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The streaming wars have only just begun

If the carve-up of televised sport is eye-watering for viewers, stay tuned for what the entertainment giants have in store.

On October 10, as Typhoon Hagibis was bearing down on Japan, threatening to disrupt Rugby World Cup games, Spark Sport created a storm of its own when it revealed it had won the rights to broadcast our other beloved game – cricket.

Spark chief executive Jolie Hodson said the six-year deal starting in 2020 would see the telecommunications provider’s streaming platform show all Black Caps and White Ferns matches played in New Zealand and cement Spark’s place “as a significant player in New Zealand’s sports viewing landscape”.

It certainly did, but with Sky retaining rights for showing international cricket games for four years, it split cricket coverage down the middle. The response from cricket fans posting on the Black Caps Facebook page, which has 2.1 million followers, was fast and furious.

“SO angry about this,” wrote May Barnard.

“As a pensioner, it’s difficult enough to pay for Sky but now we have to find more $, or go without something, to watch our favourite summer game.”

“Heartbroken by this decision,” added Jennie Henderson. “Can’t afford to have Sky and Spark to follow all the Black Caps games. … cricket is the loser.”

This was the tone of discussion spanning two days, 2100 Facebook comments and countless angry red-face emojis.

The storm will only grow. Kiwi viewers face increasing fragmentation not just of sports rights, but also TV shows and movies being divided up among premium providers as competition in video streaming intensifies. A territorial grab for rights, with sport as the big drawcard, has seen telecoms operators through to social-media giants pay vast sums for content rights overseas.

Cricket fans will have to pay twice to watch the national men’s and women’s teams. Photo/Getty Images

But there are large question marks over the ability of these players to profit from their large investments, particularly as consumers question having to take out multiple subscriptions just to see what previously was on a single platform.

Spark’s foray into cricket also revealed our lingering digital divide, with a significant number of Spark Sport subscribers in rural areas experiencing frustrating glitches and failures trying to stream Rugby World Cup matches over marginal broadband connections, an experience they had paid $70-$90 for.

“This is really rubbish,” vented Maree McNally. “We’re in a rural area with no chance of streaming with our satellite broadband. We’ll just have to enjoy one last summer of watching, then crank out Radio Sport to listen to the game.”

It wasn’t the alternative scenario those who had grown frustrated with Sky’s high prices and inflexible pay-TV plans had in mind. In recent years, Sky has been the brand to hate, a situation reflected in its eroding subscriber base and languishing share price.

“Somewhere along the way the relationship (with customers) started to get broken or damaged,” Sky’s new chief executive, Martin Stewart, told Newsroom in an early interview in March. “We stopped listening or even when we did listen, we didn’t take action.”

On October 14, Sky did act, announcing a “revolutionary broadcast agreement” with southern hemisphere rugby body Sanzaar to screen rugby in New Zealand for the next five years – including the annual Super Rugby tournament. Part of the deal, rumoured to be worth $400 million, sees New Zealand Rugby become a 5% shareholder in Sky TV. It joins rugby body and broadcaster at the hip, creating a clear conflict of interest for NZ Rugby when it comes to future rights negotiations.

With a vested interest in Sky’s future performance, NZ Rugby has no incentive to open the door further to Spark Sport. But it also shows that NZ Rugby understands the rising frustration of true fans at the growing fragmentation of sports rights. It has struck a lucrative financial arrangement, which should allow for a much-needed cash infusion to nurture the game, but its move is also strategic – to keep a critical mass of fans on one platform.

Digital divide: Sky’s Martin Stewart and Spark’s Jolie Hodson. Photos/Supplied

Subscription dilemma

As well as outbidding Sky for the Rugby World Cup, Spark has paid tens of millions of dollars for broadcast rights to Formula One, English Premier League Football, WTA women’s tennis, international hockey, the World Rally Championship and some US basketball content. That’s an impressive roster and Spark will need to continue signing big cheques to consolidate its position in sports. But neither Sky nor Spark Sport now has the ultimate sports package.

Last week, Spark delivered another bouncer – a deal with the International Cricket Council covering highlights packages for men’s and women’s T20 and ODI world cups and the world test championship. Sky countered by extending its exclusive rights deal with NZ Netball until 2024.

But cricket fans among Sky’s 618,000 satellite subscribers – who on average pay $81 a month for the pay-TV service – are left with a dilemma. Do they stick with Sky’s set-top box and sports channel line-up, supplementing it with a $19.99 a month Spark Sport subscription? Or do they cut the cord and go all-in on streaming, buying Sky Sport Now for $49.99 a month ($39.99 on a 12-month plan) and pay for Spark Sport on top?

At least the two sports streaming providers have, thankfully, adopted the Netflix model, allowing you to subscribe month-to-month, cancelling your credit card payment when your favourite sport is in its off-season without financial penalty. Dedicated sports fans, who channel-surf from cricket to golf to rugby to netball to football, are therefore well catered for in the new streaming environment – as long as they have a decent broadband connection.

One of Stewart’s first moves at Sky was to revamp the Fanpass sports streaming service, rebranding 12 sports channels as Sky Sports Now, adding a daily news show and cutting the price in half from $99.99 a month. Sky TV is certainly living up to its new tagline, “Life needs more sport”. But from the more casual sports fan’s point of view – that’s most of us – the landscape is now more frustrating to navigate, particularly if you still value Sky’s other entertainment options, such as the SoHo channels, which exclusively show a great selection of TV shows, the cable news services and dozens more pay channels as well as free-to-air TVNZ, Māori TV, Three and Prime.

Sky’s value traditionally was as the TV aggregator, giving you a decent package of entertainment, news and sport in one place. Just 10% of its subscribers pay only for sport, with 30% opting for its pay-TV entertainment package. But 60% bundle together both. The demand for one provider to put a compelling selection of content in front of us remains strong and Spark Sport’s streaming hiccups have even seen many taking to social media to express nostalgia for the days before streaming, where, for all its flaws, Sky wouldn’t interrupt your game with a buffering symbol.

Sky has locked up NZ rugby. Photo/Getty Images

Global streaming giants

But Sky’s ability to add entertainment to the mix is under pressure, too. The big US TV and movie makers, who for years cut exclusive deals with Sky to exclusively show their content here, are starting to go it alone with their own streaming platforms. Sky will lose the Disney and Disney Junior channels from its entertainment line-up on November 30 with the worldwide debut of the Disney Plus streaming service ($9.99 a month here).

Disney has a vastly profitable movie and TV business that also leverages its strengths in theme parks and merchandise. It owns popular franchises such as Star Wars and the Marvel superhero movies and last year bought Fox Corporation for US$70 billion, giving it a massive library of additional movie and TV content. It is the most promising challenger to Netflix, which now has 158 million subscribers and is spending over US$15 billion on buying and producing content this year.

Netflix started as a rent-by-mail DVD business, but it was its streaming service, which began in 2010 and soon expanded internationally as it added original content, that has changed the viewing habits of a generation and effectively killed the local video store. But it, too, is struggling with fragmentation and, with more than US$12 billion in debt, is literally burning cash to keep its streaming empire afloat. It, too, will lose Disney content, and perennial favourites such as Friends and The Office will also depart the platform. Warner Bros-produced Friends ended production in 2004 after a decade-long run on US free-to-air channel NBC. But the old episodes are so popular that Netflix paid US$100 million to extend its rights to show them for an additional year, to the end of 2019. Friends will shift to WarnerMedia’s new HBO Max streaming service, which will launch next year.

Netflix is doubling down on its strategy of producing its own shows, such as Stranger Things, which propped up its viewership and subscriber numbers in the three months to September 30.

Despite investing in Stranger Things, Netflix’s debts are mounting. Photo/Supplied

Sky TV hasn’t the deep pockets to produce its own shows for pay-TV subscribers and those opting for its own Neon video streaming service. Neither does Spark’s Lightbox video service, the future of which looks increasingly marginal as it faces a growing number of international streaming rivals.

The nightmare scenario for Sky is that HBO, which, with such shows as Game of Thrones and its own streaming platform for US subscribers, has been a mainstay supplier of SoHo channels, stops licensing its shows in favour of going direct to consumers here. WarnerMedia Entertainment, which owns HBO, is launching the streaming platform branded “HBO Max” in the US next year,  bundling content from its own television studios as well as content from the BBC and Japan.

Also gearing up to join the streaming wars is Apple, with its TV+ service due to launch on November 1. It has invested US$6 billion to produce its own content and has the advantage of putting its app on every iPhone, iPad and Apple TV device, a benefit that has seen it rapidly make inroads in streaming music against rival Spotify with its Apple Music service.

That’s not to mention Amazon Prime TV, which streams here for $9.50 a month. Amazon also produces its own shows and movies, though without integration with its Amazon Prime package-delivery service here, the e-tailing giant hasn’t made much of an impact against Netflix.

The immediate future of streaming then is one of juggling multiple online subscriptions, requiring the discipline to cancel and renew payments as must-watch shows and sporting events come and go. No wonder so many are pining for the days when bog- standard free-to-air channels and Sky’s pay service ruled.

Winston Peters. Photo/Getty Images

No government lifeline

TVNZ is keeping its hand in sports broadcasting. It screened last year’s Commonwealth Games exclusively and will show the America’s Cup in 2021. It is Spark Sport’s TV partner and back-up plan when streaming falls over. Next year, TVNZ will show a selection of T20 internationals and Super Smash provincial T20 matches as part of Spark Sport’s cricket-rights deal.

But Deputy Prime Minister Winston Peters wants free-to-air channels to air all the big sporting events, from rugby and cricket to the Olympics and the Football World Cup. Last year, New Zealand First floated a members’ bill to guarantee just that. There is, however, little interest in introducing so-called anti-siphoning legislation (preventing private broadcasters gaining monopoly rights to named events before free-to-air broadcasters have a chance to bid for them) as an antidote to the fragmentation of sports rights and the migration to streaming services. Peters renewed his call for free-to-air sports coverage following the streaming glitch that marred the All Blacks v Springboks game early in the Japan tournament. But Spark has avoided similar disasters during the remainder of the tournament and Labour and National have no interest in having the taxpayer, via TVNZ, foot the bill to claim expensive sports rights.

Which means we must embrace streaming and get savvy about the options, which, for those of us on low-bandwidth internet connections, will remain annoyingly limited.

This article was first published in the November 2, 2019 issue of the New Zealand Listener.