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14-01-2021, 11:57 AM
#6811
Originally Posted by Ogg
This argument has been litigated on this thread for the last 10 years.
Yes, this is why the stock is down 90%.
However, the reality is that third party media aggregation continues to play an important part in the industry.
Point in case, Sky's recent multi year content deal with Discovery, in which Discovery recently launched it's own OTT service but resigned anyway. If you look at Discoverys earning statement you will see a large part of their revenue comes from resellers.
It just comes down to valuation. Does Sky's current market capitalization justify the long term risks as a reseller of content. I have one think that there's a comfortable cushion with the clean balance sheet and EBTIA earnings. The kicker is Sky's branding and market awareness in NZ. It's a household brand and part of history.
I'm in it for a merger/takeover and don't see Sky as a stand only business past 2025.
I think that's a fair approach.
I think Sky should be investigating buying into the proposed NZ rugby commercial entity as well to secure its long term relationship to the content, regardless of what platform it ends up on in future. NZ Rugby is the sole jewel in the crown that keeps SKY as a long term going concern.
Last edited by LaserEyeKiwi; 14-01-2021 at 11:58 AM.
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14-01-2021, 12:25 PM
#6812
Originally Posted by LaserEyeKiwi
I think that's a fair approach.
I think Sky should be investigating buying into the proposed NZ rugby commercial entity as well to secure its long term relationship to the content, regardless of what platform it ends up on in future. NZ Rugby is the sole jewel in the crown that keeps SKY as a long term going concern.
It's myth that somehow Rugby is the only thing keeping Sky going.
Although Rugby is important for Sky, it only makes up a minor amount of it's total hourly viewership. Customers are watching other content the majority of the time.
Case in point, NZ Cricket, which Sky lost, has of yet not effected subscriber numbers materially.
If Sky lost the rugby their value proposition and brand would be effected. Most importantly it effects margin as costs are fixed. This is why it's important that Sky mergers or gets taken over before 2025 when the NZRU rights expire.
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14-01-2021, 12:27 PM
#6813
Originally Posted by Ogg
This argument has been litigated on this thread for the last 10 years.
Yes, this is why the stock is down 90%.
However, the reality is that third party media aggregation continues to play an important part in the industry.
Yes, it is entirely possible that a new investor could go it alone.
But ultimately they will want to maximise earnings to generate the best ROI.
If you sold rugby as a stand-alone product you could maybe charge $25/month like Spark Sport. Plus you would then have to pay someone like NEP to shoot the local super rugby games etc.
It has been touted that the current deal with Sky is worth as much as $100M per annum, and of course as part of that deal Sky shoulder the cost of filming the rugby matches.
So to earn what they currently get from Sky, a new rugby-only OTT product would need to attract over 350,000 customers who subscribe for the full 12 months just to break even on what they get each year from Sky. And the Sky cheque is pretty well guaranteed (apart from the Covid claw back which is a one in 100 year event) whereas an OTT model is at the mercy of subs they can sustain.
So to be better off they prob need at least 400K paying subs for 12 months of the year.
Yes NZ is a rugby loving nation, but I don’t think a stand-alone service would get anywhere near that many subs.
Which is why the aggregation model still makes sense and, in my view, Sky is still best positioned to service that need.
Last edited by mistaTea; 14-01-2021 at 12:29 PM.
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14-01-2021, 12:39 PM
#6814
There is a lot written about SKY sport here.. I wonder how many Sky subscribers do not take the sports channel.
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14-01-2021, 12:41 PM
#6815
Originally Posted by mistaTea
Yes, it is entirely possible that a new investor could go it alone.
But ultimately they will want to maximise earnings to generate the best ROI.
If you sold rugby as a stand-alone product you could maybe charge $25/month like Spark Sport. Plus you would then have to pay someone like NEP to shoot the local super rugby games etc.
It has been touted that the current deal with Sky is worth as much as $100M per annum, and of course as part of that deal Sky shoulder the cost of filming the rugby matches.
So to earn what they currently get from Sky, a new rugby-only OTT product would need to attract over 350,000 customers who subscribe for the full 12 months just to break even on what they get each year from Sky. And the Sky cheque is pretty well guaranteed (apart from the Covid claw back which is a one in 100 year event) whereas an OTT model is at the mercy of subs they can sustain.
So to be better off they prob need at least 400K paying subs for 12 months of the year.
Yes NZ is a rugby loving nation, but I don’t think a stand-alone service would get anywhere near that many subs.
Which is why the aggregation model still makes sense and, in my view, Sky is still best positioned to service that need.
It's just a question of weather or not large companies, like Amazon, Spark, Discovery, Dazn are willing to borrow large amounts of money and run operating losses for the next 20 years to gain market share.
In this case, they are not looking for a ROI. They're just looking to dominate the market.
If so, Sky can not compete.
But Sky does have assets, in the form of 1 million customers.
If large companies above, can borrow $500m on a 30 year loan at less than 2% interests. Then it just makes sense to buy Sky out and get a huge head start.
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14-01-2021, 12:50 PM
#6816
Originally Posted by airedale
There is a lot written about SKY sport here.. I wonder how many Sky subscribers do not take the sports channel.
Almost all do.
It's like most people get a combo at McDonald's. As they basically give you the fries and drink for free when you get the burger. It's just so pointless getting the burger only.
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14-01-2021, 12:53 PM
#6817
Originally Posted by Ogg
If large companies above, can borrow $500m on a 30 year loan at less than 2% interests. Then it just makes sense to buy Sky out and get a huge head start.
I agree that this strategy makes absolute sense. Very strong argument for it.
However I maintain that, given Sky’s many valuable assets, a buyer would need to pay closer to $600M to take Sky private. That is still only 4 x EBITDA, and would only attract $12M a year in interest charges.
$1M a month is lunch money for these Big Companies considering they would walk into NZ with 1M+ paying customers and a business well on its way to a streaming future backed up by an internet offering.
Now that there is light at the end of the Covid tunnel and investors are seeking returns internationally again, will this be the year Sky is targeted?
Or is the reality that nobody wants the business?
Time will tell. Def more likely to happen this year if it is to happen at all.
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14-01-2021, 12:56 PM
#6818
Originally Posted by Ogg
Almost all do.
It's like most people get a combo at McDonald's. As they basically give you the fries and drink for free when you get the burger. It's just so pointless getting the burger only.
That’s actually not true. I remember sky did a presentation a year ago or thereabouts and the sport subs were a minority. A very significant minority, but a minority of subs all the same.
Losing rugby would hurt like hell. But even that would not be ‘game over’ for Sky as most subs are in it for their entertainment packages.
In fact it is entirely possible earnings could increase in that scenario as ~$100M of costs would be removed overnight, but subs would probably not drop to the same extent.
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14-01-2021, 12:59 PM
#6819
Originally Posted by mistaTea
I agree that this strategy makes absolute sense. Very strong argument for it.
However I maintain that, given Sky’s many valuable assets, a buyer would need to pay closer to $600M to take Sky private. That is still only 4 x EBITDA, and would only attract $12M a year in interest charges.
$1M a month is lunch money for these Big Companies considering they would walk into NZ with 1M+ paying customers and a business well on its way to a streaming future backed up by an internet offering.
Now that there is light at the end of the Covid tunnel and investors are seeking returns internationally again, will this be the year Sky is targeted?
Or is the reality that nobody wants the business?
Time will tell. Def more likely to happen this year if it is to happen at all.
It's just weather or not there is more than one party interested in buying Sky.
One party = $500m tops.
Two or more parties competing in a bidding war = up to $1b possible.
Case in point, Sky UK.
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14-01-2021, 01:07 PM
#6820
2021 yea of the take over conspiracy
but I do believe we will see some major change not only with broadband but I would be very surprised if we do not get a takeover over. This company has to be the steal of the decade and if the big company's cant see this maybe NZ is just to smaller player for them?
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