UPDATE: Sky TV shares drop 7% after firm says it isn't preferred bidder for 2019 Rugby World Cup
By Tina Morrison and Sophie Boot
March 28 (BusinessDesk) - Sky Network Television's shares dropped after the company said it may miss out on the broadcast rights for next year's Rugby World Cup, saying it isn't the preferred bidder.
"We were informed overnight that we are not the preferred bidder for the New Zealand broadcast rights for Rugby World Cup 2019," the Auckland-based company said in a statement to the NZX before market open this morning. "We have been informed that negotiations are underway with the preferred party, and our bid remains in play should those negotiations fail."
The company's shares dropped 7 percent to $2.25 in the first 15 minutes of trading, meaning that they're down 41 percent from this time a year ago, when they closed the day's trading at $3.80.
"It doesn't seem to get any better for the company, and it's going to have quite an impact," said Grant Williamson, an investment adviser at Hamilton Hindin Greene. "The indication was that they would be the preferred bidder, so it has come as a bit of a surprise to the market. It just seems to have so much against it at the moment." Ahead of the market opening today he predicted some panic selling of the stock.
The announcement comes two days after long-serving chief executive John Fellet said he would retire this year. Like other pay-TV companies around the world, Sky has gained a foothold in the New Zealand market by chasing the rights to the country's most popular sport and counts almost half of New Zealand households as customers. The company is facing increased rivalry from local and overseas internet-based services, weakening its hold on movies, drama and children's television content.
Speculation emerged last year that US internet giant Amazon was moving into sports broadcasting and may start competing for rugby rights, while it has been reported this morning that Spark New Zealand and TVNZ have made a joint bid and are the preferred bidder.
Sky TV didn't disclose which company is the preferred bidder for the Rugby World Cup but said "sport broadcasting is a competitive business, and while we are disappointed not to be the preferred bidder, it’s an economic reality that we can’t have every match of every sport that New Zealanders like to watch. While the Rugby World Cup is great content and we put forward a strong bid for it, it is an incredibly expensive event that plays once every four years for six weeks."
Rugby World Cup rights are sold by IMG Media on behalf of Rugby World Cup Ltd. Sky noted it continues to have SANZAAR rights through to 2020, which covers All Blacks tests, Super Rugby and the Mitre 10 Cup. Its other sports offerings include the Warriors and the NRL, cricket, netball, supercars, golf, cycling, football, basketball, Moto GP and boxing.