time as reported in the media, well I think it's a safe bet that Sky probably paid at least that. Let's say WR gave it a bit cheaper because Sky are committing to 4 tournaments - even $10M a pop would be eye watering I think.

3. FCF of $105M includes the $55M property sale. So underlying FCF was really $50M, and that will be increasingly under pressure (especially if they spend money on 'trophy' tournaments like RWC that are unlikely to increase earnings)

4. Thank chr*** we still see eye to eye on one thing!