"These do not allow for fair-use of copyright material in accordance with the New Zealand Copyright Act and have the potential to impact heavily on our ability to cover the Games in a fair and meaningful way."
Under New Zealand copyright law, media organisations are legally allowed to provide news coverage under "fair dealing" which includes delayed video news footage of events.
Sky spokeswoman Kirsty Way said the NZME and Fairfax moves were "pretty disappointing" for Kiwis.
"Sky stands by its news access rules that they're the most generous in the whole world and have been acceptable worldwide, but apparently they're not acceptable to our news agencies in New Zealand."
Currie said Sky was wrong. The UK Olympic rules, for instance, clearly allowed for fair-use provisions as outlined in British copyright law.
He said Sky's stance undermined editorial freedom, the Olympic charter, and the public's right to see Games coverage. New Zealand taxpayers invested millions of dollars in high-performance sport.
"Sky has the exclusive live TV broadcast rights and no one is trying to undermine those. We are fighting to uphold the principle of editorial freedom and our right to bring news coverage of the Games to our readers."
While the NZ Herald would not have a team in Rio, Currie said the company would be doing its utmost to provide the best Games coverage "through our syndicated agencies and partnerships, plus with our award-winning sports journalists in New Zealand".
NZME Radio, which has two accredited journalists for Rio, is not affected.
Fairfax confirmed a similar position with executive editor Sinead Boucher saying the conditions Sky had sought to impose around Games footage were "unprecedented".
Boucher said that the rules, as first presented, seemed designed to prevent other media from covering the Games to the level they had in the past. She added that Sky's actions were contrary to the public's interests when so much taxpayer money was directed towards the Olympics and the Games itself is a major news event.
"We are being asked to waive our rights to fair dealing under the Copyright Act," she said.
Rules that were suggested but since have been negotiated away included a requirement that news websites delay any news video highlights by three hours and to not criticise Sky's commentary. Sky offered several options to media organisations in an effort to solve the impasse but Currie said that ultimately NZME was not able to reach agreement with the pay TV network.
Media organisations have been frustrated by Sky trying to not only introduce delays around when footage could be viewed on news websites but also restrictions on how they are presented and the volume of content. Having to present the footage as "news bulletins" which could only be updated as little as twice a day had been another problem area.
The media industry is also believed to be upset with the NZOC's role in the discussions, believing they should not have to negotiate access to the Olympics with a commercial rival in Sky.
Trevor Mallard, Labour's spokesman for sport and recreation, said the situation reflected the inevitable conflict that would arise as the media converges.
It was enormously upsetting to think probably the best sports journalists in New Zealand would not be in Rio, if NZME and Fairfax stuck with today's decision, Mallard said.
He hoped further discussions were possible. Sending journalists to Rio would be hugely expensive, and he hoped cost cutting did not factor in to the decision.
Currie said cost-cutting had nothing to do with the decision, with the company having to forfeit some travel costs.
The Media Freedom Committee said it was disappointing the NZOC had forced media companies to negotiate the terms of Olympics coverage with rival organisations.
Chairwoman Joanna Norris, editor of Fairfax paper The Press, said media had been asked to sign away their rights under New Zealand law, and that was unacceptable.
"The loser in this situation is the New Zealand public who rightly expect broad and free media coverage of important international sporting events such as the Olympics," she said.
"Freedom of expression is protected in New Zealand and includes the rights of New Zealanders to receive and impart information of any kind in any form. The situation created by the NZOC is a threat to these freedoms."
Massey University journalism senior lecturer Dr Catherine Strong said it was "disheartening" that the Herald and Fairfax had to withdraw their reporting teams.
Joanna Norris, Media Freedom Committee chair, said the committee is "extremely disappointed" the NZOC has created a situation whereby media organisations are forced to negotiate with rival organisations over terms relating to coverage of the Olympics.
"The result of this unsatisfactory arrangement has been borne out over the past few days with major media organisations NZME and Fairfax Media announcing they cannot accept the terms outlined by rights holder Sky Television and will therefore not be sending reporting teams to cover the Rio Olympics.
"Whilst Sky Television argues the terms offered are more generous than in some other countries, the terms proposed would have forced media companies to sign away rights they have under New Zealand law. This is not acceptable."
Ms Norris said the loser in this situation is the New Zealand public who rightly expect broad and free media coverage of important international sporting events such as the Olympics.
"Freedom of expression is protected in New Zealand and includes the rights of New Zealanders to receive and impart information of any kind in any form. The situation created by the NZOC is a threat to these freedoms."
