New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Spark / Sky TV</h2>
Sky to acquire Lightbox — likely positive for Spark, less clear for Sky
Sky TV (SKT) has conditionally agreed to acquire Spark’s (SPK) entertainment streaming service Lightbox, which it plans to merge with its own Neon service.
In our view, the transaction makes strategic sense for both parties, albeit no financial details on the transaction or ongoing commercial relationship have been provided.&nbsp;
Entertainment SVOD (subscriber video on demand) is a highly competitive market, dominated by global scale players. Netflix is already NZ’s largest pay TV provider. Other international players include Disney+, Apple TV (both launched in NZ last month), Amazon Prime and YouTube Premium. At best, there is room for only one domestic SVOD in the country. Lightbox has an established number two position today with c.350k subscribers vs. Neon &lt;100k. Consolidation of Lightbox and Neon should provide benefits though a combined technology platform and a stronger negotiating position with content providers.
Although no financial details have been provided, it is difficult to see that the transaction is not positive for SPK (albeit likely not material). SPK has used Lightbox as a subscriber acquisition/retention tool, we estimate at a cost of c.NZ$15-20m pa. The risk for SPK was that its value as a retention tool diminished as the streaming market became more crowded. We presume, at worst, the transaction will be cost neutral for SPK. Some cost savings are possible. (Dependent on the terms of the ongoing commercial relationship) it may provide SPK with greater flexibility around future bundling options, i.e. (1) Lightbox shifts from fixed cost to variable, which (2) will provide SPK greater flexibility around when and how it bundles Lightbox (SPK already has bundling offers with Netflix and Spotify).&nbsp;
For SKT, we believe combining its Neon service with Lightbox (resulting in increased subscribers and a broader content offering) enhances the likelihood of it establishing a viable entertainment SVOD service long-term. That said, this will still be far from easy in a market dominated by global tech and media giants. The lack of any financial detail – price paid, ongoing commercial arrangement with SPK – means it is not possible to comment on the risk-reward SKT is assuming from the acquisition. It adds to what is already an extreme level of uncertainty around the&nbsp;near and long-term outlook for SKT.&nbsp;
We do not believe you can conclude that the Lightbox agreement means that an amicable arrangement on sports between SPK and SKT is more likely. Entertainment is a global market, sport remains more localised meaning there is less competition and SPK has fewer partnership opportunities. SPK’s recent contract with NZ Cricket extends to 2026 highlighting its long-term focus. We believe there could be competition/regulatory barriers to combining Sky with Spark Sport. &nbsp;
Matt Henry &nbsp;CFA Head of Wealth Management Research Forsyth Barr Limited
P:+64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Spark / Sky TV
Sky to acquire Lightbox — likely positive for Spark, less clear for Sky
Sky TV (SKT) has conditionally agreed to acquire Spark’s (SPK) entertainment streaming service Lightbox, which it plans to merge with its own Neon service.
In our view, the transaction makes strategic sense for both parties, albeit no financial details on the transaction or ongoing commercial relationship have been provided.&nbsp;
Entertainment SVOD (subscriber video on demand) is a highly competitive market, dominated by global scale players. Netflix is already NZ’s largest pay TV provider. Other international players include Disney+, Apple TV (both launched in NZ last month), Amazon Prime and YouTube Premium. At best, there is room for only one domestic SVOD in the country. Lightbox has an established number two position today with c.350k subscribers vs. Neon &lt;100k. Consolidation of Lightbox and Neon should provide benefits though a combined technology platform and a stronger negotiating position with content providers.
Although no financial details have been provided, it is difficult to see that the transaction is not positive for SPK (albeit likely not material). SPK has used Lightbox as a subscriber acquisition/retention tool, we estimate at a cost of c.NZ$15-20m pa. The risk for SPK was that its value as a retention tool diminished as the streaming market became more crowded. We presume, at worst, the transaction will be cost neutral for SPK. Some cost savings are possible. (Dependent on the terms of the ongoing commercial relationship) it may provide SPK with greater flexibility around future bundling options, i.e. (1) Lightbox shifts from fixed cost to variable, which (2) will provide SPK greater flexibility around when and how it bundles Lightbox (SPK already has bundling offers with Netflix and Spotify).&nbsp;
For SKT, we believe combining its Neon service with Lightbox (resulting in increased subscribers and a broader content offering) enhances the likelihood of it establishing a viable entertainment SVOD service long-term. That said, this will still be far from easy in a market dominated by global tech and media giants. The lack of any financial detail – price paid, ongoing commercial arrangement with SPK – means it is not possible to comment on the risk-reward SKT is assuming from the acquisition. It adds to what is already an extreme level of uncertainty around the&nbsp;near and long-term outlook for SKT.&nbsp;
We do not believe you can conclude that the Lightbox agreement means that an amicable arrangement on sports between SPK and SKT is more likely. Entertainment is a global market, sport remains more localised meaning there is less competition and SPK has fewer partnership opportunities. SPK’s recent contract with NZ Cricket extends to 2026 highlighting its long-term focus. We believe there could be competition/regulatory barriers to combining Sky with Spark Sport. &nbsp;
Matt Henry &nbsp;CFA Head of Wealth Management Research Forsyth Barr Limited
P:+64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Spark / Sky TV: Sky to Acquire Lightbox — Likely Positive for Spark, Less Clear for Sky

Spark New Zealand

Spark / Sky TV: Sky to Acquire Lightbox — Likely Positive for Spark, Less Clear for Sky