Sky TV’s acquisition of Warner Bros Discovery’s Three is the most significant shake-up in New Zealand’s media landscape in decades, writes The Media Lab’s Antony Young. He takes a look behind the screen to see what this could mean for the industry and the viewers. The deal, announced last month, folds Three’s linear broadcast channels and its streaming service ThreeNow into the Sky portfolio. It’s a move that will pit two heavyweight, New Zealand-owned broadcasters Sky and TVNZ against each other in an increasingly competitive battle for audience attention, advertiser dollars and sporting rights. A home at last for Three For Three, this acquisition is life-saving. The network has endured decades of instability: frequent ownership changes, financial uncertainty and a revolving door of corporate strategies. While it enjoyed a cultural high point during the early 2000s, Three has more recently struggled under the weight of successive takeovers and diminishing investment. A stable and strategic owner in Sky gives Three what it surely has been looking for since the split off from Mediaworks. For Sky, the acquisition of Three looks to be a defensive move. Sky Open hasn’t been the free to air option that major sports want. And with TVNZ competing for all the rights of sport properties themselves, sharing the coverage rights seems to be harder to swallow for both parties. The deal gives Sky a combined audience reach of 2.2 million linear and 1.2 million digital viewers per week which provides it more scale to promote its offerings. Duncan Grieve, of The Spinoff’s The Fold, believes the addition of Sky’s enormous content library will open up possibilities for Three: “It puts them on a more even footing… two much more balanced and well matched opponents.” There is also an opportunity to lock up and monetise premium Neon content including a free to air window helping to strengthen Three’s offering. A shot in the arm for Kiwi sport What’s clear is that TVNZ and Sky are now competing for the same ad dollars, the same audiences and the same sports rights. Just in time for (fingers crossed) the ad market return. TVNZ only recently expanded into live sports, getting a taster when it was gifted the cricket due to Spark Sport’s demise in 2022. It has since been successful in securing rights to the ANZ netball competition and it is widely expected that they will pick up next year’s FIFA World Cup coverage. The addition of sports to its menu – traditionally Sky’s stronghold – signals a shift in its long-term strategy with live television acting as a way to get to hard to reach audiences. Live sport carries a premium in ad rates with a recent study showing live sport delivers 34% higher active ad attention than other content. Further content and sponsorship opportunities provide the water cooler moments that television thrives on. This also opens up pay per view opportunities through the TVNZ+ platform, giving the state broadcaster a new revenue stream. For now, it looks like NZ Rugby will be shared between the two over the next five years. But sporting codes outside of rugby, who previously had no choice other than to negotiate with Sky, have found a willing and interested broadcast partner in TVNZ. It’s no secret that cricket enjoyed significantly higher audiences, profile and interest when TVNZ aired them free to air. According to a past executive of TVNZ, netball is an example of a sport that took the short term benefits of higher broadcast revenue but is now paying the price of reduced engagement and sponsorship revenue. “What’s worse is based on this decline, the value to Sky has reduced, who aggressively sought to reduce fees on contract renewal,” he says. Netball New Zealand is betting on a bigger TV audience and attendances that will help them monetise sponsorship income. The players who have relied on that TV money to pay them will be hoping for that too. Having an option to be seen free to air on either Sky and TVNZ can only be good for the games, sponsorship and sport followers. But also the networks have played a prominent role in the development of sporting codes, particularly women’s sport. During the Spark Sport era, Sky chose to essentially bankroll the women’s basketball Tauihi competition’s first three seasons. While that sponsorship ended this year, the Tauihi league is continuing a fourth season which Sky will broadcast locally, with ESPN in the US and FIBA’s own YouTube channel screening the competition internationally. While rugby will always be king, our sportswomen, para-athletes, and community competitions all need more screen time and this could be a real game-changer. Digital frontlines and Netflix looms The timing of this shake-up is far from coincidental. Netflix’s introduction of a lower-priced, ad-supported tier has boosted both its revenue and subscriber base worldwide. Now, Netflix, Amazon Prime and Disney+ are all poised to sell ads in New Zealand, intensifying the battle for broadcast video on demand advertising, one of the bright spots of growth for television. Where does news fit into this picture? The old adage still holds: win the early evening news, and you win the night. With more streaming giants set to hit New Zealand, that prime-time advantage could become even more critical. While Sky has never really shown much interest in producing news, its ability to promote evening shows and deliver extra sports coverage gives it a firm foothold. Since Stuff launched its version of ThreeNews in July last year, linear ratings have fallen around 25%, not unexpected given it is a much leaner operation compared to the former Newshub. Still, it delivers better audience value for money. Sky have said there is “no change to the current news partnership with Stuff.” Given over one year has passed, one has to assume there’s at least another 11 months to run on the Stuff contract. If Stuff were to step back, it might re-open interest by NZME, who under Mark Jennings was eager to have a crack at it last time. It won’t be lost on NZME that partnering more actively with Sky or ThreeNews might make sense, given its access to its key sport properties and the relevance and expected ratings bump leading into the General Election next year. Adapting to a hybrid revenue future This acquisition isn’t without its risks. Sky, as a publicly listed company will have to satisfy its shareholders. They’ve given themselves a decent runway to get Three cashflow-positive, with an investor presentation mapping out $10 million in EBITDA by FY28, an ambitious leap given Discovery NZ’s $77.5 million FY25 loss. Stripping out Newshub’s restructure costs and other excluded commitments such as vacating Flower Street’s lease still leaves a net operating loss of around $9 million. For Sky, the bigger challenge is shifting from its subscription-heavy model into a hybrid one. Even with the addition of Three’s ad revenue optimistically around $150m, advertising will still only be about 22% of their revenue base. TVNZ has an advantage here. Jodi O’Donnell, a CEO well-versed in wooing clients and agency buyers, knows how to court the ad market. Over the last couple of years, TVNZ has introduced a wave of enhancements to targeting, tracking and audience-buying. Sophie Moloney speaking to Shayne Currie on Media Insider described Three Now’s platform as a huge asset, but what she will need to appreciate more is that, while the industry loves to talk about audience, reach and delivery, it’s the relationships Three’s sales teams have with media buyers that are the valuable asset gained through this acquisition. TVNZ, meanwhile, faces its own learning curve: evolving from a broadcaster to a direct-to-consumer operator. When viewers become paying customers, expectations change – sometimes dramatically. Two giants, one small market It would appear New Zealand really only has the population to sustain two large scale players in our media landscape. Two big newspaper publishers (NZ Herald and Stuff), two commercial radio networks (NZME and Mediaworks) with public funded RNZ, and now two full scale TV companies. Competition is healthy and the ad industry benefits from that, but sustainability is just as important. No doubt the biggest duopoly in our media and digital video landscape remains Google (YouTube) and Meta (Facebook and Instagram reels) who don’t invest in any local news, sport or content. But for now, one thing is clear: New Zealand television just got a jolt of energy. And the battle for the remote, the subscription dollar and the nation’s narrative is officially back on.