SKT Sky Network Television Limited.

[nztx]

Well, what a complete fiasco. Rumours say they were prepared to pay $300m of OUR money for Media Works, and they were still negotiating as of two weeks ago- you'd think private equity would have bitten their arm off weeks ago at that price - I guess there is no limit to greed when you have a sucker in your grasp eh?

In my opinion, and I'm not a large shareholder (but 300k shares, so not tiny either) I think the entire board should pack their bags and do the decent thing - they have absolutely (and I mean absolutely!) no credibility left. Certainly shouldn't bother looking around for some other deal to save face cause they will just stuff that up as well.

To quote Oliver Cromwell to parliament 1653

It is not fit that you should sit here any longer. You have sat here too long for any good you have been doing lately … In the name of God go.“

Good points there too.

No doubt .. some board vacancies should result from the recent SKT MW chapter in a monster
spring cleaning session.

I would say that SKT is possibly a better business than NZM abeit SKT's tidy up of their act is later
than NZM's and with more carnage - consolidations, tapping holders etc and of course kneecapping
NZR in the process out of the deals..

NZM should to an extent be looked on as old Media - Papers, Radio - is it any better as a target than the unfortunate MW was ?

Does SKT need to merge or takeover anything, or even want to look at troublesome Old Media formats
even if managers of the other outfits have tried reformatting & updating their camps ?

Maybe we want to see international TV outfits or PE to come along with a sensibly priced takeout for SKT
instead ?

Or even an circular relationship where NZM & SKT each hold 35% of each other could be an interesting mechanism & structuring in sea of PE predators looking for a free meal ..

Who knows - consideration could be an inspecie dish out of shares in NZM to SKT holders & vice versa
to produce a defensive structure..

[Poet]

I'd be interested to see if they give us any more detail about the failed deal once things cool off a bit

[moimoi]

That is a different issue altogether. The fact that Sky used to record live sport did not mean that they 'owned' the content.

OSB was going to require a large CAPEX investment to bring the trucks/cameras etc up to scratch. And with NEP in the market, OSB didn't provide any moat to Sky anymore.

The possibility of creating and producing your own content could be separate from the contractual arrangements to film and broadcast what a sporting entity requires.

[mistaTea]

Should we take bets on what comes first?

NZX announcement:

1. Detailing the capital return; or
2. Notification that Sophie has 'resigned'

[mistaTea]

https://thespinoff.co.nz/media/16-06...mediaworks-why

Duncan sums up why Sky is probably one of the 'safest' places to invest right now, given it is still spewing FCF and...

"Sky can be viewed as a counter-cyclical business, meaning people use it more when times are hard. During the last recession, way back in 2008-2010, people stayed in and watched Sky, instead of going out and spending money on clothes or restaurants. MediaWorks, which makes almost all its money from advertising, is a regular old cyclical business. It makes money from advertising, which people buy more of when people are also buying clothes or eating at restaurants. So because there is more and more fear of a recession, a business like MediaWorks is suddenly viewed as a lot more shaky than one like Sky."

This is a point I have tried to make in the past. Some households feeling the pinch may well cancel (or cut back on) their Sky/NEON/SSN subs. But a lot of people will be reluctant to do that when first looking to cut costs. If you have less money to booze it up at the pub, go to restaurants, holidays or general shopping...that means much more time spent at home. If you are essentially forced to stay home more, then at the very least you want to have some good TV to watch.

As inflation continues to bite, you may even see an extra boost in our subs (particularly streaming).

So watch this space!

[bottomfeeder]

Should we take bets on what comes first?

NZX announcement:

1. Detailing the capital return; or
2. Notification that Sophie has 'resigned'

Its a pity they decided to look into MMW, just before the crash. SP is tumbling on the back of the announcement. Still its all easy in hindsight.

The question is ( lets put the MMW behind us) Can she pull the company through some of the tough times ahead. No doubt, we will be in recession very soon, and SKT will lose some subscribers, more if they dont get tbeir act together fast.

Boring Netflix losing their SP ( down 75% and personally breathing through a broken snorkel if they are relying upon a reality squid games to get them out if the downward spiral??????), we need some real management now to run a lean profitable ship. Methinks I smell a takeover when the dust settles.

[LaserEyeKiwi]

A couple of articles today mentioning that Sky pays $101m per year for the Rugby rights.

Has that number been revealed before? Actually a little cheaper than I thought it would be.

At that price I can see why some entities might decide to simply bid for the NZR rights themselves at the next rights renewal, rather than make a takeover attempt for sky.

[mistaTea]

A couple of articles today mentioning that Sky pays $101m per year for the Rugby rights.

Has that number been revealed before? Actually a little cheaper than I thought it would be.

At that price I can see why some entities might decide to simply bid for the NZR rights themselves at the next rights renewal, rather than make a takeover attempt for sky.

Sky never reveal what they pay for rights, but I think it was reverse-engineered from the NZR financials that were published a while back.

I think the fact that it would costs well in excess of $100M/year (plus NEP costs, marketing costs, commentator costs etc) to win rugby from Sky makes a takeover of Sky more attractive.

I would suggest SKy would go up to $120M/year if push came to shove. Given Sky's advantages with their satellite network, for a streamer to win the contract I think they are looking at $140M+/year. By the time they pay for all the other things you need to provide to film, market and deliver the matches etc... you are looking at a good $170M/year.

First off, to justify that kind of spend you must be expecting a HUGE number of subscriptions to your service (far more subs that Sky has ever been able to attract, even when she was a monopoly).

Second, Sky currently has a market cap of $400M. Takeover premium is usually 30-50% (so $520M - $600M price tag). Let's say Sky could negotiate top end given her cash posotion and strong FCF profile...

Well, if someone bought Sky for $600M they would effectively be getting her for $450M right now when you suntract the cash. Given all the content Sky comes with, strong earnings, a stable satellite base (becoming even more stable by the day as they sign up more broadband) and a rapidly growing streaming channel...it would make far more sense to buy Sky...and eliminate a competitor for NZR rights (meaning they would be purchased for a lot cheaper than if you had to go against Sky to win them).

[Monarch]

This whole fiasco has left me questioning whether I trust the board enough going forward to hold this stock. I still think the company itself is undervalued but maybe that discount is justified given the level of incompetence shown by those at the very top. LaserEyeKiwi, I think you might be on to something re creating their own content. I reckon the key to this companies survival over the next 20 years is attracting and retaining the 50+ age group as satellite customers. From what I have read this age group seems to appreciate news and information programs like documentaries etc, and I imagine these are some of the cheapest content types to produce. It could be worthwhile for sky to invest a few million to get a studio going and a few million in yearly budget to make a bunch of exclusive content of this nature. This could become especially important if discovery chose to abandon us and take all their channels down.

[mistaTea]

This whole fiasco has left me questioning whether I trust the board enough going forward to hold this stock. I still think the company itself is undervalued but maybe that discount is justified given the level of incompetence shown by those at the very top. LaserEyeKiwi, I think you might be on to something re creating their own content. I reckon the key to this companies survival over the next 20 years is attracting and retaining the 50+ age group as satellite customers. From what I have read this age group seems to appreciate news and information programs like documentaries etc, and I imagine these are some of the cheapest content types to produce. It could be worthwhile for sky to invest a few million to get a studio going and a few million in yearly budget to make a bunch of exclusive content of this nature. This could become especially important if discovery chose to abandon us and take all their channels down.

As part of the Warner deal, there has been a commitment for the two companies to collaborate on more "Sky NZ Orignal" shows.

LEK is definitely right about SKT doing more Original content. We see that in Sky UK now (Gangs of London etc).

I repeat, moving forward Sky TV either need to own the content OR the network.

If they want to go down the content path, the best way for them to achieve this is to sell the business to a big studio (or get them to invest in Sky as some kind of JV partner). With the best will in the world, Sky will never have the budget to be able to make a lot of really good shows themselves (let alone pay the big bucks to attract top talent actors etc).

The other option is to own the network. We used to own the network before UFB...but now to own the distribution network we have to become a telco. We obviously see benefit in telco services given our broadband arrangement with Vocus (now 2D). So it is not a stretch of the imagination to see that relationship go to the next stop.

I suppose a third option is an eventual merger with NZME...and though that is an interesting idea and definitely has merit, it is my least favourite option.