Sky Television buys Prime New Zealand

Sky Television is buying free-to-air channel Prime New Zealand in a $30 million deal that could shake up the way New Zealanders watch sports.

Yesterday, the pay-television company said owning a free-to-air channel would give it the opportunity to showcase Sky's programmes while ensuring viewers could watch delayed free-to-air programmes such as rugby, rugby league and cricket, in prime time.

CanWest MediaWorks, which holds the rights to replay rugby on TV3, said in October that Super 14 and NPC games would not screen during prime-time next season if it renewed its delayed coverage deal with Sky.

Sky's director of communications, Tony O'Brien, said yesterday that Prime has made an offer to buy delayed rugby rights from Sky, which had been accepted. But TV3 still has the last right of refusal and could match the Prime offer.

Prime was also renegotiating its delayed rugby league and cricket rights with Sky prior to yesterday's deal. Analysts and fund managers said free-to-air sports coverage was undoubtedly the reason Sky pursued Prime.

"The big upside for Sky is being able to take its sports broadcasting and replay it later on free-to-air and not have to give it to a competing network," said BT Funds Management fund manager Anthony Halls, labelling the acquisition a "clever move".

Forsyth Barr analyst Rob Mercer said a Sky-Prime combination would be able to optimise sports deals such as Olympic coverage, with exhaustive coverage on pay television and a shorter version on free prime time.

The deal, still subject to Commerce Commission clearance and other undisclosed commercial conditions, follows confirmation in the Herald this week of Sky's interest in Prime.

Sky chief executive John Fellet told the Herald the pay-television company had held talks with Prime's owner, Prime Australia, as far back as 2000.

But he said an option for Australia's Nine Network to buy half of Prime New Zealand would have to be resolved before a deal could be struck. O'Brien said yesterday that Nine had renounced that option.

Fellet said yesterday the company had been looking at creating or acquiring a free-to-air channel for several years.

"In addition to Prime, we explored the idea of purchasing C4 from CanWest or TVNZ's dominant network Horizon Pacific. Neither was available. We even looked at un-encrypting one of our UHF channels but did not want to disrupt our existing UHF subscribers."

Nine Network had the right to buy half of Prime New Zealand in return for programming and management support.

Warwick Syphers, chief executive of Prime Australia, said that deal ended with the Prime New Zealand sale.

MediaWorks chief executive Brent Impey said his company was considering the implications of the deal. "As far as we are aware this will create a unique situation in international television where a pay-television monopoly also enters the free-to-air broadcast environment."

Analysts said it was unlikely the deal would prove a knockout blow for rival free-to-air networks.

"This isn't going to be doom and gloom for other operators," said Mercer. "This isn't going to lead to an overnight dramatic change in viewership. It's a 10-year strategy."

The head of the Broadcasting School at Christchurch Polytechnic, Paul Norris, said there would be an impact on TVNZ's digital plans.

"It's unlikely they will be able to mount a free-to-air digital satellite platform now, though they could still use a terrestrial platform."